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Report to the Chairwoman, Subcommittee on Housing and Community 
Opportunity, Committee on Financial Services, House of Representatives: 

United States Government Accountability Office: 
GAO: 

September 2010: 

Community Development Block Grants: 

Entitlement Communities' and States' Methods of Distributing Funds 
Reflect Program Flexibility: 

GAO-10-1011: 

GAO Highlights: 

Highlights of GAO-10-1011, a report to the Chairwoman, Subcommittee on 
Housing and Community Opportunity, Committee on Financial Services, 
House of Representatives. 

Why GAO Did This Study: 

The Housing and Community Development Act of 1974 (act) creating the 
Community Development Block Grant (CDBG) program provides entitlement 
communities (metropolitan cities and urban counties) and states with 
significant discretion in how they distribute funds for eligible 
activities. Because of this discretion, entitlement communities may 
use a variety of processes to select individual projects and states 
may also use different methods to distribute funds to non-entitlement 
communities. 

GAO was asked to report on (1) the various methods by which 
entitlement communities use and distribute their CDBG funds to 
individual projects within their jurisdictions; (2) the various 
methods by which states distribute CDBG funds to non-entitlement 
communities; and (3) HUDís role in overseeing these methods. GAO 
interviewed CDBG administrators for 20 entitlement communities (the 10 
largest by funding and 10 randomly selected) and 5 states (reflecting 
variety of methods used and geography) and reviewed documents related 
to their CDBG funding decisions, including the annual action plans for 
all 50 states. GAO also spoke with CDBG stakeholders, reviewed 
relevant statutes and regulations, interviewed HUD field office staff 
and reviewed monitoring documentation. 

What GAO Found: 

Reflecting the programís flexibility, the 20 entitlement communities 
in GAOís sample distributed CDBG funds by various methods, but most 
used some level of competition in awarding funds. Distribution 
priorities and practices were based on various assessments of local 
needs, and in some communities, the funding decisions were also part 
of the local budget process. To communicate processes and award 
decisions to the public, all the communities in GAOís sample held at 
least two public hearings, more than half formed citizen advisory 
committees, and a few conducted needs assessment surveys, among other 
outreach methods. Sampled entitlement communities varied in the level 
of detailed criteria they used to evaluate applications, but they made 
the information available to potential applicants through published 
instructions, workshops, or the Internet. 

From a review of all 50 statesí methods of distribution described in 
annual actions plans, GAO found that states used a formula, 
competition, open application, or a combination of methods to 
distribute funds to non-entitlement communities. Most states used a 
combination of competitive and open application processes. Whatever 
their method of distribution, the five states in GAOís sample 
evaluated applications to some degree against state priorities, which 
reflected a variety of needs assessments. States using some 
competitive distribution processes also incorporated their priorities 
into the scoring of applicants. All five states communicated their 
methods of distribution to non-entitlement communities and the public 
through their required annual plans and additional publications, 
workshops, and intergovernmental organizations. Of the non-entitlement 
community officials with whom GAO spoke in 10 localities, all agreed 
that their states clearly communicated their distribution process. 

HUD staff from 17 field offices (which monitor the entitlement 
communities and states in GAOís sample) reported very few findings or 
concerns related to methods of distribution. Staff told GAO that the 
lack of findings was due partly to program design (entitlement 
communities and states can choose distribution methods) and partly to 
HUDís risk-based monitoring. Because of the flexibility granted to 
entitlement communities and states, issues related to distribution 
methods are not rated high-risk. HUD has focused on higher-risk areas 
such as ensuring funds were spent on eligible activities. However, 
because states distribute funds to other government jurisdictions, 
they are required to describe their distribution methods in their 
plans. As part of its monitoring review, HUD staff check to ensure 
that the methods of distribution that state plans described were the 
methods used. Though few issues arose from the reviews, in a few cases 
HUD staff recommended that states enhance these descriptions. HUD 
staff also monitor grantees to ensure that public hearing and notice 
requirements have been met. Staff noted that none of the complaints to 
HUD offices had pertained to methods of distribution. 

View GAO-10-1011 or key components. For more information, contact 
William B. Shear at (202) 512-8678 or shearw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Entitlement Communities Drew on Program Flexibility in Distributing 
Their CDBG Funds and Communicating with the Public and Applicants: 

States also Used Different Methods to Distribute Funds to Non- 
Entitlement Communities and Communicate with Recipients and the Public: 

HUD Staff and Monitoring Results Reported Very Few Findings or 
Concerns Related to Methods of Distribution: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Sampled Entitlement Communities' Distribution Methods: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Methods in Addition to Required Public Hearings That 
Entitlement Communities in Our Sample Used for Communicating with the 
Public: 

Table 2: Summary of Methods of CDBG Distribution for Sampled States: 

Table 3: Summary of Sample State Communication Practices on Methods of 
Distribution to Non-Entitlement Community CDBG Applicants and the 
Public: 

Table 4: Summary of Sample State Communication Methods for Feedback on 
Funding Decisions, Applications, and Other Program Details to Non- 
Entitlement Community CDBG Applicants and the Public: 

Table 5: Methods of Distributing CDBG Funds for Sampled Entitlement 
Communities: 

Figures: 

Figure 1: Flow of CDBG Funds from HUD to Local Communities: 

Figure 2: Sampled Entitlement Communities and States: 

Abbreviations: 

CAPER: Consolidated Annual Performance and Evaluation Report: 

CDBG: Community Development Block Grant Program: 

CPD: Office of Community Planning and Development: 

HUD: Department of Housing and Urban Development: 

PER: Performance and Evaluation Report: 

RFP: Request for Proposal: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

September 15, 2010: 

The Honorable Maxine Waters: 
Chairwoman: 
Subcommittee on Housing and Community Opportunity: 
Committee on Financial Services: 
House of Representatives: 

Dear Madam Chairwoman: 

The Community Development Block Grant (CDBG) program provides federal 
funding for housing, economic development, neighborhood 
revitalization, and other community development activities. 
Administered by the Department of Housing and Urban Development (HUD), 
the CDBG program provides funding to metropolitan cities and urban 
counties, known as entitlement communities, and to states for 
distribution to non-entitlement communities. The activities undertaken 
with program funds must meet one of the three national objectives: (1) 
principally benefit low-and moderate-income persons, (2) aid in the 
prevention or elimination of slums or blight, or (3) meet urgent 
community development needs. In fiscal year 2010, Congress 
appropriated approximately $3.95 billion for the entitlement and non-
entitlement program. Currently, 1,163 entitlement communities and 50 
states receive CDBG funds.[Footnote 1] 

The Housing and Community Development Act of 1974 (act), as amended, 
provides entitlement communities with significant discretion in how 
they distribute funds for eligible activities. State grantees have 
similar discretion in how they distribute funds to non-entitlement 
communities.[Footnote 2] Consequently, entitlement communities and 
states may use a variety of processes to select individual projects 
and units of local governments to implement projects respectively. 
Because of the variety of methods, you requested that we conduct a 
study identifying the types of distribution methods used by 
entitlement communities and states. Specifically, our objectives were 
to (1) identify and describe examples of the various methods by which 
entitlement communities use and distribute their CDBG funds to 
individual projects within their jurisdictions, (2) identify and 
describe examples of the various methods by which states distribute 
CDBG funds to non-entitlement communities, and (3) describe and 
examine HUD's role in overseeing the methods by which entitlement 
communities and states distribute their CDBG funds. 

To address the first objective, we conducted a literature review and 
examined reports related to CDBG. We also interviewed the CDBG 
administrators for the 10 largest entitlement communities (by funding) 
to determine how they distribute their funds and how they communicate 
those processes and results to the public. We drew a sample of 10 
additional communities, considering city/county status and geography, 
and conducted similar interviews with CDBG administrators. These 
entitlement communities were selected for comparative and illustrative 
purposes. Results from this nongeneralizable sample cannot be used to 
make inferences about all entitlement communities nationwide. We also 
judgmentally selected 3 communities (from the 20), taking into account 
geographic and program diversity, and interviewed stakeholders 
involved in the CDBG process, such as community organizations and 
members of citizen advisory committees. For the second objective we 
reviewed the most recently available annual action plans covering 2008 
through 2010 (required and reviewed by HUD) for all 50 states to 
identify the types of methods of distribution. From this review, we 
judgmentally selected five states that represented a variety of 
distribution methods, geography, and funding amount, and we 
interviewed their CDBG administrators. We also interviewed local non-
entitlement officials about the CDBG process and how it is 
communicated to the public. For both objectives, we interviewed issue-
area experts and relevant associations such as the National League of 
Cities and the Council of State Community Development Agencies to 
obtain their views on the distribution process. For the third 
objective, we reviewed relevant statutes and regulations to understand 
HUD policies and practices for oversight of methods of distribution 
and to determine how the agency ensures states' compliance with the 
requirement to publish their distribution methods. Finally, we 
interviewed HUD staff from the 17 field offices that oversee our 
selected entitlement communities and states.[Footnote 3] 

We conducted this performance audit from November 2009 to September 
2010 in accordance with generally accepted government standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. (More 
information on our scope and methodology is contained in appendix I.) 

Background: 

The CDBG program has two basic funding streams (see figure 1). After 
funds are set aside for purposes such as the Indian CDBG program and 
allocated to insular areas, the annual appropriation for CDBG formula 
funding is split so that 70 percent is allocated among eligible 
metropolitan cities and urban counties (entitlement communities) and 
30 percent among the states to serve non-entitlement communities. 
[Footnote 4] Entitlement communities are (1) principal cities of 
metropolitan areas, (2) other metropolitan cities with populations of 
at least 50,000, and (3) qualified urban counties with populations of 
at least 200,000 (excluding the population of entitled cities). 

Figure 1: Flow of CDBG Funds from HUD to Local Communities: 

[Refer to PDF for image: illustration] 

Entitlement community program: 
HUD; to: 
Entitlement community; to: 
CDBG projects: Project examples: 
* Housing rehabilitation; 
* Water/sewer; 
* Neighborhood facilities. 

State program: 
HUD; to: 
State; to: 
Nonentitlement community; to: 
CDBG projects: Project examples: 
* Housing rehabilitation; 
* Water/sewer; 
* Neighborhood facilities. 

Source: GAO analysis; Art Explosion (images). 

