The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audited the State of Kansas' (State) Neighborhood Stabilization Program I (NSP I). Our audit objectives were to determine whether the State properly obligated its NSP I funds and to determine whether the State's contracts contained all of the required provisions. We concluded the State improperly obligated more than $12 million of its NSP I funds by reporting its funds as obligated in HUD's Disaster Recovery Grant Reporting system without those funds being linked to a specific address and/or household. Also, the State entered into NSP I contracts without all of the required provisions.

We recommended that the Director of the Kansas City, KS, Office of Community Planning and Development require the State to (1) implement a system to track and support its obligations as defined by HUD rules and regulations and (2) deobligate any portion of the more than $12 million in NSP I funds that has not been expended and was improperly obligated. In addition, we recommend that the State amend its NSP I contracts with its subrecipients to include the missing provisions and the additional NSP I funding awarded. Finally, we recommend that the State's NSP staff receive training regarding the required provisions of NSP I contracts.