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The City of Niagara Falls, NY Had Weaknesses in Controls Over CDBG-Funded Subgrantee Administered Rehabilitation Activities


We reviewed the City of Niagara Falls’ Community Development Block Grant (CDBG) program.  We selected this auditee based on our risk assessment of CDBG grantees administered through the Buffalo, NY, field office, which considered the City’s funding, HUD’s risk assessment of the City, and prior Office of Inspector General (OIG) audits.  The City received more than $2.2 million in each of its program years 2013 and 2014; was ranked medium risk in HUD’s risk assessment for 2014 and 2015, with a score of 38 and 45, respectively; and had not recently been audited by OIG. 

City officials committed and spent CDBG funds for eligible activities but did not establish sufficient controls to ensure that subgrantee expenditures were always adequately supported; program income was administered in compliance with HUD regulations; and subgrants were properly awarded, executed, and monitored.  As a result, City officials disbursed $220,538 for unsupported costs, used $113,733 in CDBG funds when program income was available, executed subgrants without receiving required documentation and after the start of the subgrant term, and did not ensure that services costing $2,516 were received during the subgrant period.

We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to (1) provide adequate documentation to support the eligibility of unsupported disbursements and obligations of $70,538 and $150,000, respectively; (2) implement monitoring procedures for CDBG-funded subgrantees to ensure compliance with program requirements; (3) ensure that $2,516 in unexpended funds is reprogrammed for other eligible CDBG activities; (4) ensure that program income of $113,733 is spent on eligible CDBG activities before additional CDBG entitlement funds are drawn down; (5) strengthen procedures to ensure that program income received by grantees is properly reported to HUD  and spent before funds are drawn down from the U.S. Treasury; and (6) strengthen subgrant procedures to ensure that all required documents are received, explanations are obtained when prior performance does not meet goals, and subgrants are executed in a timely manner.