[End of figure] 

HUD distributes funds to entitlement communities and states using a 
dual formula system in which grants are calculated under two different 
weighted formulas and grant recipients receive the larger of the two 
amounts. The formulas consider factors such as population, poverty, 
housing overcrowding, the age of the housing, and any change in an 
area's growth (growth lag) in comparison with other areas. HUD ensures 
that the total amount awarded is within the available appropriation by 
reducing the individual grants on a pro rata basis. Entitlement 
communities and states can have more than one agency administer parts 
of the CDBG program but one agency must be designated the "lead" 
(typically a Department of Community Development or similar entity) 
and single point of contact with HUD. The entitlement communities may 
carry out activities directly or in the case of urban counties, they 
may award funds to other units of local government to carry out 
activities on their behalf. In addition, entitlement communities may 
award funds to subrecipients to carry out agreed-upon activities. 
[Footnote 5] Entitlement communities are subject to very few 
requirements relating to distribution of their CDBG funds. As long as 
entitlement communities fund projects that are eligible and meet a 
national objective, submit required plans and reports, and follow 
their stated citizen participation plans, they have a large amount of 
discretion as to how and what they fund. Unlike entitlement 
communities, states must distribute funds directly to recipients, 
which again are local units of government (non-entitlement cities and 
counties). The states' major responsibilities are to (1) formulate 
community development objectives, (2) decide how to distribute funds 
among non-entitlement communities, and (3) ensure that recipient 
communities comply with applicable state and federal laws and 
requirements. 

Grant recipients are limited to 26 eligible activities for CDBG 
funding. For reporting purposes, HUD classifies the activities into 
eight broad categories--acquisition, administration and planning, 
economic development, housing, public improvements, public services, 
repayments of section 108 loans, and "other" (includes nonprofit 
organization capacity building and assistance to institutions of 
higher learning).[Footnote 6] Recipients may use up to 20 percent of 
their annual grant plus program income on planning and administrative 
activities and up to 15 percent of their annual grant plus program 
income on public service activities.[Footnote 7] Additionally, the act 
requires that recipients certify that they will use at least 70 
percent of their funds for activities that principally benefit low-and 
moderate-income people over 1, 2, or 3 years, as specified by the 
recipient. Generally, an activity is considered to principally benefit 
low-and moderate-income people if 51 percent or more of those 
benefiting from the activity are of low-or moderate-income. 

To receive its annual CDBG entitlement grant, a recipient must submit 
a 3 to 5-year consolidated plan, a comprehensive planning document and 
application for funding, to HUD for approval.[Footnote 8] This 
document identifies a recipient's goals, which serve as the criteria 
against which HUD will evaluate a recipient's performance annually. 
The consolidated plan must include a citizen participation plan for 
obtaining public input on local needs and priorities, informing the 
public about proposed activities to be funded, and obtaining public 
comments on performance reports. Annually, recipients must submit an 
action plan that identifies the activities they will undertake to meet 
the goals and objectives identified in their consolidated plan as well 
as an evaluation of past performance and a summary of the citizen 
participation process.[Footnote 9] Moreover, on an annual basis, 
recipients must submit a consolidated annual performance and 
evaluation report (CAPER) that compares proposed and actual outcomes 
for each goal and objective in the consolidated plan and, if 
applicable, explains why the recipient did not make progress in 
meeting the goals and objectives. Similar to entitlement communities, 
states must submit their consolidated plans, annual action plans, and 
performance and evaluation reports (PER). However, the states' action 
plans must describe methods for distributing funds to local 
governments to meet the goals and objectives in their consolidated 
plans instead of a list of activities as provided by entitlement 
recipients. 

HUD's Office of Community Planning and Development (CPD) administers 
the CDBG program through program offices at HUD headquarters and 43 
field offices located throughout the United States. Staff in the 
headquarters offices set program policy, while staff in the 43 field 
offices monitor entitlement recipients directly and monitor the 
states' oversight of non-entitlement recipients.[Footnote 10] A CPD 
director heads each unit in the field offices. CPD field staff are 
responsible for grant management activities that include annual review 
and approval of consolidated plans and action plans, review of annual 
performance reports, preparation and execution of grant agreements, 
closeout activities, and technical assistance. 

Entitlement Communities Drew on Program Flexibility in Distributing 
Their CDBG Funds and Communicating with the Public and Applicants: 

Reflecting the flexibility of the CDBG program, entitlement 
communities used various methods to distribute their funds. For 
example, most of the medium and large communities in our sample of 20 
entitlement communities used competitive processes for a portion of 
their CDBG funds. These communities aligned award decisions with local 
priorities and, in some cases, elected officials and the budget 
process factored strongly in funding decisions. Some local officials 
told us they could adjust their funding priorities and practices from 
year to year as needed. To solicit public input and communicate 
processes and award decisions, all the communities in our sample met 
the program requirement to hold at least two public hearings, and most 
took additional steps, including holding multiple community meetings, 
forming citizen advisory committees, conducting needs assessment 
surveys, and making information available online. Most of the 
representatives of community organizations with whom we spoke thought 
the cities clearly communicated their distribution practices, although 
some thought that newer or less sophisticated applicants might have 
more difficulty obtaining funding. 

Entitlement Communities Selected Their Distribution Methods Based 
Largely on Local Priorities and Incorporated Political and Public 
Input: 

Our interviews with 20 entitlement communities demonstrated that the 
sample grantees took advantage of the CDBG program's flexibility to 
distribute their funds in the ways that the grantees felt fit their 
local needs and circumstances. 

Distribution Methods and Application Process: 

Most of the medium and large entitlement communities with which we 
spoke had some level of competitive process for distributing CDBG 
funds, especially for public services such as childcare, senior 
services, or employment training.[Footnote 11],[Footnote 12] Some 
communities required government agencies to apply through the same 
process as nonprofits and other subrecipients. In several communities 
that distributed funds competitively, the CDBG administrators issued a 
request for proposal (RFP) describing the local funding priorities, 
eligible uses for CDBG funds, and, in some cases, specific selection 
criteria and related points for meeting those criteria. Processes for 
evaluating applications varied, but commonly involved some level of 
review by local staff, sometimes followed or accompanied by a review 
by program experts or a citizen committee. In several communities, the 
mayor, the local governing board (such as the city council), or both 
had input and final approval authority for funding recommendations. 
For example, in Los Angeles, CDBG administrative staff conducted a 
high-level review of all applications to ensure they were eligible and 
met a national objective. The departments that administered individual 
categories of funds then ran their own RFP processes and assembled 
teams of subject experts and department staff to evaluate proposals. 
The mayor and city council also had the opportunity to review projects 
that the departments recommended for funding. The city council issued 
the final approval following a public hearing at which council 
members, community organizations, and members of the general public 
could provide input on the funding recommendations. (See appendix II 
for information on the methods used by all of the entitlement 
communities in our sample.) 

A few of the small and medium-sized entitlement communities in our 
sample used large proportions of their CDBG funds for housing 
activities or public works projects, and they directly spent those 
monies through local governmental departments. For instance, Lincoln 
Park, Michigan, planned to spend more than 70 percent of its 2010 CDBG 
allocation on infrastructure projects such as streets and utilities, 
which the public services department would carry out or bid to private 
contractors. The Lincoln Park official we interviewed stated that 
capital improvement needs, such as streets and utilities projects, 
were the city's highest priority for CDBG funds due to a lack of other 
funds to carry out such projects. South Gate, California planned to 
direct about 50 percent of its 2010 allocation to the parks 
department, based on the results of a series of public and city staff 
meetings at which citizens and city officials agreed that their parks 
were the highest-priority need. In South Gate and a few other 
communities, the government agencies still had to submit letters of 
request or formal applications. 

In cases in which smaller communities distributed funds to 
subrecipients, they often used less formal application and review 
procedures than some of the larger communities. For example, in 
Bismarck, North Dakota, which primarily distributed its funds to 
subrecipients, the CDBG administrator sent application packages to 
organizations on the city's mailing list and reached out directly to 
organizations of which she knew that might have had a CDBG-eligible 
funding need. A committee of two city officials and a nonprofit 
official reviewed the applications but did not use a formal ranking 
system. Gloucester Township, New Jersey, awarded funds based on a 
discussion between the council and mayor on how proposals met overall 
township needs. Some of the smaller communities in our sample did not 
receive applications from many more organizations than they could 
afford to fund. For instance, Bismarck funded 16 of 22 applications 
for 2010 and Dover, Delaware, funded 6 of 9 applications. Officials 
from Gloucester Township and Deltona, Florida, stated that they rarely 
rejected applications. 

In a few entitlement communities, governmental departments that 
administered some funds in-house used first-come, first-served, or 
"rolling" application processes to make small awards for certain 
activities. For example, Cleveland's community development department 
used such a process to award funds for housing rehabilitation and 
storefront renovation programs. Gloucester Township's grants office 
planned to award several small home improvement loans to low-and 
moderate-income residents for abatement of code violations and 
emergency repairs. Applicants had to meet certain income thresholds to 
qualify for the no-interest loans. 

[Side bar: 
Use of Consortiums for Addressing Local Needs: 
Two of the entitlement communities in our sample participated in 
consortiums with other local entitlement communities to more 
effectively target CDBG and other HUD funds, and reduce administrative 
costs. Specifically, the city of Gresham, Oregon, is a member of the 
Portland Consortium, which also includes the city of Portland and 
Multnomah County. While the two cities and the county each receive 
their own CDBG allocation and distribute the funds through separate 
processes, a Gresham official stated that the consortium allows them 
to prioritize needs on a metropolitan or regional level rather than 
separately for each jurisdiction. Likewise, the city of Sarasota, 
Florida, joined Sarasota County and the cities of North Port and 
Venice in a consortium that allows them to administer housing and 
community development programs and allocate resources based on the 
entire countyís needs and not just individual jurisdictions. According 
to the Sarasota Consortiumís 2005-2010 consolidated plan, this 
agreement creates a standard set of rules for housing and community 
development programs for all of the jurisdictions and reduces 
administrative costs by running programs through one central office. 
End of side bar] 

The three counties in our sample of entitlement communities used three 
different methods to distribute their CDBG funds, based on size and 
the capacity of their participating localities to administer the 
funds. For example, Los Angeles County, California, the country's 
largest urban county with a population of about 10 million people, 
distributed its funds to participating cities and unincorporated areas 
by formula.[Footnote 13] In turn, the participating cities could 
distribute their funds through competition or other methods, while the 
county's community development department worked with the county's 
five district supervisors to identify projects for funding in the 
unincorporated areas. Dane County, Wisconsin, ran a competitive 
process for most of its funds, citing the importance of providing 
standardized treatment across municipal, nonprofit, and for-profit 
applicants because of the high level of competing needs in the county. 
Greenville County, South Carolina, contracted with a countywide 
redevelopment authority to administer the funds. The redevelopment 
authority used a formula to determine the award amounts for the five 
local municipalities and a large unincorporated area. However, it 
retained control over the distribution method for all the funds, with 
some awards made competitively to nonprofit subrecipients and housing 
developers and others bid to contractors. 

