Community Development Block Grants:

Program Offers Recipients Flexibility but Oversight Can Be Improved

GAO-06-732: Published: Jul 28, 2006. Publicly Released: Aug 28, 2006.

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The Community Development Block Grant (CDBG) program provides funding for housing, economic development, and other community development activities. In fiscal year 2006, Congress appropriated about $4.2 billion for the program. 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 nonentitlement communities. This report discusses (1) how recipients use CDBG funds, including the extent to which they comply with spending limits, (2) how HUD monitors recipients' use of CDBG funds, and (3) how HUD holds recipients that have not complied with CDBG program requirements accountable. To address these objectives, we visited 20 recipients, analyzed HUD data, and interviewed HUD staff.

HUD data show that CDBG recipients spend the largest percentage of their grants on public improvements (such as water lines and streets) and housing, but HUD does not centrally maintain the data needed to determine compliance with statutory spending limits. Due to the lack of centralized data, GAO was not able to determine the extent to which all recipients have complied with statutory spending limits on public services (such as health and senior services) and administration and planning. However, data provided by HUD for the 100 most populous entitlement communities, which received about one-third of the CDBG funds allocated in fiscal year 2006, showed that not all of these entitlement communities complied with the limits. Of the 100 communities, 3 exceeded their public service spending limit, and 1 exceeded the administration and planning spending limit. Given that entitlement communities collectively spend at or close to the limits, it is important for HUD to be able to report on the extent of their individual compliance with these limits. HUD uses a risk-based approach to monitor CDBG recipients; however, it has not developed a plan to replace monitoring staff or fully involved its field staff in plans to redesign an information system they use to monitor recipients. HUD's monitoring strategy calls for its field offices to consider various risk factors when determining which recipients to review because it has limited monitoring resources, and its workload has increased as its staffing levels have decreased. For example, 13 of the 42 field offices that oversee CDBG recipients do not have a financial specialist to evaluate the financial operations of each recipient, and 39 percent of CDBG monitoring staff is eligible to retire within the next 3 years. Despite these statistics, HUD has not developed a plan to hire staff with needed skills or manage upcoming retirements. Finally, although the Integrated Disbursement and Information System (IDIS) is a tool that HUD field staff use to monitor, HUD headquarters has solicited little input from them on efforts to redesign IDIS. Although it has issued a clear policy stating what actions it will take when entitlement communities fail to meet the statutory requirement that funds be spent in a timely manner, HUD has not developed similar guidance establishing a consistent framework for holding CDBG recipients accountable for deficiencies identified during monitoring. For deficiencies other than being slow to expend funds, HUD has the flexibility to institute sanctions ranging from issuing a warning letter to advising the recipient to return funds. Although its field offices have great flexibility when taking sanctions, HUD has not issued guidance establishing a framework to ensure that they are treating recipients that commit similar infractions equitably. We found instances in fiscal year 2005 where treatment seemed inconsistent. For example, several field offices found that recipients had not documented that a funded activity met any one of the program's three national objectives, but took different actions. In the continued absence of guidance, HUD lacks a means to better ensure consistency in the sanctioning process.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In May 2010, HUD reported that it had implemented this recommendation. The Office of Community Planning and Development (CPD) released the redesigned system, IDIS Online, for user acceptance testing in the Fall of 2008. According to HUD, field staff were advised to use the system not only as HUD staff but also as if they were grantees. This practice continued for over 9 months until the system was rolled out to the first grantees in the summer of 2009. A HUD official provided a spreadsheet that outlined problems identified during testing. In addition, HUD stated that CPD's Systems Development and Evaluation Division currently conducts a monthly conference call about IDIS Online with all field offices to solicit input and to address any related issues.

    Recommendation: In order to improve HUD's oversight of the CDBG program, the Secretary of Housing and Urban Development should direct the Assistant Secretary for Community Planning and Development to look for additional opportunities to solicit field staff input on IDIS user requirements.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: In May 2010, HUD reported that it had implemented this recommendation. In September 2006, HUD issued a Succession Management Plan for fiscal years 2006 to 2009. In that plan, HUD identified the types of mission-critical positions that had been found to be vulnerable to retirements in HUD's four major program offices, one of which was CPD. The plan also described several strategies for succession planning, including redeploying employees from non-critical positions to mission-critical positions and closing skill gaps through training and development programs. Further, on March 26, 2010, the HUD Secretary sent out a memorandum on the agency's Targeted Recruitment Strategy for fiscal years 2010-2012. In this document, he described a strategy for addressing HUD's need to identify qualified individuals for its talent pipeline over the next three fiscal years. He stated that this strategy would incorporate the utilization of various programs and authorities to include: Presidential Management Fellows (PMF); the Student Career Experience Program (SCEP); and the Student Temporary Employment Program (STEP).

    Recommendation: In order to improve HUD's oversight of the CDBG program, the Secretary of Housing and Urban Development should direct the Assistant Secretary for Community Planning and Development to develop a plan for ensuring the proper mix of skills and abilities and replacing an aging CPD workforce.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: In May 2010, HUD reported that it had implemented this recommendation. The agency had rolled out a new application called IDIS Online in the summer of 2009. According to HUD, this new application stores grantee inputs and adjustments to financial summary reports, which show the two spending limit calculations. percentage of funds obligated for public services and administration and planning. A HUD official provided financial summary reports for two grantees that showed the adjustments taken to calculate compliance with the two spending limits for program year 2009.

    Recommendation: In order to improve HUD's oversight of the CDBG program, the Secretary of Housing and Urban Development should direct the Assistant Secretary for Community Planning and Development to maintain in IDIS the data needed to determine compliance with the statutory limitations on expenditures for public service activities and administration and planning.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Implemented

    Comments: In October 2006, HUD reported that it had examined its guidance relating to corrective actions for monitoring findings and determined that it was an opportune time to update this guidance and examine whether certain flexibility for dealing with monitoring findings remained the appropriate protocol. In response to subsequent follow-up in September 2010, the Office of Community Planning and Development (CPD) indicated that it had considered updating the guidance. Specifically, a CPD representative stated that CPD had considered updating the guidance and still thought it would be beneficial, but competing priorities had forced them to delay any effort to do so. He noted that implementing the Housing and Economic Recovery Act of 2008 and the American Recovery and Reinvestment Act of 2009 had been higher priorities because many of the programs in these two acts were funded through the Community Development Block Grant program account. Due to these competing demands, CPD planned to rely on the current guidance for the immediate future.

    Recommendation: In order to improve HUD's oversight of the CDBG program, the Secretary of Housing and Urban Development should direct the Assistant Secretary for Community Planning and Development to consider developing guidance for the CDBG program that details what conditions should be considered when taking corrective actions and what specific conditions warrant different types of corrective actions.

    Agency Affected: Department of Housing and Urban Development

 

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