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Report Fraud, Waste and Abuse
September 28, 2011
2011-AT-1018
ig1141018.pdf

We audited the Municipality of San Juan’s HOME Investment Partnerships Program (HOME). We selected the Municipality for review as part of our strategic plan based on the large amount of HOME funds approved. The objectives of the audit were to determine whether the Municipality met HOME program objectives and its financial management system complied with U.S. Department of Housing and Urban Development (HUD) requirements.

The Municipality disbursed more than $3.48 million for four activities that showed signs of slow progress without assurance that the activities would generate the intended benefits. In addition, it failed to ensure that more than $2.49 million of a community housing development organization’s proceeds was used for housing efforts. The Municipality also disbursed more than $766,000 for two activities that were not carried out and failed to reprogram more than $1.14 million in unexpended HOME funds for these terminated activities. As a result, HUD had no assurance that funds were used solely for eligible purposes and that HOME program objectives were met.

The Municipality’s financial management system did not support the eligibility of more than $2.3 million in disbursements and allowed the use of more than $2.2 million for ineligible expenditures. In addition, it failed to disburse more than $2.8 million in HOME funds in a timely manner and did not account for $14,732 in HOME receipts. As a result, HUD lacked assurance that funds were adequately accounted for, safeguarded, and used for authorized purposes and in accordance with HUD requirements.

The Municipality did not monitor the accuracy of commitments and other information reported in HUD’s Integrated Disbursement and Information System. It reported to HUD more than $8.7 million in HOME commitments without executing written agreements and failed to reprogram and put to better use more than $1.6 million in unexpended HOME funds associated with terminated activities or for which additional disbursements were no longer needed. In addition, it provided inaccurate information on the amount of program income generated, amount of funding awarded, and program accomplishments. As a result, HUD had no assurance that the Municipality met HOME objectives, commitments, and disbursement requirements.

We recommend that HUD determine the eligibility of more than $4.8 million disbursed from HOME funds on activities that showed signs of slow progress and for unsupported program costs. HUD should require the Municipality to reimburse the HOME program more than $3 million for ineligible project costs and activities that failed to meet program objectives. HUD should also require the Municipality to recapture or reprogram and put to better use more than $11.3 million in unexpended obligated funds, overstated commitments, and unexpended HOME funds maintained in its local bank account.

We also recommend that HUD require the Municipality to develop and implement an internal control plan to ensure that (1) its HOME-funded activities meet the program objectives, (2) its HOME program has a financial management system that complies with HUD requirements, and (3) the program has controls and procedures which ensure that HOME requirements are followed and accurate information is reported to HUD. In addition, HUD should reassess the Municipality’s annual commitment compliance and recapture any amounts that have not been committed within HUD-established timeframes.