Officials from a majority of the entitlement communities in our sample 
noted that they based their funding priorities on various assessments 
of local needs, and these priorities influenced the selection of CDBG 
projects. They funded projects based on priorities identified in their 
consolidated plans, other strategy documents, or citizen input. 
[Footnote 14] For instance, South Gate, California's consolidated 
planning process resulted in the city's focus on funding its parks. In 
addition, an official from Greenville County stated that the majority 
of funding for the county's unincorporated area went to "target 
neighborhoods," which had developed master plans to meet their most 
pressing needs. 

In some of the larger entitlement communities we interviewed, elected 
officials' priorities also factored strongly in the distribution 
process. Officials from Chicago, Detroit, and New York reported that 
their CDBG funding processes were integrated with their local budget 
processes.[Footnote 15] Therefore, CDBG spending priorities often were 
viewed in the context of mayoral and city council priorities, and the 
city's current fiscal strength. Officials in Los Angeles stated that 
city council members sometimes made changes to proposed economic 
development or infrastructure projects based on their knowledge of 
what was needed in their communities. They added that council members 
occasionally tried to fund projects outside of the competitive 
process. In those cases, the administrative department reviewed the 
requests to ensure they met federal and city CDBG priorities. In 
addition, an official from Philadelphia stated that for 36 years, a 
consensus had existed between the mayor and city council that housing 
activities were the city's highest CDBG priority. 

Some communities drew on the CDBG program's flexibility and revised 
their funding priorities or practices to adapt to local circumstances. 
They told us that severe (or catastrophic) weather events, economic 
conditions, or internal reviews had caused them to change their 
funding priorities or distribution methods. For example, the Deltona 
CDBG administrator stated that the city was considering revising its 
consolidated plan to focus on repairing the damage from recent 
hurricanes and other storms. Los Angeles officials stated that the 
recession had caused them to focus more heavily on family self- 
sufficiency and foreclosure prevention. In addition, Los Angeles 
recently changed the way it funded public service activities in 
response to a 2008 report by the city controller that noted a 
duplication of efforts, service gaps, a lack of competition in 
procurement, and other problems with the city's anti-gang strategy and 
related human services. Rather than giving grants to several 
individual organizations for separate projects, the city now funds the 
FamilySource Program, described in the RFP as "...an infrastructure 
for delivering coordinated, outcome-driven services to the most 
vulnerable city residents."[Footnote 16] Los Angeles officials stated 
that this shift resulted in a denial of renewal funding for some 
organizations that were not connected to the city's new continuum of 
care. 

Selection of Subrecipients: 

As discussed above, many entitlement communities also awarded funds to 
subrecipients. In choosing which organizations to fund, some 
entitlement communities told us that they tended to fund the same 
subrecipients annually; this was seemingly due in large part to 
capacity considerations. An official in San Francisco stated that, for 
several years, the city's pool of subrecipients had included a group 
of strong performers that received funding annually. At least half of 
the officials we interviewed reported that they considered applicants' 
capacity to effectively carry out program activities and meet the 
administrative requirements that accompanied CDBG funding. Several 
communities considered past performance in evaluating applicants, thus 
tending to give an advantage to incumbent organizations. Officials in 
Los Angeles and San Francisco noted that smaller organizations with 
limited administrative infrastructure might find it challenging to 
meet CDBG application and administrative requirements. 

Officials told us that new organizations were able to obtain funding 
in some communities. For instance, officials in Bismarck, San 
Francisco, and six other communities specifically mentioned that they 
encouraged new applicants to apply or that they funded a small number 
of new organizations in addition to some repeat subrecipients. San 
Francisco officials stated that they encouraged smaller organizations 
to coordinate with other providers or to find a fiscal agent who could 
focus on administration of the funds, allowing the groups to focus on 
service delivery. 

Entitlement Communities Sought Public Input and Communicated about 
CDBG Funding through Methods such as Public Hearings, Citizen Advisory 
Committees, and the Internet: 

All of the entitlement communities in our sample reported that they 
held at least two public hearings annually and some used citizen 
advisory committees, surveys, and other outreach methods to involve 
and inform the public about their distribution of CDBG funds. As 
previously discussed, all entitlement communities must have a citizen 
participation plan. As part of the citizen participation requirements, 
they must hold at least two annual public hearings. These hearings are 
intended to provide opportunities for citizens to voice concerns about 
how CDBG funds are distributed and help ensure that the process is 
transparent, among other purposes. 

Several of the entitlement community representatives with whom we 
spoke told us that attendance at public hearings generally was low. 
For instance, the Detroit administrator reported that only five or six 
people attended the public hearings. The CDBG administrator in 
Gloucester Township stated that the public hearings were poorly 
attended and no one questioned how the township spent its CDBG funds. 
This official equated a lack of comments or complaints to a lack of 
interest in the township's funding process and local priorities and 
stated that it may be due in part to the small amount of funding 
available. Officials from Los Angeles and Dane County stated that 
attendance at hearings varied based on factors such as funding 
availability and the relevance and timeliness of the agenda items for 
local residents and community groups. In particular, a Dane County 
official noted that attendance was high for public meetings following 
recent flooding, when the county had a combination of CDBG disaster 
assistance funding and state funding available to assist flood victims. 

Additional Steps Taken to Communicate about the Program and Local 
Priorities: 

Some entitlement community representatives with whom we spoke told us 
that they took additional measures to involve local residents in the 
CDBG process and ensure transparency (see table 1). For example, 
several entitlement communities in our sample reported holding public 
meetings in addition to the two required public hearings to provide 
more opportunities for public involvement. For instance, Houston 
officials stated that they hosted a series of meetings with each major 
community and council district about proposed capital improvements, 
during which they addressed CDBG planning and processes for 
distributing funds. Los Angeles County officials stated that, for the 
unincorporated areas, they conducted five community meetings annually 
throughout the county and held them in the evenings so that residents 
would be more likely to attend. They reported that participation was 
higher using this method than when they used to hold just the two 
required public hearings. 

Table 1: Methods in Addition to Required Public Hearings That 
Entitlement Communities in Our Sample Used for Communicating with the 
Public: 

Entitlement community: Baltimore, Maryland; 
Additional public meetings: [Empty]; 
Citizen advisory committee: [Empty]; 
Survey: [Empty]. 

Entitlement community: Bismarck, North Dakota; 
Additional public meetings: [Empty]; 
Citizen advisory committee: [Empty]; 
Survey: [Check]. 

Entitlement community: Chicago, Illinois; 
Additional public meetings: [Empty]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Entitlement community: Cleveland, Ohio; 
Additional public meetings: [Empty]; 
Citizen advisory committee: [Empty]; 
Survey: [Check]. 

Entitlement community: Dane County, Wisconsin; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Entitlement community: Deltona, Florida; 
Additional public meetings: [Empty]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Entitlement community: Detroit, Michigan; 
Additional public meetings: [Empty]; 
Citizen advisory committee: [Check]; 
Survey: [Empty]. 

Entitlement community: Dover, Delaware; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Entitlement community: Gloucester Township, New Jersey; 
Additional public meetings: [Empty]; 
Citizen advisory committee: [Empty]; 
Survey: [Empty]. 

Entitlement community: Greenville County, South Carolina; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Empty]. 

Entitlement community: Gresham, Oregon; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Entitlement community: Houston, Texas; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Entitlement community: Lincoln Park, Michigan; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Empty]. 

Entitlement community: Los Angeles County, California; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Empty]; 
Survey: [Check]. 

Entitlement community: Los Angeles, California; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Entitlement community: New York, New York; 
Additional public meetings: [Empty]; 
Citizen advisory committee: [Empty]; 
Survey: [Empty]. 

Entitlement community: Philadelphia, Pennsylvania; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Empty]; 
Survey: [Empty]. 

Entitlement community: San Francisco, California; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Entitlement community: Sarasota, Florida; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Empty]. 

Entitlement community: South Gate, California; 
Additional public meetings: [Check]; 
Citizen advisory committee: [Check]; 
Survey: [Check]. 

Source: GAO analysis of information provided by entitlement 
communities. 

Note: This table is not all-inclusive. Many entitlement communities 
used other methods to engage the public. For example, New York and 
Cleveland worked closely with community boards and community 
development organizations to obtain input on neighborhood priorities, 
and Bismarck placed solicited suggestions using an advertisement in 
the newspaper, which resulted in more suggestions than the city would 
typically receive at public hearings. 

[End of table] 

More than half of the entitlement communities with which we met had 
some form of citizen advisory committee to solicit and provide citizen 
input on local priorities. The committees typically comprised local 
residents who volunteered or were nominated or appointed by CDBG 
administrative staff, the mayor or other government executive, local 
council members, or community organizations. Because these committees 
often comprised representatives from a variety of business sectors and 
neighborhoods, they could provide a more knowledgeable perspective on 
the needs and circumstances of different communities and applicants 
than CDBG administrative staff alone could provide. A few of the 
committees also included one or more representatives of local 
government, such as the city council. Some communities also had the 
committees review CDBG applications and either recommend specific 
projects for funding or comment on proposed recommendations. For 
example, the Chicago Community Development Advisory Committee's three 
subcommittees reviewed and commented on program criteria, reviewed 
subrecipient proposals, and made funding recommendations in 
collaboration with city staff. In San Francisco, the Citizens 
Committee on Community Development could comment on the CDBG-
administering office's initial recommendations before they went to the 
mayor and board of supervisors. Similarly, after an initial 
eligibility screening by city staff, the Citizen Advisory Committee in 
South Gate, California, reviewed and scored applications (based in 
part on applicants' oral presentations to the committee) and passed on 
recommendations to the city council. 

Several entitlement communities in our sample also used needs 
assessment surveys or similar mass communications to gather input on 
local priorities. For instance, Dane County, Wisconsin, surveyed 1,500 
county residents on its most recent consolidated plan and achieved a 
response rate of more than 30 percent, which allowed the county to 
obtain meaningful information on residents' priorities. Cleveland CDBG 
officials stated that they found it most effective to reach out to 
community members where they gathered to discuss neighborhood issues. 
This included over 50 venues such as block club meetings, annual 
meetings of citizen organizations, and community festivals. At these 
events, staff members obtained citizen comments and used a short 
survey to capture citizen ideas. Officials in several other 
entitlement communities also reported using surveys to gain input on 
CDBG priorities, usually in connection with their consolidated or 
annual action plans. Similarly, a Chicago official stated that the 
city emailed more than 500 individuals and community-based 
organizations to inform them about a public hearing on unmet needs and 
community priorities. 

Communication about the Application Process and Funding Decisions: 

Throughout the application process, the entitlement communities we 
interviewed used methods such as the Internet, mass mailings, 
publishing scoring systems, workshops, and letters to communicate 
funding availability, requirements, and results to applicants and the 
public. Many entitlement communities published information about CDBG 
funds on their Web sites, making it publicly available to anyone with 
an Internet connection. In addition, officials from a few of the 
entitlement communities reported that they sent mailings to large 
lists of past and potential applicants to notify them about funding 
availability. For example, San Francisco officials told us that they 
sent a mailing to more than 900 community-based organizations about 
CDBG funding opportunities. 

