U.S. flag

An official website of the United States government Here’s how you know

The .gov means it’s official.

Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a federal government site.

The site is secure.

The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.


As part of the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General’s (OIG) annual plan and based on the large amount of funds approved, we audited the Municipality of Arecibo’s Community Development Block Grant program.  Our main objective was to determine whether the Municipality complied with HUD regulations, procedures, and instructions related to the administration of its Block Grant program.

The Municipality’s financial management system did not properly identify the source and application of more than $1.8 million in Block Grant funds and did not support the eligibility of more than $400,000.  As a result, HUD lacked assurance that funds were adequately accounted for, safeguarded, and used for requested and eligible purposes.

The Municipality charged the Block Grant program more than $1.6 million as activity costs associated with wages without supporting the basis and reasonableness of funds charged.  Therefore, HUD had no assurance that funds were used solely for eligible purposes and that Block Grant-funded activities met program objectives.

The Municipality did not support more than $1.2 million spent in its housing rehabilitation and road reconstruction activities and did not demonstrate compliance with the Block Grant national objective.  Consequently, HUD lacked assurance that Federal funds drawn for housing rehabilitation and street improvement efforts met program objectives and that Block Grant funds were used solely for authorized purposes.

The Municipality generally complied with requirements for planning, soliciting, and awarding contracts and purchase orders.  However, it failed to perform a required cost analysis in one contract and did not always maintain adequate documentation of all of its procurement history.  As a result, it did not support the reasonableness of more than $124,000 disbursed in an awarded construction contract.

We recommend that HUD (1) determine the eligibility of more than $4.6 million disbursed for unsupported Block Grant program costs, (2) require the repayment of more than $500,000 in ineligible expenditures, (3) require the Municipality to develop a financial management system in accordance with HUD requirements and provide related training to its staff, (4) require the Municipality to charge only eligible program delivery costs to the Block Grant program, and (5) require the Municipality to improve its housing rehabilitation program to ensure that Block Grant funds are used in accordance with HUD regulations.

Recommendation Status Date Issued Summary
2013-AT-1003-002-A Open March 22, 2013 Require the Municipality to reimburse from non-federal funds $552,658 in unallowable and unallocated costs associated with the disbursement of salaries and fringe benefits of employees who did not perform duties directly related to carrying out activities charged with the program delivery costs.
2013-AT-1003-002-B Open March 22, 2013 Require the Municipality to provide support showing the allocability and eligibility of $1,077,577 spent on salaries and fringe benefits for employees who performed local government duties and multiple federally funded activities without properly allocating the costs directly related to carrying out each activity. Any amounts determined ineligible must be reimbursed to the Block Grant program from non-federal funds.