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We completed an audit of the City of Rochester's (City) asset control area (ACA) program as part of a nationwide audit of the U.S. Department of Housing and Urban Development's (HUD) monitoring of ACA participants. The objective of the audit was to determine whether the City administered its ACA program in compliance with program requirements to increase homeownership for low and moderate income borrowers and contribute to the revitalization of blighted communities.

The City's ACA program generally met the program objectives for increasing homeownership for low and moderate income borrowers and contributed to the revitalization of blighted communities, but was not always administered in compliance with program requirements. Specifically, the City did not (1) obtain HUD approval for a nonprofit organization to participate in its ACA program; (2) resell ACA properties within the required timeframe; (3) sell an ACA property within the price limit imposed by HUD; (4) obtain HUD's approval for conflict-of-interest issues; and (5) accurately calculate or report to HUD net development costs for each ACA property.

We recommended that the Assistant Secretary for Housing-Federal Housing Commissioner instruct the City to (1) develop procedures to ensure that any nonprofit hired to administer or participate in the ACA program is approved by HUD in accordance with ACA policies, (2) ensure that ACA properties are resold within the established timeframe, (3) buy down the mortgage for the ACA property that was resold to the eligible purchaser for $4,700 more than the established limit, (4) cease participation with individuals or entities that have conflict-of-interest relationships unless HUD approval can be obtained, (5) establish procedures to ensure accurate calculation and reporting of net development costs and compliance with program requirements, and (6) review the noncompliance issues identified in the report and make a decision on whether to impose sanctions in accordance with section 8 of the ACA standard operating procedures.