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We audited the City of Memphis’ Community Development Block Grant (CDBG) and HOME Investment Partnerships Program-funded Housing and Rehabilitation Program (HARP) as part of the activities in our 2013 fiscal year annual audit plan and based on a referral from the Office of Inspector General’s Office of Investigation.  Our audit objective was to determine whether the City used its CDBG and HOME funds for eligible activities and complied with the U.S. Department of Housing and Urban Development’s (HUD) and its own requirements when administering its HARP activities.

The City’s administration of its HARP activities for performing home repairs and resolving code violations, as related to its policies and procedures, was not effective.  Specifically, inspectors approved payments for home repairs that did not meet rehabilitation standards or were not properly repaired as contracted.  These conditions occurred because the City did not properly write its rehabilitation specifications for contractors and perform inspections as required.  In addition, the City did not follow its policies and procedures to ensure that the contractors performed acceptable repairs.  Consequently, it permitted more than $400,000 in CDBG and HOME funds to be used contrary to program requirements for 61 rehabilitation contracts for work that was either not completed or not completed correctly and placed undue hardships on the property owners.

We recommend that the Director of HUD’s Knoxville Office of Community Planning and Development require the City to (1) reimburse or support more than $400,000 to the City’s CBDG or HOME program line of credit accounts from non-Federal funds for the repairs not completed or corrected and refrain from awarding future contracts.  Also, we recommend that the Director reinspect the homes to ensure that all deficiencies have been corrected.