We completed an audit of the operations of the City of Troy, New York (the City), pertaining to its administration of its Community Development Block Grant (CDBG) program. The objective of our audit was to determine whether the City administered its CDBG program in an effective and efficient manner in compliance with applicable HUD rules and regulations.

The audit disclosed that the City generally complied with HUD program requirements when administering its overall CDBG program; however, for certain areas, it did not always carry out its activities in an efficient and effective manner and comply with HUD regulations. Specifically, the City did not establish adequate 1) procedures to ensure that its housing rehabilitation program was administered in accordance with program regulations; 2) procedures to ensure that costs for its street improvement activities were allowable and supported by adequate documentation; 3) administrative controls to ensure that costs associated with its public facilities activities were eligible, necessary, and supported by sufficient documentation; and 4) controls to ensure that program labor costs were adequately supported and that costs incurred were current and accurately recorded. As a result, the City's ability to administer its programs efficiently and effectively and ensure that CDBG program objectives were met was diminished.

We recommend that HUD instruct the City to (1) reimburse the CDBG program from nonfederal funds the $186,088 paid for ineligible program expenditures, (2) provide supporting documentation to justify the eligibility of more than $1.2 million in CDBG disbursements or reimburse the program from nonfederal funds any amounts not supported, and (3) establish adequate procedures to ensure compliance with CDBG program requirements.