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HUD OIG audited the Municipality of Arecibo’s (Municipality) HOME Investment Partnerships Program (HOME). We selected the Municipality for review as part of our strategic plan based on the results of a previous audit of the Puerto Rico Department of Housing’s (Department) HOME program, which disclosed that the Department disbursed HOME funds for land acquisition that did not meet program requirements at a 288-unit housing project named Bello Monte. During the audit, we found documentation indicating that the Bello Monte project also received HOME funds from the Municipality. The objectives of this audit were to determine whether the Municipality committed and/or disbursed HOME funds for the Bello Monte housing project and whether it met program objectives.

The Municipality committed and disbursed more than $115,000 in HOME funds for the purchase of land that could not be used to provide housing for low- and very low-income families. The commitment and disbursement of HOME funds to acquire land not intended to provide affordable housing was not consistent with program requirements and was an ineligible use of program funds.

The Municipality disbursed more than $483,000 for the Bello Monte housing project, which reflected slow progress without assurance that the project was feasible. The Municipality executed an agreement in July 2006 with a CHDO for site acquisition and construction of the Bello Monte housing project. According to the agreement, the construction of the housing units should have started in July 2007, with a completion date of July 2011. However, as of November 2010, the construction had not started. According to HUD, the project had encountered problems in complying with environmental requirements from a local agency. The Municipality failed to ensure the timely completion of the activity. As a result, HUD had no assurance that this activity provided the intended benefits and met HOME objectives.

HUD’s system contained inaccurate information concerning the Bello Monte project. This information included incorrect funding amounts. The awarded amount shown in HUD’s system was incorrect, resulting in an overstatement of HOME commitments of more than $45,000. As a result, more than $45,000 in HOME funds was not available for use and to meet program objectives.

OIG recommended that HUD require the Municipality to repay more than $52,000 in ineligible expenditures, and reprogram and put to better use more than $108,000 in unexpended funds obligated for ineligible purposes or that were overstated. HUD should also determine the eligibility of the $431,489 disbursed for the Bello Monte housing project with signs of slow progress and reevaluate the feasibility of this activity.