a

GAO

United States Government Accountability Office

Report to Congressional Committees

July 2006 COMMUNITY 

DEVELOPMENT 

BLOCK GRANTS

Program Offers 

Recipients Flexibility 

but Oversight Can Be 

Improved

GAO-06-732
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

July 2006

COMMUNITY DEVELOPMENT BLOCK 

GRANTS 

Program Offers Recipients Flexibility but 

Oversight Can Be Improved 

Highlights of GAO-06-732, a report to 

congressional committees 

The Community Development 

Block Grant (CDBG) program 

provides funding for housing, 

economic development, and other 

community development activities. 

In fiscal year 2006, Congress 

appropriated about $4.2 billion for 

the program. Administered by the 

Department of Housing and Urban 

Development (HUD), the CDBG

program provides funding to 

metropolitan cities and urban 

counties, known as entitlement 

communities, and to states for 

distribution to nonentitlement

communities. This report discusses

(1) how recipients use CDBG 

funds, including the extent to 

which they comply with spending 

limits, (2) how HUD monitors 

recipients’ use of CDBG funds, and 

(3) how HUD holds recipients that 

have not complied with CDBG 

program requirements accountable. 

To address these objectives, we

visited 20 recipients, analyzed HUD

data, and interviewed HUD staff. 

What GAO Recommends

GAO recommends that HUD 

centrally maintain the data needed

to determine compliance with 

statutory spending limits, develop a 

plan for replacing an aging

workforce, solicit additional input 

from its field staff on user 

requirements for IDIS, and

consider developing guidance on

sanctioning CDBG recipients. In 

responding to a draft of this report, 

HUD stated that, overall, it agreed

with GAO’s findings, conclusions, 

and recommendations. 

HUD data show that CDBG recipients spend the largest percentage of their 

grants on public improvements (such as water lines and streets) and 

housing, but HUD does not centrally maintain the data needed to determine 

compliance with statutory spending limits. Due to the lack of centralized 

data, GAO was not able to determine the extent to which all recipients have 

complied with statutory spending limits on public services (such as health 

and senior services) and administration and planning. However, data 

provided by HUD for the 100 most populous entitlement communities, which 

received about one-third of the CDBG funds allocated in fiscal year 2006, 

showed that not all of these entitlement communities complied with the 

limits. Of the 100 communities, 3 exceeded their public service spending 

limit, and 1 exceeded the administration and planning spending limit. Given 

that entitlement communities collectively spend at or close to the limits, it is 

important for HUD to be able to report on the extent of their individual 

compliance with these limits. 

HUD uses a risk-based approach to monitor CDBG recipients; however, it 

has not developed a plan to replace monitoring staff or fully involved its field 

staff in plans to redesign an information system they use to monitor 

recipients. HUD’s monitoring strategy calls for its field offices to consider 

various risk factors when determining which recipients to review because it 

has limited monitoring resources, and its workload has increased as its 

staffing levels have decreased. For example, 13 of the 42 field offices that 

oversee CDBG recipients do not have a financial specialist to evaluate the 

financial operations of each recipient, and 39 percent of CDBG monitoring 

staff is eligible to retire within the next 3 years. Despite these statistics, HUD 

has not developed a plan to hire staff with needed skills or manage 

upcoming retirements. Finally, although the Integrated Disbursement and 

Information System (IDIS) is a tool that HUD field staff use to monitor, HUD 

headquarters has solicited little input from them on efforts to redesign IDIS. 

Although it has issued a clear policy stating what actions it will take when 

entitlement communities fail to meet the statutory requirement that funds be 

spent in a timely manner, HUD has not developed similar guidance 

establishing a consistent framework for holding CDBG recipients 

accountable for deficiencies identified during monitoring. For deficiencies 

other than being slow to expend funds, HUD has the flexibility to institute 

sanctions ranging from issuing a warning letter to advising the recipient to 

return funds. Although its field offices have great flexibility when taking 

sanctions, HUD has not issued guidance establishing a framework to ensure 

that they are treating recipients that commit similar infractions equitably. We

found instances in fiscal year 2005 where treatment seemed inconsistent. 

For example, several field offices found that recipients had not documented 

that a funded activity met any one of the program’s three national objectives, 

but took different actions. In the continued absence of guidance, HUD lacks 

a means to better ensure consistency in the sanctioning process. 

www.gao.gov/cgi-bin/getrpt?GAO-06-732.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact William Shear 

at (202) 512-8678 or shearw@gao.gov. 
Page i GAO-06-732 Community Development Block Grants

Contents

Letter 1

Results in Brief 2

Background 5

Recipients Fund a Variety of Activities, but HUD Lacks Centralized 

Data Showing Compliance with Statutory Spending Limits 12

Although HUD Uses a Risk-Based Approach to Monitor CDBG 

Recipients, It Lacks a Plan to Replace Monitoring Staff and Has 

Not Fully Involved Field Staff in Its Plans to Redesign IDIS 23

HUD Has Implemented a Clear Timeliness Policy, but Has Not Issued 

Similar Guidance on Other Enforcement Actions 32

Conclusions 36

Recommendations for Executive Action 38

Agency Comments and Our Evaluation 38

Appendixes

Appendix I: Objectives, Scope, and Methodology 40

Appendix II: Selected States’ Methods of Distributing Funds 45

Appendix III: Activities Funded by the Recipients That GAO Visited 50

Public Improvements 50

Housing 53

Public Services 56

Economic Development 58

Acquisition 60

Appendix IV: Comments from the Department of Housing and Urban 

Development 61

GAO Comments 64

Appendix V: GAO Contact and Staff Acknowledgments 67

Tables Table 1: Categories of Eligible CDBG Activities 9

Table 2: Percentage of CDBG Recipients Monitored, FY 

2001-2005 24

Table 3: Number of Times CDBG Recipients Were Monitored, FY 

2001-2005 26

Table 4: Sanctions Taken against CDBG Recipients, FY 2003 - 

2005 34

Table 5: 20 Recipients That GAO Visited 41

Table 6: Information on How 10 States Distribute Their CDBG 

Funds 46
Contents

Page ii GAO-06-732 Community Development Block Grants

Figures Figure 1: CDBG Appropriations, 1990 – 2006 6

Figure 2: FY 2005 CDBG Expenditures, All Recipients 13

Figure 3: FY 2005 CDBG Expenditures, Entitlement Communities 

and States 14

Figure 4: Activities Funded by Recipients That We Visited 15

Figure 5: FY 2005 CDBG Expenditures, by National Objective 17

Figure 6: Number of Recipients Eligible to Use Alternative Criteria 

for Defining Low- and Moderate-Income Areas 18

Figure 7: Sanctions Taken as Result of FY 2005 Monitoring 

Reviews, by Type 35

Figure 8: Boys and Girls Club in West Point, Georgia 50

Figure 9: Renovated Briggs Playground Pool in Attleboro, 

Massachusetts 52

Figure 10: Corron Farm Park in Kane County, Illinois 53

Figure 11: Single Family Housing Rehabilitation in Greeley, 

Colorado 54

Figure 12: Loaves and Fishes Community Food Pantry in Naperville, 

Illinois 56

Figure 13: Heartland Financial Building in Dubuque, Iowa 59

Abbreviations

CDBG Community Development Block Grant Program

CPD Office of Community Planning and Development

ESG Emergency Shelter Grants Program

GAO Government Accountability Office

GMP Grants Management Process System

HOME HOME Investment Partnerships Program

HOPWA Housing Opportunities for Persons with AIDS Program

HUD Department of Housing and Urban Development

IDIS Integrated Disbursement and Information System

OMB Office of Management and Budget

PART Program Assessment Rating Tool

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Page 1 GAO-06-732 Community Development Block Grants

United States Government Accountability Office

Washington, D.C. 20548

A

July 28, 2006 Letr

The Honorable Robert Ney

Chairman, Subcommittee on Housing

 and Community Opportunity

Committee on Financial Services

House of Representatives

The Honorable Michael R. Turner

Chairman, Subcommittee on Federalism

 and the Census

Committee on Government Reform

House of Representatives

The Honorable Tom A. Coburn

Chairman, Subcommittee on Federal Financial

 Management, Government Information, and

International Security

Committee on Homeland Security and

 Governmental Affairs

United States Senate

The Community Development Block Grant (CDBG) program is the federal 

government’s principal community development program. It provides 

funding for housing, economic development, neighborhood revitalization, 

and other community development activities. In fiscal year 2006, Congress 

appropriated approximately $4.2 billion for the program. Administered by 

the Department of Housing and Urban Development (HUD), the CDBG 

program provides funding to metropolitan cities and urban counties, 

known as entitlement communities, and to states for distribution to 

nonentitlement communities. The program provides annual grants on a 

formula basis that takes into account population, poverty, housing 

overcrowding, the age of the housing, and any change in an area’s growth in 

comparison with that of other areas. The activities undertaken with 

program funds must (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.

The CDBG program has undergone few fundamental changes since 

Congress created it in 1974. However, the administration’s fiscal year 2006 

budget proposed consolidating the program with other community and 

economic development programs in the Department of Commerce and 
Page 2 GAO-06-732 Community Development Block Grants

reducing overall funding. Congress did not act on this proposal, but the 

administration proposed additional program reforms and a 27 percent 

funding reduction in its fiscal year 2007 budget. Because of these proposed 

changes, you requested that we review the use of CDBG funds and how 

HUD oversees the program. Specifically, this report discusses (1) how 

recipients have used CDBG funds, including the extent to which they have 

funded activities that meet national program objectives, complied with 

spending limits, and reported accomplishments achieved with funds; (2) 

how HUD has monitored recipients’ use of CDBG funds; and (3) how HUD 

has held recipients that have not complied with CDBG program 

requirements accountable for their actions.

To address these objectives, we visited 20 recipients—4 states, 2 urban 

counties, and 14 cities.1

 We selected these recipients based on factors such 

as geographic dispersion, funding level, and need.2 During these visits, we 

interviewed staff, toured funded projects, and reviewed 144 recipient files. 

We also visited four nonentitlement communities. We analyzed Integrated 

Disbursement and Information System (IDIS) data on expenditures and 

Grants Management Process (GMP) System data on the extent of HUD 

monitoring. We determined that the data were sufficiently reliable for the 

purposes of this report. Finally, we reviewed HUD’s program regulations 

and guidance and interviewed headquarters and field staff. We performed 

our work from July 2005 to July 2006 in accordance with generally 

accepted government auditing standards. Appendix I provides additional 

details on our scope and methodology.

Results in Brief HUD data show that CDBG recipients spend the largest percentage of their 

grants on public improvements (such as water lines and street 

improvements), housing, and administration and planning, but HUD does 

not centrally maintain the data needed to determine compliance with 

statutory spending limits on public services (such as health and senior 

services) and on administration and planning. In terms of the activities 

most often funded, some differences exist in how entitlement communities 

and states have used their funds. In fiscal year 2005, HUD data showed that 

1

The 20 recipients we visited included 17 recipients in the Atlanta, Baltimore, Boston, 

Chicago, Denver, and Los Angeles metropolitan areas and 3 recipients outside of large 

metropolitan areas (Warner Robins, Georgia; Dubuque, Iowa; and Beloit, Wisconsin).

2

“Need” comprises factors such as poverty, age of housing, and decline.
Page 3 GAO-06-732 Community Development Block Grants

entitlement communities—cities and urban counties—spent 27 percent of 

their funds on housing, 24 percent on public improvements, and 17 percent 

on administration and planning. Other activities they funded to a lesser 

extent included public services, acquisition of property, and economic 

development. During that same time period, HUD data showed that the 

nonentitlement communities funded by states spent 54 percent of their 

funds on public improvements, 17 percent on housing, and 15 percent on 

economic development. Because HUD’s information systems do not 

maintain a record of data adjustments needed to calculate compliance, we 

were not able to determine the extent to which all recipients have complied 

with the statutory spending limits on public services and administration 

and planning. However, data collected by HUD from its field offices for the 

100 most populous entitlement communities showed that not all complied 

with the limits.3

 These 100 entitlement communities received about 

one-third of the CDBG funds allocated in fiscal year 2006. Of the 100 

entitlement communities, 3 exceeded their public service spending limit, 

and 1 exceeded the administration and planning spending limit. Given that 

HUD data show that entitlement communities collectively spend at or close 

to the limits, it is important for HUD to be able to report on the extent of 

their individual compliance with these limits.

HUD uses a risk-based approach to monitor CDBG recipients; however, it 

has not developed a plan to ensure that it has enough staff with the skills 

needed to conduct monitoring or fully involved its field staff in plans to 

redesign an information system they use to monitor recipients. Consistent 

with our internal control standards, HUD has developed a formal risk 

analysis process for its field offices to follow when determining which 

recipients to review.4

 The factors considered include the size of the 

recipient’s grant, the complexity of the activities that a recipient 

undertakes, and how long it has been since the department last reviewed a 

recipient. HUD’s field offices generally followed this process when 

determining which recipients to review in fiscal year 2005. Our analysis of 

the extent of HUD monitoring showed that HUD reviewed most, but not all, 

CDBG recipients at least once in the 5-year period from fiscal year 2001 

through fiscal year 2005. Specifically, HUD reviewed all but 255 recipients 

3

We do not know to what extent the 100 most populous entitlement communities are 

reflective of the 1,128 entitlement communities; therefore, results of this analysis cannot be 

generalized to all entitlement communities.

4

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).
Page 4 GAO-06-732 Community Development Block Grants

in fiscal years 2003 through 2005. These 255 recipients received about $525 

million in fiscal year 2005 funding. During the 5-year period from fiscal year 

2001 through 2005, HUD did not monitor 84 recipients that received a total 

of about $132 million in fiscal year 2005. HUD uses a risk-based approach 

because it has limited staff to devote to CDBG monitoring and its CDBG 

workload has increased as its staffing levels have decreased. For example, 

13 of the 42 field offices overseeing CDBG recipients do not have a 

financial specialist to evaluate the financial operations of each recipient, 

and 39 percent of CDBG monitoring staff is eligible to retire within the next 

3 years. Despite these statistics, HUD has not developed a plan to hire staff 

with needed skills or help manage upcoming retirements. Further, 

IDIS—the system that HUD uses to conduct on-site and off-site 

monitoring—does not contain all of the information that HUD needs to 

monitor recipients’ performance. For example, HUD field staff told us that 

the data in IDIS are not always current because some recipients do not 

update it quarterly, as HUD recommends. HUD is currently redesigning 

IDIS, but it has solicited limited input from its field staff on its development 

plans.