The majority of entitlement communities in our sample provided clear 
information regarding their evaluation processes for applications. In 
particular, over half of the communities spelled out specific 
evaluation criteria, often with points assigned to those criteria, and 
they published this information in their applications (or RFP) or 
application guidelines, which they frequently made available online. 
Others used a more informal rating system based on general adherence 
to stated local priorities, national eligibility, or capacity to carry 
out the proposed project. 

Half of the entitlement communities in our sample also reported that 
they held workshops to explain the application process and answer 
questions. These workshops helped ensure that all applicants had the 
opportunity to receive consistent information about the funding 
process. Others provided technical assistance throughout the 
application process, or connected applicants with other organizations 
that could provide help. For example, the Dover administrator told us 
that the city's public notice of funding availability included a 
telephone number for technical assistance. The Dane County Web site 
had a question and answer page about the process and its CDBG 
administrator stated that she had connected a municipal applicant with 
someone from another town that recently had completed a similar 
project with CDBG funds. 

Most of the entitlement community officials we interviewed told us 
that they sent notification letters to unsuccessful applicants at the 
end of the application process. Three entitlement communities in our 
sample--Bismarck, Dane County, and Detroit--made public a list of all 
applicants' funding results. The other communities published a list of 
funded projects or activities, typically in their action plans, which 
they made publicly available in hard copy, if not on the Web.[Footnote 
17] In most cases, when entitlement communities published a list of 
funding recommendations in their draft action plans, the public had an 
opportunity to comment on or challenge those recommendations before 
they were finalized for submission to HUD. Officials from Detroit and 
Los Angeles also noted that they had a formal appeals process for 
unsuccessful applicants to contest funding results. 

We spoke with nine representatives of community groups in Baltimore 
and Los Angeles, and most told us that, in general, they thought their 
localities' CDBG funding processes were transparent.[Footnote 18] 
However, a representative in Baltimore stated that organizations that 
had not previously received funding had more difficulty obtaining 
funding than incumbent organizations. The Baltimore CDBG official with 
whom we spoke corroborated this point in stating that newer applicants 
tended to be at a disadvantage when compared to those with already 
successful programs. In addition, a representative in Los Angeles 
noted that the city's process was more difficult to navigate for less 
sophisticated or well-connected organizations. Two community 
representatives said that they understood there were limited funds and 
that some proposals would not get funded. One nonprofit representative 
in Baltimore noted that the list of all awarded projects in the action 
plan illustrated the city's many competing needs and helped him 
appreciate the difficulty the city faced in choosing which 
organizations would receive funding. 

States also Used Different Methods to Distribute Funds to Non- 
Entitlement Communities and Communicate with Recipients and the Public: 

States used program flexibility to distribute CDBG funds by varying 
combinations of three methods: competitive, open application, or 
formula, and are also required to describe methods in annual plans and 
consult with eligible non-entitlement community recipients in 
developing methods. Most states employed multiple distribution 
methods, with a majority using a combination of competitive and open 
application processes. The five states in our sample also used 
different processes to implement the three methods of distribution. 
According to non-entitlement community officials we interviewed, they 
generally found these processes to be transparent.[Footnote 19] To 
communicate methods of distribution and obtain applicant feedback, 
states in our sample generally used a combination of similar 
processes, including guidance and other documents, meetings, online 
resources, and intergovernmental organizations. States' use of these 
methods went beyond general requirements, such as public hearings, and 
the applicants we interviewed generally viewed states' efforts 
favorably. 

States Primarily Distributed CDBG Funds to Non-Entitlement Communities 
through a Combination of Competitive, Open Application, or Formula 
Processes: 

Our review of all 50 states' annual action plans showed that states 
used program flexibility to implement a variety of methods to 
distribute funds, but most states used some combination of three 
methods: competitive, open application, or formula. 

* States used competitive distribution methods to allocate funds to 
numerous types of CDBG-eligible activities, with awards determined by 
a variety of application criteria and evaluation methods. States' 
competitive processes typically included one standard application 
deadline and ranked all eligible applicants in determining awards. 

* States also used the open application distribution method to fund a 
variety of eligible activities that met certain threshold criteria as 
long as funds were available. Generally, with this process, states 
either did not establish an application deadline or the application 
submission period extended over several months. States' open 
application processes sometimes rated projects, but did not 
necessarily rank them against each other. 

* The formula distribution method used population and other factors to 
distribute CDBG funds to all eligible non-entitlement communities 
through a non-competitive process. 

From our review of all 50 states' methods of distribution described in 
annual plans, we found that most states used a combination of the 
competitive and open application distribution methods to distribute 
funds to non-entitlement communities within defined CDBG-eligible 
categories, while a few states utilized a formula to distribute some 
funds. 

Four of the five states in our sample also used more than one method 
of distribution, but combinations varied (see table 2). Based on our 
review of action plans and on our interviews with officials from the 
five states, each allocated the majority of their CDBG funds under one 
method--two used competitive processes, two formulas, and one an open 
application process--and four used another method for the remainder. 
[Footnote 20] For example, Arizona distributed 85 percent of CDBG 
funds to non-entitlement communities through a formula based on 
population and poverty rates, but distributed the remaining 15 percent 
through a competitive process. 

Table 2: Summary of Methods of CDBG Distribution for Sampled States: 

State: Arizona; 
Total fiscal year 2009 CDBG funding: $12.1 million; 
Methods of distribution used[A]: Formula (85%) and competitive 
(15%)[B]. 

State: Georgia; 
Total fiscal year 2009 CDBG funding: $39.9 million; 
Methods of distribution used[A]: Competitive (74%) and open 
application (26%). 

State: Pennsylvania; 
Total fiscal year 2009 CDBG funding: $46.6 million; 
Methods of distribution used[A]: Formula (87%) and competitive (13%). 

State: South Dakota; 
Total fiscal year 2009 CDBG funding: $6.6 million; 
Methods of distribution used[A]: Open application (100%). 

State: Virginia; 
Total fiscal year 2009 CDBG funding: $19.6 million; 
Methods of distribution used[A]: Competitive (89%) and open 
application (11%)[C]. 

Source: GAO analysis of information provided by states. 

[A] Proportions do not include amounts set aside for state use for 
program administration, technical support, or other uses allowed by 
CDBG regulations. Proportions only relate to funds directly provided 
to non-entitlement communities in each state. 

[B] In addition to the 3 percent of CDBG funds that Arizona utilizes 
for administration and technical support, Arizona also sets aside 10 
percent of total funds for colonias, federally designated low-income 
communities near the Mexican border. The state distributes funds for 
colonias through a competitive process. 

[C] Virginia's proportion of funds distributed through competitive and 
open application methods varies from year to year and typically 
includes a larger proportion of open application funding than in 
fiscal year 2009. Funds set aside for some open application funding 
streams can be shifted to the competitive process if application 
requests are less than initial allocations. 

[End of table] 

Application Process: 

Although states used different methods of distribution, all the states 
in our sample employed an application process by which units of local 
government applied for funding for each project. State officials 
reviewed applications to ensure projects were CDBG-eligible and met 
one of the program's three national objectives. States also conducted 
additional monitoring to ensure projects matched application 
descriptions, including on-site reviews. For example, Georgia's plan 
requires officials to conduct on-site visits during at least three 
stages of each CDBG project--prior to approving applications to ensure 
applications are accurate, prior to starting awarded projects to 
conduct a capacity assessment and review compliance requirements, and 
at least once after project work has been started to ensure continued 
compliance. 

The four states using competitive processes demonstrated similarities 
in applicant criteria and rating systems. Three of the four states 
that used competitive processes allowed all non-entitlement 
communities to apply for funds and used a point-based scoring system 
to evaluate applicants. For example, Georgia's CDBG funds could be 
awarded to all eligible units of local government. Its competitive 
application process rated and ranked all applicants on a 500-point 
scale across nine different factors, such as demographics need, 
impact, and leverage of other resources. All four states used 
evaluation criteria that included benefits to low-income individuals, 
capacity to execute projects, and potential impact. 

When using open application or formula-based processes, states tended 
to vary more with respect to criteria used to assess applications or 
distribute awards. All three states that used an open application 
method to distribute some funds varied in some of the criteria, beyond 
meeting national objectives, they used to evaluate and approve 
projects. For example, South Dakota factored in leveraging from other 
funding sources and maximization of local resources to evaluate all 
projects, while Virginia used varying criteria across five separate 
open application programs that funded different categories of 
projects. Furthermore, the two states that mostly used a formula to 
distribute their program funds factored population in their 
calculations. Arizona also considered a poverty rate indicator and 
allowed recipients to decide by region whether to receive funding 
every year or to alternate funding with neighboring communities for up 
to 4 years in order to apply funds to higher-cost projects. 
Pennsylvania's formula factored in the level of local government 
receiving funds, and provided varying base funding amounts to 
counties, cities, and other types of municipalities before factoring 
in population. 

Use of State and Local Priorities to Review Projects: 

In all five states we reviewed, the priorities states outlined in 
their action plans played a role in the evaluation and approval of 
CDBG projects across all methods of distribution. States used 
priorities to limit categories of eligible projects beyond broader 
national objectives, or to more specifically incorporate priorities as 
scoring components in some competitive distribution processes. For 
example, Arizona limited its formula grants, which represent 85 
percent of its non-entitlement community CDBG allocation, to housing 
or community development projects, and also uses state priorities to 
limit activities funded by competitive grants. Two of the four states 
that used multiple methods of distribution also used priorities to 
segment eligible project categories by funding method. Virginia 
created priority categories, with separate applications and funding 
pools. For instance, its open application funded programs included 
community development, planning, and urgent needs, and its competitive 
grant priorities included housing and infrastructure projects. 

While non-entitlement community officials we interviewed in these 
states generally noted significant flexibility in selecting CDBG- 
eligible projects, state priorities for CDBG funds were a 
consideration in their selection of projects to present for funding. 
Local representatives in two states noted that their knowledge of 
state priorities and past experience with their states' CDBG 
distribution processes significantly influenced the types of projects 
for which they submitted funding applications. For example, most non-
entitlement communities in South Dakota used CDBG funds for water and 
sewer projects, which were identified as a highest-need priority by 
state officials and difficult to fund from other available sources. 

