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We audited the City of Mesa’s (grantee) Neighborhood Stabilization Program (NSP1) grant to determine whether the grantee administered the grant in accordance with HUD’s program requirements. The audit was started primarily because the Office of Inspector General’s (OIG) audit plan includes objectives to review Housing and Economic Recovery Act grantees and because staff from the U.S. Department of Housing and Urban Development’s (HUD) Office of Community Planning and Development raised general concerns about the nonprofit subgrantee selected by the grantee to administer a portion of the grant.
We found the grantee’s procedures for administering its NSP1 grant were not adequate to ensure that HUD’s program requirements were met. The grantee (1) did not maintain adequate controls over construction contractor draw requests, (2) failed to ensure the eligibility of labor costs claimed by its subrecipient, (3) did not require payment and performance bonds for construction contracts as required, (4) charged unsupported employee salary costs to the NSP1 grant, and (5) failed to properly enforce the program’s continued affordability requirements.

We recommend that the Acting Director of the San Francisco Office of Community Planning and Development require the grantee to implement procedures to ensure that NSP1 requirements are met and to ensure that $328,207 in grant funds could be put to better use. In addition, we recommended the grantee be required repay $22,344 in ineligible costs charged to the grant.