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The U.S. Department of Housing and Urban Development – Office of Inspector General audited the City of Colorado Springs (City) in response to a citizen’s complaint received by our office.  The complainant alleged the City committed HOME Investment Partnerships Program (HOME) funds without written agreements, delayed the reporting of Community Development Block Grants (CDBG) program income in a timely manner, and improperly charged some of its program and administrative costs to its HUD grants.  Our objective was to determine whether the allegations were valid.

The allegations related to commitment of HOME funds without written agreements were valid. The City fabricated a contract to avoid deobligation of more than $68,000 in HOME funding.  In addition, the City committed four projects totaling $1.625 million in HOME funds without written agreements.

The allegations related to the failure to report CDBG program income in a timely manner were valid.  The City received CDBG program income on January 4, 2013 but did not deposit the funds until February 14, 2013 in order to avoid a deficiency in HUD’s January 31, 2013 review of the City’s timely expenditure of CDBG funds.

The allegations related to improper charging of program and administrative costs were also valid.  The City improperly charged at least 50 percent of the salaries for two of its administrative staff as direct program costs.  In addition, the City paid more than $20,000 in HOME and CDBG funds for the maintenance and cleaning of a vacant office building.

We recommend that HUD, 1) recapture $68,681 from the City’s non-Federal funds for the portion of the contract the City’s former executive director fabricated in order to stop HUD from recapturing funds due to a shortfall, 2) require that the City provide support showing the $20,304 used for the vacant office building actually supported eligible activities.  For any funds not supported, recapture the funds from non-Federal funds, and 3) take appropriate administrative actions, up to and including debarment, against the City’s former executive director for their actions in providing fabricated documents to HUD which resulted in HUD halting the recapture of non-committed funds.