HUD OIG performed an audit of the State of Alabama Department of Economic and Community Affairs, Neighborhood Stabilization Program (NSP1) in Montgomery, AL, to assess issues raised in a hotline complaint. The complaint alleged that the State of Alabama misused its NSP1 funds by not following the regulations and statutes governing the NSP1 program to ensure that it used program funds for eligible and supported purposes. The State was awarded a $37 million grant authorized under the Housing and Economic Recovery Act of 2008. The objective of our audit was to determine whether the grantee properly used its NSP1 funds as required by the regulations and statutes governing program income and expenditures.
The grantee did not ensure that it disbursed program income before requesting additional program fund withdrawals from the U.S. Treasury. In addition, it did not report accurate program income in HUD’s Disaster Recovery Grant Reporting system as required by Federal regulations. By not disbursing program income before requesting additional program fund withdrawals from the U.S. Treasury, the grantee could not assure HUD that it used the appropriate amount of program income before using grant funds. As a result, the grantee had grant funds of $304,043 that could be put to better use.
The grantee did not ensure that its subgrantees drew program funds for supported expenditures. Without supporting documentation to substantiate the actual expenses, the grantee lacked assurance that the expenditures were accurate and program related. As a result, the grantee drew $8,540 in grant funds for unsupported expenditures
OIG recommended that the Director of HUD’s Birmingham Office of Community Planning and Development require the grantee to (1) use program income of $304,043, or the current amount available before drawing additional grant funds from the U.S. Treasury, (2) develop and implement policies and procedures to ensure that the grantee identifies and tracks program income so that it is used before the grantee requests additional cash withdrawals from the U.S. Treasury, (3) reconcile the Disaster Recovery Grant Reporting system to accurately reflect the grantee’s use of its grant funds and program income, (4) provide supporting documentation for the $8,540 charged to its program or repay the U.S. Treasury account from non-Federal funds the amount that it cannot support, and (5) develop and implement policies and procedures for its disbursement review and approval process.