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We audited the City of New Orleans’ HOME Investment Partnerships program in response to a citizen complaint alleging that the City did not monitor its HOME-assisted projects and in accordance with our annual audit plan.  Our objective was to determine the validity of the complaint allegations and whether the City administered its HOME program in accordance with Federal and HUD requirements.

We found that complaint had merit as the City did not always properly monitor or administer its HOME program in accordance with requirements. For 13 projects reviewed, the City did not ensure that 4 projects had regulatory agreements, preventing the City from enforcing the affordability and other program requirements.  For the remaining nine projects, the City did not always ensure that (1) rents remained within rent limits, (2) it performed initial tenant income eligibility certifications, and (3) it conducted property inspections and onsite monitoring visits.  In addition, the City did not track or accurately report unit vacancies and properly report and use its program income.  These conditions occurred because the City (1) did not follow the program requirements, (2) lacked supervisory management of staff, (3) did not have adequate written policies and procedures, and (4) had poor record-keeping practices.  As a result, the City failed to protect more than $7.5 million in HOME funds disbursed; detect $82,800 in rent overpayments; ensure that affordable housing was available and offered to low-income households; and ensure that program participants lived in decent, safe, and sanitary housing.  In addition, the City could not provide HUD with reasonable assurance that it properly managed its HOME program, putting more than $9.3 million in available HOME funds at risk for mismanagement.

We recommend that HUD require the City to develop and implement written procedures and take actions to better ensure that it spends more than $9.3 million.  In addition, we recommend that HUD require the City to (1) repay more than $1.8 million, (2) support or repay more than $5.8 million, and (3) develop and implement, and revise its written procedures and management controls.