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We audited the U.S. Department of Housing and Urban Development’s (HUD) Community Development Block Grant program’s direct home-ownership assistance activities.  We conducted the audit because it was included in our audit plan based on recent HUD, Office of Inspector General, audits that found issues with home-ownership assistance in the HOME Investment Partnerships program.  Our audit objective was to determine whether HUD had adequate oversight of Community Development Block Grant direct home-ownership assistance activities.

HUD did not always provide adequate oversight of grantees’ administration of Block Grant direct home-ownership assistance activities and a sufficient explanation of program requirements.  The eight responsible field offices monitored seven of the nine grantees that we reviewed, but none monitored the grantees’ home-ownership program.  Grantees did not always follow program requirements for calculating household income, providing assistance to borrowers consistent with maximum downpayment assistance limits, ensuring properties complied with lead-based paint requirements, and providing assistance to home buyers that met the low- and moderate-income national objective.  These conditions occurred because field offices determined that other programs posed a greater risk, HUD’s requirements were not always clear and field office staff interpreted statutory program requirements differently, and HUD had not provided grantees sufficient guidance to properly calculate household income.  As a result, grantees made unsupported payments totaling $227,260, and HUD lacked assurance that grantees properly administered the program in accordance with requirements.

We recommend that HUD (1) direct responsible field offices to require the grantees identified by the audit to either provide documentation to support $227,260 in unsupported payments or reimburse their programs from non-Federal funds for any costs that they cannot support, (2) provide guidance to field office staff to clarify the difference between a principal reduction and a downpayment for direct home-ownership assistance activities, (3) develop and implement guidance to communicate appropriate ways for grantees to calculate household income, and (4) reemphasize to the field offices the importance of using the correct monitoring guide to monitor direct home-ownership assistance activities.