We audited Middlesex County, NJ’s HOME Investment Partnerships Program based on a risk analysis that considered funding, the U.S. Department of Housing and Urban Development’s (HUD) risk score, and prior Office of Inspector General audits.  The audit objective was to determine whether County officials established and implemented adequate controls over their HOME program to ensure that program funds were expended and administered for eligible activities in accordance with HUD regulations.
County officials did not always expend and administer HOME program funds in compliance with program requirements.  Specifically, they lacked support to show that funds were committed in accordance with regulations and expended for eligible activities, HUD’s and the County’s interest in HOME-assisted properties was protected, and a CHDO was properly organized.  We attribute these deficiencies to County officials’ inadequate financial and administrative controls.  Consequently, $833,706 was not committed in a timely manner as required; $24,979 and $220,322 in HOME funds were expended for ineligible and unsupported activities, respectively; HUD’s and the County’s interest in $980,436 in HOME-assisted properties was not protected; and the County lacked documentation showing that a CHDO was properly organized.

We recommend that HUD instruct County officials to (1) provide support showing that $833,706 was committed in a timely manner, (2) reimburse the County’s HOME program line of credit from non-Federal funds for $24,979 in ineligible costs and any unsupported amount of the allocated costs of $220,322, (3) record liens or other appropriate notices of record on HOME-assisted properties to ensure that HUD’s and the County’s $980,436 interest in these properties is protected, and (4) provide support showing that officials complied with eligibility requirements at the time of the initial certification and recertification of its community housing development organization (CHDO).