We audited the City of Mesa’s Community Development Block Grant (CDBG) program based on (1) a hotline complaint alleging CDBG noncompliance; (2) a prior U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, audit (2011-LA-1006), which determined that the City needed to improve how it administered its Neighborhood Stabilization Program 1 funds; and (3) our objective to promote fiscal responsibility and financial accountability. The audit objective was to determine whether the City administered its CDBG program funds in compliance with HUD requirements; specifically, whether it (1) awarded funds that met a CDBG national objective, (2) spent funds only for activities that were eligible and supported, and (3) adequately monitored subrecipients.
We determined that the complaint had some merit and that the City did not administer its program in accordance with HUD requirements. Specifically, the City did not always (1) ensure that its CDBG activities met a national objective or that subrecipients followed HUD’s requirements or its own subrecipient agreements, (2) maintain adequate documentation, and (3) implement adequate internal controls. This condition occurred because the City did not always have sufficient knowledge of and disregarded HUD’s and its own requirements when it administered its CDBG program. As a result, the City was unable to support that it spent more than $3.1 million on CDBG activities that met HUD requirements. There was also little assurance that the City would use the additional $225,000 allocated for similar activities in compliance with HUD requirements.
We recommended that the Director of HUD’s San Francisco Office of Community Planning and Development require the City to (1) support the eligibility of more than $3.1 million in CDBG costs or repay its program from non-Federal funds, (2) suspend $225,000 in activities until it can show that the activities meet program requirements, (3) implement its policies and procedures that require adequate documentation to be maintained, and (4) develop and implement adequate and effective internal controls.