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We audited the City of Chattanooga’s Emergency Solutions Grants (ESG) program.  We selected the City for review in accordance with our annual audit plan.  Our audit objective was to determine whether the City administered its ESG program in accordance with HUD’s requirements.

The City did not always administer its ESG program in accordance with HUD’s requirements.  Specifically, it did not ensure that program expenditures were adequately supported, payments to subrecipients and drawdowns from HUD’s system were timely, and matching requirements for the subrecipients were sufficiently reviewed.  These conditions occurred because the City (1) lacked adequate policies and procedures and an understanding of HUD’s ESG program requirements, (2) did not cross-train its staff, and (3) failed to adequately monitor its subrecipients.  As a result, nearly $14,000 in program disbursements was not adequately supported, and HUD and the City lacked assurance that matching requirements were sufficiently met.

We recommend that the Director of HUD’s Knoxville, TN, Office of Community Planning and Development require the City to (1) support or reimburse HUD and its ESG program participants nearly $14,000 from non-Federal funds for inadequately supported program expenditures and untimely drawdowns, (2) provide adequate training to staff associated with the administration of the ESG program, and (3) implement adequate policies and procedures for the timely issuance of subrecipient payments and the complete and consistent monitoring of subrecipients’ matching requirements.