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The U.S. Department of Housing and Urban Development (HUD) OIG audited the Neighborhood Stabilization Programs (NSP) administered by Palm Beach County (County). Our objective was to determine whether the County administration of its NSPs complied with federal requirements. Specifically, we determined whether (1) NSP1 activities met or will meet the low- and moderate-income national objective, (2) program income was properly accounted for, and (3) expended program funds were allowable. In addition, we determined whether expended NSP2 administrative costs were allowable.

The County did not fully comply with Federal regulations when administering its NSP1 activities. Specifically, it did not (1) obtain HUD’s approval to waive the conflict-of-interest provision, (2) purchase properties at the required purchase discount, and (3) ensure that NSP1 funds expended did not exceed the amounts authorized. In addition, the County did not execute an agreement between its housing department and the facilities department administering the redevelopment activity. The deficiencies resulted in ineligible costs of $1.75 million to the NSP1 program.

In addition, the County did not report accurate program income to HUD. Thus, HUD could not be assured that the County would use an appropriate amount of its program income before drawing down NSP1 funds. As a result, the County had program income of $211,952 that could be put to better use.

The County also did not maintain documentation to sufficiently support the administrative expenditures recorded in its financial system. By not having effective controls, the County could not assure HUD that reviewed administrative expenditures were justified and that accurate program financial results were disclosed. As a result, the County drew down $10,000 in unsupported NSP2 funds.
OIG recommended that the Director of the Miami Office of Community Planning and Development require the County to (1) reimburse the NSP1 program $1.75 million from non-Federal funds for ineligible expenditures made from the program, (2) use the $211,952 in program income earned before drawing down additional NSP1 funds, (3) provide supporting documentation or repay the NSP2 program from non-Federal funds for the $10,000 drawn down to reimburse the unsupported workers compensation, and (4) implement policies and procedures to prevent future occurrences of the conditions identified.