We audited the State of Indiana’s HOME Investment Partnerships Program. The audit was part of the activities in our fiscal year 2011 annual audit plan. We selected the State based upon our analysis of risk factors relating to Program grantees in Region V’s (see footnote 1) jurisdiction. Our objectives were to determine whether the Indiana Housing and Community Development Authority, the administrator of the State’s Program, complied with the U.S. Department of Housing and Urban Development’s (HUD) requirements in its (1) use of Program funds for a community housing development organization’s rental rehabilitation and new construction project; (2) use of resale or recapture provisions and Program funds for organizations’ home-buyer activities; and (3) use and reporting of the State’s Program income. This is the second of two audit reports on the State’s Program.
The Authority did not comply with HUD’s regulations when it did not reimburse the State’s HOME investment trust fund treasury account until March 2011 for $395,000 in Program funds used for an organization’s rental rehabilitation and new construction project that was terminated in November 2009. As a result, the Authority did not have $395,000 in Program funds available for eligible Program-funded activities for more than 15 months.
The Authority also did not comply with HUD’s requirements in its use of resale or recapture provisions and or use of Program funds for organizations’ home-buyer new construction projects, home-buyer acquisition-only activities, and home-buyer rehabilitation projects. It (1) did not ensure that homes for home-buyer new construction projects would remain the principal residence of the home buyers throughout the affordability period; (2) provided assistance for ineligible home-buyer acquisition-only activities; and (3) lacked sufficient documentation to support that home-buyer acquisition-only activities and home-buyer rehabilitation projects were eligible. As a result, the Authority (1) used more than $173,000 in Program funds for home-buyer new construction projects that did not meet HUD’s requirements and (2) was unable to support its use of more than $401,000 in Program funds for home-buyer acquisition-only activities and home-buyer rehabilitation projects.
In addition, the Authority did not comply with HUD’s requirements in its use and reporting of the State’s Program income. As a result, HUD lost nearly $15,000 in interest on the Program funds that the Authority drew down from the State’s treasury account when Program income was available.
We recommend that the Acting Director of HUD’s Indianapaolis Office of Community Planning and Development ensure that the State uses the nearly $406,000 the Authority reimbursed the State’s treasury account or Program for eligible Program costs. We also recommend that the Acting Director require the State to (1) provide supporting documentation or reimburse its Program nearly $393,000 from non-Federal funds; (2) reimburse HUD nearly $15,000 from non-Federal funds, and (3) implement adequate procedures and controls to address the findings cited in this audit report.
(footnote 1)Region V includes the States of Indiana, Illinois, Ohio, Michigan, Minnesota, and Wisconsin.