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HUD OIG performed an audit of the Mobile Housing Board, which serves as both the public housing agency and the administering agency for the City of Mobile, AL’s HOME Investment Partnerships Program(HOME) and Community Development Block Grant (CDBG) program. We performed the audit based on a request from the Assistant Secretary, Community Planning and Development. The Assistant Secretary, along with the Director of the Office of Affordable Housing, expressed substantial concerns regarding the eligibility of the HOME and CDBG funds expended on the Housing Board’s HOPE VI project, as well as the Housing Board’s administration of the HOME and CDBG programs related to its public housing HOPE VI project, given the Housing Board’s dual role as administrator of the programs and the public housing authority. The purpose of the audit was to determine whether the City adequately monitored the Housing Board and whether the Housing Board’s controls and procedures to separate its public housing agency operations from its administration of HOME and CDBG programs were effective in preventing and detecting ineligible and unsupported costs in its HOPE VI redevelopment.

The City of Mobile did not perform annual monitoring of the Housing Board to ensure that its HOME funds were used in accordance with all program requirements. Cost allocation plans were not developed by the Housing Board to properly allocate or prorate its HOME program costs for phases III and IV. The Housing Board arbitrarily charged more than $1 million to phases III and IV. As a result, the Housing Board disbursed $839,713 in unsupported costs on both phases. The Housing Board used $339,657 of its HOME funds to pay for ineligible costs in all four phases of its HOPE VI redevelopment project. As a result, $339,657 in HOME funds was not used as intended under the HOME program.

OIG recommended that the Director for Community Planning and Development ensure that the City of Mobile establishes and maintains a subrecipient agreement with the Housing Board pursuant to HUD requirements; develops procedures to monitor the Housing Board at least annually; and reallocates the excessive $1.9 million in HOME and CDBG funds to other eligible activities and program recipients. OIG also recommended that the Director for Community Planning and Development require the Housing Board to support the $839,713 in HOME funds it charged to phases III and IV with either a cost allocation or proration plan, repaying any amount that cannot be supported; lower the sales prices of the HOME units in phase I to within HUD requirements and ensure that they are occupied by qualified low-income persons in a timely manner or repay the $156,004 in ineligible HOME funds; and recapture the $183,653 in HOME funds used to pay for ineligible costs for phases II, III, and IV of the HOPE VI redevelopment.