We completed an audit of the City of Newburgh, New York's administration of its Community Development Block Grant (CDBG) program. The objectives of our audit were to determine whether the City (1) administered its CDBG program effectively, efficiently, and economically in accordance with applicable rules and regulations, and (2) expended CDBG funds for eligible activities that met a national objective of the program.

The audit disclosed that the City did not always carry out its activities effectively, efficiently, and economically in compliance with HUD regulations, and expended CDBG funds for activities that did not meet a national objective of the program. Specifically, the City routinely charged certain costs to the CDBG program without adequate support or detail, could not adequately demonstrate that CDBG program funds were used for eligible activities that achieved program objectives, awarded a contract for consulting services without ensuring compliance with federal procurement requirements, charged costs to the CDBG program without evidence that all of the contract services provided related to the City's CDBG program. As a result, the City could not ensure that only reasonable and necessary administrative costs were charged to its CDBG program.

We recommend that HUD instruct the City to (1) provide supporting documentation to justify the eligibility of $894,793 in questionable CDBG disbursements or reimburse the program from nonfederal funds any amounts not supported, (2) establish procedures to ensure adequate monitoring of subrecipient-administered activities, and (3) establish procedures to ensure compliance with CDBG program requirements.