We audited the City of Worcester’s administration of its Community Development Block Grant (CDBG) program. We selected the City for review based on a request from the U.S. Department of Housing and Urban Development (HUD), Boston, MA, Office of Community Planning and Development. The objectives of the audit were to determine whether the City established adequate controls to ensure that the CDBG activities were eligible and supported and met a national objective and whether the City exceeded the 15 percent public service cap.
The City did not properly administer its CDBG program. Specifically, it did not (1) ensure that costs paid for under the City’s affordable housing, public service, and code enforcement activities were eligible and supported; (2) document and could not show that a national objective was met for several of the activities reviewed; (3) ensure that the public service cap of 15 percent was not exceeded; and (4) ensure that the contracted CDBG revolving loan fund was administered effectively and efficiently and in accordance with HUD regulations. These conditions were caused by a lack of (1) proper internal controls over activity classification, identification of a national objective, and cash disbursements; (2) adequate management and a management plan; (3) City policies and procedures related to CDBG administration and record keeping, resulting in inconsistent guidance; and (4) oversight of subrecipients. As a result, the City paid more than $2.2 million in ineligible costs and more than $4 million in unsupported costs and must reallocate $153,268 in unexpended CDBG funds to other eligible CDBG activities.
We recommend that the Director of the HUD Boston Office of Community Planning and Development instruct the City to (1) repay more than $1.9 million in CDBG program funds that was expended for ineligible activities and $298,303 that was expended over the CDBG 15 percent public service cap, (2) provide documentation to support that more than $4 million in CDBG program funds was expended for eligible activities and used for eligible loans that met a national objective, and (3) reallocate $153,268 to be used for other eligible CDBG activities.