We audited the New York State Community Development Block Grant Disaster Recovery Assistance (CDBG-DR) funded New York Rising Housing Recovery Program to address the Disaster Relief Appropriations Act requirement that the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General, monitor the expenditure of CDBG-DR funds. State officials allocated more than $1 billion in CDBG-DR funds to the Housing Recovery Program, of which $621 million had been obligated and more than $600 million had been disbursed as of March 31, 2015. The objective of the audit was to determine whether State officials established and maintained adequate controls to ensure that CDBG-DR funds were disbursed for eligible activities and allowable costs and properly reported in compliance with regulations.
Weaknesses in program controls did not always ensure that CDBG-DR funds were disbursed for eligible costs, ineligible awards could be recovered, procurement activity was executed or reported as required, and disbursements were properly reported. Specifically, (1) funds were disbursed for ineligible and unsupported costs, (2) disbursements were made before recipients executed grant agreements, (3) procedures were not implemented to recapture funds disbursed for ineligible costs, (4) procurement of construction management and environmental review services did not comply with Federal and State requirements, (5) national objectives were inadequately classified and reported, and (6) assistance payments were made without receipts.
We recommend that HUD direct State officials to (1) repay the program more than $2.2 million in CDBG-DR funds disbursed for ineligible costs, (2) provide documentation for $119,124 in unsupported disbursements and the reasonableness of the cost figure used to disburse more than $55.6 million for reconstruction costs, (3) strengthen controls to ensure that grant agreements are signed before checks are disbursed to recipients, (4) implement procedures to recapture ineligible CDBG-DR funds disbursed, (5) provide documentation showing that the $127.2 million contract for construction management and environmental review services was fair and reasonable, (6) strengthen controls to ensure that national objectives are adequately classified and reported and (7) require receipts for completed work to ensure that more than $241.2 million will be put to its intended use.