We audited the City of New Orleans’ Community Development Block Grant Disaster Recovery (CDBG-DR) assistance funds awarded to the City as a result of damages caused by Hurricane Isaac. Our objective was to determine whether the City maintained adequate procurement controls and financial management systems and administered its CDBG-DR funds in accordance with Federal guidelines, HUD regulations, and other requirements.
We found that the City did not always maintain adequate procurement controls and financial management systems or administer its CDBG-DR funds in accordance with Federal guidelines, HUD regulations, and other requirements. Specifically, it did not always (1) prepare independent cost estimates or cost analyses, (2) have documentation to support expenditures, or (3) submit timely projections to HUD or maintain a complete public Web site. These conditions occurred because the City did not understand or disregarded Federal requirements or did not have written documentation setting clear requirements for its CDBG-DR contracted work. As a result, it could not show that costs were reasonable, adequately support its contract costs, or ensure that it received the greatest overall benefit from more than $2.5 million paid to its contractors. Further, the City could not provide reasonable assurance to HUD that it had adequate procurement and financial controls for the proper administration and expenditure of its CDBG-DR funds; thus, its remaining $4.5 million in CDBG-DR grant funds was at risk of mismanagement.
We recommend that HUD require the City to (1) support or repay more than $2.5 million and develop and implement a HUD-approved written plan and checklists to correct and prevent the procurement and financial deficiencies identified, to better ensure that it spends its remaining $4.5 million in CDBG-DR funds in accordance with requirements. We also recommend that HUD require the City to (1) amend its contracts to clarify the type of documentation needed to support invoices, (2) maintain complete CDBG-DR procurement and expenditure files, (3) obtain training concerning procurement and CDBG-DR requirements, and (4) maintain a required log of its Web site updates and submit the log to HUD periodically for review to ensure that it completes the updates in a timely manner and in accordance with the requirements.