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The Director of the U. S. Department of Housing and Urban Development’s (HUD) Oklahoma City Office of Community Planning and Development requested that we perform a corrective action verification of recommendation 1B in audit report 2008-FW-1012, The City of Tulsa, OK, Allowed Its Largest Subrecipient To Expend $1.5 Million in Unsupported CDBG Funding. We expanded the review to include recommendation 1C. The purpose of the review was to determine whether HUD closed recommendations 1B and 1C in accordance with requirements and actions taken to resolve the underlying findings.

Based upon the evidence reviewed, HUD closed the recommendations before the City of Tulsa required the Tulsa Development Authority to implement specific plans to dispose of land purchased with Community Development Block Grant (CDBG) funds and remit program income earned on the land. The Authority still held land valued at more than $3.1 million without specific plans for its use and retained at least $42,000 in program income. In addition, the Authority did not provide supporting documentation to ensure that it correctly computed and remitted program income to the City for two properties which it sold.

Instead of reopening recommendation 1B, we recommended that HUD require the City to repay HUD the higher of the current cost or market value for the land the Authority still holds and either support or repay more than $2 million for the two properties it sold without supporting calculations of program income remitted. Due to the inability of the City to use these funds for eligible CDBG activities, the City should return the funds to HUD. HUD should also require the City to report monthly on its actions to return the funds and obtain prior HUD approval before funding future land acquisitions with CDBG funds. Further, HUD should reopen recommendation 1C concerning the remittance and use of program income.