Community Development:

HUD Oversight of the Dallas Block Grant Program Needs Improvement

RCED-92-3: Published: Nov 27, 1991. Publicly Released: Nov 27, 1991.

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Judy A. England Joseph
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Pursuant to a congressional request, GAO determined whether the Department of Housing and Urban Development (HUD) provided adequate oversight of the Dallas Community Development Block Grant (CDBG) Program, focusing on HUD monitoring of the city's: (1) timely expenditure of CDBG funds; (2) use of CDBG funds to enforce housing codes; (3) control over subrecipients; and (4) accounting and planning and administrative costs.

GAO found that: (1) HUD guidance on monitoring Dallas's timely use of CDBG funds fails to emphasize identifying the cause of slow project spending; (2) as a result, HUD failed to determine the reasons for Dallas's noncompliance with the CDBG timeliness standard and conditioned the city's entire 1989 and 1990 grants by requiring the city to either quickly spend its CDBG funds or risk losing them; (3) in response, Dallas reprogrammed some funds to lower-priority activities in an attempt to spend funds more quickly; (4) since HUD failed to monitor annual expenditures of more than $2 million for code enforcement, it did not detect that Dallas improperly charged the CDBG program code to employees that did not work full-time on CDBG projects; (5) while HUD monitoring reports generally concluded that Dallas' subrecipient monitoring system was adequate, independent audit reports concluded that the system lacked such federally required features as formal, written monitoring procedures, adequate monitor supervision, or corrective action procedures; (6) HUD did not take effective action to correct recurring delinquent subrecipient audit problems; and (7) although Dallas reported planning and administrative (P&A) expenses at 20 percent in 1990, which is the maximum amount permitted by federal legislation and CDBG regulations, the true P&A costs may be either unknown or understated, since HUD permitted Dallas to report similar subrecipients' expenses as P&A costs.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: According to the Director, Office of Block Grant Assistance, there is no evidence that Congress intends to act on this issue (3-30-93), because Congress sees the need for greater flexibility in how CDBG funds may be used, not less.

    Matter: Since the use of subrecipients is increasing and HUD does not know the extent to which P&A expenses of subrecipients and subunits of local government would affect grantees' compliance with the 20-percent limitation, and although some additional resources may be necessary, Congress should consider requiring that HUD identify the amount of planning and administrative costs that are now excluded from the 20-percent limitation. Further, if on the basis of this information, Congress believes the CDBG program's P&A expenses are excessive, appropriations could be revised to require that all CDBG P&A costs be applied to the 20-percent limitation, regardless of who incurs them.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: HUD issued CDBG Entitlement Grant Management Handbook (6513.01) on September 18, 1992. The Handbook includes instructions to monitoring staff on identifying the reasons for a grantee's inability to meet the standards for timely use of CDBG funds.

    Recommendation: To improve the overall effectiveness of the CDBG program by ensuring that funds are spent on the highest-priority activities, the Secretary of Housing and Urban Development should require community planning and development monitors to identify the causes of grantee performance deficiencies affecting the timely use of CDBG funds in order to help ensure that appropriate corrective measures are devised and implemented.

    Agency Affected: Department of Housing and Urban Development


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