States have flexibility in setting funding priorities, but three 
states noted that CDBG-required consultation with non-entitlement 
communities and local hearings were factors in developing funding 
priorities and methods of distribution. For example, South Dakota 
officials attributed their prioritization of water and sewer projects 
as a response to local feedback. States must document these needs 
assessment processes for HUD's review, which all officials confirmed 
occurs.[Footnote 21] Two of the states required recipient communities 
to develop a formal plan based on their local needs assessments. For 
instance, Georgia requires non-entitlement community plans to outline 
needs in areas such as housing, infrastructure, and quality of life. 
Three states conducted additional meetings beyond the one required 
public hearing. For example, Arizona officials conducted regional 
meetings in each of their Councils of Government to solicit community 
input. Each of our five sample states used a body similar to many 
entitlement communities' citizen advisory committees in the needs 
assessment process, though these groups varied in format. For example, 
Virginia's Planning District Commissions communicated with non-
entitlement communities in their areas to identify needs and develop 
regional CDBG funding priorities. The state then used these priorities 
as part of the scoring process for competitive fund pools and also as 
evaluation criteria for open application grants. 

Other governing stakeholders also factored into state priorities and 
methods of distribution. According to state officials, Pennsylvania, 
for example, requires new legislation to make any changes to its 
formula distribution process, which officials noted would be very 
difficult to revise and has remained in place since 1984. In South 
Dakota, the governor's office makes final approvals of all CDBG 
projects funded, after reviewing the recommendations of program 
officials. All states utilized one agency to lead administrative 
efforts in the CDBG distribution process, as required by program 
regulations, but each state also involved additional government 
offices and/or legislative bodies in the overall decision-making 
process. 

Use of Subrecipients: 

Unlike entitlement communities, officials in sample states generally 
noted that most of their non-entitlement communities rarely used 
nonprofit organizations and other subrecipients to execute CDBG-funded 
projects in their local communities. Since all funds flow directly to 
units of local government, these entities must contract with any 
subrecipient through a separate agreement. Two of the states in our 
sample indicated their CDBG programs most commonly funded 
infrastructure projects, and noted that local government agencies 
typically executed these projects. However, officials from three of 
our sample states noted that some of their non-entitlement communities 
used subrecipients. For instance, Georgia officials noted that they 
encouraged non-entitlement communities to use subrecipients when they 
possessed better capacity for a given project. Additionally, South 
Dakota officials noted that they have a process in place to review and 
approve all subrecipients used by non-entitlement communities. 

States Used Several Feedback Methods to Communicate Methods of 
Distribution and Provide Feedback to Non-Entitlement Communities and 
the Public: 

All five states in our sample noted that they communicated their 
methods of distribution to non-entitlement communities and the public 
through their required annual plans. States also made stakeholders 
aware of distribution methods in several other ways--for example, 
through additional publications, workshops, online support systems, 
and intergovernmental organizations (see table 3). Three states 
published additional documents focused specifically on the CDBG 
program that supplemented their annual and consolidated plans. For 
example, Virginia's annual CDBG program design document provided 
details on program changes and eligible communities, and other 
information beyond basic plan requirements. Two states held workshops 
outlining application procedures and methods of distribution. For 
instance, Georgia's annual applicant workshop informed local 
government representatives and other interested parties of CDBG 
application procedures, and allowed participants to ask questions and 
share information. Georgia also provided applicants and citizens with 
an online customer service management system that addressed questions 
on methods of distribution. Three states worked with intergovernmental 
organizations (regional bodies that represent multiple local 
governments) to communicate methods of distribution to non-entitlement 
communities. For instance, Arizona's Councils of Government provided 
assistance with the application process and developed funding cycles 
for distribution of formula grants. Non-entitlement community 
officials we interviewed in all five states noted that their states' 
distribution methods generally were transparent and communicated 
sufficiently. 

Table 3: Summary of Sample State Communication Practices on Methods of 
Distribution to Non-Entitlement Community CDBG Applicants and the 
Public: 

State: Arizona; 
Communication methods[A]: CDBG application handbook document (posted 
online), regional bodies that represent local governments (Councils of 
Government). 

State: Georgia; 
Communication methods[A]: CDBG application manual document (posted 
online), applicant workshop, online customer service management system. 

State: Pennsylvania; 
Communication methods[A]: CDBG program guidelines document (posted 
online) and conferences. 

State: South Dakota; 
Communication methods[A]: Regional bodies that represent local 
governments (Councils of Government). 

State: Virginia; 
Communication methods[A]: Additional CDBG program design document 
(posted online), applicant workshops, regional bodies that represent 
local governments (Planning District Commissions). 

Source: GAO analysis of information provided by states. 

[A] 24 CFR 91.320 requires all states to provide information on their 
methods of CDBG fund distribution to non-entitlement communities in 
annual plans. Communication methods noted indicate additional efforts 
beyond required annual plans. 

[End of table] 

Sample states also used several communication methods to provide 
feedback to applicants on funding decisions, application deficiencies, 
and other CDBG-related information (see table 4). Each state provided 
letters or other documentation to applicants to inform them about 
funding decisions and amounts, follow-up procedures, and other 
relevant information. Three states also posted application information 
online. For example, Virginia's CDBG funding press release is 
available online, and contains details on all applicants that received 
an award through their competitive process, including amounts and 
projects funded. States with a competitive process to distribute some 
CDBG funds used letters and online feedback to convey decisions for 
both funded and denied applicants, but generally did not make public 
details on unfunded applicants. For example, Georgia sends denied 
applicants a detailed letter containing their score, rank, and 
information on why the application lost points for various criteria 
and identified ways they could improve their application for the next 
funding cycle. Non-entitlement community officials we interviewed in 
Georgia indicated that they found this process useful and were able to 
improve on declined applications to gain funding awards in subsequent 
years. States that used open application and formula processes to 
distribute CDBG funds also provided applicant feedback. The states we 
interviewed also provided some technical support as part of their 
feedback process, with all five states willing to conduct meetings or 
telephone conversations with non-entitlement communities upon request. 

Table 4: Summary of Sample State Communication Methods for Feedback on 
Funding Decisions, Applications, and Other Program Details to Non- 
Entitlement Community CDBG Applicants and the Public: 

State: Arizona; 
Communication methods: Online posting of projects funded (public), 
notification letters (all applicants), verbal technical support (upon 
request). 

State: Georgia; 
Communication methods: Online posting of all funding decisions (not 
public, applicant review only), notification letters with ranking and 
scoring details (all unfunded projects with funded projects upon 
request), verbal technical support (upon request). 

State: Pennsylvania; 
Communication methods: Notification letters (all applicants), verbal 
technical support (upon request and at conferences). 

State: South Dakota; 
Communication methods: Press release on funded projects (no online 
posting), notification letters (all applicants), applicant rating 
details (not public, upon request), verbal technical support (upon 
request). 

State: Virginia; 
Communication methods: Online posting of projects funded (public), 
notification letters (all applicants), applicant ranking and scoring 
details (not public, upon request), verbal technical support (upon 
request). 

Source: GAO analysis of information provided by states. 

[End of table] 

HUD Staff and Monitoring Results Reported Very Few Findings or 
Concerns Related to Methods of Distribution: 

HUD staff from the 17 field offices that monitor the entitlement 
communities and states in our sample reported very few findings or 
concerns related to methods of distribution. HUD requires states to 
describe their methods of distribution in their annual action plans 
and HUD has authority to monitor methods of distribution as part of 
its audit and review responsibilities. In performing its reviews, HUD 
may check to determine whether the state has distributed its funds in 
conformance with the method of distribution described in its annual 
action plan. Entitlement communities have no requirement to describe 
methods of distribution. Instead, entitlement communities must provide 
a description of the activities they will undertake during the next 
year to address their priority needs and objectives. 

As we previously reported and we recently verified with several HUD 
field office staff, HUD uses a risk-based strategy to monitor CDBG 
recipients' compliance with the program rules because it has limited 
monitoring resources.[Footnote 22] Field office staff rate all 
recipients on applicable factors under four categories: financial, 
management, satisfaction, and services and focus on high-risk 
recipients to review.[Footnote 23] HUD considers recipients that 
receive a score of 51 or greater to be high-risk. According to many 
field office staff with whom we spoke, they reported very few findings 
or concerns related to methods of distribution from their monitoring 
site visits for the CDBG program over the last few years. Our review 
of HUD's monitoring reports confirmed that HUD staff reported very few 
findings or concerns related to methods of distribution. This is due 
in part to program design--states and entitlement communities decide 
which activities to fund and how to distribute funds. Because HUD 
monitors the program using risk analysis and because of the 
flexibility granted to entitlement communities and states to 
distribute funds, issues made about the choice of methods of 
distribution are not rated high-risk. 

HUD's monitoring tends to focus on higher-risk areas such as ensuring 
funds are spent on eligible activities that meet one of the national 
objectives. For example, in April 2010 the Portland field office 
completed an on-site monitoring review of the City of Gresham's CDBG 
program. According to the field office staff, the City of Gresham was 
deemed high-risk because it had not been reviewed since 2005 and the 
city had engaged in new activities since that time. According to the 
on-site monitoring letter summarizing the results of the review, HUD 
staff assessed three areas of the city's program, including compliance 
with program eligibility and national objectives. HUD staff found that 
all of the CDBG activities were eligible for assistance, although one 
of seven projects they reviewed needed to be recategorized in HUD's 
management information system. Furthermore, because states are 
required to describe their methods of distribution, many HUD staff 
told us they also monitored states' conformance with the methods of 
distribution described in their action plans. For instance, in March 
2008 the Atlanta field office reviewed the rating and ranking of 
applications for Georgia's regular competition for CDBG awards and 
determined that the state's system for reviewing applications had 
remained basically the same for at least 10 years. Furthermore, staff 
in one field office explained that for the small portion of funds 
distributed competitively by the state they oversee, they reviewed RFP 
and award processes to ensure that they mirrored the state's planned 
approach. Staff in two other field offices noted that they looked at a 
sample of applications the state received to see whether the state 
rated and ranked them in accordance with its stated method of 
distribution. 

In addition to risk-based monitoring (on-site reviews), HUD staff 
conduct annual reviews of states' and entitlement communities' 
required annual performance reports. Many field office staff with whom 
we spoke said they compared the actual activities to those proposed in 
the annual action plans to ensure that entitlement communities and 
states were complying with the goals and objectives identified in 
their plans. For instance, the Los Angeles field office reviewed the 
Los Angeles County 2008 program year performance report and noted that 
the county reported activities and accomplishments that related back 
to strategies described in its consolidated plan. Also, the San 
Francisco field office reviewed Arizona's 2007 program year 
performance report and concluded that the state undertook activities 
that addressed the state's priority needs identified in its 
consolidated plan. 