Although it has issued a clear policy stating what actions it will take when 

entitlement communities fail to meet the statutory requirement that funds 

be spent in a timely manner, HUD has not developed similar guidance 

establishing a consistent framework for holding CDBG recipients 

accountable for deficiencies identified during monitoring. HUD has set a 

timeliness standard for entitlement communities and established a grant 

reduction policy for recipients that exceed the standard. For deficiencies 

other than being slow to expend funds (such as funding an ineligible 

activity or failing to document that an activity meets one of the program’s 

national objectives), HUD has the flexibility to assess sanctions ranging 

from issuing a warning letter to advising the recipient to return CDBG 

funds. Although its field offices have great flexibility when making 

sanctions, HUD has not issued guidance establishing a consistent 

framework to ensure that these offices are treating recipients that commit 

similar infractions equitably. In conducting our work, we found instances in 

fiscal year 2005 where findings that appeared to be similar were associated 

with different enforcement actions. For example, several field offices 

found that recipients had not documented that a funded activity met a 

national objective, but took different actions. One office advised the 

recipient to pay back funds. If the recipient could not provide further 

documentation, the second office planned to advise the recipient to 

provide written assurance that it would not fund that type of activity again, 

while the third office stated that it might disallow the expenditures. 
Page 5 GAO-06-732 Community Development Block Grants

Treatment can continue to appear inconsistent in the absence of guidance 

to better ensure consistency and transparency in the sanctioning process. 

This report contains four recommendations designed to improve HUD’s 

processes for monitoring communities’ use of CDBG funds. We 

recommend that HUD centrally maintain the data needed to determine 

compliance with statutory spending limits, develop a plan for replacing an 

aging workforce, solicit additional input from its field staff on the user 

requirements for IDIS, and consider developing guidance on sanctioning 

CDBG recipients. We provided a draft of this report to HUD for its review 

and comment. In response, HUD provided a letter with comments that are 

technical in nature. In addition, we received oral comments from the Office 

of Community Planning and Development’s Comptroller stating that, 

overall, HUD agrees with our findings, conclusions, and recommendations.

Background The Housing and Community Development Act of 1974 combined seven 

categorical programs to form the CDBG program. The objective of the 

program is to develop viable urban communities by providing decent 

housing and a suitable living environment and expanding economic 

opportunities, principally for persons of low and moderate income. 

Program funds can be used on housing, economic development, 

neighborhood revitalization, and other community development activities. 

As shown in figure 1, CDBG appropriations have fluctuated over time.
Page 6 GAO-06-732 Community Development Block Grants

Figure 1: CDBG Appropriations, 1990 – 2006

Note: The formula allocation represents the portion of CDBG funds that is available for distribution to 

entitlement communities and states after Congress sets aside funds for special purposes.

After funds are set aside for special 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 counties (referred to as entitlement communities) 

and 30 percent among the states to serve nonentitlement communities.5

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

Fiscal year Fiscal year 

Source: HUD appropriations data. 

0 

1 

2 

3 

4 

5 

6 

Formula allocation 

Total appropriations 

’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 

0 

1 

2 

3 

4 

5 

6 

Real dollars in billions Constant dollars in billions (2005)

5

Total set-asides for fiscal year 2006 are $467 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. 
Page 7 GAO-06-732 Community Development Block Grants

population of entitled cities).6 Currently, 1,128 entitlement communities 

receive CDBG funds, which is up from 866 entitlement communities in 

fiscal year 1990; 50 states also receive CDBG funds.7

 HUD distributes funds 

to entitlement communities and states based on the higher yield from one 

of two weighted formulas that consider factors such as population, poverty, 

housing overcrowding, the age of the housing, and any change in an area’s 

growth in comparison with that of 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 may carry out activities directly or may award 

funds to subrecipients to carry out agreed-upon activities. Subrecipients 

can be governmental agencies such as public housing authorities or park 

districts; private nonprofits such as private social service agencies, 

community development corporations, or operators of homeless shelters; 

and certain private, for-profit entities that facilitate economic development. 

Whenever an entitlement community uses a subrecipient, it must enter into 

a signed, written 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.

Every activity funded by entitlement communities and states must meet 

one of three national program objectives. Activities undertaken must (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. Recipients must use at least 70 percent of their funds 

for activities that principally benefit low- and moderate-income people over 

a period of 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 meet the definition. 

However, the CDBG statute includes an exception that enables certain 

6

The Office of Management and Budget (OMB) defines metropolitan areas. A principal city 

is the largest city of a metropolitan area or a city that meets specified statistical criteria.

7

Although 118 of the 1,128 entitlement communities no longer meet the definition, they 

remain entitlements due to a statutory provision that allows communities that qualified for 

at least 2 years to remain qualified indefinitely. These 118 entitlement communities were 

allocated about $100 million in fiscal year 2005. 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 for the nonentitlement areas in Hawaii directly to the three 

eligible counties.
Page 8 GAO-06-732 Community Development Block Grants

entitlement communities to utilize CDBG funds for “area benefit activities” 

in census tracts having a low- and moderate-income population of less than 

51 percent.8

 Area benefit activities are activities that benefit all of the 

residents in a particular geographic area, such as a park, community center, 

or streets. Entitlement communities that may utilize this exception are 

those that have a limited number of census tracts with a majority low- and 

moderate-income population, and the exception extends to the 25 percent 

of census tracts within the entitlement community’s boundaries having the 

highest percentages of low- and moderate-income persons.

Recipients can only use their CDBG funds on 26 eligible activities. For 

reporting purposes, HUD classifies these eligible activities into eight broad 

categories, as defined in table 1. Some of the activities that can be funded, 

such as loans for housing rehabilitation, generate program income for 

recipients that must be used to fund additional activities. There are 

statutory limitations on the amounts that recipients may spend in two 

specific areas. Pursuant to provisions in annual appropriations laws, 

recipients may only use up to 20 percent of their annual grant plus program 

income on planning and administrative activities. Recipients may also only 

use up to 15 percent of their annual grant plus program income on public 

service activities.9

 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.

8

42 U.S.C. § 5305(c)(2)(A)(ii).

9

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.
Page 9 GAO-06-732 Community Development Block Grants

Table 1: Categories of Eligible CDBG Activities 

Source: HUD data.

Recipients must submit a strategic plan that addresses the housing, 

homeless, and community development needs in their jurisdictions at least 

once every 5 years. The plan covers CDBG and three other formula grant 

programs administered by HUD—the HOME Investment Partnerships 

(HOME) Program, the Emergency Shelter Grants (ESG) Program, and the 

Housing Opportunities for Persons with AIDS (HOPWA) Program.10

Annually, recipients must submit an action plan that identifies the activities 

they will undertake to meet the objectives in their strategic plans.11 At the 

end of each year, recipients must submit to HUD an annual performance 

report detailing progress they have made in meeting the goals and 

Category Description

Acquisition Includes the acquisition of real property, clearance and 

demolition, and relocation

Administration and 

planning

Includes planning, general program administration, and indirect 

costs

Economic 

development

Includes financial assistance to for-profit businesses and the 

rehabilitation of publicly or privately owned commercial or 

industrial property

Housing Includes the rehabilitation of residential properties, direct 

homeownership assistance, and code enforcement

Public improvements Includes public facilities such as homeless shelters and 

neighborhood facilities and improvements to water and sewer 

lines and streets

Public services Includes health services, senior services, child care services, and 

employment training

Repayments of 

Section 108 loans

Repayments of loans obtained using current and future CDBG 

allocations as collateral

Other Includes nonprofit organization capacity building and assistance 

to institutions of higher learning

10The HOME program provides federal assistance to participating jurisdictions for housing 

rehabilitation, rental assistance, home-buyer assistance, and new housing construction. The 

ESG program provides homeless persons with basic shelter and essential supportive 

services by assisting with the operational costs of shelter facilities. The HOPWA program 

provides housing assistance and related supportive services to persons living with human 

immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS). 

11Recipients have different program year start and end dates that often coincide with their 

jurisdictions’ fiscal year.
Page 10 GAO-06-732 Community Development Block Grants

objectives outlined in their strategic and action plans. HUD staff use 

detailed checklists to review recipients’ strategic and annual actions plans 

as well as their annual performance reports.

HUD’s Office of Community Planning and Development (CPD) administers 

the CDBG program through program offices at HUD headquarters and 42 

field offices located throughout the United States. The headquarters offices 

set program policy, while staff in the 42 field offices monitor recipients. 

Each field office is headed by a CPD director. CPD has a total authorized 

staff of approximately 800—about 200 at headquarters and 600 in the field. 

CPD field offices are responsible for a broad range of grant management 

activities that include annual review and approval of entitlement grantee 

action plans, preparation and execution of grant agreements, review of 

entitlement grantee annual performance reports, managing homeless 

program competition to include reviewing over 4,500 applications; 

preparing conditional award letters; reviewing and approving technical 

submission for conditionally approved grants; setting up budgets for each 

grant in Line of Credit Control System; executing grant agreements and 

grant closeout activities, providing technical assistance to entitlement and 

competitive grantees, and recapturing unobligated/unexpended grant 

funds, as well as monitoring activities.

In September 2005, CPD issued a new monitoring handbook. The handbook 

states that monitoring is an integral management control technique and 

that the goal of monitoring is to determine compliance, prevent/identify 

deficiencies, and design corrective actions to improve or reinforce program 

participant performance. It contains two chapters on monitoring the CDBG 

program, and these chapters include 29 exhibits for field office staff to use 

when monitoring CDBG recipients.

HUD staff use two major information systems to monitor the use of CDBG 

funds—IDIS and GMP. Developed in fiscal year 1996, IDIS is a management 

information system that consolidates planning and reporting processes 

across HUD’s four formula grant programs. The recipients use this system 

to enter information on their plans, establish projects and activities to draw 

down funds, and report accomplishments. The GMP system, created in 

fiscal year 1997, records information such as HUD’s monitoring of 

recipients, provision of technical assistance, and review of recipients’ plans 

and performance reports. The system is designed for use by HUD staff to 

ensure that funds are being expended properly and to provide information 

on recipient progress.
Page 11 GAO-06-732 Community Development Block Grants

In April 1999, we issued a report on HUD’s oversight of CDBG and CPD’s 

three other formula grant programs.12 At that time, we found that HUD’s 

monitoring did not ensure that the programs’ objectives were being met or 

that recipients were managing their funds appropriately. We also noted that 

IDIS did not provide the information necessary to accurately assess 

recipients’ performance and thus did not compensate for HUD’s 

breakdowns in monitoring. Specifically, we reported that IDIS (1) provided 

ample opportunity for major problems with data entry and did not allow 

such problems to be corrected easily, (2) did not provide timely and 

accurate information, and (3) had difficulty producing reports. Because of 

the actions HUD took in response to our recommendations in this report, 

we removed CPD’s programs from our high-risk list in 2001.13

We have issued standards for internal control in government that agencies 

should follow.14 Internal control helps government program managers 

achieve desired results through effective stewardship of public resources. 

Internal control standards provide the overall framework for establishing 

and maintaining internal control and for identifying and addressing major 

performance and management challenges and areas at greatest risk of 

fraud, waste, abuse, and mismanagement. Two of the standards are (1) risk 

assessment, where risks are identified and analyzed for their possible 

effect and (2) monitoring, which assesses the quality of performance over 

time and ensures that findings are promptly resolved. Another standard is 

control activities that help ensure that management’s directives are carried 

out. Examples of such activities include managing an organization’s 

workforce and establishing and reviewing performance measures and 

indicators.

12GAO, Community Development: Weak Management Controls Compromise Integrity of 

Four HUD Grant Programs, GAO/RCED-99-98 (Washington, D.C.: Apr. 27, 1999).

13GAO, High-Risk Series: An Update, GAO-01-263 (Washington, D.C.: January 2001).

14GAO/AIMD-00-21.3.1.
Page 12 GAO-06-732 Community Development Block Grants

Recipients Fund a 

Variety of Activities, 

but HUD Lacks 

Centralized Data 

Showing Compliance 

with Statutory 

Spending Limits

While the data that HUD collects on CDBG expenditures show that CDBG 

recipients fund a variety of activities, HUD does not centrally maintain the 

data needed to determine if recipients are complying with statutory 

spending limits. According to HUD’s data, CDBG recipients spend the 

largest percentage of their funding on public improvements and housing 

activities. Further, recipients report that the vast majority of activities they 

fund meet the national objective of principally benefiting low- and 

moderate-income persons; however, 359 recipients are currently eligible 

for an exception that allows them to expand the definition of low- and 

moderate-income areas. There are statutory spending limits on public 

services and administration and planning, but HUD’s information systems 

do not maintain all the data needed to determine the extent of compliance 

with these limits. Finally, HUD has implemented a new performance 

measurement system to improve its ability to obtain consistent data on 

accomplishments attained with CDBG funds.

CDBG Recipients Use the 

Majority of Their Grants to 

Fund Public Improvements 

and Housing Activities

CDBG recipients spend the largest percentage of their funding on public 

improvements and housing activities. In fiscal year 2005, recipients spent 

about $4.8 billion in CDBG funds to address a wide range of local needs. 

Approximately $508 million (or 10 percent) of these total expenditures 

were from program income generated by previous CDBG activities. As 

shown in figure 2, CDBG recipients spent 32 percent of their total funds on 

public improvements and 25 percent on housing in fiscal year 2005. Within 

the category of public improvements, recipients spent the largest 

percentage of their funds on water and sewer improvements. Under the 

housing category, the single activity that received the most funding was 

single-unit residential rehabilitation.
Page 13 GAO-06-732 Community Development Block Grants

Figure 2: FY 2005 CDBG Expenditures, All Recipients

Note: Other includes nonprofit organization capacity building and assistance to institutions of higher 

learning.

