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"HUD OIG performed the seventh of the ongoing audits of the Lower Manhattan Development Corporation’s (LMDC’s) administration of the $2.783 billion in Community Development Block Grant (Block Grant) Disaster Recovery Assistance funds provided to the State of New York following the September 11, 2001, terrorist attacks on the World Trade Center in New York City.  HUD OIG’s audit objectives were to determine whether the LMDC (1) disbursed Block Grant Disaster Recovery Assistance funds in accordance with the guidelines established under HUD’s approved partial action plans, (2) expended Block Grant Disaster Recovery Assistance funds for eligible planning and administrative expenses in accordance with applicable laws and regulations, and (3) had a financial management system in place that adequately safeguards funds.

HUD OIG found that expenditures were misclassified in HUD’s Line of Credit Control System and a consultant’s fees were overpaid.  This occurred because of weaknesses in the auditee’s procedures for classifying funds drawn down from the Line of Credit Control System and reimbursing a consultant’s fees.  Consequently, funds may not be available to drawdown from the correct budget line items and could be used for other than their intended purposes.

HUD OIG recommended that HUD’s general deputy assistant secretary for community planning and development require LMDC to (1) reclassify costs to the appropriate HUD Line of Credit Control System program budget line item, (2) reimburse funds to the World Trade Center Memorial and Cultural program, and (3) strengthen controls over the invoice approval process to ensure consultants are reimbursed in accordance with the terms of agreements and other applicable requirements.