In general, HUD field staff noted that the few problems identified 
during their reviews were administrative in nature and easily 
resolved. For instance, HUD staff at several field offices noted that 
a common problem with the consolidated and action plans, although not 
related to methods of distribution, related to the certifications that 
grantees had to submit to HUD. Grantees sometimes submitted outdated 
certification forms, failed to submit a renewal certification to 
replace the expired form on file, or submitted a certification without 
a signature. HUD staff also noted a few cases relating to requirements 
for states to describe their methods of distribution. In one instance, 
the state had changed the amount of funding dedicated to a certain 
type of project but did not revise its method of distribution 
description to reflect this change. In two other instances, HUD staff 
recommended that their respective states include sufficient 
information in their methods of distribution to meet HUD's requirement 
relating to descriptions of all selection criteria.[Footnote 24] 
Officials from one state told us that they described the criteria and 
rating system they would use to evaluate applications in their RFP 
package but the description in their program design was not as 
detailed. Although this information was disclosed elsewhere, they 
explained that they began providing more details about their criteria 
in the method of distribution about 2 years ago. In the other 
instance, HUD staff told us that the state resolved the issue by 
referring HUD staff to additional information the state included in 
its separate method of distribution document. 

HUD also requires CDBG grantees to develop and follow a detailed plan 
that provides for, and encourages, citizen participation. The plan 
must provide citizens with reasonable and timely access to local 
meetings and provide for public hearings to obtain citizen views on 
proposals and answer their questions. Several of the HUD staff with 
whom we spoke described how they annually reviewed the citizen 
participation requirement. For instance, staff in one field office 
stated that they reviewed the citizen participation processes of the 
entitlement communities they oversee to determine whether the process 
was open and the community was reaching out to find eligible projects 
that met local needs. While processes varied by entitlement 
communities, HUD accepted variation so long as the citizen 
participation plan described how the process worked and citizens had 
an opportunity to participate. According to most field office staff 
with whom we spoke, grantees generally met the citizen participation 
requirement. For example, staff in one field office told us that one 
of the entitlement communities they oversee holds hearings in 
identified neighborhoods each year to obtain public input for its 
advisory committee. 

Throughout the citizen participation process, citizens have an 
opportunity to provide input on the consolidated planning process as 
well as discuss their concerns about the city or state's distribution 
process. However, HUD field staff told us that citizens rarely used 
these venues to discuss issues related to how a city or state 
distributed its funds. Most of the discussions at these hearings 
focused on areas of need or on projects that did not receive funding. 
Citizens also can contact their local HUD office to express concerns 
about the CDBG program. Overall, several of the field office staff 
with whom we spoke stated that they had received a few complaints but 
none pertained to methods of distribution. Several field office staff 
told us that HUD investigates complaints they receive to ensure that 
grant recipients are in compliance with the program requirements. 
Local non-entitlement community officials with whom we spoke confirmed 
that they have not contacted HUD to express concerns about the states' 
methods of distribution. The lack of concerns raised about methods of 
distribution through these venues corroborates HUD officials' findings 
that methods of distribution are not a high-risk area for compliance 
with program requirements. 

Agency Comments: 

We provided HUD with a draft of this report for their review and 
comment. HUD provided technical comments, which we incorporated into 
the report, as appropriate. 

We are sending copies of this report to the Secretary of the 
Department of Housing and Urban Development and other interested 
congressional committees. In addition, the report will be available at 
no charge on GAO's Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have any questions regarding this report, please 
contact me at (202) 512-8678 or shearw@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are in appendix III. 

Sincerely yours, 

Signed by: 

William B. Shear: 
Director, Financial Markets and Community Investment: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

Our objectives were to (1) identify and describe examples of the 
various methods by which entitlement communities use and distribute 
their CDBG funds to individual projects within their jurisdiction; (2) 
identify and describe examples of the various methods by which states 
distribute CDBG funds to non-entitlement communities; and (3) describe 
and examine HUD's role in overseeing the methods by which entitlement 
communities and states distribute their CDBG funds. 

To identify and describe the methods by which entitlement communities 
use and distribute their Community Development Block Grant (CDBG) 
funds to individual projects within their jurisdictions, we conducted 
a literature review and examined reports on the CDBG program and a 
report on managing CDBG grantees.[Footnote 25] We also interviewed 
CDBG experts and representatives of several national organizations 
that represent entitlement cities and counties and potential CDBG 
subrecipients to gather general information on how entitlement 
communities distribute their CDBG funds. These organizations included 
the National League of Cities, the National Association of Housing and 
Redevelopment Officials, the National Alliance of Community Economic 
Development Associations, the National Association for County, 
Community and Economic Development, and the National Community 
Development Association. 

We selected a sample of 20 entitlement communities for detailed 
interviews (see figure 2). Ten of these communities (nine cities and 
one county) were the largest in terms of fiscal year 2010 CDBG 
allocations from the Department of Housing and Urban Development 
(HUD). To select the other 10 entitlement communities, we divided the 
list of 1,153 remaining entitlement communities into cities and 
counties. Within the city group, we divided the communities into four 
regions of the country (Northeast, Midwest/Central, South, and West). 
We then randomly drew 2 entitlement cities from each of the 4 regions 
and 2 counties from the overall list of counties--for a total sample 
of 17 entitlement cities and 3 entitlement counties, which matched the 
national distribution of cities to counties (approximately 85 percent 
and 15 percent respectively). Since we selected entitlement 
communities for comparative and illustrative purposes, results from 
this nongeneralizable sample cannot be used to make inferences about 
all entitlement communities nationwide. We interviewed the CDBG 
administrators from each of these entitlement communities to determine 
how they distributed their funds and how they shared this information 
with the public. We visited Baltimore, Chicago, Los Angeles, Los 
Angeles County, New York, San Francisco, and South Gate. We conducted 
the other interviews by telephone. We also reviewed these communities' 
annual action plans and other relevant documentation. Lastly, we 
judgmentally selected three communities from the communities we 
visited, taking into account geographic and program diversity, and 
interviewed stakeholders involved in the CDBG process, such as 
community organizations and members of citizen advisory committees. In 
Baltimore and Los Angeles, we interviewed recent and current nonprofit 
CDBG subrecipients to discuss their understanding of their cities' 
processes for distributing funds, as well as the transparency of those 
processes. In Chicago, we interviewed the executive members of the 
Community Development Advisory Committee, which comprises community 
members who provide input on CDBG funding priorities and 
recommendations to discuss their role in Chicago's funding process and 
their views about how the process works. 

To identify and describe examples of the various methods by which 
states distribute CDBG funds to non-entitlement communities, we 
reviewed the most recently available annual action plans covering 2008 
through 2010 (required and reviewed by HUD) for all 50 states to 
identify the types of methods of distribution. From this review, we 
judgmentally selected five states that represented a variety of 
distribution methods to conduct interviews (see figure 2).[Footnote 
26] In selecting states, we considered the distribution methods, 
geographic dispersion (at least one state from the Northeast, 
Midwest/Central, South, and West regions), funding amount, and states 
and regions represented by the 20 entitlement communities we reviewed. 
We interviewed the CDBG administrators for each state to obtain an 
understanding of their methods of distribution and the level of 
transparency in their process and reviewed relevant documentation. We 
also interviewed officials from two non-entitlement communities from 
each sample state to obtain their views on their respective state's 
CDBG distribution process and how information is communicated to the 
public.[Footnote 27] Finally, we interviewed a representative from the 
Council of State Community Development Agencies to obtain general 
information on how its members distribute their CDBG funds. 

Figure 2: Sampled Entitlement Communities and States: 

[Refer to PDF for image: illustration] 

State grantees reviewed: 
Arizona; 
Georgia; 
Pennsylvania; 
South Dakota; 
Virginia. 

Entitlement community grantees reviewed: 
Baltimore, Maryland; 
Bismark, North Dakota; 
Chicago, Illinois; 
Cleveland, Ohio; 
Dane County, Wisconsin; 
Deltona, Florida; 
Detroit, Michigan; 
Dover, Delaware; 
Gloucester Township, New Jersey; 
Greenville County, South Carolina; 
Gresham, Oregon; 
Houston, Texas; 
Lincoln Park, Michigan; 
Los Angeles, California; 
Los Angeles County, California; 
New York, New York;
Philadelphia, Pennsylvania; 
San Francisco, California; 
Saratoga, Florida; 
South Gate, California. 

Source: GAO analysis; Art Explosion (images). 

[End of figure] 

To describe and examine HUD's role in overseeing the methods by which 
entitlement communities and states distribute their CDBG funds, we 
reviewed the relevant statutes, regulations, and HUD's policies and 
procedures. In addition, we interviewed HUD staff from the 17 field 
offices that oversee our sampled entitlement communities and states to 
gain an understanding of their policies and practices relating to 
oversight of methods of distribution and to determine how they ensure 
that states complied with the requirement to publish their 
distribution methods. To confirm our understanding of HUD's monitoring 
efforts and annual review of the performance and evaluation reports, 
we reviewed HUD documents summarizing the results of their reviews. 

We conducted this performance audit from November 2009 to September 
2010 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Sampled Entitlement Communities' Distribution Methods: 

We interviewed the Community Development Block Grant (CDBG) 
administrators from each of 20 entitlement communities in our sample 
to determine how they distributed their funds (see table 5). We also 
reviewed these communities' annual action plans and other relevant 
documentation. For more information about how we selected these 
communities, see appendix I. 

Table 5: Methods of Distributing CDBG Funds for Sampled Entitlement 
Communities: 

Entitlement community: New York, New York; 
Fiscal year 2010 CDBG allocation: $195,203,459; 
Method(s) of distributing funds: New York directed the largest portion 
of its funds to housing preservation activities, in addition to 
neighborhood economic development, public services, and other eligible 
activities. New York published anticipated CDBG spending in its action 
plan and then allocated funding to various city agencies through the 
annual city budget process. Approximately 20 city agencies received 
funds, some of which they used to carry out activities internally and 
some of which they awarded to subrecipients. In the latter cases, 
agencies used a competitive process and established staff review 
panels that evaluated applications. The city contract office reviewed 
all contracts proposed for CDBG funding. In the case of neighborhood 
economic development, the city gave funds to the local development 
corporations with responsibility for the retail strips in specific 
areas. 

Entitlement community: Chicago, Illinois; 
Fiscal year 2010 CDBG allocation: $90,582,706; 
Method(s) of distributing funds: Chicago directed its funds toward 
housing development, public services, youth services, workforce 
activities, and other eligible activities. As part of the city budget 
process, the budget office (the CDBG administrative agency) worked 
with other city departments to suggest CDBG funding levels for various 
programs. Overall, funds were budgeted both for internal use by city 
departments and for grants to subrecipient organizations. To determine 
subrecipient awards, the budget office administered a competitive 
online application process. Staff from the applicable departments 
reviewed applications with assistance from a community development 
advisory committee and forwarded funding recommendations to the budget 
office. Following a series of public hearings, the mayor submitted a 
proposed city budget to the city council; the budget included the CDBG 
funding recommendations. After more public hearings, the city council 
approved the overall budget. 

