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We audited the County of Beaver, Beaver Falls, PA’s administration of the U.S. Department of Housing and Urban Development’s (HUD) HOME Investment Partnerships Program funds.  We audited the County because we received a complaint alleging misuse of Federal funds resulting from a potential conflict of interest involving a County employee.  Our audit objective was to determine whether the County administered its HOME program in accordance with applicable HUD and Federal requirements.

The County did not always administer its HOME program in accordance with applicable HUD and Federal requirements.  The allegations in the complaint had merit.  The County allowed an apparent conflict of interest to exist.  It also (1) did not commit program funds to the owner of an assisted property, (2) did not adequately evaluate developers’ sources and uses of funds, (3) did not execute and record a mortgage, (4) did not impose deed restrictions, (5) did not determine whether its potential business partners were excluded or disqualified from participating in a HOME-funded project, (6) made payments for expenses that were not supported with adequate documentation, (7) did not ensure that program documentation was accurate and complete, and (8) did not enforce the terms of its loan agreement.  These deficiencies occurred because the County did not establish and implement controls to ensure that it complied with applicable program requirements.  As a result, it could not adequately support disbursements totaling $519,284.

We recommended that HUD direct the County to (1) execute and record a mortgage, (2) impose and record deed restrictions, (3) provide documentation to support its use of $519,284 in program funds or reimburse its program from non-Federal funds for any amount that it cannot support, and (4) establish and implement controls to ensure that it complies with applicable program requirements.  We also recommend that HUD (1) evaluate the apparent conflict-of-interest situation identified in this report, determine whether a conflict of interest existed, and pursue administrative sanctions if warranted; and (2) provide technical assistance to the County to ensure that it administers its HOME program in accordance with applicable HUD and Federal requirements.