We audited the U.S. Department of Housing and Urban Development’s (HUD) oversight of the disposition of real properties assisted with Community Development Block Grant (CDBG) funds. We conducted the audit as part of our annual audit plan. Our audit objective was to determine whether HUD had adequate controls over the disposition of real properties assisted with CDBG funds.
We found that HUD could improve its oversight of the disposition of real properties assisted with CDBG funds. Although HUD’s drawdown and reporting system allowed grantees to enter identifying information for assisted properties and its field offices performed risk-based monitoring of grantees, HUD’s controls were not always sufficient to ensure that grantees (1) entered addresses of assisted properties into its system, (2) provided proper notice to affected citizens before changing the use of assisted properties, (3) adequately determined the fair market value of assisted properties at the time of disposition, and (4) properly reported program income from the disposition of the properties. Further, HUD did not fully implement guidance related to the applicability of change of use requirements after voluntary grant reductions. We attributed these deficiencies to HUD’s lack of emphasis on verifying address information, its field office staff not being adequately trained to use data to monitor HUD’s interest in properties, and the Milwaukee field office incorrectly interpreting program requirements. As a result, HUD could not track and monitor its interest in the properties and did not have assurance that grantees properly handled changes in use and properly reported program income.
We recommend that HUD (1) issue guidance reminding grantees of the requirements to report address information for assisted properties and calculate and report program income related to the disposition of these properties; (2) develop a process to ensure that grantees properly report address information and properly calculate and report program income; and (3) require three grantees to provide documentation showing that (a) affected citizens were notified of a change in use of the property for one activity, (b) the fair market value of properties for two activities was supported, and (c) program income for three activities was properly calculated and reported; (4) document the applicability of change of use requirements for one grantee; and (5) issue guidance to clarify the applicability of change of use requirements after voluntary grant reductions.
Recommendations
Community Planning and Development
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Status2017-NY-0002-001-AOpenClosedClosed on August 19, 2019
We recommend that the Deputy Assistant Secretary for Grant Programs issue guidance reminding grantees of the requirement to properly report the addresses of assisted properties in IDIS and properly calculate and report program income from the disposition of these properties.
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Status2017-NY-0002-001-BOpenClosed
We recommend that the Deputy Assistant Secretary for Grant Programs develop a process to ensure that grantees properly report the addresses of assisted properties in IDIS and properly calculate and report program income from the disposition of these properties regularly. This process could include but is not limited to developing a process to extract data reported in IDIS on activities with the matrix codes related to real property, and training and instructing the Office of Community Planning and Development’s field office staff to extract this data and manually check for address and program income data on grantees’ activities, particularly activities that are completed but have properties that could still be subject to program income requirements.
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Status2017-NY-0002-001-COpenClosed
We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Newark, NJ, field office to require Jersey City to provide documentation to show that a notice was provided to affected citizens as required or take action to advise affected citizens that they disposed of the property.
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Status2017-NY-0002-001-DOpenClosed$503,550.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Newark, NJ, field office to require Jersey City to provide documentation to support the fair market value of the property at the time of disposition. If documentation cannot be provided, the grantee should be required to reimburse $503,550 to its CDBG line of credit from non-Federal funds. If documentation can be provided, the grantee should be required to determine and reimburse its local bank account from non-Federal funds any additional program income not already reported and properly report the additional program income in IDIS under the activity ID that generated the income.
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Status2017-NY-0002-001-EOpenClosed$575,263.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Philadelphia, PA, field office to require Luzerne County to provide documentation to support the fair value of the property at the time of disposition. If documentation cannot be provided, the grantee should be required to reimburse $575,263 to its CDBG line of credit from non-Federal funds. If documentation can be provided, the grantee should be required to determine and reimburse its local bank account from non-Federal funds the additional program income not already reported and properly report the additional program income in IDIS under the activity ID that generated the income.
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Status2017-NY-0002-001-FOpenClosed
We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Philadelphia, PA, field office to require Luzerne County to reclassify program income already reported to the activity ID in IDIS that generated the income, ensuring that the $798,273 in program income is properly accounted for.
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Status2017-NY-0002-001-GOpenClosedClosed on March 20, 2019
We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Los Angeles, CA, field office to require the County of Los Angeles to reclassify program income to the activity ID in IDIS that generated the income, ensuring that the $300,330 in program income is properly accounted for.
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Status2017-NY-0002-001-HOpenClosedClosed on August 19, 2019
We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Milwaukee, WI, field office to document that no portion of the four State of Wisconsin’s activities reviewed is currently subject to the change of use requirements or remind the State of Wisconsin that the portions of the activities related to the voluntary grant reductions are still subject to the change of use requirements.
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Status2017-NY-0002-001-IOpenClosed
We recommend that the Deputy Assistant Secretary for Grant Programs issue guidance to HUD staff and grantees to clarify the applicability of change of use requirements in cases where there is both a repayment from non-Federal funds and a voluntary grant reduction.