We completed an audit of the Union County Consortium's (County) administration of its Community Development Block Grant (CDBG) program to determine whether the County (1) disbursed CDBG funds efficiently and effectively in accordance with its submission to HUD and in compliance with HUD rules and regulations, (2) maintained a financial management system to adequately safeguard funds, and (3) established adequate controls to ensure that program activities were administered properly and complied with CDBG national objectives.

The County did not always disburse CDBG funds in accordance with regulations, maintain a financial management system that always safeguarded funds, or establish sufficient controls to ensure that program activities were properly administered and complied with CDBG national objectives. Specifically, weaknesses in the County's financial and monitoring controls caused the County to (1) draw down CDBG funds instead of first using available program income, (2) transfer program income and CDBG funds for non-CDBG uses, (3) use program income for unsupported items, (4) inadequately record and report program income, and (5) inadequately monitor its consultant.

We recommend that the Director of HUD's New Jersey Office of Community Planning and Development instruct the County to (1) establish controls to ensure that available program income is used before drawing down funds from HUD's line of credit, (2) reimburse the program income account $463,793 from nonfederal sources if the County cannot provide supporting documentation, (3) implement policies and procedures to ensure that the program income is accurately recorded and reported, and (4) instruct its consultant to remit $31,851 to the County to be put back into the County's line of credit since the funds were not disbursed.