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We audited the State of New Jersey’s Community Development Block Grant Disaster Recovery-funded Sandy Homebuyer Assistance program.  We conducted the audit because (1) it was the State’s only home-buyer assistance program, (2) the State had spent a high percentage of its allocated funds, and (3) reviews performed by the State auditor and the State’s disaster recovery integrity monitor identified potential issues.  Our objective was to determine whether the State disbursed disaster funds for its Sandy Homebuyer Assistance program to assist eligible home buyers in accordance with applicable program requirements.

The State did not always disburse disaster funds for its program to assist eligible home buyers in accordance with applicable program requirements.  Of 65 home-buyer files reviewed, 12, with loans totaling $600,000, showed that the home buyers did not meet all program eligibility criteria and therefore, $558,000 of the $600,000 disbursed was ineligible.  Based on our review, we projected that at least 39 of the 347 loans that the State issued, and more than $1.7 million of the nearly $16.4 million that it disbursed for the program, could be ineligible.  This condition occurred because the State lacked procedures and its staff lacked training to ensure that home buyers complied with income eligibility and property ownership requirements.  The State also disbursed $429,500 to nine home buyers in Atlantic County whose income exceeded the U.S. Department of Housing and Urban Development’s (HUD) low- and moderate- income limits for 2013.  This condition occurred because the State made a clerical error when it established HUD’s 2013 income limits for Atlantic County.  As a result, the State’s use of nearly $1 million in program funds to assist 21 home buyers was ineligible because the home buyers did not meet all of the program eligibility requirements.

We recommend that HUD direct the State to repay HUD from non-Federal funds for nearly $1 million disbursed to 21 ineligible home buyers.