We audited the City of Houston’s Community Development Block Grant (CDBG) Disaster Recovery downpayment assistance program. The program allowed the City to provide up to $45,000 in downpayment assistance for homebuyers in low to moderate income areas within the City limits. We initiated the audit as part of the U. S. Department of Housing and Urban Development (HUD), Office of Inspector General’s (OIG) annual audit plan to implement oversight of Disaster Recovery funds to prevent fraud, waste, and abuse. Our objective was to determine whether the City had adequate internal controls to ensure that it administered the program funds in accordance with applicable HUD requirements, laws and regulations, and State of Texas program requirements.
The City could have better planned and implemented its program. Further, it did not always administer program funds in accordance with applicable rules and regulations. Specifically, the City did not limit downpayment assistance to persons and properties that most needed the assistance, was overly generous with its assistance, and violated its contract with the State and various Federal rules and regulations. The State detected many of the City’s violations and did not reimburse the City for the associated expenses. However, the City did not award funds fairly because one of its officials granted unwarranted and unauthorized waivers of program requirements. These conditions occurred because City officials erroneously concluded that their plan for providing downpayment assistance with the program funds would be the best use of those funds. Further, City officials either did not know program rules or knew them but believed that the City had adequate internal controls to ensure that the funds would be used in accordance with its contract, Federal rules and regulations, and State requirements.
We recommend that the Deputy Assistant Secretary for Grant Programs require the City to ensure that it submits for the State’s approval an exception policy that specifically addresses all waivers granted by the City.