Examination of the Financial Statements of the Urban Renewal Fund for Fiscal Year 1979

The Urban Renewal Program was authorized to provide Federal financial assistance in the form of loans and grants to localities for rehabilitating and redeveloping slums and blighted areas. Local communities' urban renewal plans must be approved by the Department of Housing and Urban Development (HUD) to qualify for Federal financial assistance. In addition to grants, HUD guarantees loans to the communities from commercial banks or may make direct loans to local communities. The program was terminated by the Housing and Community Development Act of 1974, which provided that no new projects could be approved after January 1, 1975, but that all projects already contracted with the local communities could be completed. The Urban Renewal Fund remains active, even though HUD is striving to close out the program. GAO examined the combined balance sheet of the Urban Renewal Program as of September 30, 1979, the related combined statements of income and expense and cumulative deficit, and source and application of funds for the year then ended. Because of major inadequacies in the Fund's accounting records in the Chicago Regional Office, GAO could not express an opinion on these accounting records. The breakdown which occurred in the accounting functions of the Chicago Regional Office of HUD affected nearly all the accounting activities of which the Urban Renewal Fund was a part. The problems included: (1) differences in cash balances; (2) loans receivable not reconciled to subsidiary accounts; (3) accounts receivable subsidiary ledger balances not in agreement with the general ledger balance; (4) missing reservation, disbursement, and contract documents; (5) lack of controls over disbursement records for surplus funds; and (6) a difference in reports of the yearend balance for unliquidated obligations.