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December 07, 2008
  • Community Planning and Development
2009-NY-1004
ig0921004.pdf

We completed an audit of the Community Development Block Grant (CDBG) program administered by the Economic Development Corporation (Corporation), a subgrantee of Essex County Consortium (the County). Our audit objectives were to determine whether the Corporation adequately administered its CDBG program in accordance with applicable rules and regulations. Specifically, whether it efficiently and effectively disbursed CDBG funds, had a financial management system in place to adequately safeguard the funds, and used CDBG funds to meet the national objectives.

The Corporation did not adequately administer its CDBG program. Specifically, it did not properly administer economic development loan programs, did not carry out adequate technical assistance and site search services, could not support that its activities met the CDBG national objectives, and lacked evidence to justify its CDBG administrative expenses. Also, the Corporation did not always ensure that adequate financial records were maintained for its two economic development loan programs, program income was properly accounted for, and adequate budget and cost allocation procedures were implemented.

We recommended that the Director of HUD's New Jersey Office of Community Planning and Development instruct the County to require the Corporation to develop and implement appropriate program plans and controls to ensure that $662,184 in CDBG funds is used effectively to make economic development loans, repay $100,000 for the ineligible loan and $33,000 for the duplicate drawdown, obtain and submit all supporting documentation showing the appropriateness and eligibility of more than $1.6 million in administrative expenditures, develop and implement proper financial controls to safeguard CDBG funds, and establish adequate procedures to ensure that receipts and expenditures of program income are properly recorded and reported. We also recommended that the County discontinue further funding to the Corporation until HUD determines that it has the capacity to carry out CDBG activities in compliance with HUD regulations.