We recommend that the Deputy Assistant Secretary for Grant Programs develop a process to ensure that grantees properly report the addresses of assisted properties in IDIS and properly calculate and report program income from the disposition of these properties regularly. This process could include but is not limited to developing a process to extract data reported in IDIS on activities with the matrix codes related to real property, and training and instructing the Office of Community Planning and Development’s field office staff to extract this data and manually check for address and program income data on grantees’ activities, particularly activities that are completed but have properties that could still be subject to program income requirements.

We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Newark, NJ, field office to require Jersey City to provide documentation to support the fair market value of the property at the time of disposition. If documentation cannot be provided, the grantee should be required to reimburse $503,550 to its CDBG line of credit from non-Federal funds. If documentation can be provided, the grantee should be required to determine and reimburse its local bank account from non-Federal funds any additional program income not already reported and properly report the additional program income in IDIS under the activity ID that generated the income.

We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Philadelphia, PA, field office to require Luzerne County to provide documentation to support the fair value of the property at the time of disposition. If documentation cannot be provided, the grantee should be required to reimburse $575,263 to its CDBG line of credit from non-Federal funds. If documentation can be provided, the grantee should be required to determine and reimburse its local bank account from non-Federal funds the additional program income not already reported and properly report the additional program income in IDIS under the activity ID that generated the income.

We recommend that the Deputy Assistant Secretary for Grant Programs instruct the Philadelphia, PA, field office to require Luzerne County to reclassify program income already reported to the activity ID in IDIS that generated the income, ensuring that the $798,273 in program income is properly accounted for.

We recommend that the Deputy Assistant Secretary for Grant Programs issue guidance to HUD staff and grantees to clarify the applicability of change of use requirements in cases where there is both a repayment from non-Federal funds and a voluntary grant reduction.

Provide documentation to show that payroll costs totaling $2,019,496 and any payroll costs incurred outside our audit period, including fiscal year 2017, were reasonable and necessary expenses for the operation of the project or repay the project from nonproject funds for any amount that it cannot support.

Provide documentation to show that other direct costs totaling $56,021 and any direct costs incurred outside our audit period, including fiscal year 2017, were reasonable and necessary expenses for the operation of the project or repay the project from nonproject funds for any amount that it cannot support.

Require indemnification for the 26 loans that had significant servicing deficiencies. In these cases, the loss to HUD was $1,673,117 (appendixes A and D).

Require that the servicers with significant and other deficiencies revise and update their policies and procedures, as necessary, to ensure that they comply with HUD requirements and guidance on loss mitigation evaluation.

Direct responsible field offices to require the grantees identified by the audit to either provide documentation to support $227,260 in unsupported payments or reimburse their programs from non-Federal funds for costs they cannot support.

Provide guidance to field office staff to clarify the statutory requirements in 42 U.S.C. 5305(a)(24) regarding a principal reduction and a downpayment for direct home-ownership assistance activities.

We recommend that the General Deputy Assistant Secretary for Community Planning and Development, develop and implement a quality control review process at the headquarters level to ensure compliance with monitoring requirements for reports and exhibits, to include but not be limited to explaining procedures performed and adequately explaining and providing supporting documentation for conclusions drawn.

Support the $576,997 in code enforcement costs (activities 499, 512, and 531), including meeting code enforcement and cost allocation requirements, or repay the program from non-Federal funds.

Implement revised code enforcement program policies and procedures to meet CDBG requirements. This will help ensure that the remaining $328,918 budgeted for code enforcement activity 531 is put to better use.

Support the reasonableness of the $110,000 Graffiti Removal program (activities 504 and 520) cost allocations or repay the program from non-Federal funds.

Support the $31,186 After School program (activity 501) costs, including the reasonableness of the contract costs and meeting the limited clientele national objective, or repay the program from non-Federal funds.

Support the reasonableness of the $95,736 in cost allocations charged as CDBG administrative (activity 522) costs or repay the costs from non-Federal funds.

Provide documentation to show that prices paid for purchases of products and services totaling $970,381 were fair and reasonable or reimburse the project from nonproject funds for any amounts that were not fair and reasonable.

Provide documentation to show that costs totaling $942,636 for activity 7099 were for employees’ actual time spent benefiting the activity or repay its program from non-Federal funds for any amount that it cannot support.

Provide documentation to show that costs totaling $100,000 for activity 6865 benefited the activity or repay its program from non-Federal funds for any amount that it cannot support.