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We audited Del Norte Neighborhood Development Corporation based on information we received indicating that Del Norte may have violated the U.S. Department of Housing and Urban Development’s (HUD) HOME Investment Partnerships program rules during the demolition of one of its low- to moderate-income rental developments.  Our objective was to determine whether Del Norte properly transferred, stopped, modified, or extended the availability of affordable units for the Emerson Apartments, received HUD approval before demolishing the Emerson Apartments, and followed Federal contracting and procurement regulations while developing Veterans Apartments.

Del Norte properly followed the Federal contracting and procurement regulations while developing Veterans Apartments.  However, it improperly transferred eight units of HOME-funded affordable housing.  Del Norte should have kept these units at West 32nd Apartments but violated HOME rules by transferring them to Emerson Apartments and then demolishing Emerson without HUD approval.  This condition occurred because Del Norte lacked controls to ensure that it honored the HOME program’s affordability requirements.  As a result, eight affordable units were no longer available for low- to moderate-income families.

We recommend that the Director of the Denver Office of Community Planning and Development (1) work with the City of Denver Office of Economic Development to recapture $37,000 in HOME funds not properly used for the affordable housing projects, and (2) require Del Norte to develop policies and procedures to prevent ineligible affordability period transfers.