Although both entitlement communities and states devote large amounts of 

funding to public improvements, figure 3 shows some differences in how 

they use their CDBG funds. Entitlement communities spend the largest 

percentage of their CDBG funds on housing activities. In fiscal year 2005, 

entitlement communities spent 27 percent of their CDBG allocations on 

housing activities, followed by 24 percent on public improvements, and 17 

percent on administration and planning activities. In contrast, states 

distribute over half of their CDBG funds to public improvements. In fiscal 

year 2005, states distributed 54 percent of their funds to public 

improvements, 17 percent to housing activities, and 15 percent to economic 

development. States and entitlement communities use a similar process to 

identify CDBG needs, but states also have to determine how they will 

distribute their funds to nonentitlement communities. How states choose 

to distribute their funds varies from state to state. For example, Georgia 

distributes most of its CDBG funding through a competitive process that 

funds the best projects regardless of activity type. Colorado also uses a 

competitive process, but it distributes a third of its CDBG funding to 

housing, a third to business financing, and a third to public facilities and 

community development. Pennsylvania distributes most of its CDBG 

Source: GAO analysis of IDIS data. 

0.5% Other

2.7% Section 108 loan repayments

5.7% 

8.8% 

11.4% 

14.3% 

24.6% 

31.9% 

Acquisition 

Public improvements

Housing 

Administration and planning 

Public services

Economic development 
Page 14 GAO-06-732 Community Development Block Grants

funding using a formula method. For examples of how selected states 

distribute their CDBG funds, see appendix II.

Figure 3: FY 2005 CDBG Expenditures, Entitlement Communities and States

As a result of the flexibility inherent in the CDBG program, the types of 

activities that entitlement communities and states fund within each broad 

category vary considerably. During our site visits, many of the recipients 

we interviewed stated that the flexibility afforded by CDBG was one of the 

program’s strengths. Figure 4 illustrates the variety of activities funded by 

the recipients we visited. More detailed descriptions of various activities 

funded by the recipients we visited can be found in appendix III.

0.5% Other

3.7% Section 108 

loan repayments

6.4% 

6.6% 

15.0% 

16.7% 

24.0% 

27.4% 

Acquisition 

Public 

improvements

Housing 

Administration 

and planning 

Public services

Economic 

development 

0.6% Other

0.1% Section 108

loan repayments

8.1% 

15.2% 

17.4% 

53.5% 

3.5% Acquisition 

Public 

improvements

Housing 

Administration 

and planning 

1.7% Public 

services

Economic 

development 

CDBG expenditures by entitlement communities CDBG expenditures by states

Source: GAO analysis of IDIS data. 
Page 15 GAO-06-732 Community Development Block Grants

Figure 4: Activities Funded by Recipients That We Visited

Sources: GAO (top two photos); City of Beloit, Wisconsin (middle two photos); Civil Technology, Inc. (bottom two photos). 

Washington Street 

corridor redevelopment 

(Denver, Colorado)

Economic development activities

included improvements to 

commercial properties, infrastructure development to attract or 

retain businesses, revolving loan 

funds, and business façade 

improvements. For example, the 

city of Denver, Colorado used 

CDBG funds to finance the 

demolition and rehabilitation of 

blighted commercial properties.

El Centro Del Pueblo 

(Los Angeles, California)

Public service activities

included youth services, 

senior services, employment 

training, and literacy 

programs. For example, the 

city of Los Angeles, California

used CDBG funds to support 

an after-school activities

center that serves 250 youth 

ages 7 to 20.

Hope House 

(Atlanta, Georgia)

Public improvement activities

included the construction of 

homeless shelters, improvements

to water and sewer lines, and 

park renovations. For example, 

the city of Atlanta, Georgia used 

CDBG funds to construct a new 

shelter and transitional housing 

facility for 70 homeless men. 

Beloit housing rehabilitation

(Beloit, Wisconsin)

Housing activities included housing 

rehabilitation, home buyer assistance, 

energy efficiency improvements, and 

various home safety improvements. For 

example, the city of Beloit, Wisconsin 

used CDBG funds for paint, housing 

rehabilitation, and revolving loan 

programs.

Before After

Before After
Page 16 GAO-06-732 Community Development Block Grants

Almost All Funded 

Activities Benefit Low- and 

Moderate-Income People, 

but the Criteria for Defining 

Target Areas Are Allowed to 

Vary

Of the three national program objectives, recipients report that the vast 

majority of activities they fund under the CDBG program meet the 

objective of principally benefiting low- and moderate-income persons. 

However, some recipients can use different criteria when defining low- and 

moderate-income areas. As shown in figure 5, entitlement communities 

reported that 91 percent of the activities they funded in fiscal year 2005 

principally benefited low- and moderate-income persons; states reported 

that 96 percent of their activities met this national objective. The remaining 

activities funded, excluding activities coded for administration and 

planning, sought to eliminate slums or blight, addressed urgent needs, or 

were missing a national objective code. For the small percentage of 

activities missing a code, we could not determine which national objective 

was met. According to a HUD official, activities missing a national 

objective code were also administration and planning activities, however, 

we could not verify this statement based on our analysis of HUD’s IDIS 

data. 
Page 17 GAO-06-732 Community Development Block Grants

Figure 5: FY 2005 CDBG Expenditures, by National Objective

Note: Entitlement communities reported that 0.1 percent of the activities they funded addressed urgent 

needs. Numbers do not add to 100 percent due to rounding. The figure excludes expenditures coded 

as administration and planning, which are presumed to meet a national objective.

A special statutory exception allows certain entitlement communities to 

count activities that benefit fewer than 51 percent low- and 

moderate-income people as meeting the corresponding national objective. 

This exception allows the recipient to use the first 25 percent of all census 

tracts in its jurisdiction to qualify as meeting the national objective. For 

example, if a city or county consists of 40 census tracts, only 4 of which 

contain 51 percent or more low- and moderate-income persons, that 

recipient can also consider the 6 census tracts with the next highest 

percentages of low- and moderate-income persons as low- and 

moderate-income census tracts.

Currently, 359 of the 1,128 cities and urban counties that receive CDBG 

funds are eligible to use this exception. These recipients’ exception 

percentages range from a high of 50.9 percent to a low of 18.5 percent. The 

exception percentage indicates the minimum percentage of low- and 

moderate-income people that must live in an area for an activity funded in 

0.8%

Missing national 

objective code

95.6% 

2.6% 

Slum/blight 

1.1% 

Urgent need 

Entitlement communities States

Source: GAO analysis of IDIS data. 

4.4% Slum/blight 

91.0% 

4.5% Missing 

national objective 

code 

Low/moderate 

income persons Low/moderate 

income persons
Page 18 GAO-06-732 Community Development Block Grants

that area to meet the low- and moderate-income national objective. As 

shown in figure 6, the majority of recipients eligible for the exception had 

an exception percentage higher than 40 percent; 39 CDBG recipients had a 

percentage less than 30 percent. Although a recipient is eligible to use this 

exception, it may not take advantage of it for all of the activities it funds. 

First, the exception only applies when the activity—such as a park, 

community center, or streets—serves an identified geographic area. Many 

activities, such as public services, benefit low- and moderate-income 

people, not an area. Also, in cases where the recipient has both areas that 

contain a majority of low- and moderate-income people and areas that 

qualify for the exception, it may choose to fund only activities that are in its 

areas with a majority of low- and moderate-income people.

Figure 6: Number of Recipients Eligible to Use Alternative Criteria for Defining Lowand Moderate-Income Areas

0

30

60

90

120

150

Less

than 30

34.9 to

30.0

39.9 to

35

44.9 to

40.0

50.9 to

45.0

Number of CDBG recipients

Exception percentage range

Source: GAO analysis of HUD data.

26

70

89

135

39
Page 19 GAO-06-732 Community Development Block Grants

HUD Does Not Centrally 

Maintain the Data Needed to 

Determine Compliance with 

Statutory Spending Limits 

on Public Service Activities 

and Administration and 

Planning

HUD does not centrally maintain the data needed to determine if 

entitlement communities and states are complying with the statutory 

spending limits on public services and administration and planning. 

Information on manual adjustments needed to determine compliance can 

be obtained from the field offices but is not readily available. By law, CDBG 

recipients may only use up to 15 percent of their funds on public service 

activities and up to 20 percent on administration and planning. We 

attempted to use the data in IDIS to assess each entitlement community’s 

compliance with these spending limits but determined that certain manual 

adjustments that are needed to complete the calculations are not saved in 

IDIS.15 Entitlement communities enter these manual adjustments into IDIS 

at the end of each program year for the sole purpose of creating financial 

summary reports that show, among other things, the two spending limit 

calculations. Entitlement communities include these reports in the annual 

performance reports that they submit to HUD’s 42 field offices for review. 

After they are prepared, the reports are saved in HUD’s mainframe 

computer for only 5 days due to limited system capacity.

With respect to determining state compliance, data are even more limited. 

IDIS does not currently generate reports that show the spending limit 

calculations for states. The calculations that are used to determine an 

entitlement community’s compliance do not work for states because a 

state’s compliance is determined based on the percentage of each grant 

that is spent on public services and administration and planning instead of 

the percentage of each program year’s obligations, as is the case for 

entitlement communities. Therefore, according to the HUD official that 

heads the state CDBG program, field staff currently determine compliance 

with the spending limits during on-site monitoring and when grants are 

fully spent. However, the official noted that future design enhancements to 

IDIS will allow HUD to more easily generate information on state 

compliance with these spending limits.

Without a record of data adjustments needed to calculate entitlement 

community compliance and data on state compliance, HUD cannot provide 

timely assurance that recipients are adhering to the spending limits. For 

example, when information on compliance with the administrative and 

planning spending limit was recently requested from HUD for a House 

15These manual adjustments reflect amounts that affect the calculation but are not included 

in IDIS.
Page 20 GAO-06-732 Community Development Block Grants

report, HUD could not provide data that directly addressed the request.16

The agency provided the data that were readily available but noted that the 

data could not be used to determine compliance with the spending limit. 

HUD stated that it would have to collect additional information on certain 

manual adjustments to give the committee a more accurate picture of 

compliance with the limit.

In the absence of centralized data on all recipients, we requested that HUD 

contact its field offices to provide data on the extent to which the 100 most 

populous entitlement communities had complied with the statutory 

spending limits in program year 2004. These entitlement communities 

received about one-third of the CDBG funds allocated in fiscal year 2006.17

Our analysis of the limited data showed that not all of these entitlement 

communities complied with the statutory spending limits.18 Of the 100 

entitlement communities, 3 exceeded their public service spending limit, 

and 1 exceeded the administration and planning spending limit. HUD could 

not provide similar data on the extent to which individual states have 

complied with the spending limits because, as described earlier, IDIS does 

not generate reports that track state compliance with the limits. According 

to the head of the state CDBG program, compliance with the limits has 

never really been a concern for states because they collectively spend well 

below the statutory maximums.

Congress Has Provided Some 

Exceptions to the Public Service 

Spending Limit

Some recipients are allowed, due to a special provision, to use more than 

15 percent of their funds for public services. By law, entitlement 

communities that used in excess of 15 percent of CDBG funds received for 

public service activities in fiscal year 1982 or 1983 are allowed to continue 

to use the higher of the actual dollar amount or percentage of assistance in 

either of those years. Due to this provision, a total of 41 entitlement 

communities are allowed to use more than the 15 percent they would have 

been allowed if they were subject to the cap. For example, the city of 

16House Committee on Government Reform, Bringing Communities into the 21st Century: 

A Report on Improving the Community Development Block Grant Program, Report 

109-365, January 31, 2006.

17The percentage reported only reflects funds allocated to 99 of the 100 entitlement 

communities because Jefferson County, Kentucky was no longer listed as a separate 

entitlement community in fiscal year 2006.

18We do not know to what extent the 100 most populous entitlement communities are 

reflective of the 1,128 entitlement communities; therefore, results of this analysis cannot be 

generalized to all entitlement communities.
Page 21 GAO-06-732 Community Development Block Grants

Chicago, Illinois is allowed to use $41 million (48 percent of its fiscal year 

2006 allocation) for public services. The city of Seattle, Washington is 

allowed to use about 36 percent of its CDBG funds for public services. 

Congress has also authorized temporary exceptions to the spending limit 

when warranted by events affecting a specific community. These 

temporary exceptions are for a limited period of time, such as 5 years, and 

a limited amount, such as up to 25 percent of their grant amount, unless 

extended by law. For instance, the city and county of Los Angeles were 

allowed to exceed the limit for a set period of time in the aftermath of the 

1992 Los Angeles civil unrest. Also, in September 2005, HUD issued a 

suspension of the limit to enable CDBG recipients to utilize CDBG funds to 

address emergency expenses associated with the needs of Hurricane 

Katrina evacuees.19

Not All Staff and Overhead Costs 

Funded with CDBG Are Subject 

to the Planning and 

Administration Spending Limit

The expenses subject to the spending limit on administration and planning 

do not reflect all of the staff and overhead costs being funded with CDBG. 

CDBG recipients are allowed by regulation to incorporate into individual 

activity budgets delivery costs such as architectural and engineering 

expenses, legal expenses, insurance, permit fees, taxes, and similar 

expenses if such expenses are directly attributable or integral to carrying 

out an eligible activity. These expenses are not counted toward the 20 

percent administrative and planning spending limit. With the exception of 

housing rehabilitation administration and code enforcement, HUD does not 

track staff costs charged to various eligible activities. In fiscal year 2005, 

CDBG recipients spent $153 million on housing rehabilitation 

administration and $133 million on code enforcement—about 6 percent of 

total expenditures. While funds charged to planning and administration are 

presumed to meet the program’s national objectives, HUD requires 

recipients to document that any staff or overhead costs charged to other 

eligible activities meet a national objective.

HUD Has Established a New 

Performance Measurement 

System to Track Program 

Accomplishments

HUD has established a new performance measurement system to better 

track accomplishments achieved with CDBG funds. IDIS currently contains 

data on CDBG-funded accomplishments, but the data are incomplete and 

inconsistent. First, HUD has not always required recipients to enter 

accomplishment data; therefore, data on the older projects are incomplete. 

19This suspension was issued pursuant to a statutory provision that allows the Secretary of 

Housing and Urban Development to suspend most, but not all, statutory requirements in 

cases where the President has issued a federal disaster declaration.
Page 22 GAO-06-732 Community Development Block Grants

Second, recipients report data differently. For example, some CDBG 

recipients report the number of persons served by a CDBG funded activity, 

while other recipients report the number of times a service is provided. In 

an effort to address these problems, HUD began verifying the accuracy of 

CDBG accomplishment data in 2004. To ensure complete and accurate 

data, HUD periodically reviews the data that recipients enter into IDIS for 

inconsistencies, inaccuracies, and omissions. HUD then gives the 

recipients feedback by placing spreadsheets on the Web for each recipient 

that indicate the fields in IDIS that need correction.

