Interim Report on GAO's Review of the Urban Development Action Grant Program

GAO was asked to provide an interim report on major issues included in its review of the Urban Development Action Grant (UDAG) Program.

GAO found that reasons contributing to the low level of participation in UDAG by small cities were lack of knowledge about UDAG and insufficient capacity within the city government to either carry through a UDAG application or hire an outside concern for that purpose. Also, small cities had major difficulties obtaining adequate private sector involvement. Since cities receiving UDAG funds often loan them to private developers, a question arises as to whether the cities or the federal government should receive loan repayments. Although Department of Housing and Urban Development (HUD) officials are aware of the need for a consistent policy, no policy has been established on when a city is entitled to UDAG repayments. GAO believes that HUD needs to aggressively pursue its efforts to develop a clear policy concerning when cities can use UDAG repayments.