Community Development Block Grants
Entitlement Communities' and States' Methods of Distributing Funds Reflect Program Flexibility Gao ID: GAO-10-1011 September 15, 2010The 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) HUD's 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.
Reflecting the program's flexibility, the 20 entitlement communities in GAO's 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 GAO's 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 states' 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 GAO's 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 GAO's 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 HUD's 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.
GAO-10-1011, Community Development Block Grants: Entitlement Communities' and States' Methods of Distributing Funds Reflect Program Flexibility
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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) HUD‘s 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 program‘s flexibility, the 20 entitlement communities
in GAO‘s 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 GAO‘s 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 states‘ 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 GAO‘s 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 GAO‘s 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
HUD‘s 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 county‘s needs and not just individual jurisdictions. According
to the Sarasota Consortium‘s 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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