To further track program accomplishments, HUD has developed a new 

performance measurement system for the CDBG program. In March 2006, 

HUD published performance measures developed in conjunction with a 

working group comprised of community development organizations. They 

undertook this effort in reaction to an OMB finding that the CDBG program 

was unable to demonstrate results at the national level.20 HUD’s new 

outcome performance measurement system has three objectives: (1) 

creating suitable living environments, (2) providing decent affordable 

housing, and (3) creating economic opportunities. Under these broad 

objectives, there are three outcomes: (1) availability and accessibility, (2) 

affordability, and (3) sustainability. The specific outcome indicators that 

HUD will track include the number of persons assisted by a public service 

activity, number of housing units rehabilitated, and number and types of 

jobs created. Recipients could start entering the new performance 

measurement data in May 2006.

To help recipients implement the new performance measurement system, 

HUD has scheduled 15 regional training sessions that will provide 

information to recipients on performance measurement principles and the 

new outcome framework. The first session was held in May 2006, and the 

last session is scheduled for August 2006. According to HUD, the training 

sessions will (1) provide information about how recipients can implement 

the outcome indicators through their local and state procedures for data 

collection and reporting and (2) discuss entry of the performance data into 

IDIS. The agenda topics include data quality and how to measure the 

20OMB, Department of Housing and Urban Development PART Assessments, February 

2005. OMB uses its Program Assessment Rating Tool (PART) to assess and improve program 

performance so that the federal government can achieve better results. PART looks at all 

factors that affect and reflect program performance including program purpose and design; 

performance measurement, evaluations, and strategic planning; program management; and 

program results.
Page 23 GAO-06-732 Community Development Block Grants

outcome of various activities such as housing and economic development. 

For this training, HUD has developed a training manual and guidebook that 

contains information on measuring outcomes achieved with CDBG funds. 

The department has made these materials available to all recipients on its 

Web site. At the close of our review, these activities were too new to assess 

their effectiveness.

Although HUD Uses a 

Risk-Based Approach 

to Monitor CDBG 

Recipients, It Lacks a 

Plan to Replace 

Monitoring Staff and 

Has Not Fully Involved 

Field Staff in Its Plans 

to Redesign IDIS

While HUD has implemented a risk-based monitoring strategy for the 

CDBG program, it has not developed a plan to ensure that it has enough 

staff with the skills needed to conduct monitoring or fully involved its field 

staff in plans to redesign IDIS, an information system they use to monitor 

recipients. Consistent with our internal control standards, HUD has 

established a risk assessment process to identify CDBG recipients for 

review.21 HUD’s monitoring strategy calls for its field offices to consider 

various risk factors when determining which recipients to review because 

it has limited monitoring resources, and its workload has increased as its 

staffing levels have decreased. For example, 13 of the 42 field offices 

overseeing CDBG recipients do not have a financial specialist, and 39 

percent of its field staff is eligible to retire within the next 3 years. Despite 

these statistics, HUD has not developed a plan to hire staff with needed 

skills or help manage upcoming retirements. Finally, although IDIS is one 

of the tools that HUD field staff use to monitor recipients, HUD 

headquarters has solicited little input from them on efforts to redesign 

IDIS.

HUD’s Monitoring Strategy 

Focuses on High-Risk 

Recipients

HUD’s monitoring of the CDBG program focuses on high-risk recipients. 

Each year, CPD sets a formal monitoring goal. Its goal in fiscal year 2005 

was for CPD as a whole and each of its field offices to monitor a minimum 

of 20 percent of their formula and competitive recipients.22 According to 

the HUD official who set the goal, he set it at 20 percent based on the need 

to balance government stewardship with available resources, including 

staff and travel funds. With a 20 percent goal, he noted that it would be 

conceivable that every recipient would be monitored over a period of 5 

years. Overall, CPD met its monitoring goal for fiscal year 2005. CPD’s goal 

21GAO/AIMD-00-21.3.1.

22This 20 percent goal applies to CDBG as well as the other formula and competitive grant 

programs that CPD administers. 
Page 24 GAO-06-732 Community Development Block Grants

was to review 942 recipients, and it completed 977 reviews. Of the 977 

reviews, 349 were CDBG reviews. However, two individual field offices did 

not monitor 20 percent of their recipients.23 As shown in table 2, CPD has 

monitored more than 20 percent of its CDBG recipients in recent years.

Table 2: Percentage of CDBG Recipients Monitored, FY 2001-2005

Source: GAO analysis of GMP data.

Note: Total recipients consist of entitlement communities, states, and insular areas (American Samoa, 

Guam, the Northern Mariana Islands, and the Virgin Islands).

HUD’s monitoring policy calls for HUD staff to focus on high-risk recipients 

when selecting CDBG recipients for review. Consistent with our internal 

control standards, HUD has developed a formal risk analysis process for its 

field offices to use when determining which recipients to review.24 Field 

office staff rate recipients on various factors that fall under the following 

four categories: financial, management, satisfaction, and services.25 The 

23The two offices that did not monitor 20 percent of their recipients in fiscal year 2005 were 

Fort Worth, Texas and Philadelphia, Pennsylvania. According to HUD officials, the Fort 

Worth office did not meet its goal because it was very involved in the Hurricane Katrina 

disaster recovery process. The Philadelphia office did not meets its goal because the staff 

person assigned to complete the remaining two monitoring visits passed away suddenly.

Fiscal year Total recipients

Recipients

monitored

Recipients not 

monitored

Percentage of 

recipients 

monitored

2001 1,067 366 701 34.3

2002 1,078 408 670 37.8

2003 1,088 363 725 33.4

2004 1,158 373 785 32.2

2005 1,165 349 816 30.0

24GAO/AIMD-00-21.3.1.

25The financial factors considered 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 evaluated include the complexity of the activities 

that a recipient undertakes, the timeliness and accuracy of the recipient’s submissions, a 

recipient’s staff capacity, and how long it has been since HUD last monitored the recipient 

on site. The satisfaction factors examined include whether the recipient has received citizen 

complaints and how responsive the recipient has been to any citizen complaints. The 

service factors considered are whether the recipient has met the program’s national 

objectives and complied with the limitation on public service expenditures.
Page 25 GAO-06-732 Community Development Block Grants

staff total the scores from each factor and assign recipients a final score on 

a 100-point scale. At each field office, a CPD management representative 

then conducts a review to ensure the validity and consistency of the scores. 

HUD considers recipients that receive a score of 51 or greater to be high 

risk; it considers those with a score of 30 to 50 to be medium risk; and 

those with less than 30 it considers to be low risk. Recipients that receive a 

high-risk rating are subject to monitoring, unless a management 

representative approves an exception. CPD management representatives 

can approve an exception if (1) the HUD Office of Inspector General is 

auditing the recipient; (2) they determine that monitoring is 

administratively infeasible in the current year, given other monitoring 

actions; or (3) they have other reasons—such as HUD recently monitored 

the recipient or it monitored another program administered by the 

recipient. Field office staff must review high-risk recipients on site unless 

they reviewed them on site in the last 2 years, and the purpose of the 

monitoring is to validate the implementation of corrective actions. 

Medium- and low-risk recipients can be reviewed using remote, or off-site, 

monitoring.

Our review of data from GMP—the system that field staff use to record the 

results of the risk analysis process and any monitoring 

performed—showed that HUD’s field offices followed the risk analysis 

process in all but 16 cases in fiscal year 2005. For fiscal year 2005, HUD 

designated 164 recipients as high risk. Out of these 164 recipients, GMP 

data showed that 107 were monitored, 41 were granted an exception, and 

16 were not monitored or provided an exception.26 The risk scores assigned 

to the 16 high-risk recipients that HUD did not monitor or provide an 

exception ranged from a low of 51 to a high of 80.27 These 16 recipients 

received allocations totaling about $145 million in fiscal year 2005. They 

included Detroit, Michigan ($43 million), Oregon ($16 million), and 

Honolulu, Hawaii ($11 million). According to HUD, these recipients were 

26According to HUD officials, 4 of the 16 recipients that GMP showed were not monitored or 

granted an exception were monitored in fiscal year 2005, but the documentation was not 

completed in time to be counted in fiscal year 2005. The city of New Orleans was monitored 

in August 2005, just before Hurricane Katrina, but did not show up as being monitored 

because a monitoring letter was never completed. Similarly, HUD monitored three more 

recipients at the end of fiscal year 2005, but they did not show up as being monitored 

because the monitoring letters were not finalized prior to the end of the fiscal year.

27Ten of the 16 high-risk grantees were last reviewed in fiscal year 2004, three were last 

reviewed in fiscal year 2003, two were last reviewed in fiscal year 2001, and one was a new 

grantee in fiscal year 2004.
Page 26 GAO-06-732 Community Development Block Grants

not monitored or granted an exception either because its field staff 

misunderstood the exception requirements or the field office responsible 

for monitoring the recipient experienced a staffing shortfall. However, 

despite not monitoring these 16 high-risk recipients, 8 of the 12 responsible 

field offices monitored recipients that they did not consider high risk.

Further, we found that HUD reviewed most, but not all, CDBG recipients at 

least once in the 5-year period from fiscal year 2001 through fiscal year 

2005. As shown in table 3, our analysis of GMP data showed that HUD 

monitored all but 255 recipients in fiscal years 2003 through 2005. These 

255 recipients received about $525 million in fiscal year 2005 funding. When 

we expanded our analysis to 4 years (fiscal years 2002 through 2005), we 

determined that HUD had monitored all but 140 recipients that received a 

total of about $239 million in fiscal year 2005. During the 5-year period from 

fiscal year 2001 through 2005, HUD did not monitor 84 recipients that 

received a total of about $132 million in fiscal year 2005.

Table 3: Number of Times CDBG Recipients Were Monitored, FY 2001-2005

Source: GAO analysis of GMP data.

a

We excluded 77 recipients that were not entitlement communities all 3 years, resulting in a total of 

1,066 recipients. HUD monitored 12 of the 77 new entitlement communities once during the 3-year 

period.

b

We excluded 86 recipients that were not entitlement communities all 4 years, resulting in a total of 

1,057 recipients. HUD monitored 16 of the 86 new entitlement communities once during the 4-year 

period.

c

We excluded 96 recipients that were not entitlement communities all 5 years, resulting in a total of 

1,047 recipients. HUD monitored 22 of the 96 new entitlement communities once during the 5-year 

period.

Monitoring recipients is critical because it often results in findings. During 

our site visits, we reviewed 144 recipient files and found documentation

Number of times 

monitored 

3-year period 

(FY 2003-2005)a

4-year period (FY 

2002-2005)b

5-year period 

(FY 2001-2005)c

Not monitored 255 140 84

Once 588 502 396

Twice 190 300 352

Three times 33 94 151

Four times N/A 21 48

Five times N/A N/A 16
Page 27 GAO-06-732 Community Development Block Grants

problems.28 For example, 24 of the 144 files we reviewed did not contain 

sufficient documentation to show that the activity met one of the three 

national objectives, as required by the program.29 Another 14 files did not 

note which national objective the activity was supposed to meet. 

Additionally, 46 files we reviewed showed no evidence of monitoring by the 

recipient.30 In contrast, recipients we visited tended to have signed 

agreements with their subrecipients as required by program regulations. Of 

the 90 cases that involved a subrecipient, 87 files contained a signed 

subrecipient agreement, and 76 of the 87 agreements contained the five 

required elements we tested. When HUD reviews files during its 

monitoring, it finds similar occurrences. Fifty-seven percent of HUD’s fiscal 

year 2005 reviews resulted in at least one finding. In total, HUD’s fiscal year 

2005 monitoring resulted in 581 findings and 447 concerns.31 Examples of 

cited findings included not documenting a national objective, funding an 

ineligible activity, poor recordkeeping, and incomplete subrecipient 

requirements.

HUD Has Limited Staff and 

Travel Funds to Devote to 

CDBG Monitoring

HUD employs a risk-based monitoring approach because it has limited staff 

and travel funds to devote to CDBG monitoring. CPD’s staffing levels have 

decreased nationwide, as its CDBG workload has increased. From fiscal 

year 1993 to the beginning of fiscal year 2006, the number of CPD field 

office staff decreased from 751 to 599, a decline of 20 percent. During the 

same time period, the number of entitlement communities grew from 889 

28We reviewed documentation on 134 projects, of which 4 involved multiple activities or 

files, for a total of 144 files.

29The documentation required varies based on the national objective. For instance, if CDBG 

funds were spent on an activity that benefited low- and moderate-income people based on 

the creation of jobs, the recipient must document (1) that it entered into a written 

agreement with the assisted business containing a commitment by the business that at least 

51 percent of the jobs would be held by low- and moderate-income people and a listing by 

job title of the full and part-time permanent jobs to be created; (2) the number of permanent 

jobs filled and which jobs were initially held by low- and moderate-income people; and (3) 

for each low- or moderate-income person hired, the size and annual income of the person’s 

family prior to the person being hired for the job.

30When assessing the extent of monitoring performed, we excluded the six projects that 

were administration and planning projects.

31A finding is a deficiency in program performance based on a statutory, regulatory, or 

program requirement for which sanctions or other corrective actions are authorized. A 

concern is a deficiency in program performance not based on a statutory, regulatory, or 

other program requirement.
Page 28 GAO-06-732 Community Development Block Grants

to 1,128, an increase of 27 percent. This increase in workload has had a 

greater effect on certain CPD field offices. As of February 2006, the average 

number of CDBG recipients per program representative was nearly four.32

The number of recipients per representative exceeded this average at 20 of 

the 42 CPD field offices and was six or more at three offices.33 The HUD 

official responsible for CPD field office staff told us he would like to have 

more staff but has to get the work done with what he has. Additionally, 

CPD program representatives in their role as program monitors oversee 

other HUD programs, including three other formula grant programs, 

homeless programs, and a number of smaller competitive grant programs. 

For example, at the Chicago CPD office, each representative monitors four 

to six formula grants, as well as approximately 100 competitive grants. 

