We audited the City of Paterson, NJ’s Housing Opportunities for Persons With AIDS (HOPWA) program in support of the Office of Inspector General’s (OIG) goal to contribute to improving HUD’s execution of its fiscal responsibilities. We selected the City after a risk analysis of HOPWA grantees administered by the HUD Newark, NJ, field office that considered funding, the U.S. Department of Housing and Urban Development’s (HUD) 2011 risk assessment score, and HUD monitoring of the grantees. The audit objective was to determine whether City officials had implemented adequate controls to ensure that HOPWA funds were obligated and expended in accordance with HUD regulations for eligible activities.

City officials did not always administer the City’s HOPWA program in accordance with Federal regualtions and HOPWA program requirements. Specifically, HOPWA funds were expended for ineligible and unsupported costs, subgrantee monitoring was inadequate, and waiting list maintenance had weaknesses. These conditions existed because of City officials’ unfamiliarity with HUD program regulations and weaknesses in financial and management controls. Consequently, (1) $483,502 was not disbursed in a timely manner; (2) $15,776 was expended on ineligible costs; (3) $357,800 was expended on unsupported costs; and (4) $480,179 in HOPWA funds would be put to better use if adequate financial and management controls were implemented over tenant recertification, unit inspections, classification and recording of costs, and subgrantee adminsitration and monitoring.

We recommend that the Director of HUD’s New Jersey Office of Community Planning and Development instruct City officials to (1) expend or deobligate $438,502; (2) reimburse $15,776 disbursed for ineligible expenses; (3) provide documentation to adequately support expenditures of $357,800; and (4) strengthen controls over subgrantee monitoring, tenant certification, and compliance with HUD’s housing quality standards.