Community Development

Congress created the Neighborhood Reinvestment Corporation in 1978 to encourage reinvestment in older neighborhoods by financial institutions working in tandem with local government and residents. The Corporation provides these partnerships, known as NeighborWorks Organizations, with about $6 million in grants each year. The Corporation's oversight of the organizations, however, has fallen short as a result of inadequate program reviews and financial audits. Grant management, which should alert the Corporation to potential problems at the organizations before they become critical, has suffered because of this poor oversight. Unapproved transfers of grant funds to pay for organizations' operating expenses often went undetected. The Corporation is relying increasingly on competition in awarding contracts for professional services and is making policy changes to increase competition in its procurements. It is not yet clear, however, how effective these policy changes will be. Lowering the dollar threshold above which competitive bidding is required would guarantee more competition.

GAO found that: (1) 94 percent of the Corporation's 1992 budget came from federal appropriations totalling $28.6 million; (2) the Corporation lacks assurances that program reviews and financial audits receive adequate oversight; (3) poor oversight of grant management led to the Corporation's failure to detect grant funds being spent without necessary Corporation approval; (4) the Corporation lowered its competitive bid threshold to increase competition, but its threshold is still above that of most federal agencies; and (5) in 1991, the Corporation awarded six noncompetitive contracts to former employees.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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