We audited the City of New York’s Infrastructure Rehabilitation and Reconstruction of Public Facilities Program. We selected this program for review because the City had allocated nearly $91 million to the program and disbursed more than $59.6 million as of October 31, 2017, and as part of our ongoing oversight of the U.S. Department of Housing and Urban Development’s (HUD) Disaster Recovery programs. Our objective was to determine whether the City used Disaster Recovery funds under its program for eligible and supported costs.
We found that the City did not always use Disaster Recovery funds under its program for eligible and supported costs. Specifically, for one of two projects reviewed, the City did not (1) have sufficient documentation to show that the use of salary multipliers for overhead and profit, resulting in $594,012 in additional costs, was supported and eligible; (2) maintain adequate documentation to show compliance with Davis-Bacon and Related Acts requirements; and (3) identify billing and payroll errors made by subcontractors, including $1,198 in overpaid wages and $2,689 in wages that may have been overpaid. These deficiencies occurred because the City did not fully understand how to document compliance with Federal requirements and relied on its subrecipient instead of performing a detailed review of invoices to ensure that they contained adequate documentation showing compliance with requirements. As a result, HUD did not have assurance that the City used $597,899 in Disaster Recovery funds as intended for matching requirements for other federally funded infrastructure projects, and HUD could not be assured that funds were disbursed for only eligible and supported costs that complied with applicable Federal requirements.
We recommend that HUD require the City to (1) provide documentation to show that the $596,701 disbursed due to the use of multipliers and a higher than required overtime rate was for eligible, reasonable, necessary, and supported costs or reimburse its program from non-Federal funds; (2) reimburse its program from non-Federal funds $1,198 for overpaid wages; (3) provide documentation showing that it has strengthened its invoice review process to ensure that costs are eligible and supported before disbursing Disaster Recovery funds; and (4) provide documentation showing compliance with Davis-Bacon requirements and that restitution has been made to affected workers for any underpayments identified.