We completed the twelfth report in our ongoing audits of the Lower Manhattan Development Corporation's (the auditee) administration of the Community Development Block Grant Disaster Recovery Assistance funds provided to the State of New York in the aftermath of the September 11, 2001, terrorist attacks on the World Trade Center in New York City. During our audit period, April 1 through September 30, 2008, the auditee disbursed approximately $103.4 million of the $2.783 billion funds appropriated. The objectives of this audit were to determine whether the auditee (1) disbursed Disaster Recovery Assistance funds in accordance with the guidelines established under U.S. Department of Housing and Urban Development (HUD)-approved partial action plans, (2) expended Disaster Recovery Assistance funds for eligible administration and planning expenses in accordance with applicable laws and regulations, and (3) had a financial management system in place that adequately safeguarded funds and prevented misuse.
The auditee administered the grant funds we reviewed in accordance with HUD regulations, expended funds for eligible planning and administrative expenses, and continued to maintain a financial management system that adequately safeguarded funds and prevented misuse. However, several issues require HUD's attention. Specifically, (1) the Chinatown Clean Streets program subrecipient was reimbursed $508,361 for costs that were not adequately supported at the time of audit, (2) $19,643 was disbursed for costs related to an auditee division for which other sources of funding were available, and (3) the Affordable Housing subrecipient monitoring procedures to increase assurance of compliance with a 30-year affordability requirement had not been finalized.

We recommend that HUD's General Deputy Assistant Secretary for Community Planning and Development direct the auditee to (1) obtain and review documentation substantiating the $508,361 reimbursed to the Chinatown Clean Streets program subrecipient for its nonprofit contractor's expenditures and recover any amounts not supported, (2) reimburse $14,603 ($19,643 less $5,040 already recovered) to the HUD CDBG Disaster Recovery Assistance fund from other than HUD funds so that these funds can be available for administration and planning expenses, and (3) ensure that its Affordable Housing program subrecipient finalizes monitoring procedures to enhance controls over compliance with the 30-year period affordability requirement.