The State of New York Did Not Ensure That Appraised Values Used by Its Program Were Supported and Appraisal Costs and Services Complied With Requirements

We audited the State of New York’s Community Development Block Grant Disaster Recovery-funded New York Rising Buyout and Acquisition program. We initiated this audit based on observations related to the appraised fair market values made during a previous audit (2015-NY-1010) of the State’s program. Our objectives were to determine whether the State ensured that (1) the appraised fair market values used to determine award amounts under its program were supported and (2) appraisal costs for its program complied with applicable requirements and were for services performed in accordance with Federal, State, and industry standards. The State did not ensure that (1) appraised fair market values used to determine award amounts under its program were supported and (2) appraisal costs complied with applicable requirements and were for services performed in accordance with applicable Federal, State, and industry standards. The State also did not ensure that it had a clear and enforceable agreement with the City of New York before relying on appraisal services provided by the City’s contractor and did not ensure that the appraisal services were properly procured and performed. These issues occurred because the State did not have adequate controls over its program. As a result, the U.S. Department of Housing and Urban Development (HUD) and the State did not have assurance that (1) more than $367.3 million paid to purchase properties was supported; (2) more than $3.4 million disbursed for appraisal services was for costs that were reasonable, necessary, and adequately documented; and (3) appraisal services were properly procured and performed. If the State improves controls over its program, it can ensure that up to $93.4 million not yet disbursed is put to better use. We recommend that HUD require the State to (1) provide documentation to support the appraised values of the properties purchased; (2) provide support to show that appraisal costs were reasonable, necessary, supported, and for services that were performed in accordance with requirements; (3) execute an agreement with the City for the use of appraisal services and show that services were properly procured; and (4) strengthen controls to ensure that Disaster Recovery funds used for appraisal services are for costs that are reasonable, necessary, supported, and for services that comply with applicable requirements.