We audited the City of Los Angeles Housing Department’s (Department) single-family and small multifamily property rehabilitation programs funded by the HOME Investment Partnerships Program (HOME program) as part of our annual audit plan. The objectives of our audit were to determine whether the Department (1) effectively monitored construction bids, costs, and quality; (2) ensured that borrowers and properties met eligibility requirements for income and affordability; (3) properly reported HOME program activities to the U.S. Department of Housing and Urban Development (HUD); and (4) properly allocated certain administrative costs. We found the Department did not always ensure that HOME-assisted rehabilitation work met all applicable construction standards and/or was complete. The Department also had incomplete documentation of income eligibility and property values, and did not report the status of its HOME program activities to HUD in the required timeframes.

We recommended that HUD require the Department to develop, maintain, and implement operating policies, procedures, and controls regarding loan approvals, construction standards and monitoring, and to ensure accurate and timely reporting of HOME program data to HUD. We also recommended that HUD require the Department to certify that construction deficiencies and incomplete construction work for the properties cited in the report have been repaired or completed in accordance with the applicable standards or to reimburse up the U.S. Treasury Home Investment Trust Fund (HOME Trust fund) account for the uncertified portion of the $1.2 million disbursed for these properties. Finally we recommended that HUD require the Department to inspect and certify 35 properties rehabilitated under the asset control agreement cited in the report, or reimburse the HOME Trust fund for the uncertified portion of the $4.8 million disbursed for these properties.