We audited the City of Los Angeles Housing Department (City) as a result of two complaints alleging violations of affordable housing and low-income housing tax credit regulations at the NoHo Commons housing development (development), which was partially funded with HOME funds and administered by the Community Redevelopment Agency of Los Angeles (subrecipient). Our objective was to determine whether the alleged violations had merit and warranted further review. Specifically, we wanted to determine (1) the type and amount of HUD funding used and (2) whether the City administered its subrecipient and the development in accordance with pertinent HUD regulations.

We identified the HUD funding used and found that the allegations had merit. The City improperly allocated HOME funds for the development without adequate controls in place to ensure compliance with HOME program requirements. Specifically, the City’s subrecipient did not ensure that the development’s management agent implemented a waiting list as established by its lottery and subsequent applications, correctly determined tenants’ income to establish eligibility, maintained adequate documentation supporting the use of HOME funds, and implemented adequate monitoring policies and procedures for the development.

We recommend that HUD require the City to suspend all HOME funding to the subrecipient until acceptable monitoring policies and procedures have been implemented to ensure compliance with all HOME program requirements, reconstruct and establish a complete waiting list, and determine which eligible applicants were improperly bypassed and ensure that they are given first priority for housing as vacancies arise. We also recommend that both the City and the subrecipient establish and implement effective policies and procedures to ensure compliance with HOME regulations.