Although they represent fewer dollars than the formula grant programs, the 

competitive grant programs require more monitoring, according to CPD 

program managers. The programs are generally administered by small 

nonprofit organizations that experience a large amount of staff turnover. 

Further, there were 9,705 active competitive grants in fiscal year 2005.

A number of CPD field offices also do not have a financial analyst. 

Financial analysts are important because they evaluate the financial 

operations of each recipient and ensure that CPD’s monitoring activities 

adequately address any financial vulnerabilities in CPD programs and 

related capacity concerns. They help field offices review budget 

submissions, financial report submissions, independent audit reports, and 

drawdown requests. As of late April 2006, 13 of the 42 CPD field offices did 

not have a financial analyst. These 13 field offices averaged a CDBG 

portfolio of $60 million. In offices we visited that did not have a financial 

analyst, other staff assumed some of the responsibilities of a financial 

analyst, but these staff had other responsibilities as well and lacked the 

specialized skills of a financial analyst.

Staffing shortages may worsen in the future because many current CPD 

field staff are eligible to retire. As of February 2006, 39 percent of CPD field 

staff was eligible to retire within the next 3 years. If we include those 

eligible for early retirement, the percentage increases to 59 percent within

32A program representative is in charge of working with a recipient to provide technical 

assistance, training, program guidance, and monitoring.

33We focused on program representatives because they are primarily responsible for 

monitoring recipients, but other CPD staff are sometimes assigned recipients to monitor.
Page 29 GAO-06-732 Community Development Block Grants

the next 3 years. For example, the four officials we interviewed in the 

Milwaukee field office told us that they were all currently eligible to retire, 

including the CPD Director. Denver field office officials told us that the 

office could lose all but one of its program representatives to retirement in 

the next 5 years.

HUD has not developed a plan to hire staff with needed skills, such as 

financial analysts, or to help CPD manage upcoming retirements. Our 

internal control standards state that agencies, as part of their human 

capital planning, should consider how to retain valuable employees, plan 

for their eventual succession, and ensure continuity of needed skills and 

abilities.34 According to a HUD official, HUD has taken a number of steps to 

manage its CPD workforce, such as hiring interns and implementing a 

leadership development program. However, these efforts do not 

specifically address the need to hire financial analysts and replace the staff 

that will become eligible for retirement in the next few years. According to 

internal control standards, an agency should have a specific and explicit 

workforce planning strategy that allows for identification of current and 

future human capital needs and a formal recruiting and hiring plan with 

explicit links to skill needs the agency has identified.35

HUD internal reviews and the HUD Inspector General have also noted that 

limited staffing has negatively impacted CPD’s monitoring. In fiscal year 

2004, 11 of the 12 internal management reviews, known as Quality 

Management Reviews, performed at CPD field offices noted staffing 

issues.36 For example, the reports noted that one office might not meet its 

monitoring goals due to significant loss of staff and that staff at two offices 

had an unbalanced workload. Also, one report noted that the field office 

needed a financial analyst for oversight of $113 million in CPD program 

funds. Furthermore, in a June 2004 report on CPD management controls, 

the HUD Inspector General observed that reductions in field office staffing

34GAO/AIMD-00-21.3.1.

35GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, 

D.C.: August 2001).

36Quality Management Reviews are HUD-wide management reviews of its field office 

programs and services.
Page 30 GAO-06-732 Community Development Block Grants

levels had impacted CPD’s monitoring capabilities.37 The report noted that, 

between 1993 and 2003, CPD had been negatively impacted by staffing 

challenges that had plagued all of HUD.

Further, according to HUD field office staff, limited travel budgets have 

affected their ability to monitor CDBG recipients. For fiscal year 2005, the 

travel budget for all 42 CPD field offices was about $392,000. The travel 

budgets for the six field offices we visited ranged from $2,528 in Baltimore 

(11 CDBG recipients) to $20,691 in Los Angeles (105 CDBG recipients). 

Some field office staff told us their travel budgets affect which recipients 

they select for on-site monitoring during the risk assessment process. For 

example, they will limit their monitoring of recipients that require a high 

cost of travel. They will either conduct off-site monitoring or document an 

exception, which allows them to monitor these recipients less often despite 

their risk analysis score. Additionally, when monitoring recipients, field 

office staff sometimes shorten their visit to fit within their travel budget. In 

its June 2004 report, the HUD Inspector General reported similar findings 

and added that field offices will also reduce the amount of staff 

participating in a monitoring visit in order to reduce travel costs. According 

to the headquarters official that manages CPD’s field offices, he has to 

balance the travel needs of all 42 field offices when allocating limited travel 

funds. To help the field offices better plan their travel, he has begun 

providing them with quarterly, rather than monthly, allocations of funds.

HUD Has Made Little Effort 

to Involve Field Staff in 

Plans to Redesign IDIS

HUD is currently redesigning IDIS but has solicited limited input from its 

field staff. IDIS, a tool that HUD field staff use to conduct on-site and 

off-site monitoring, has shortcomings that limit its usefulness as a 

monitoring tool. IDIS was designed to be a real-time information system 

providing financial disbursement, tracking, and reporting functions for 

CPD. In our April 1999 report, we noted that the system was not providing 

needed information, and our current work indicates that, despite HUD 

improvements to the system, it still is not providing all the information 

needed to monitor recipients’ performance. During our site visits, field 

office staff noted that (1) the data in IDIS are not always current because 

some recipients do not update it quarterly, as HUD recommends and (2) the 

accomplishment data in IDIS are not as reliable as the financial data. As 

37U.S. Department of Housing and Urban Development, Office of Inspector General, Audit of 

Management Controls over Grantee and Subgrantee Capacity, Community Planning and 

Development, 2004-FW-0001 (June 2004).
Page 31 GAO-06-732 Community Development Block Grants

previously noted, HUD is currently working with recipients to improve the 

quality of the accomplishment data. Also, a HUD headquarters official 

noted that HUD plans to add reports that will better assist field staff with 

their monitoring. Similarly, in a report on how to incorporate performance 

measures into IDIS, the National Academy of Public Administration found 

that (1) IDIS allows data input errors and omissions, (2) the ability to 

manipulate data for reporting purposes is limited, and (3) HUD staff and 

recipients have expressed frustration with using the system.38

To improve the usefulness of IDIS, HUD is currently reengineering the 

system. The department has obligated $9.4 million for development of the 

new system. One problem with the initial development of IDIS was that 

HUD did not adequately consider input from end users. HUD has attempted 

to address this problem in the statement of work for the new system by 

stating that the contractor should gather requirements from HUD 

stakeholders and recipients. Specifically, the contractor was to work with 

HUD’s field offices to identify issues with the current accomplishment 

reporting, hold sessions with both field office staff and recipients to solicit 

user requirements pertaining to reports, and develop a draft prototype to 

solicit HUD stakeholder and recipient feedback on proposed navigation 

approaches. Soliciting input from end users on their requirements is 

consistent with best practices for system development. Our guidance on 

information technology investment management states that (1) investment 

control processes should ensure that key customers and business needs for 

each project are identified and that the users are engaged in this process 

and (2) users should participate in project management throughout a 

project’s or system’s life cycle to ensure that it supports the organization’s 

business needs and meets users’ needs.39

Contrary to the IDIS statement of work and our guidance on information 

technology investment management, HUD headquarters and its contractor 

have solicited little input from field staff. As the HUD staff tasked with 

monitoring CDBG recipients, field staff are the users that rely most heavily 

on IDIS as a monitoring tool. Although HUD headquarters and the 

38Staff Report from the National Academy of Public Administration for the Office of 

Community Planning and Development, U.S. Department of Housing and Urban 

Development, Integrating CDBG Performance Measures into IDIS (Washington, D.C.: 

February 2005).

39GAO, Information Technology Investment Management: A Framework for Assessing and 

Improving Process Maturity, GAO-04-394G Version 1.1 (Washington, D.C.: March 2004).
Page 32 GAO-06-732 Community Development Block Grants

contractor have held only one session with field staff, they have already 

drafted a document outlining the system’s functional requirements. 

According to the HUD official that is overseeing development of the new 

system, the one session held with field staff was unproductive; therefore, 

they plan to wait until they are making decisions regarding the standard 

reports that the system will generate to solicit additional input from field 

office staff. If HUD’s plans to involve its field staff in efforts to improve 

IDIS are limited to soliciting input regarding the new system’s reporting 

capabilities, the other factors that have limited IDIS’ effectiveness as a 

monitoring tool may not be addressed.

HUD Has Implemented 

a Clear Timeliness 

Policy, but Has Not 

Issued Similar 

Guidance on Other 

Enforcement Actions

Although HUD has issued a clear policy stating what actions it will take 

when entitlement communities fail to meet the statutory requirement that 

funds be spent in a timely manner, it has not developed similar guidance 

establishing a consistent framework for holding CDBG recipients 

accountable for deficiencies identified during monitoring. Because federal 

law requires HUD to ensure timely expenditure of entitlement funds, HUD 

has set a timeliness standard for entitlement communities and established 

a grant reduction policy for recipients that exceed the standard. As it 

monitors CDBG recipients, however, HUD has the flexibility to assess other 

sanctions ranging from issuing a warning letter to advising the recipient to 

pay back CDBG funds. HUD headquarters has not issued guidance that 

describes the conditions under which each type of sanction should be 

taken, and we found instances in fiscal year 2005 where findings that 

appeared to be similar were associated with different enforcement actions.

HUD’s Timeliness Policy 

Has Reduced the Number of 

Entitlement Communities 

That Are Slow to Expend 

Funds

By implementing a timeliness standard, HUD has reduced the number of 

entitlement communities that are slow to expend funds. Federal law 

requires HUD to review CDBG entitlement communities to determine if 

they have carried out their CDBG-assisted activities in a timely manner.40 It 

considers an entitlement community to be timely if, 60 days prior to the end 

of the recipient’s current program year, the amount of entitlement grant 

funds available under grant agreements but undisbursed by the U.S. 

Treasury was not more than 1.5 times the entitlement grant amount for its 

40While HUD encourages states to expend their funds in a timely manner, its timely 

expenditure standard does not apply to them. Federal law only requires states to distribute 

their funds to nonentitlement communities in a timely manner. HUD does not have the 

statutory authority to impose a timely expenditure standard for states.
Page 33 GAO-06-732 Community Development Block Grants

current program year. To ensure that entitlement communities comply with 

this standard, HUD established a grant reduction policy for untimely 

recipients in November 2001. The new policy stated that an untimely 

recipient had 1 year to become timely. If it still did not meet the 1.5 

standard at the end of its next program year, HUD would reduce its next 

grant by how much it exceeded the standard, unless HUD determined that 

the lack of timely spending was due to factors beyond the recipient’s 

control. For example, if a recipient’s annual grant was $1 million and its 

60-day ratio was 1.57, the maximum amount of the reduction would be 

$70,000 (0.07 times $1 million).

Since the implementation of this grant reduction policy, the number of 

untimely entitlement communities has gone down from 140 in November 

2001 to 65 as of April 2006. Of the 65 recipients that were untimely as of 

April 2006, 8 had a 60-day ratio above 2.0. The remaining recipients had 

60-day ratios between 1.51 and 2.0. Although HUD could not provide a list 

showing the total number of recipients that have been untimely for only a 

year since the inception of the standard, it has tracked the total number 

that were untimely for 2 consecutive years and, therefore, subject to grant 

reduction. As of April 2006, 14 recipients had been subject to grant 

reduction. Of these 14, HUD only reduced three recipients’ funding. It 

granted exceptions to six recipients due to factors such as natural disasters 

that triggered Presidential disaster designations and did not take action 

against three because HUD failed to provide proper notice to the recipient 

when it first became untimely. The remaining two had moved under the 1.5 

standard quickly, and HUD decided not to reduce their grants.

Guidance Could Help 

Ensure Sanctions Are 

Appropriate

When they identify deficiencies other than failing to meet the timeliness 

standard, HUD’s field offices have the flexibility to determine which 

sanctions are warranted based on the conditions identified. As shown in 

table 4, HUD’s monitoring of CDBG recipients during fiscal years 2003 to 

2005 resulted in approximately 1,900 findings and about 350 sanctions. In 

fiscal year 2005, HUD assessed 95 sanctions, including about $1.6 million in 

financial sanctions.
Page 34 GAO-06-732 Community Development Block Grants

Table 4: Sanctions Taken against CDBG Recipients, FY 2003 - 2005

Source: GAO analysis of GMP data.

Note: Some, but not all, sanctions result in a financial action. 

The sanctions that HUD may take against recipients range from issuing a 

letter of warning to advising recipients to reimburse their lines of credit.41

Beyond the program regulations that describe the purpose of taking 

corrective actions and the various actions that can be taken, HUD has 

issued no guidance to its field offices describing what conditions its field 

staff should consider when taking corrective actions and what specific 

conditions warrant different types of corrective actions.42 Instead, its 42 

field offices have the flexibility to determine the types of sanctions for 

findings that they identify. According to HUD headquarters officials, field 

offices may call HUD headquarters for advice before taking sanctions 

against a recipient. Figure 7 shows that the action taken the most often 

during fiscal year 2005 was that of advising the recipient to alter or end an 

activity.

Fiscal 

year Concerns Findings Sanctions

Amount of financial 

sanctions

2003 538 685 110 $2,025,487

2004 488 644 147 7,217,377

2005 447 581 95 1,616,704

Total 1,473 1,910 352 $10,859,568

41If the recipient fails to take corrective or remedial action that resolves the deficiency to the 

satisfaction of HUD, HUD may impose more severe sanctions, such as terminating payments 

to the recipient. However, HUD may impose these sanctions only after, in most 

circumstances, the recipient is provided an opportunity for a hearing before an 

administrative law judge.

42The program regulations state that corrective actions should be designed to (1) prevent a 

continuation of the performance deficiency; (2) mitigate, to the extent possible, the adverse 

effects or consequences of the deficiency; and (3) prevent a recurrence of the deficiency.
Page 35 GAO-06-732 Community Development Block Grants

Figure 7: Sanctions Taken as Result of FY 2005 Monitoring Reviews, by Type

Note: Numbers do not add to 100 percent due to rounding. In one of the few cases where HUD 

advised a recipient to change a payment, it advised the recipient to reimburse expenses improperly 

charged to others. In the one case where HUD advised a recipient to reprogram funds, it advised the 

recipient to shift the funds to an eligible activity. The other sanctions that HUD took included advising 

recipients to provide additional documentation, collect additional information on people served, or 

report activities differently in IDIS.

