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We audited the State of Louisiana, Office of Community Development’s (State), Orleans Parish Long Term Community Recovery Program (Program), administered by the State’s subrecipient, the City of New Orleans (City). Our objective was to determine whether the City, as the State’s subrecipient, met the requirements of its cooperative endeavor agreement (agreement) with the State during its administration of the New Orleans Redevelopment Authority’s (Authority) projects under the Program. We initiated the audit as part of the Office of Inspector General (OIG) Gulf Coast Region’s audit plan and examination of activities related to Gulf Coast hurricane disaster relief efforts.

The City, as the State’s subrecipient, did not always meet the requirements of its agreement with the State during its administration of the Authority’s projects. Specifically, the City failed to meet agreement obligations as it did not (1) execute agreements with the Authority in a timely manner and ensure the Authority completed projects within specified timeframes, (2) ensure that the Authority met its performance standards, reporting, and consultation requirements or implemented projects in an efficient manner, (3) set progressive deadline dates for the Authority or appropriately develop the Authority’s initial agreement performance standard requirements, and (4) have monitoring controls in place to ensure that the Authority’s projects effectively progressed. These conditions occurred because the State did not always exercise adequate oversight and hold the City accountable, once performance issues were apparent. Specifically, the State did not (1) conduct an onsite monitoring review of the City to correct deficiencies, (2) set progressive deadline dates in its agreement with the City to adequately track the Program’s progress, or (3) exercise its agreement options when the City failed to meet its obligations in a timely and effective manner. As a result, Program funds were not used in a timely, efficient, or effective manner, thus delaying the City’s recovery from the damage caused by Hurricanes Katrina and Rita.

We recommend that the Director of the U.S. Department of Housing and Urban Development’s Disaster Recovery and Special Issues Division require the State to exercise its agreement option by deobligating the $28.1 million in Program funds allocated to the Authority’s projects and reallocate those funds to other disaster programs. In addition, the State must finalize its monitoring plan and consider including an individual subrecipient risk assessment requirement in its final monitoring plan to determine the frequency of monitoring.