Special Inspector General Christy Romero's report recommends the six states, including Indiana, which were given grants in 2013 aimed at boosting economic vitality by reducing the number of vacant properties in an area, should report more regularly to the U.S. Treasury, which administers the programs.
According to the report, Indiana officials do not routinely share any information with the Treasury regarding demolition contracts, unless asked to do so.
In addition, the programs have not identified ways to measure their effectiveness.
"Without Treasury establishing a target outcome, it is not clear whether Treasury would claim that any decrease in the state foreclosure filings means that blight elimination was successful," the audit states.
Much of the money was also provided without identifying what the goals of the programs actually were.
For example, Indiana's contract with the Treasury is the only one out of the six states in which increasing neighborhood safety and decreasing foreclosure rates were specifically noted as goals.
The inspector general's report aims to serve as a warning that the blight elimination programs could follow the path of previous Treasury programs.
In response to the 2008 financial crisis, the federal government created the Hardest Hit Fund, allocating $7.6 billion to 18 states and the District of Columbia to help homeowners facing foreclosure.
It was part of TARP, the $700 billion Congress authorized the Treasury to spend to insure "troubled assets."
But critics of the Hardest Hit Fund say it was poorly managed.
By 2013, only 27 percent of the funds dedicated to help homeowners had been spent, leaving many homeowners to face foreclosure.
Indiana is one of six states that received a second round of federal funding for blight elimination in 2013. The other states are Michigan, Ohio, Illinois, South Carolina and Alabama.
Indiana's initial grant to the Hardest Hit Fund allowed more homeowners to qualify for foreclosure relief and let them receive assistance for two years instead of 18 months.
Then, in 2014, the state received federal approval to divert $75 million of that fund to demolish properties abandoned or foreclosed on during the financial crisis.
A spokesman for the Indiana Lieutenant Governor's Office, which oversees the Indiana Housing and Community Development Authority, declined to comment on the audit, saying they would not "participate in a conversation about the internal issues within a Federal agency."