Our internal control standards state that agencies should implement 

control activities, which are policies and procedures that enforce 

management’s directives and ensure accountability.43 One such strategy is 

to document the steps taken to implement internal controls. Such 

documentation should be clear and readily available. Contrary to these 

standards, HUD has not clearly documented the steps that its field offices 

take to determine the appropriate sanctions when deficiencies are 

identified during monitoring. Such guidance could establish the parameters 

within which field office should operate, while still allowing for 

consideration of individual situations. By establishing a framework within 

which field offices should operate, HUD headquarters could instill 

accountability as well as allow field staff to make individual judgments 

based on factors such as a recipient’s past performance and the frequency 

and severity of findings.

In the absence of guidance, HUD’s field offices have treated recipients that 

committed similar infractions differently. In our meetings with several 

national organizations that represent CDBG recipients, representatives 

43GAO/AIMD-00-21.3.1.

Type of sanction (occurrences) Percentage of all sanctions

End/alter activity (46) 48.4%

Other (26) 27.4

Reimburse line of credit (12) 12.6

Warning letter (5)

Change payment (3)

Suspend disbursement of funds (2)

Reprogram funds (1)

All (95) 100.0%

5.3

3.2

2.1

1.1

Source: GAO analysis of GMP data.
Page 36 GAO-06-732 Community Development Block Grants

noted that their members have observed inconsistent interpretation of 

program regulations across HUD field offices. Further, we found instances 

where deficiencies identified in fiscal year 2005 seemed similar to us but 

different corrective actions were taken.

• Inability to support meeting a national objective: When one field office 

found that a recipient could not support that an activity met a national 

objective, it asked the recipient to provide either more documentation 

or a written assurance that it would not fund that type of activity in the 

future. In contrast, another field office advised a recipient that could not 

document that an activity met a national objective to reimburse its line 

of credit. In another instance, a field office stated that it might disallow 

expenditures if the recipient could not document that an activity met a 

national objective.

• Documenting environmental reviews: When one field office determined 

that a recipient had not documented any follow-up compliance actions 

for projects where mitigating measures for environmental compliance 

were identified, even after the office had previously identified the lack 

of follow up as a concern, it advised the recipient to submit 

documentation showing that follow-up actions had been taken. In 

another case where a field office determined that a recipient had failed 

to fully document its environmental reviews, that field office advised the 

recipient to suspend disbursement of funds for all activities until it put 

in place revised environmental review procedures and the appropriate 

level of environmental review had been carried out.

Guidance providing HUD’s 42 field offices with a range of appropriate 

actions for identified deficiencies could help to provide greater 

transparency and accountability, and it could better ensure consistency of 

sanctions for similar infractions.

Conclusions Many communities use their CDBG funds to benefit their residents and 

increase the economic health of the community. One of the cited strengths 

of the program is its flexibility, which allows communities to make 

decisions locally about the best use of the funds in their community. Given 

the program’s flexibility, it is critical that HUD ensure that recipients use 

funds in a manner that is consistent with the purposes of the program. 

While there are statutory spending limits on public services and planning 

and administration, HUD does not centrally maintain the data needed to 

determine compliance with these spending limits in a timely manner. 
Page 37 GAO-06-732 Community Development Block Grants

Entitlement communities collectively spend at or close to the limits on 

public services and planning and administration. Therefore, it is important 

for HUD to be able to report on the extent of entitlement community 

compliance with these limits. Without these data readily available, HUD 

cannot provide timely assurance that recipients are adhering to these 

limits.

With program funding being cut as the number of grant recipients 

increases, it is essential for HUD to ensure that recipients use funds 

properly. Because it has limited monitoring resources, HUD has 

implemented a risk-based process to identify recipients for review. 

However, HUD faces challenges as it carries out these responsibilities. 

First, a large percentage of the field staff responsible for monitoring CDBG 

recipients will be eligible for retirement within the next 3 years. HUD has 

not developed a plan for replacing this vital program expertise. HUD has 

established an internship program and other initiatives to develop senior 

leaders, but such activities will not, in themselves, replace experienced 

professionals. Without such a plan, HUD has no way to ensure continuity of 

needed skills and abilities. Second, HUD is reengineering IDIS—the system 

that it relies on to monitor recipients it cannot review on-site—to address a 

number of shortcomings in the system, but its plans to involve HUD field 

staff in these efforts are limited to soliciting input regarding the new 

system’s reporting capabilities. If it does not fully involve all of the system’s 

stakeholders in the reengineering process, as it failed to do when initially 

developing the system, HUD runs the danger of repeating past development 

mistakes and having to live with a flawed system that limits its monitoring 

abilities. Developing a system that better meets the monitoring needs of 

HUD field staff has increased in importance in an environment where the 

number of monitoring staff is declining as the workload is increasing.

While allowing for judgment and flexibility, an effective monitoring 

program should also make it transparent to recipients what actions may be 

taken if deficiencies are found. HUD has established a clear policy stating 

that it will reduce an entitlement community’s grant funds if it fails to spend 

its funds in a timely manner, and, as a result, the number of untimely 

recipients has dropped. However, HUD has not developed similar guidance 

laying out a framework of enforcement actions that may be taken when 

certain deficiencies are identified during monitoring, and we found 

instances where findings that appeared to be similar were associated with 

different enforcement actions. Such guidance could establish the 

parameters within which field offices should operate, while still allowing 

for flexibility to address individual situations. Issuing guidance could also 
Page 38 GAO-06-732 Community Development Block Grants

help HUD’s management provide greater transparency and accountability 

to the sanctioning process.

Recommendations for 

Executive Action

In order to improve HUD’s oversight of the CDBG program, we recommend 

that the Secretary of Housing and Urban Development direct the Assistant 

Secretary for Community Planning and Development to take the following 

four actions:

• Maintain in IDIS the data needed to determine compliance with the 

statutory limitations on expenditures for public service activities and 

administration and planning.

• Develop a plan for ensuring the proper mix of skills and abilities and 

replacing an aging CPD workforce.

• Look for additional opportunities to solicit field staff input on IDIS user 

requirements.

• Consider developing guidance for the CDBG program that details what 

conditions should be considered when taking corrective actions and 

what specific conditions warrant different types of corrective actions.

Agency Comments and 

Our Evaluation

We provided HUD with a draft of this report for review and comment. We 

received oral comments from the Office of Community Planning and 

Development’s Comptroller on July 12, 2006, addressing our key findings, 

conclusions, and recommendations. He stated that, overall, HUD agrees 

with our findings, conclusions, and recommendations. In addition, HUD 

provided a letter from the General Deputy Assistant Secretary for 

Community Planning and Development with comments that were technical 

in nature. This letter and our response to each of the comments appear in 

appendix IV. HUD also provided other oral technical comments that were 

incorporated where appropriate. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

date of this letter. At that time, we will send copies of this report to the 

Ranking Minority Member, Subcommittee on Housing and Community 

Opportunity, House Committee on Financial Services; Ranking Minority 
Page 39 GAO-06-732 Community Development Block Grants

Member, Subcommittee on Federalism and the Census, House Committee 

on Government Reform; Ranking Minority Member, Subcommittee on 

Federal Financial Management, Government Information, and 

International Security, Senate Committee on Homeland Security and 

Governmental Affairs; and the Chairman and Ranking Minority Member, 

Subcommittee on Housing and Transportation, Senate Committee on 

Banking, Housing, and Urban Affairs. We will also send copies to the 

Secretary of Housing and Urban Development. Copies of this report will 

also be available to other interested parties upon request. In addition, the 

report will be made available at no charge on the GAO Web site at 

http://www.gao.gov.

If you or your staff have any questions about 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. Key contributors to this report are listed in appendix V.

William B. Shear

Director, Financial Markets and

 Community Investment
Page 40 GAO-06-732 Community Development Block Grants

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

The Chairman of the Subcommittee on Housing and Community 

Opportunity, House Committee on Financial Services; the Chairman of the 

Subcommittee on Federalism and the Census, House Committee on 

Government Reform; and the Chairman, Subcommittee on Federal 

Financial Management, Government Information, and International 

Security, Senate Committee on Homeland Security and Governmental 

Affairs requested that we review the use of Community Development Block 

Grant (CDBG) funds and how the Department of Housing and Urban 

Development (HUD) oversees the program. In particular, we examined (1) 

how recipients have used CDBG funds, including the extent to which they 

have funded activities that meet national program objectives, complied 

with spending limits, and reported accomplishments achieved with funds; 

(2) how HUD has monitored recipients’ use of CDBG funds; and (3) how 

HUD has held recipients that have not complied with CDBG program 

requirements accountable for their actions.

To accomplish these objectives, we analyzed fiscal year 2005 data from 

HUD’s Integrated Disbursement and Information System (IDIS) and fiscal 

year 2001 through 2005 data from the Grants Management Process (GMP) 

System on all CDBG recipients. We assessed the reliability of the HUD data 

we used by reviewing information about the systems, performing 

electronic data testing to detect errors in completeness and 

reasonableness, and discussing the data with knowledgeable agency 

officials. We determined that the data were sufficiently reliable for the 

purposes of this report. In addition to analyzing HUD data on all CDBG 

recipients, we visited 20 recipients. As shown in table 5, we visited 17 

recipients in six large metropolitan areas as well as 3 smaller recipients 

outside large metropolitan areas.1

 In selecting the recipients located in 

large metropolitan areas, we considered geographic dispersion, funding 

level, need,2

 and proximity to a HUD field office and state capital. We 

selected the smaller recipients outside large metropolitan areas based on 

their population and location. Of the 20 recipients we visited, 4 were states, 

2 were urban counties, and 14 were cities. We also visited four 

1

We considered a community to be within a metropolitan area if it was within 70 miles of the 

central city. This meant that some of the communities that we considered to be within a 

certain metropolitan area, such as Greeley, Colorado, were outside that metropolitan area as 

defined by the Office of Management and Budget.

2

We determined “need” using the needs scores HUD developed for its recent study on the 

formula used to distribute CDBG funds. See U.S. Department of Housing and Urban 

Development, Office of Policy Development and Research, CDBG Formula Targeting to 

Community Development Need (Washington, D.C.: February 2005). 
Appendix I

Objectives, Scope, and Methodology

Page 41 GAO-06-732 Community Development Block Grants

nonentitlement communities funded by the states of Georgia and 

Maryland.3

 We interviewed the eight HUD field offices that monitor the 

grantees we visited and interviewed staff at HUD headquarters.4 Finally, we 

interviewed representatives of four national organizations that represent 

CDBG recipients—the Council of State Community Development Agencies, 

the National Association for County Community and Economic 

Development, the National Association of Housing and Redevelopment 

Officials, and the National Community Development Association—to 

obtain their views on the use of CDBG funds and HUD’s oversight of the 

program.

Table 5: 20 Recipients That GAO Visited

Source: GAO.

3

These nonentitlement communities were Poulan, Georgia; West Point, Georgia; Denton, 

Maryland; and Caroline County, Maryland.

4

We interviewed staff in person and collected documentation from the Atlanta, Baltimore, 

Boston, Chicago, Denver, and Los Angeles field offices. We interviewed staff at the 

Milwaukee and Omaha field offices via the telephone.

Area Recipient

Atlanta metropolitan area Atlanta, Georgia

State of Georgia

Baltimore metropolitan area Baltimore, Maryland

Baltimore County, Maryland

State of Maryland

Boston metropolitan area Boston, Massachusetts

Attleboro, Massachusetts

Commonwealth of Massachusetts

Chicago metropolitan area Chicago, Illinois

Kane County, Illinois

Naperville, Illinois

Denver metropolitan area Denver, Colorado

Greeley, Colorado

State of Colorado

Los Angeles metropolitan area Los Angeles, California

Gardena, California

Santa Monica, California

Other Beloit, Wisconsin

Dubuque, Iowa

Warner Robins, Georgia
Appendix I

Objectives, Scope, and Methodology

Page 42 GAO-06-732 Community Development Block Grants

To determine how the communities that receive CDBG funds use those 

funds, we reviewed CDBG program regulations to determine how 

recipients are allowed to use their funds. We then analyzed IDIS data on 

activities funded as of September 30, 2005, to determine (1) the activities 

most often funded by recipients in fiscal year 2005, (2) any differences 

between the activities most often funded by entitlement and state 

recipients in fiscal year 2005, and (3) the percentage of activities funded in 

fiscal year 2005 that met each of the three national program objectives. For 

examples of how communities use their funds, we relied on documentation 

provided by the 20 recipients we visited and pictures we took during our 

site visits. We had planned to use IDIS data to examine the extent to which 

CDBG recipients were complying with the statutory spending limits on 

public services and planning and administration but determined that (1) 

IDIS did not save some of the data needed to determine compliance by 

entitlement communities and (2) IDIS data cannot be used to determine 

states’ compliance with the limits. Therefore, we requested data from HUD 

showing the percentage of funds spent by selected recipients on public 

services as well as on planning and administration. We initially requested 

data on the 200 entitlement communities that received the most funding, 

but HUD could only provide data on the 100 most populous entitlement 

communities within our time frames. We then analyzed that data to 

determine how many had exceeded the two spending limits in program 

year 2004. We also analyzed HUD data to determine the number of 

recipients eligible for the special exception that allows certain recipients to 

count activities that benefit fewer than 51 percent low- and moderateincome persons as meeting the low- and moderate-income national 

objective in fiscal year 2006. To determine the status of HUD’s efforts to 

implement a performance measurement system, we reviewed the notices 

published in the Federal Register and guidance on HUD’s Web site as well 

as interviewed HUD officials.

