We audited the City of Newark, NJ’s administration of its Neighborhood Stabilization Program (NSP1), funded under Title III of Division B of the Housing and Economic Recovery Act of 2008, in support of the Office of Inspector General’s (OIG) goal to improve the U.S. Department of Housing and Urban Development’s (HUD) execution of and accountability for its fiscal responsibilities. We selected the City based upon a risk assessment that considered that the City was awarded the second highest amount of funds among the Newark field office’s six grantees and received the highest HUD risk assessment score (70). The objective of the audit was to determine whether the City officials properly obligated and expended NSP1 funds.

City officials generally obligated NSP1 funds in a timely manner for eligible activities and expended funds in accordance with HUD regulations. However, there were weaknesses in administrative controls. Specifically, City officials approved ineligible and unsupported consultant fees, did not properly report program income, and did not always properly maintain program records. Consequently, $60,525 expended and $11,250 obligated for consultant fees was not available for eligible costs, program income of $111,943 was not available for use, and HUD was not adequately informed of program income generated. In addition, some of the NSP1-funded activities had experienced delays that would require city council approval for extensions.

We recommend that HUD instruct City officials to (1) reimburse the City’s line of credit for the $11,250 paid and deobligate the additional $11,250 budgeted for ineligible consultant fees, (2) provide support for the $49,275 unsupported consultant fees paid, (3) report and use the $111,943 in program income not realized before drawing down additional NSP1 funds, and (4) provide supporting documentation for the appraisal of an NSP1-developed property.