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September 23, 2008
  • Community Planning and Development
2008-DE-1003
ig0881003.pdf

We audited the State of Colorado (State), Division of Housing's (Division) Community Development Block Grant (CDBG) program to determine whether the Division (1) awarded CDBG funds to ineligible projects and (2) properly identified and reported program income data.

The Division used CDBG funds for ineligible and questionable projects. This condition occurred because management's main focus was on selecting projects that were for the greater good of the state, even if some projects did not fully comply with the U.S. Department of Housing and Urban Development's (HUD) requirements. As a result, the Division awarded more than $4.6 million in grants that did not effectively meet the needs of the intended nonentitlement low- and moderate-income beneficiaries.

The Division did not effectively identify, report, or classify program income generated by its subrecipients, because the Division did not have adequate controls. As a result, neither the Division nor HUD had assurance that subrecipients used program income for its intended purpose. In addition, the Division did not realize the full benefits of the allowable amounts for planning and administrative costs and for public service activities.

We recommend that HUD require the Division to repay from nonfederal funds the $1.7 million in ineligible grants; require the Division to develop and implement effective controls over establishing and administering projects and identifying and recording program income. We also recommend that HUD determine the eligibility of the questioned costs and require the Division to repay from nonfederal funds the amounts determined to be unsupported or unnecessary.