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We audited the Texas General Land Office’s Community Development Block Grant Disaster Recovery (CDBG-DR) grant that it used to rehabilitate or reconstruct 125 homes affected by Hurricane Ike in 2008.  Texas General Land Office contracted with the Deep East Texas Council of Governments, in Jasper, TX, to operate its program.  We reviewed Texas General Land Office and its subrecipient as part of our annual audit plan to review CDBG-DR programs.  Our objective was to determine whether Texas General Land Office administered its CDBG-DR program in accordance with U.S. Department of Housing and Urban Development (HUD) requirements; specifically, whether it ensured that its subrecipient met its contract requirements.

We found that the Texas General Land Office generally administered its CDBG-DR program in accordance with HUD requirements.  However, it did not ensure that its subrecipient administered its CDBG-DR grant in a prudent and cost-effective manner.  In addition, Texas General Land Office’s affordability period for its disaster program did not appear to be reasonable based on those of its other disaster programs that its subrecipient administered and the government’s substantial CDBG-DR grant fund investment.  These conditions occurred because Texas General Land Office did not establish consistent guidelines to protect the significant government investment.  As a result, Texas General Land Office and its subrecipient did not effectively use government funds or assist as many homeowners as they could have.  In addition, the government investment benefited a relatively small number of low- and moderate-income persons for a short time.  Further, Texas General Land Office and its subrecipient placed participants at risk of incurring increased property tax bills that they may not be able to afford.

We recommend that the Director of the Office of Block Grant Assistance require Texas General Land Office to (1) implement appropriate controls, including limits for reconstruction and rehabilitation costs, to ensure that it uses limited government resources in a more economical and efficient manner; (2) evaluate whether its program would benefit from a longer affordability period; and (3) ensure that tax burden implications are adequately addressed, as part of the determination of whether to replace homes.