Objective

To determine the extent of implementation of the two recommendations included in our initial audit report, Housing Trust Fund Corporation: Internal Controls Over and Maximization of Federal Funding for Community Development Block Grant & HOME Investment Partnerships Programs (Report 2021-S-10).

About the Program

Homes and Community Renewal (HCR) is the State’s affordable housing agency, with a mission to build, preserve, and protect affordable housing and increase homeownership throughout the State. HCR comprises several different offices and agencies, including the Housing Trust Fund Corporation (HTFC). HTFC’s Office of Community Renewal receives federal funding from the U.S. Department of Housing and Urban Development (HUD) to administer the Community Development Block Grant (CDBG) program and HOME Investment Partnerships Program (HOME) across the State. The unprecedented housing crisis caused by the COVID-19 pandemic escalated the need for programs that provide housing stability. As such, the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) provided funding for emergency economic relief for individuals, families, and businesses affected by COVID-19, and the American Rescue Plan Act of 2021 enhanced this assistance.

Between April 1, 2017 and January 18, 2024, HUD allocated about $340 million in CDBG funds to HCR for grant years 2017 through 2023, and about $127 million CDBG COVID-19 relief aid (CDBG-CV) through the CARES Act. During the same period, HUD allocated about $177 million in HOME funds to HCR, as well as approximately $93 million more in HOME COVID-19 relief aid through the HOME American Rescue Plan Program (HOME-ARP). CDBG and HOME both provide funding to expand the supply of decent, safe, and affordable housing, principally for low- and moderate-income households across the State. While CDBG and HOME share the same goals, the programs have different approaches to meeting the needs of low- and moderate-income families and have different rules regarding eligible activities. HCR functions as a pass-through entity, awarding CDBG and HOME grants to Local Program Administrators (LPAs), which may be entities such as units of local government and non-profit corporations. LPAs are subrecipients of pass-through funds from HCR; however, they may elect to further subgrant all or portions of their CDBG funds to another subrecipient (Subrecipient) or contract with another entity (Contractor). HCR is responsible for overseeing the activities of LPAs to ensure their compliance with federal requirements and that performance expectations are achieved.

The objective of our initial audit, issued September 16, 2022 and covering the period April 2017 through June 2022, was to determine whether HCR had established and maintained adequate internal controls to oversee and monitor the federally funded CDBG and HOME programs to ensure they met requirements, and whether HCR obtained federal reimbursements on time and in a manner that recovered all eligible costs. We found that HCR could improve the timely release of federal funds, especially with the CDBG-CV funded grants. As of June 2022—more than two years after the start of the pandemic—HCR had only obligated about $98 million of the $127 million and expended less than $5 million. In addition, HCR was still developing the HOME-ARP allocation plan required to be submitted and approved by HUD before it could begin spending HOME-ARP funds. We further found that HCR could improve its internal controls over the administration of the CDBG program. This finding was attributable, in part, to HCR’s procedures for monitoring LPAs’ use of Contractors and Subrecipients. We also identified potential vulnerabilities in the handling of confidential information.

Key Findings

HCR officials have made progress in addressing the issues we identified in the initial audit report. Of the report’s two audit recommendations, both were implemented.