We reviewed the City of San Bernardino’s Community Development Block Grant (CDBG) and CDBG-Recovery Act (CDBG-R) programs because the U.S. Department of Housing and Urban Development’s (HUD) Los Angeles Office of Community Planning and Development expressed concerns about the City’s administration of its CDBG program. Our objective was to determine whether the City administered its CDBG and CDBG-R program funds in accordance with applicable HUD requirements.

We found that the City did not operate in accordance with HUD rules and regulations. It used $47,699 in CDBG funds for ineligible expenditures and lacked supporting documentation for more than $7.1 million. The City also did not report $168,761 in program income and did not adequately support its procurement activities for the $951,548 in Recovery Act funds it received.

We recommend that the Director of HUD’s Los Angeles Office of Community Planning and Development require the City to (1) repay $47,699 in ineligible expenses from non-Federal sources, (2) support more than $7.1 million in expenses or repay the program, (3) remit $168,761 in unreported program income, and (4) demonstrate the reasonableness of $951,548 in Recovery Act funds used in the procurement of two contracts. We also recommend that HUD’s Associate Counsel for Program Enforcement pursue civil remedies, civil money penalties, or other administrative action, as appropriate, against the City for intentionally not reporting CDBG program income.