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The City of Rochester, NY Did Not Always Administer Its Community Development Block Grant Program in Accordance With HUD Requirements

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We audited the City of Rochester’s Community Development Block Grant (CDBG) program to address our audit plan priority to improve financial management controls over CDBG grants.  We selected this grantee based on a risk analysis of grantees administered by the U.S. Department of Housing and Urban Development’s (HUD) Buffalo field office, which considered funds received and the risk score assigned by HUD.  The City received more than $32.7 million in CDBG funds in program years 2011 through 2014.  The audit objective was to determine whether City officials established and implemented adequate controls to ensure that the CDBG program was administered in accordance with applicable requirements.

City officials had not established and implemented adequate controls to ensure that CDBG funds were always administered in accordance with applicable requirements.  Specifically, they did not always spend CDBG funds for eligible and supported costs, draw down and disburse Section 108 loan funds in a timely manner, make adequate efforts to collect a delinquent float loan, execute a procurement in compliance with Federal procurement regulations, and adequately monitor subrecipients.  As a result, the City spent $153,279 and more than $8.1 million for ineligible and unsupported costs, respectively, and did not ensure that $1.5 million was spent for its intended use.

We recommend that the Director of HUD’s Buffalo Office of Community Planning and Development instruct City officials to (1) reimburse from non-Federal funds the $153,279 spent for ineligible costs, (2) provide documentation for the eligibility of $291,236 in unsupported costs, (3) justify the untimely drawdown and disbursement of more than $6.7 million of Section 108 loan funds, (4) reimburse the $1.5 million disbursed for a delinquent float loan through one of the options identified in HUD regulations, (5) support that a $1.2 million contract was fair and reasonable and that the sole-source method was appropriate, (6) develop and implement controls and comprehensive procedures to ensure the proper administration of the CDBG program, and (7) request CDBG program training from the HUD Office of Community Planning and Development field office.