Entitlement community: Los Angeles, California; 
Fiscal year 2010 CDBG allocation: $77,983,283; 
Method(s) of distributing funds: Los Angeles awarded most of its funds 
to nonprofits for public services, economic development, housing 
activities, and neighborhood improvements through a competitive 
process. The relevant city departments ran an RFP process for most of 
the funds, but for homelessness services and economic development 
activities, they contracted with two large quasi-governmental agencies 
that acted as umbrella organizations to administer the funds. The 
departments and agencies established panels of experts and staff to 
rate the applications. The mayor and city council also reviewed 
recommended projects and could provide input, and the city council 
issued the final approval. 

Entitlement community: Philadelphia, Pennsylvania; 
Fiscal year 2010 CDBG allocation: $55,325,903; 
Method(s) of distributing funds: Philadelphia directed nearly all of 
its fiscal year 2010 allocation to housing and public service 
activities (housing preservation, affordable housing production, and 
housing counseling), as well as to neighborhood economic development 
activities. The city selected contractors to perform housing 
preservation work through a competitive process and then accepted 
applications from homeowners on a rolling, year-round basis. It 
distributed the remainder of its funds through a competitive process. 
For competitive funds, an interdepartmental team of at least three 
people--which varied depending on the proposed activities--reviewed 
each application and made funding recommendations to the lead 
administrative agency. The city council had final approval authority 
for the overall CDBG budget, but not for specific award amounts. 

Entitlement community: Detroit, Michigan; 
Fiscal year 2010 CDBG allocation: $40,142,357; 
Method(s) of distributing funds: Detroit awarded funds for public 
services, home repair, development, and public facility rehabilitation 
activities, primarily through a competitive process. The city made 
funding decisions concurrent with the mayor's budget process. For 
proposals related to bricks and mortar projects, the city planning 
commission, a support agency of the city council, reviewed 
applications and made funding recommendations. A citizen review 
committee advised the city planning commission on these 
recommendations and also reviewed and made funding recommendations on 
proposals for the Neighborhood Opportunity Fund--neighborhood-based 
projects that were short-term in nature. All of these recommendations 
went into the mayor's proposed budget and were presented to the city 
council, which could provide input on the recommendations and had 
final approval of the overall budget. 

Entitlement community: Houston, Texas; 
Fiscal year 2010 CDBG allocation: $32,769,402; 
Method(s) of distributing funds: Houston directed its 2010 allocation 
to affordable housing (primarily single family home repair), economic 
development, public improvements and infrastructure, and public 
services. For home repair projects, the city's CDBG administrative 
department accepted homeowner applications on a first-come, first-
served basis and bid out the work to pre-certified contractors. A city-
established nonprofit made economic development loans to small 
businesses and individuals through a revolving loan account on a first-
come, first-served basis. For public improvements and infrastructure, 
the CDBG administrative department accepted proposals year-round from 
city agencies and private organizations. For public service funds, the 
CDBG administrative department awarded some grants through an open-
ended application process and subcontracted with a large nonprofit to 
manage a competitive 60-day RFP process for juvenile delinquency 
prevention, child care, and emergency shelter grant programming. The 
city council had final approval authority for all proposed funding 
amounts in excess of $50,000. 

Entitlement community: Los Angeles County, California; 
Fiscal year 2010 CDBG allocation: $32,219,273; 
Method(s) of distributing funds: Los Angeles County used the HUD 
formula to allocate its funds among 47 participating cities and five 
unincorporated districts. The county allowed each city to determine 
how funds would be utilized to meet local needs and priorities. The 
cities used various processes, which could include competition, to 
distribute their funds. However, the county provided oversight over 
the cities' use of funds by ensuring that proposed projects were 
eligible and met a national objective, in addition to conducting 
ongoing programmatic and financial monitoring. The county played a 
more direct role in distribution of funds in the unincorporated areas. 
It worked with the five district offices to identify needs and 
distribute funds for specific projects in the unincorporated areas. 
The supervisors for each of the five districts had the final approval 
authority for funding decisions in those areas. 

Entitlement community: Cleveland, Ohio; 
Fiscal year 2010 CDBG allocation: $25,908,893; 
Method(s) of distributing funds: Cleveland's CDBG administrative 
department awarded funds for housing rehabilitation and storefront 
renovation on a first-come, first-served basis and allocated some 
funding directly to other city departments to carry out housing 
demolition and build-up, landbank maintenance, and fair housing 
services, among other activities. The city awarded funds to 
subrecipients for social services, community development corporation 
activities, block club activities, and a housing trust fund through a 
one-time competitive process, and it funded neighborhood development 
activities on an ongoing basis. The city's CDBG administering 
department served as the primary review team for most funding 
applications. For social services and community development 
corporation awards, the department invited city council staff to 
participate in the review process. The city council had final approval 
of all funding allocations. 

Entitlement community: Baltimore, Maryland; 
Fiscal year 2010 CDBG allocation: $25,179,425; 
Method(s) of distributing funds: Baltimore awarded its fiscal year 
2010 funds to city agencies and subrecipients for housing, public 
services, administration and planning, neighborhood improvements 
(infrastructure), and economic development using a competitive 
process. Staff of the city's CDBG administrative department conducted 
an initial screening of proposals for eligibility and compiled a list 
of eligible projects for a review committee, which comprised 
departmental executive staff. The review committee selected a list of 
finalists and sent it to the mayor's office for review and potential 
revision. The city held a public hearing on the proposed funding 
awards, which often resulted in reconsideration requests that the 
review committee considered. The commissioner of the CDBG 
administrative department made the final decision on changes to the 
proposed awards. 

Entitlement community: San Francisco, California; 
Fiscal year 2010 CDBG allocation: $22,267,380; 
Method(s) of distributing funds: San Francisco used two competitive 
cycles to allocate the majority of its 2010 allocation. The city's 
housing office ran one competition for housing, public services, 
capital projects and improvements, and planning and capacity building, 
while the office of economic and workforce development ran another 
competition for those types of activities. The largest portion of the 
funds went to housing activities. The review process consisted of an 
initial review by the two CDBG administering departments, with 
subsequent review by a citizen committee, the city's board of 
supervisors, and the mayor's office. The board of supervisors had the 
final approval authority for funding awards. 

Entitlement community: Greenville County, South Carolina; 
Fiscal year 2010 CDBG allocation: $2,625,533; 
Method(s) of distributing funds: To administer its CDBG allocation, 
Greenville County contracted with a redevelopment authority, which 
used a formula to determine the funding allocations for five 
municipalities and a large unincorporated area. However, the 
redevelopment authority retained control over the distribution method 
for all of the funds. In both the municipalities and the 
unincorporated area, the redevelopment authority used a competitive 
process to award a portion of funds to subrecipients for public 
services, facility construction or renovation, infrastructure 
improvements, and other eligible activities, as well as to housing 
developers for activities such as housing construction or 
rehabilitation or assistance to first-time homebuyers. In the 
municipalities, the redevelopment authority board and staff scored the 
applications and made funding recommendations to the municipal 
managers for approval of the subrecipients. The redevelopment 
authority board had final approval of the municipal subrecipients. In 
the unincorporated area, redevelopment authority staff forwarded 
recommendations to the board's administration committee. Once that 
committee approved the recommendations, it sent them to the full board 
for final approval. The county council approved the annual action plan 
that included all of the funding recommendations. The redevelopment 
authority distributed all other CDBG funds (i.e., those that did not 
go to subrecipient organizations or housing developers) on a rolling 
basis. Overall, no more than 10 percent of the total allocation went 
to subrecipients. 

Entitlement community: South Gate, California; 
Fiscal year 2010 CDBG allocation: $2,289,200; 
Method(s) of distributing funds: South Gate awarded a majority of its 
2010 allocation to two city departments for park infrastructure 
improvements and code enforcement activities. While the departments 
submitted applications, the selection was based solely on the city's 
highest priority needs as identified in a series of public meetings 
and meetings with city officials from various departments. In 
addition, the city competitively awarded some funds to nonprofit 
organizations and the Police Department to carry out public service 
activities. For the competitive applications, following an initial 
eligibility screening by the city, a citizen advisory committee 
reviewed and scored each application, also considering presentations 
by each applicant, and made recommendations to the city council for 
its final approval. 

Entitlement community: Dane County, Wisconsin; 
Fiscal year 2010 CDBG allocation: $1,236,378; 
Method(s) of distributing funds: Dane County directed its 2010 funds 
to government agencies and nonprofits for housing, public facilities, 
public services, disaster assistance, and economic development 
activities. With the exception of a commercial revolving loan program 
and disaster assistance funds, for which applicants could receive 
funds on a first-come, first-served basis, the county awarded all 
funds competitively. Following an initial eligibility screening by 
county staff, an application review team of the county's CDBG 
commission (composed of resident representatives of municipalities and 
county board supervisors) scored applications and interviewed each 
applicant. The application review team passed its preliminary 
recommendations to the full CDBG commission for input. The county 
incorporated these recommendations into a draft of the annual action 
plan. Following public review and input on the plan, the CDBG 
commission passed its final recommendations to the county board of 
supervisors and county executive for approval. 

Entitlement community: Gresham, Oregon; 
Fiscal year 2010 CDBG allocation: $959,393; 
Method(s) of distributing funds: Gresham used a competitive process to 
award its CDBG funds to city departments and community based 
organizations for public services, economic development, public 
infrastructure and facilities, and housing. The review process 
entailed a basic eligibility screening by CDBG administrative staff, 
with subsequent detailed reviews and scoring by three advisory 
committees, including a community development and housing 
subcommittee, a financial review committee, and a technical review 
committee. The community development and housing subcommittee then 
heard oral presentations from all applicants at a public hearing, 
after which it could revise scores as necessary before passing on the 
recommendations to the city council (including the mayor) for final 
funding decisions. 

Entitlement community: Lincoln Park, Michigan; 
Fiscal year 2010 CDBG allocation: $936,808; 
Method(s) of distributing funds: Lincoln Park directed most of its 
2010 allocation to public infrastructure projects, such as streets and 
utilities. Based on the mayor and city council's review of Lincoln 
Park's capital needs and overall budgets, the city awarded these funds 
to the public services department, which conducted the work through 
its own personnel or via bids to private contractors. The city also 
spent a small portion of its funds on public service activities such 
as community policing and senior services, which it administered 
competitively. The CDBG administrative department and a community 
improvement commission reviewed the proposals and made funding 
recommendations to the mayor and city council. The city council 
members then individually submitted their recommendations to the 
administrative department for tabulation of final grant awards, for 
which the mayor and city council had approval authority. 