To identify how HUD monitors communities’ use of CDBG funds, we 

reviewed HUD’s monitoring guidance to determine which tools it uses to 

monitor recipients. To gain an understanding of HUD’s formal monitoring, 

we reviewed documentation on its risk analysis process and interviewed 

the HUD headquarters officials responsible for setting monitoring policy as 

well as HUD field staff responsible for performing the monitoring. We 

analyzed data from HUD’s Integrated Performance Reporting System 

(HIPRS) to determine if the Office of Community Planning and 

Development (CPD) met its monitoring goal in fiscal year 2005. We 

interviewed a knowledgeable agency official regarding the data and 

determined that they were sufficiently reliable for the purposes of this 
Appendix I

Objectives, Scope, and Methodology

Page 43 GAO-06-732 Community Development Block Grants

report. We also analyzed GMP data to determine (1) if HUD’s field offices 

complied with its risk analysis process in fiscal year 2005, (2) the extent to 

which HUD monitored CDBG recipients in fiscal years 2001 to 2005, and (3) 

what types of monitoring findings HUD had in fiscal year 2005. To 

determine the adequacy of HUD’s monitoring resources, we reviewed 

information on CPD staffing and travel budgets. To assess the usefulness of 

IDIS as a monitoring tool, we reviewed reports on the system and 

interviewed HUD field staff regarding their experiences with using the 

system. We also reviewed HUD’s plans for reengineering IDIS and 

discussed them with the responsible HUD official.

To assess the extent to which the recipients we visited have complied with 

CDBG program regulations, we reviewed 144 project files.5

 To identify 

projects for review, we requested that each recipient provide a list of the 

projects that they had awarded in calendar year 2003. We used the calendar 

year because recipients’ fiscal years vary, and we chose 2003 because we 

anticipated that projects would be well under way or complete by the time 

of our review. From the list that each recipient provided, we selected a 

stratified random sample of 6 to 10 projects; the number of files selected 

depended on the funding level of the recipient—more files were selected 

for recipients with larger grants.6

 If we determined that a project selected 

for review was terminated after it was awarded, we selected a replacement 

project. When reviewing the files, we looked for (1) documentation 

showing that the activity funded met a national objective, (2) a subrecipient 

agreement that included the information required in the program 

regulations (if applicable), and (3) evidence that the recipient had 

monitored the activity.

To determine the extent to which HUD has held recipients that have not 

complied with CDBG program requirements accountable for their actions, 

we reviewed the CDBG program regulations to determine what sanctions 

HUD can take against recipients. We reviewed HUD’s policy on timely 

expenditure of funds and analyzed data on the number of untimely 

recipients as of April 2006. We also analyzed GMP data to determine the 

number of sanctions that HUD had taken in fiscal years 2003 to 2005 and 

the specific types of sanctions it took in fiscal year 2005. In addition, we 

5

We reviewed documentation on 134 projects, of which 4 involved multiple activities or files, 

for a total of 144 files.

6

For every recipient we visited, except Warner Robins, Georgia, we reviewed a random 

sample of files. In Warner Robins, we reviewed all six subrecipient files.
Appendix I

Objectives, Scope, and Methodology

Page 44 GAO-06-732 Community Development Block Grants

interviewed HUD field and headquarters staff to determine how they 

decide which sanctions to take against recipients. 

We performed our work from July 2005 to July 2006 in accordance with 

generally accepted government auditing standards.
Page 45 GAO-06-732 Community Development Block Grants

Appendix II

Selected States’ Methods of Distributing 

Funds ApendxiI

The methods that states use to distribute CDBG funds vary. To demonstrate 

the variety of methods used, we examined the approach that the following 

10 states take when distributing their funds: Georgia, Colorado, Maryland, 

Massachusetts, North Carolina, New York, Ohio, Pennsylvania, Puerto 

Rico, and Texas.1

 We selected these states because we visited the first four 

and the remaining six received the largest funding allocations in federal 

fiscal year 2005. To determine the method of distribution used, we 

reviewed each state’s fiscal year 2005 action plan.2

 Table 6 provides 

information such as how each state allocates its funds among various 

activities, the evaluation criteria used to select applications, and incentives 

or application bonuses offered.

1

The Commonwealth of Puerto Rico is a United States Territory, but it is classified as a state 

for the purposes of the CDBG program.

2

While these plans describe how each state planned to distribute its fiscal year 2005 

allocation from HUD, they do not cover the same time periods because the states’ fiscal 

years vary. 
Appendix II

Selected States’ Methods of Distributing 

Funds

Page 46 GAO-06-732 Community Development Block Grants

Table 6: Information on How 10 States Distribute Their CDBG Funds

Colorado Georgia Maryland Massachusetts New York

FY 2005 allocation $12,428,946 $44,692,413 $8,944,527 $38,578,167 $54,423,586

Program year April 1 to March 31 July 1 to June 30 July 1 to June 30 April 1 to March 31 January 1 to 

December 31

Breakdown of 

allocation

• Housing (32.3%)

• Business financing 

(32.3%)

• Public facilities and 

community 

development (32.3%)

• Technical assistance 

(1%)

• State administration 

(2%)

• Annual competition 

(77%)

• Immediate threat 

and danger (1%)

• Employment 

incentives (16%)

a

• Redevelopment 

fund (3%)

• Technical 

assistance (1%)

• State 

administration (2%)

• Community 

development 

(72%)

• Business and 

economic 

development 

(25%)

• Technical 

assistance (1%)

• State 

administration 

(2%)

• Community 

development (54%)

• Housing 

development 

support (12%)

• Economic 

development (6%)

• Mini-entitlements 

(23%)

b

• Reserves (2%)

• Technical assistance 

(1%)

• State administration 

(2%)

• Annual competition 

(60%)

• Economic 

development (35%)

• Imminent threat 

(2%)

• Technical assistance 

(1%)

• State administration 

(2%)

Evaluation criteriad • Project impact

• Public and private 

commitments

• Management 

capability

• Demographic need

• Program feasibility

• Program strategy

• Project impact

• Leverage of 

additional 

resources

• Urgent need

• Public purpose

• Project impact

• Project 

management

• Local commitment

• Project feasibility

• Sources and use 

of funds

• Readiness to 

proceed

• Past performance

• Financial feasibility

• Affordability

• Readiness to 

proceed

• Developer capacity

• Site and design

• Cost effectiveness

• Community needs 

score

• Municipal poverty 

score

• Program impact

• Outstanding 

performance

Application 

deadline

Applications accepted 

until all funds are 

allocated.

Annual competition 

accepts applications 

at a set time each 

year, but all other 

programs accept 

applications until all 

funds are allocated.

Applications 

accepted at set 

time each year.

All programs accept 

applications at set 

time each year, except 

economic 

development, which 

accepts applications 

until all funds are 

allocated.

Annual competition 

accepts applications 

at set times each 

year, but all other 

programs accept 

applications on a firstcome, first- served 

basis, until all funds 

are allocated.
Appendix II

Selected States’ Methods of Distributing 

Funds

Page 47 GAO-06-732 Community Development Block Grants

North Carolina Ohio Pennsylvania Puerto Rico Texas

$50,010,517 $54,560,938 $55,485,726 $53,094,663 $82,305,507

January 1 to December 

31

July 1 to June 30 January 1 to December 

31

July to June 30 February 1 to January 31

• Community 

revitalization (31%)

• Scattered site housing 

(29%)

• Infrastructure (11%)

• Housing development 

(4%)

• Economic development 

(20%)

• Urgent needs (2%)

• Technical assistance 

(1%)

• State administration 

(2%)

• Community housing 

improvement (15.6%)

• Homeless assistance 

(1%)

• Formula allocation 

(42.5%)

• Water and sewer 

(19.2%)

• Economic development 

(12.3%)

• Downtown revitalization 

(4.6%)

• Discretionary grant (1%)

• Micro enterprise 

business development 

(0.4%)

• New horizon (0.2%)

• Technical assistance 

(1%)

• State administration 

(2.2%)

• Annual competition 

(13%)

• Cities (24%)

• Towns (38%)

• Counties (38%)

• State administration 

(2%)

• Basic grant (34%)

• Competitive fund (61%)

• Emergency grant (2%)

• Technical assistance 

(1%)

• State administration 

(2%)

• Community 

development (61%)

• Texas capital (15%)

• Colonia (13%)

c

• Planning and capacity 

building (1%)

• Disaster relief fund (4%)

• Texas community 

development program—

small towns 

environment program 

(3%)

• Technical assistance 

(1%)

• State administration 

(2.2%)

• Severity of needs

• Local commitment

• Feasibility

• Rotatione

• Capacity

• Market demand

• Job creation

• Community distress

• Administrative capacity

• Past performance

• Program design and 

impact

• Cost effectiveness

• Leverage and 

coordination

• Magnitude and severity 

of need

• Third party support

• Impact of problem on 

residents in affected 

area

• Basic grant distributes 

funds evenly among 51 

nonentitlement 

communities

• Competitive fund 

distributes funds based 

on past performance, 

project impact, 

feasibility, and number 

of beneficiaries

• Emergency grant 

distributes funds on a 

case-by-case basis

• Project impact

• Community needs

• Feasibility

• Leverage ratio

• Management capacity

• Past performance

Community revitalization 

and scattered site 

housing accept 

applications at set times. 

All other programs accept 

applications until all funds 

are allocated.f

All programs accept 

applications at a set time 

each year, except for 

Economic development, 

Discretionary grant and 

New horizon, which 

accept applications until 

all funds are allocated.

All programs accept 

applications at a set time 

each year, except Annual 

competition, which 

accepts applications until 

all funds are allocated.

Basic grant and 

competitive fund accept 

applications at a set time 

period each year. 

Emergency grant accept 

applications when an 

urgent need occurs.

All programs accept 

applications at a set time 

each year or when a 

natural disaster occurs. 
Appendix II

Selected States’ Methods of Distributing 

Funds

Page 48 GAO-06-732 Community Development Block Grants

Incentives or 

application 

bonuses offered

None Available for certain 

applicants proposing 

projects in 

revitalization areas.

None No incentives, but all 

communities have a 

community wide 

needs score that can 

help their chances of 

receiving an award.

None

Matching 

requirement

None Annual competition 

grantees must match 

5 percent of awards 

ranging from 

$300,001 to 

$500,000 and 10 

percent for awards 

over $500,000.

None None Economic 

development requires 

applicants to match at 

least 60 percent of 

total project costs for 

which CDBG funds 

are being requested.

(Continued From Previous Page)

Colorado Georgia Maryland Massachusetts New York
Appendix II

Selected States’ Methods of Distributing 

Funds

Page 49 GAO-06-732 Community Development Block Grants

Source: GAO analysis of state data.

a

The Employment Incentive Program awards grants to nonentitlement communities to offer loans to 

private-for-profit entities that create and/or retain jobs for persons who are low- and moderate-income.

b

The Mini Entitlement Program awards grants to nonentitlement communities based on multiple 

parameters that other grantees are not required to meet, including population, percentage of low- and 

moderate-income persons, age of housing stocks, and population density.

c

Colonia refers to any unincorporated community with poor water and sewage systems and housing. 

Texas’ allocation for colonia includes the Colonia Fund and Non-Border Colonia fund, which have 

geographic differences but address similar community needs.

d

Evaluation criteria listed are a summary of the various criteria that the states use to evaluate 

applications for their programs.

e

Rotation refers to county governments that receive scattered site housing grants on a revolving basis 

to address housing needs of very low income families in the county.

f

The Housing development program has two components—one accepts applications at a set time each 

year and the other accepts applications until all funds are allocated.

North Carolina Ohio Pennsylvania Puerto Rico Texas

Economic development 

offers additional funding 

for jobs created in state 

designated communities.

Economic development 

considers applicants to be 

more competitive in the 

selection process if they 

create jobs for low- and 

moderate-income 

individuals.

None None None

Economic development 

requires most grantees to 

match at least 25 percent 

of awards received.

Economic development 

requires applicants to 

leverage funds from other 

sources. All other 

programs do not require a 

match, but it can make 

applicants more 

competitive in the 

selection process.

None None Disaster relief applicants 

must match awards 

based on population size; 

the larger the population, 

the larger the match 

required. All other 

programs require a match 

to be competitive in the 

selection process.
Page 50 GAO-06-732 Community Development Block Grants

Appendix III

Activities Funded by the Recipients That GAO 

Visited ApendxiI

During our review of the CDBG program, we visited 16 entitlement 

communities and four states. Additionally, we visited four nonentitlement 

communities funded by two of the states we visited (Georgia and 

Maryland). These recipients funded the following examples of public 

improvement, housing, public service, economic development, and 

acquisition activities. 

Public Improvements West Point, Georgia (a nonentitlement community) used $500,000 in CDBG 

funds awarded by the state of Georgia to build a new Boys and Girls Club 

(see fig. 8). According to the city’s application for funds, the old Boys and 

Girls Club did not have an accessible entry, had several leaks in the roof 

that could only be temporarily repaired, did not have load bearing walls, 

and had a mechanical system that appeared to be well beyond its 

reasonable life expectancy. The total budget for the project was $721,500, 

including operating costs. According to the application, the club plans on 

serving 200 children, 180 of which are from low- and moderate-income 

families.

Figure 8: Boys and Girls Club in West Point, Georgia 

• Poulan, Georgia (a nonentitlement community) utilized a $499,081 grant 

from the state of Georgia to replace a portion of the city’s corroding 

water pipes. At the time of the grant, the corroding water pipes 

Source: GAO.

Former location of Boys and Girls Club (left). New location and building for Boys and Girls Club (right).
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 51 GAO-06-732 Community Development Block Grants

restricted the amount of water that flowed through the water lines and 

caused the water to become discolored and rusty. According to local 

officials, the water that was fed through these water lines was not 

suitable for drinking, bathing, or cleaning clothes. In addition to the 

money provided by the state, the city of Poulan provided $40,000. Over 

70 percent of residents that benefited from the new water lines had lowand moderate-incomes.

• The state of Maryland awarded the town of Denton (a nonentitlement 

community) $600,000 to make improvements to city streets. Specifically, 

the funding was used to install a new storm water management system, 

curbs, gutters, sidewalks, and paving. The CDBG grant provided 

$431,913 for construction, $148,087 for project administration and 

contingency, and $20,000 for general administration. The project was 

matched with a $566,950 loan and a $4,920 grant from the U.S. 

Department of Agriculture and $7,841 from the town of Denton.

