We audited the City of Reading, PA’s Neighborhood Stabilization Program 2 as part of our annual audit plan to review activities funded by the American Recovery and Reinvestment Act of 2009 (Recovery Act) because the City received $5 million in Program funds under the Recovery Act. Our audit objective was to determine whether the City (1) met Program expenditure deadlines, (2) made Program expenditures that were eligible and adequately supported, (3) properly awarded contracts, (4) met appraisal requirements, and (5) adequately monitored its Program. We found that the City met Program expenditure deadlines, and generally ensured expenditures were eligible and adequately supported and that contracts were properly awarded. Some improvements were needed, however, to ensure that some costs were adequately supported and to ensure that the City fully met property appraisal requirements and adequately monitored its Program. We recommended that HUD require the City to (1) provide documentation showing that $58,263 paid to four contractors without written contracts or detailed invoices was fair and reasonable or reimburse its Program from non-Federal funds, (2) provide documentation showing it reimbursed its Program $8,151 from non-Federal funds for ineligible vehicle expenses, (3) ensure all future contracts are in writing and adequately documented, (4) ensure all required clauses are included in future solicitations and contracts, (5) ensure it fully meets Program appraisal requirements, and (6) adequately document its Program monitoring and establish an internal audit function as required.