As part of our mission to safeguard HUD’s programs from fraud, waste, and abuse, and to identify opportunities for HUD programs to progress and succeed, we selected New Jersey for a review of potential improper payments. Our audit objective was to determine whether New Jersey made improper non-Federal match activity payments. We also assessed whether the Office of Community Planning and Development’s Office of Disaster Recovery (CPD ODR) had sufficient and adequate controls to prevent improper match payments.
New Jersey could not provide support for 17 of 64 Hurricane Sandy (27 percent) and all 8 Hurricane Irene (100 percent) items that we tested. This occurred because New Jersey did not establish adequate controls for properly classifying, allocating, and tracking non-Federal match costs. Consequently, these unsupported payments meet OMB’s definition of an improper payment because it could not be determined whether the payment was proper or improper due to the lack of documentation. As of June 6, 2025, New Jersey still had more than $5.6 million of unspent HUD Sandy non-Federal match funds which, due to the inadequate controls, were at risk of being unsupported when paid.
Further, we found that New Jersey commingled its non-Federal match costs with other disaster recovery costs to support payments made by HUD funds that totaled $174,352. These payments were improper because the other costs are not part of the non-Federal project’s total costs. This occurred because New Jersey did not establish its own financial or payment controls to separately allocate, track, and report non-Federal match costs from other eligible disaster recovery costs. Further, CPD’s policies did not require its grantees to separately report non-Federal match costs from other activities funded by disaster appropriations. As a result, New Jersey was not transparently reporting the amounts of HUD disaster funding it spent on non-Federal match activities versus other eligible disaster recovery activities. Instead, it overreported the amount it paid for non-Federal match activities, which increased the risk of potential improper payments. In addition, due to the overreported amounts, HUD and its stakeholders cannot use DRGR system quarterly performance reports to ensure that New Jersey properly used its disaster recovery funds to meet the goals and objectives of the non-federal match portion of its projects.
We recommended that CPD ODR require all disaster recovery grantees to adopt consistent financial and internal controls to allocate and track non-Federal match activity costs that are paid with HUD disaster recovery funds. We also recommended that New Jersey support or repay unsupported payments totaling more than $4.8 million. Finally, we recommended that New Jersey revise its controls for non-Federal match costs and ensure that such costs are appropriately allocated, tracked and reported, thereby putting to better use more than $5 million at risk of future improper payments.
