We reviewed the U.S. Department of Housing and Urban Development (HUD), Office of
Community Planning and Development’s (CPD) Neighborhood Stabilization Program (NSP).  We initiated the audit under the HUD Office of Inspector General’s (OIG) annual audit plan.  Our objective was to provide an overall assessment of NSP, including assessing the sufficiency of HUD’s controls and determining whether HUD had improved its controls as a result of its own monitoring efforts as well as audits or reviews by OIG or other entities.

HUD failed to take appropriate action regarding more than $22 million in unexpended NSP1 and NSP3 initial funding allocations.  This condition occurred because HUD (1) did not agree that certain grantees had missed deadlines, (2) was unable to provide documentation showing remedial actions, and (3) relied on expenditure information reported in its Disaster Recovery Grant Reporting system that was not always accurate.  Since HUD had no assurance that these funds were used to help reduce the effects of the foreclosure crisis in a timely manner as Congress intended, the overall effectiveness of the program may have been lessened. 

HUD had generally implemented sufficient controls and improvements, including providing guidance and technical assistance, as a result of its own assessments.  However, HUD could improve its administration of NSP and similar programs by effectively using OIG reports on individual grantees to identify trends programwide.  HUD management did not effectively use trends identified from OIG reports on individual grantees that highlighted common problems or regulatory gaps on which it could base national policy guidance or other directives.  As a result, HUD may not have always recognized recurring issues or provided grantees the most effective guidance for improving overall program performance.

We recommend that CPD (1) provide support showing that it took action regarding more than $22 million in unexpended funds or provide adequate support showing that grantees did not miss the expenditure deadlines, (2) work with grantees to ensure that the information reported is accurate and up to date, and (3) adopt a best practice to use OIG audit reports to help identify potential areas for improvement programwide for NSP and similar programs.