Purpose of Audit

The purpose of our audit was to evaluate the City’s financial management and administration of the Community Development Block Grant program for the period April 1, 2008 through June 13, 2012.

Background

The City of Dunkirk is located in Chautauqua County and has a population of approximately 12,600 residents. The City is governed by its Charter and other laws of the State of New York. The Common Council, consisting of five elected members, has overall responsibility for the City’s operations and can adopt and amend local laws, ordinances, and resolutions. For the four-year period ending March 31, 2012, the City has received over $2 million in CDBG grant funding.

Key Findings

• City officials have severely mismanaged the CDBG program and have put significant public funds at risk. City officials have disbursed CDBG funds without the most basic of documentation to support the expenses and have used the funds at times to pay for a variety of miscellaneous expenses that have no connection to the CDBG program. Most disturbing is that some of these transactions have been recorded in a manner to apparently hide the true nature of the transactions.
• City officials have disbursed more CDBG funds than properly authorized, spent funds on items that are not eligible under the CDBG program, and spent over $500,000 for no legitimate CDBG purpose. In addition, they have made nearly $400,000 in loans that are unsecured and lack the most fundamental paperwork, such as a signed loan document. All told, we determined that more than $1.1 million may have been wasted or misused to fund ineligible, questionable and unauthorized activities.

Key Recommendations

• Establish formal procedures to monitor the performance and administration of the CDBG program, including a review of periodic status reports on grant activity. Enter into a written agreement with the DLDC that clearly establishes the responsibilities of both parties including the work to be performed, a schedule for completion, and a budget.
• Require documentation sufficient to support all claims against the City’s CDBG funds to demonstrate how moneys are being used to meet the program’s objectives. Inspect the DLDC’s loan files to ensure adequate documentation is on file prior to providing the DLDC with grant funds for this purpose.