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The U.S. Department of Housing and Urban Development's (HUD) Office of Inspector General audited the State of Mississippi's (State) calculation of homeowners' grant amounts and monitoring of the implementation of its Homeowner's Assistance Grant Program. Our audit was part of the activities in our annual audit plan. Our objectives were to determine whether the State appropriately calculated the homeowners' grant amounts and monitored the implementation of its Homeowner's Assistance Grant Program.

The State did not appropriately calculate the homeowners' grant amounts when it allowed its contractor, Reznick Group, to deduct unnecessary costs such as unpaid state income taxes, state unemployment taxes, and local ad valorem or property taxes from the homeowners' grant amounts. These problems occurred because Reznick Group relied on the delinquent taxes shown on the title reports provided by its subcontractor and failed to confirm with state and local tax agencies the total delinquent taxes owed by the homeowners. As a result, the homeowners did not receive the maximum benefits from the program, which was designed to assist them in rebuilding or repairing their damaged homes. In addition, the homeowners with underpaid delinquent taxes still do not have clear titles to their properties.

The State also did not monitor Reznick Group's implementation of its Homeowner's Assistance Grant Program. This deficiency occurred because the Mississippi Development Authority (Authority) did not have adequate staff to perform the monitoring and had not established its monitoring processes as required. The lack of monitoring may potentially result in noncompliance with federal requirements such as ineligible and/or unsupported program expenses being charged against the 2006 Community Development Block Grant disaster recovery funds.

We recommend that the U.S. Department of Housing and Urban Development's (HUD) general deputy assistant secretary for community planning and development require the Authority to immediately (1) cease withholding or deducting unnecessary tax debts from homeowners' grant amounts, (2) recalculate the grant amounts for those homeowners who have already received assistance and refund such homeowners a total of $159,172 in state and/or local taxes inappropriately withheld or deducted from their grants, and (3) confirm with state and local tax agencies the delinquent taxes the homeowners owed such agencies.

We also recommend that the general deputy assistant secretary require the Authority to immediately establish and implement monitoring procedures and controls for the Homeowner's Assistance Grant Program to ensure that program requirements are met.