We audited the State of Maryland's (State) HOME Investment Partnerships program (HOME) as part of our annual audit plan. We chose to audit the State's HOME-assisted single-family owner-occupied rehabilitation program based on deficiencies identified in a sample of work-write ups reviewed during a previous review of the State's HOME program. This audit is the second phase of our review of the State's HOME program. Our overall audit objective was to determine whether the State administered its HOME-assisted single-family owner-occupied rehabilitation program (program) in accordance with U.S Department of Housing and Urban Development (HUD) regulations and its own requirements.

The State did not ensure that its single-family owner-occupied rehabilitation projects (projects) met HUD regulations and/or the State's property standards. As a result, it used $42,290 in program funds for a project that did not meet federal regulations and was unable to support its use of $2.3 million in program funds for projects.

We recommend that the Director of HUD's Baltimore Office of Community Planning and Development require the State to reimburse its program $42,290 from nonfederal funds for the ineligible project, provide documentation to support its use of $2,071,462 or reimburse its program from nonfederal funds, ensure that housing rehabilitation work and required repairs are completed in accordance with HUD's or the State's standards or reimburse its program $205,372 from nonfederal funds, and implement adequate procedures and controls to address the findings cited in this audit report. These procedures and controls should help ensure that $74,648 in program funds is appropriately used over the next year for projects that comply with HUD's regulations and the State's standards.