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We audited the City of South Gate’s Community Development Block Grant (CDBG) program.  We selected the City based on our risk analysis of Los Angeles area grantees and prior monitoring concerns identified by the U.S. Department of Housing and Urban Development (HUD) with the City’s code enforcement activities.  The objective of the audit was to determine whether the City administered its CDBG funds in accordance with HUD requirements, focusing on code enforcement and graffiti abatement activities.

The City did not administer CDBG funds in accordance with HUD requirements.  Specifically, it (1) did not meet HUD’s code enforcement requirements and (2) did not ensure that code enforcement and graffiti abatement salary and benefits costs were adequately supported.  This condition occurred because the City did not correctly interpret and implement code enforcement program requirements and did not have adequate policies and procedures to ensure that code enforcement and graffiti abatement salaries and benefits were accurately calculated and recorded.  As a result, it used $811,325 in CDBG funds for unsupported code enforcement costs and $285,496 for unsupported graffiti removal costs.

We recommend that the Director of HUD’s Los Angeles Office of Community Planning and Development require the City to (1) provide documentation to support the eligibility of $811,325 in code enforcement costs and $285,496 in graffiti abatement costs or repay the program from non-Federal funds; (2) develop and implement policies and procedures to ensure that code enforcement and graffiti abatement salaries and benefits are accurately charged to CDBG grants; and (3) develop and implement a targeted code enforcement strategy that would specify deteriorating or deteriorated areas where code enforcement would be expected to arrest decline, including a description of public or private improvements, rehabilitation, or services that would help facilitate code enforcement.