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We audited the State of New York’s Community Development Block Grant Disaster Recovery-funded New York Rising Buyout and Acquisition program.  We initiated this audit due to concerns related to whether properties purchased were substantially damaged.  The objective of this audit was to determine whether the State ensured that properties purchased under the acquisition component of the program met applicable U.S. Department of Housing and Urban Development (HUD), Federal, and State requirements.

The State did not ensure that properties purchased under the acquisition component of its program met eligibility requirements.  Specifically, it did not ensure that properties (1) were substantially damaged and (2) complied with flood hazard requirements.  Further, it may have improperly purchased properties that did not comply with flood insurance requirements.  These deficiencies occurred because the State did not have adequate controls and relied on applicants and other entities to ensure compliance with requirements.  For example, the State relied on letters from local governments provided by its applicants to show that properties were substantially damaged, and it did not have a process to ensure that the substantial damage determination letters were accurate and supported.  As a result, the State disbursed more than $3.5 million for ineligible properties and incentives and more than $5.9 million for properties that it could not show met applicable requirements, and HUD did not have assurance that Disaster Recovery funds were used for their intended purpose.

We recommend that HUD require the State to (1) reimburse more than $3.5 million in settlement costs and incentives paid for properties that did not meet eligibility requirements or should not have received incentives; (2) provide documentation showing that 15 properties met requirements related to substantial damage, flood hazards, and flood insurance or reimburse more than $5.9 million paid to purchase the properties; and (3) conduct a review of the other properties purchased under its program to ensure that properties were eligible and reimburse the amount paid for any additional properties found to be ineligible.  Further, we recommend that HUD require the State to provide documentation showing that the acquisition component of its program has ended or improve its controls to ensure that properties purchased are eligible.

Recommendation Status Date Issued Summary
2019-NY-1001-001-A Open March 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to reimburse from non-Federal funds the $2,595,127 paid to purchase six properties that were not substantially damaged. Further, the State should identify and reimburse from non-Federal funds any additional Disaster Recovery funds used to acquire and dispose of the properties.
2019-NY-1001-001-B Open March 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to reimburse from non-Federal funds the $783,571 paid to purchase two properties that did not comply with flood hazard requirements and for which the State did not have sufficient documentation to show that the properties were substantially damaged. Further, the State should identify and reimburse from non-Federal funds any additional Disaster Recovery funds used to acquire and dispose of the properties.
2019-NY-1001-001-C Open March 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to support the hardship letter provided for a property located outside the 500-year floodplain and documentation to show that the property was substantially damaged or reimburse from non-Federal funds the $435,069 in settlement costs paid to purchase the property. Further, the State should identify and reimburse from non-Federal funds any additional Disaster Recovery funds used to acquire and dispose of the property.
2019-NY-1001-001-D Open March 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to reimburse from non-Federal funds the $183,500 in incentives paid to a homeowner that failed to maintain flood insurance.
2019-NY-1001-001-E Open March 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that the five properties for which the homeowners failed to maintain flood insurance were eligible for assistance and documentation to show that the properties were substantially damaged or reimburse from non-Federal funds the $1,336,883 paid to purchase the properties, including incentives for one property. Further, the State should identify and reimburse from non-Federal funds any additional Disaster Recovery funds used to acquire and dispose of the properties.
2019-NY-1001-001-F Open March 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation to show that the remaining nine properties were substantially damaged or reimburse from non-Federal funds the $4,158,836 paid to purchase the properties. Further, the State should identify and reimburse from non-Federal funds any additional Disaster Recovery funds used to acquire and dispose of the nine properties.
2019-NY-1001-001-G Open March 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to conduct a review of the universe of properties purchased through the acquisition component of its program to ensure that properties were eligible and reimburse from non-Federal funds the Disaster Recovery funds used in connection with any additional properties found to be ineligible. For example, the State’s review could include verification that (1) its files contained the required substantial damage letters, (2) the letters provided by applicants reflected the most recent substantial damage determination made by local officials, (3) substantial damage determinations were adequately supported, (4) properties met flood hazard requirements, and (5) properties were not FEMA-noncompliant.
2019-NY-1001-001-H Open March 29, 2019 We recommend that HUD’s Deputy Assistant Secretary for Grant Programs require the State to provide documentation showing that the acquisition component of its program has ended or improve its controls over the program to ensure that properties purchased are eligible. This recommendation includes but is not limited to updating its policies and procedures and implementing verification processes to ensure that it verifies information provided by applicants and other entities.