Entitlement community: Sarasota, Florida; 
Fiscal year 2010 CDBG allocation: $607,958; 
Method(s) of distributing funds: Sarasota directed its 2010 allocation 
primarily to housing rehabilitation, public services (specifically, 
homeless services), and economic development activities in a 
designated neighborhood. The CDBG administrative department ran 
housing rehabilitation projects directly on a first-come, first-served 
basis. The city administered public service funds to a large 
subrecipient that, in turn, awarded funds to other organizations on a 
first-come, first-served basis. For activities in the targeted 
neighborhood, the city carried out some of the work itself and awarded 
funds to two nonprofits to solicit applications from other service 
organizations to conduct summer youth employment activities. 

Entitlement community: Deltona, Florida; 
Fiscal year 2010 CDBG allocation: $543,184; 
Method(s) of distributing funds: Deltona directed the majority of its 
2009-2010 allocation to city departments to conduct storm water 
projects and improvements to public facilities. For housing 
rehabilitation activities, which used a small portion of the 
allocation, the city decided what to fund on a case-by-case basis, 
typically first-come, first-served. The city used a competitive 
process to allocate funds to subrecipients for public service 
activities. In addition to a written application, the city required 
applicants for these public service funds to make presentations about 
their projects to city officials. 

Entitlement community: Gloucester Township, New Jersey; 
Fiscal year 2010 CDBG allocation: $376,580; 
Method(s) of distributing funds: Gloucester Township awarded its 2010 
funds to city departments and subrecipients for home improvement 
loans, public services, infrastructure, and other activities. 
Applicants typically submitted request letters, but there was no 
required format. The grants manager and other township staff reviewed 
applications, and then the mayor and council made final funding 
decisions based on overall township needs. The council adopted the 
final awards through a resolution. 

Entitlement community: Bismarck, North Dakota; 
Fiscal year 2010 CDBG allocation: $374,662; 
Method(s) of distributing funds: Bismarck directed the majority of its 
2010 allocation to construction activities such as renovation of 
public facilities, affordable housing creation, and housing 
accessibility, as well as public service activities. Most of the 
grantees were nonprofit organizations, although the city and the 
housing authority carried out two large construction projects. A 
committee composed of the city administrator, the head of the CDBG 
administrative department, and the executive director of the United 
Way reviewed all applications and used consensus to select projects 
for funding. 

Entitlement community: Dover, Delaware; 
Fiscal year 2010 CDBG allocation: $296,526; 
Method(s) of distributing funds: Dover directed its 2010 allocation to 
housing rehabilitation and homeownership assistance and to other CDBG-
eligible services provided by nonprofit subrecipients. The city used a 
competitive application process to distribute its CDBG funding. After 
a threshold review by administrative staff, a committee consisting of 
three council members and two private citizens appointed by the mayor 
reviewed the applications and submitted its funding recommendations to 
the administrative department. The city council then received a copy 
of the recommendations in the proposed annual action plan and provided 
final approval. 

Source: HUD; GAO analysis of information provided by entitlement 
communities. 

[End of table] 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William B. Shear (202) 512-8678 or shearw@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Kay Kuhlman, Assistant 
Director; Rudy Chatlos; Geoffrey King; Yola Lewis; Kristeen McLain; 
John McGrail; Lisa Reynolds; and Barbara Roesmann made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] The 50 state recipients include Puerto Rico but not Hawaii because 
it has permanently elected not to receive state CDBG program funding. 
HUD awards funds by formula directly to the non-entitlement areas of 
Hawaii (three counties). The District of Columbia is considered an 
entitlement community for CDBG funds. 

[2] The CDBG program was authorized under Title I of the Housing and 
Community Development Act of 1974 (Pub. L. No. 93-383, codified as 
amended at 42 U.S.C. 5301 et seq.). In 1981, Congress amended the act 
to allow states the opportunity to administer CDBG fund for non- 
entitlement communities--units of general local government that do not 
receive CDBG funds directly from HUD as part of the entitlement 
program. 

[3] During our review, we interviewed staff from 6 HUD regional 
offices and 11 field offices. To facilitate the discussion in the 
draft, we used the term "field offices" to cover all 17 of the offices 
we contacted. 

[4] Total set-asides for fiscal year 2010 are $457 million. Under the 
Indian CDBG program, HUD provides competitive grants to federally 
recognized Indian tribes and to certain tribal organizations. The four 
insular areas are American Samoa, Guam, the Northern Mariana Islands, 
and the Virgin Islands. 

[5] Subrecipients can be independent governmental agencies, private 
nonprofits, and certain private, for-profit entities that facilitate 
economic development. If an entitlement community uses a subrecipient, 
it must enter into an agreement with that subrecipient that includes a 
statement of work--which describes the work to be performed, the 
schedule for completing the work, and the budget--and the recipient's 
recordkeeping and reporting requirements. 

[6] Congress established the section 108 program in 1974 as part of 
the CDBG program. This program allows communities to borrow against 
their current and future CDBG allocations to fund larger-scale housing 
rehabilitation and community and economic development projects. See 
GAO, Leveraging Federal Funds for Housing, Community, and Economic 
Development, [hyperlink, http://www.gao.gov/products/GAO-07-768R] 
(Washington, D.C.: May 25, 2007). 

[7] Entitlement communities comply with these requirements by limiting 
the amount of funds they obligate for these activities during the 
program year, while states limit the amount they spend on these 
activities over the life of the grant. Public service activities 
funded through community-based development organizations--
organizations authorized under 24 C.F.R. 570.204 to carry out special 
activities such as economic development or new housing construction--
are not subject to the public service spending limit when they are 
carried out in a neighborhood revitalization strategy area. 

[8] The consolidated plan covers CDBG and three other formula-based 
grant programs that HUD administers--the HOME Investment Partnerships, 
the Emergency Shelter Grants, and the Housing Opportunities for 
Persons with AIDS programs. 

[9] The action plan is a section of the consolidated plan that 
includes a summary of the actions, activities, and programs that will 
take place during the next year to address the priority needs and 
specific objectives identified in the consolidated plan. It is updated 
annually to reflect what will be accomplished in that program year. 

[10] Some field offices monitor both entitlement and state recipients. 
However, because some field offices do not have any states within 
their jurisdiction, they monitor only entitlement recipients. 

[11] Depending in part on local capacity, many communities also 
awarded funds to subrecipients to conduct activities such as housing 
development or counseling, economic development, and renovation of 
public facilities. 

[12] After considering the range of HUD's 2010 CDBG allocations to 
1,163 entitlement communities, we developed a classification system to 
describe the 20 communities in our sample. "Small" communities were 
those with allocations up to $1 million, "medium" communities had 
allocations between $1 million and $10 million, and "large" 
communities had allocations of $10 million and up. Our sample 
consisted of 7 small communities, 3 medium communities, and 10 large 
communities. 

[13] As an entitlement community, Los Angeles County does not include 
the cities of Los Angeles, South Gate, or other cities within the 
county that have their own entitlement community status. The Los 
Angeles County officials told us that the cities and unincorporated 
areas covered by the county's CDBG program have total populations of 
1.2 million and 1.1 million, respectively. 

[14] HUD regulations (24 CFR 91.220(d)) state that entitlement 
communities must describe in their annual action plans the activities 
they will undertake to address the priority needs and objectives 
identified in their consolidated plans. We asked entitlement community 
officials to describe some of the key factors that influenced how they 
decided to use and distribute CDBG funds. While not all officials 
named the priorities in their consolidated plans as key factors, our 
interviews were not designed to determine compliance with the 
requirement. 

[15] Detroit officials noted that while this was true in the past, a 
city restructuring process in the 2010 through 2011 CDBG program year 
removed the CDBG funding process from the local budget process. 

[16] The city established 21 FamilySource Centers to assist and 
support residents in the city's areas of greatest need. According to 
the city's Web site, each center offers an array of educational, 
family, child, and youth services onsite or nearby through referrals. 

[17] The exception was Cleveland, which listed allocations to 
categories of activities but did not list funding for specific 
projects. 

[18] Baltimore and Los Angeles were two of the communities in which we 
conducted site visits. 

[19] We conducted telephone interviews with officials from the 
following non-entitlement communities: Arizona--City of Coolidge and 
Town of Prescott Valley; Georgia--Town of Arabi and City of 
Smithville; Pennsylvania--City of Bradford and Lebanon County; South 
Dakota--City of Vermillion and City of Whitewood; and Virginia--Town 
of Blackstone and Greensville County. 

[20] South Dakota uses a system to rate projects and rejects those 
that do not receive a certain rating, referring to the system as 
competitive in its plan (distributing all CDBG funds through this 
process less those set aside for administrative purposes). However, 
officials noted that they attempt to fund all applications that meet 
their stated criteria and they accept applications on a rolling basis, 
though funding amounts may be less than requested. While South Dakota 
does not officially refer to this process as an open application 
method, we classified it as such. Officials also noted, however, that 
projects are compared by rating, and lower-rated projects may receive 
less funding in the event that funds are not available for all 
applicants. 

[21] We discuss HUD's review of methods of distribution in more detail 
in the next section of this report. 

[22] GAO, Community Development Block Grants: Program Offers 
Recipients Flexibility but Oversight Can Be Improved, [hyperlink, 
http://www.gao.gov/products/GAO-06-732] (Washington, D.C.: July 28, 
2006). 

[23] The financial factors include the size of the grant, how timely 
the recipient has been in expending its grant funds, and the extent to 
which the recipient has received program income. The management 
factors include the complexity of the activities that a recipient 
undertakes, the timeliness and accuracy of the recipient's 
submissions, the recipient's staff capacity, and how long it has been 
since HUD last monitored the recipient on-site. The satisfaction 
factors include whether the recipient has received citizen complaints 
and how responsive the recipient has been to any citizen complaints. 
The service factors are whether the recipient has met the program's 
national objectives and complied with the limitation on public service 
expenditures. 

[24] On October 24, 2006, HUD issued Notice CPD-06-11, Guidance on 
Preparation of the State CDBG Method of Distribution in Accordance 
with the Final Consolidated Plan Rule dated February 9, 2006, to aid 
states in the preparation of an acceptable method of distribution 
description. The final rule states that the method of distribution 
must provide sufficient information so that units of general local 
government will be able to prepare responsive applications. That is, 
the method of distribution shall contain a description of all criteria 
used to select applications from local governments for CDBG funding, 
including the relative importance of the criteria. 

[25] U.S. Department of Housing and Urban Development, Office of 
Policy Development and Research, Managing Subrecipients of CDBG 
Grantees (Washington, D.C.: December 2005). 

[26] We visited the state of Virginia in person and conducted 
telephone interviews with representatives of the remaining four states. 

[27] We conducted telephone interviews with officials from the 
following non-entitlement communities: Arizona-City of Coolidge and 
Town of Prescott Valley; Georgia-Town of Arabi and City of Smithville; 
Pennsylvania-City of Bradford and Lebanon County; South Dakota-City of 
Vermillion and City of Whitewood; and Virginia-Town of Blackstone and 
Greensville County. 

[End of section] 

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