• Attleboro, Massachusetts used $222,267 in CDBG funds to finance, in 

part, the reconstruction of the Fred E. Briggs Playground municipal pool 

and bathhouse, which is located in a census tract where 59 percent of 

the households are of low- and moderate-income. The city demolished 

the old pool, the bathhouse, the building that housed the filtration 

system, the walkways, and the fencing and constructed a brand new 

municipal pool and bathhouse facility (see fig. 9). The capital project 

was necessary to bring both the pool and bathhouse into compliance 

with federal, state and local building and health codes and to provide 

accessibility for persons with disabilities. The total project cost was 

$537,849.
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 52 GAO-06-732 Community Development Block Grants

Figure 9: Renovated Briggs Playground Pool in Attleboro, Massachusetts

• Kane County, Illinois used $28,592 in CDBG funds to finance the 

rehabilitation of the Corron Farm Park (see fig. 10), located in and 

owned by Campton Township. The structure was listed in the Kane 

County Register of Historic Places and was vacant and badly 

deteriorated when rehabilitation work began. The building will house a 

local history museum upon completion. Additionally, local officials told 

us that the investment of CDBG funds helped reinforce local efforts to 

protect open space in an area facing rapid growth and development. The 

overall funding for the project was $64,936, with Campton Township 

investing $36,344 in the project. 

Source: GAO.
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 53 GAO-06-732 Community Development Block Grants

Figure 10: Corron Farm Park in Kane County, Illinois

Housing Greeley, Colorado spent $236,000 in 2003 CDBG funds to continue its 

single-family housing rehabilitation program and provide emergency 

assistance to the elderly and persons with disabilities. Efforts were 

concentrated in areas targeted for urban renewal. Activities included in the 

housing rehabilitation were housing rehabilitation and weatherization, 

housing replacement, property acquisition, ramps for persons with 

disabilities and elderly, first-time home buyer’s program, and urban renewal 

(see fig. 11).

Source: Kane County, Illinois.
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 54 GAO-06-732 Community Development Block Grants

Figure 11: Single Family Housing Rehabilitation in Greeley, Colorado

• In 2003, Atlanta, Georgia provided $350,000 in CDBG funds to Southeast 

Energy Assistance (SEA) for energy-related repairs to 225 homes owned 

by low-income residents. These repairs eliminate air leaks to make 

homes more energy efficient and reduce heating and cooling costs. SEA 

is a nonprofit organization that is a service provider for the federally 

funded Weatherization Assistance Program (WAP). WAP services 

include adding insulation to floors, walls, and attics; replacing or 

repairing damaged exterior doors and windows; and installing weatherstripping and caulking.

• In fiscal year 2003, the Commonwealth of Massachusetts awarded 

$1,118,125 in funding to the town of Oak Bluffs to rehabilitate 40 units of 

substandard housing in the towns of Oak Bluffs, Aquinnah, Chilmark, 

Edgartown, Tisbury, and West Tisbury. Low- and moderate-income 

persons residing in substandard housing were eligible to participate. 

Upon completion of the grant, a total of 47 units had been rehabilitated. 

The project utilized three loan options: a deferred payment loan, a 

deferral agreement loan, and a direct reduction loan. Ten loans were 

Source: GAO.
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 55 GAO-06-732 Community Development Block Grants

issued at or under $30,000, 23 loans were issued at or under $25,000, and 

14 loans were issued at or under $20,000.

• Chicago, Illinois provided $5.9 million in CDBG funds to build 

Wentworth Commons. Wentworth Commons provides affordable 

housing to families and individuals that were formerly homeless or at 

risk of homelessness. To qualify to live at Wentworth, applicants must 

make 60 percent or less of the area median income. Overall, there are 51 

units at the site: 24 efficiency apartments, 15 three-bedroom apartments, 

9 two- bedroom apartments, and 3 four-bedroom apartments. The site 

also features supportive services such as case management, 

employment training, and leadership development. The building is 

environmentally friendly and energy efficient. It uses solar energy to 

generate electricity into the building’s electrical distribution system, 

which offsets electrical use. The total cost of the project was $13 

million.

• Los Angeles, California runs a “Handyworker” Program that provides 

minor home repair services to low-income senior citizens or 

homeowners with disabilities. The program helps keep housing from 

deteriorating by funding repairs that homeowners could not otherwise 

afford. In program year 2004, the city budgeted $2,000,000 in CDBG 

funds for the program. Grants of up to $5,000 per client were available 

for repairs or home improvements that address home safety, 

accessibility, and security issues. Improvements include exterior and 

interior painting, minor finish work, the installation of disability grab 

bars and accesiblity ramps, minor plumbing, and other repairs. Through 

this program, the city is working to preserve the existing stock of 

affordable housing. The city’s goal for program year 2004 was to provide 

1,552 households “Handyworker” services.

• Caroline County, Maryland (a nonentitlement community) began 

receiving state of Maryland CDBG funds in 2002 to rehabilitate housing 

for low- and moderate-income households. Since 2002, the county has 

received $575,000 in CDBG funds to rehabilitate 51 homes. Additionally, 

the county also received $17,250 in CDBG funds in 2003 to complete a 

housing study. The county told us that the CDBG funds have also helped 

the county leverage $10,250 from the U.S. Department of Agriculture for 

housing rehabilitation.

• Baltimore County, Maryland conducts a Single Family Rehabilitation 

and Emergency Repair Program. Since the inception of the program, the 
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 56 GAO-06-732 Community Development Block Grants

county has assisted nearly 1,850 income eligible households. In fiscal 

year 2005, the county spent $1 million in CDBG funds to assist 93 

households. The program provides loans of up to $25,000 per home. The 

loans are then deferred until the sale, refinance, or transfer of property. 

During ownership, the county allows homeowners to make certain 

repairs and home improvements.

Public Services Naperville, Illinois provided $19,223 in program year 2005 funding for the 

Loaves and Fishes Community Food Pantry (see fig. 12). The food pantry 

provides groceries that ensure a healthy diet to Naperville’s low-income 

and homeless clients. According to Loaves and Fishes, 3,000 Naperville 

residents live in poverty. On a weekly basis, the food pantry provides 250 

families with the equivalent of three bags of groceries to last for a 2-week 

period. In 2005, the food pantry provided: services to over 1,500 families, 

home delivery to over 100 seniors and individuals with disabilities, and 

over 1,800 holiday food distributions. 

Figure 12: Loaves and Fishes Community Food Pantry in Naperville, Illinois

Source: GAO.
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 57 GAO-06-732 Community Development Block Grants

• Denver, Colorado provided $50,000 in 2003 funding to Brothers 

Redevelopment Incorporated to provide the salaries and benefits for a 

director and two part time counselors. The director and part time 

counselors provided information, referrals and mortgage counseling for 

low- and moderate-income households in the Denver community.

• Santa Monica, California provided $242,442 in program year 2005 CDBG 

funding toward the SAMOSHEL homeless shelter. SAMOSHEL provides 

110 shelter beds to homeless adults, and expects to serve up to 500 

persons annually with their emergency shelter. Additionally, the shelter 

provides services such as access to medical and mental health services, 

permanent and transitional housing programs, domestic violence 

intervention, counseling and case management, and substance abuse 

recovery support and employment services. 

• In fiscal year 2003, Warner Robins, Georgia provided $41,000 in CDBG 

funds to the Gateway Cottage. The Gateway Cottage program targets 

young homeless mothers recovering from substance abuse. The cottage 

provides housing and resources for a time span of 1 year while providing 

training in hygiene, personal finance, substance abuse, parenting, and 

daily living skills. The program networks with other service providers to 

link clients with job training, educational opportunities, and physical 

and mental health services. Upon graduation from the program, clients 

are eligible to apply for the aftercare component of the program, which 

is supportive housing in conjunction with supportive services.

• Beloit, Wisconsin provided $7,068 for the Beloit Chore Service Program 

in 2005. The program provides senior citizens with screened, qualified 

workers who will do home maintenance and repairs at affordable prices. 

The program staff screen workers and verify that they are qualified to 

perform the repair and maintenance work. The workers provide 

inexpensive home repairs, which allow seniors to remain independent 

and in their own homes. 

• Baltimore, Maryland provided $80,700 in 2003 CDBG funds to the BelairEdison Neighborhoods Incorporated. The funds were used to undertake 

several activities including prepurchasing, default and delinquency 

counseling, fair housing counseling and education, homeownership 

workshops, and public information and technical assistance to 

businesses in the Belair-Edison area of Baltimore.
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 58 GAO-06-732 Community Development Block Grants

Economic 

Development

• In fiscal year 2005, Boston, Massachusetts designated $856,697 in CDBG 

funds for its Boston Main Streets program. The city of Boston provided 

funding and technical assistance to 19 neighborhood-based Main Streets 

districts throughout the city. The program helps the local districts 

capitalize on their unique cultural and historical assets while focusing 

on the community's economic development needs. Examples of 

activities funded under the program include small business recruitment, 

business retention, and addressing competition from shopping malls 

and discount retailers. From 1995 to December 2005, the city created 

540 new businesses and 3,643 new jobs, and leveraged $9,645,644 in 

additional private investment through the program. 

• Dubuque, Iowa provided a $500,000 CDBG loan to Heartland Financial 

in April 2003 as an incentive to select a downtown location for the 

company's expansion of 47 new jobs (see fig. 13). The $4.5 million 

project provided for the renovation of two downtown buildings both of 

which are on the National Register of Historic Places. In addition, it 

provided for reuse of the vacant buildings, retained a workforce in the 

downtown, and created new jobs for low- and moderate-income 

persons.
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 59 GAO-06-732 Community Development Block Grants

Figure 13: Heartland Financial Building in Dubuque, Iowa

Source: City of Dubuque, Iowa.
Appendix III

Activities Funded by the Recipients That 

GAO Visited

Page 60 GAO-06-732 Community Development Block Grants

• As of the 2003/2004 fiscal year, the city of Gardena, California had 

expended $490,755 in CDBG funds revitalizing their Van Ness Corridor. 

The goal of the revitalization was to strengthen the economic vitality of 

the city, provide employment opportunities, stimulate quality retail 

development, and create a sustainable economic base for the city. The 

city provided funds to businesses along the corridor to eliminate slum 

and blight. CDBG assistance has included financial assistance for facade 

and exterior improvements, providing block wall and infrastructure 

improvements along the corridor, conducting a business survey to 

develop and implement a business outreach program, and providing an 

on-going graffiti abatement and removal program. 

Acquisition • The state of Colorado provided $250,000 in CDBG funds to help a health 

clinic in Lafayette, Colorado acquire property to build a new facility. 

Clinica Campesina is a community health center serving the needs of the 

low-income, uninsured residents of Southeastern Boulder, Broomfield, 

and Western Adams Counties. Ninety-six percent of the patients that the 

clinic serves are at or below 200 percent of the federal poverty line. The 

clinic’s patients are predominately children under the age of 13 (38 

percent) and women of childbearing age (28 percent). The total project 

budget was $1.3 million.
Page 61 GAO-06-732 Community Development Block Grants

Appendix IV

Comments from the Department of Housing 

and Urban Development ApendxiIV

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

(Page references in this 

letter may differ.)

See comment 1.

See comment 2.

See comment 3.

See comment 4.
Appendix IV

Comments from the Department of Housing 

and Urban Development

Page 62 GAO-06-732 Community Development Block Grants

See comment 5.

See comment 6.

See comment 7.
Appendix IV

Comments from the Department of Housing 

and Urban Development

Page 63 GAO-06-732 Community Development Block Grants

See comment 8.

See comment 9.

See comment 10.

See comment 11.

See comment 12.
Appendix IV

Comments from the Department of Housing 

and Urban Development

Page 64 GAO-06-732 Community Development Block Grants

The following are GAO’s comments on the Department of Housing and 

Urban Development’s letter dated July 11, 2006.

GAO Comments 1. We agree that it is important to monitor compliance with 

administration and planning and public service spending caps. 

However, our report emphasizes HUD’s need to centrally maintain data 

on compliance with statutory spending limits so that it can report on 

the extent of compliance; therefore, we made no change to the report in 

response to this comment.

2. The CPD staffing/hiring plan was approved in June 2006 and was 

provided to us along with HUD’s written agency comments. Because 

the plan was provided at the close of this engagement this report does 

not evaluate the extent to which the plan addresses identified 

workforce needs.

3. The guidance that HUD references was issued in the 1990s. When we 

interviewed the Director of CPD’s Office of Field Management and field 

office staff regarding the monitoring of CDBG recipients, they stated 

that they were following the new CPD Monitoring Handbook, which 

was issued in September 2005. The introduction to this handbook states 

that it establishes standards and provides guidance for monitoring CPD 

programs, including CDBG. Beyond referring field staff to various 

sections of the program regulations, the new handbook does not 

describe what conditions its field staff should consider when taking 

corrective actions and what specific conditions warrant different types 

of corrective actions. Because we believe that HUD needs a consistent 

framework for holding CDBG recipients accountable for deficiencies 

identified during monitoring, we made no change to the report.

4. Our report acknowledges that any additional guidance that HUD 

develops for its field staff taking sanctions could allow for the 

consideration of individual situations. Because individual situations 

may vary, we stated that such guidance could establish a framework, or 

parameters, within which field offices should operate. Although HUD 

points to several forms of guidance in its comment, none of them 

specifically addresses the concerns raised in this report. The regulatory 

language in 24 C.F.R. 570.910(a) states that corrective actions should be 

designed to (1) prevent a continuation of the performance deficiency; 

(2) mitigate, to the extent possible, the adverse effects or consequences 

of the deficiency; and (3) prevent a recurrence of the deficiency. While 
Appendix IV

Comments from the Department of Housing 

and Urban Development

Page 65 GAO-06-732 Community Development Block Grants

this language establishes the purpose of taking sanctions, it does not 

provide parameters that help field staff determine which specific 

corrective sanction is appropriate to address the deficiency identified. 

Section 2-8.B. of the CPD Monitoring Handbook describes HUD’s basis 

for determining whether a deficiency should result in a finding or 

concern, but it does not help field office staff determine which sanction 

may be appropriate if the deficiency results in a finding. Finally, as we 

mentioned in our response to the previous comment, the additional 

handbook HUD referenced was issued in 1992, while the CPD 

Monitoring Handbook was issued in 2005. Given the great flexibility 

that exists when taking sanctions, we believe it would be useful to 

provide field office staff further guidance to ensure they are treating 

recipients that commit similar infractions equitably. 

5. We revised the report to include the suggested text.

6. We revised the text to make it clear that the 29 exhibits we mention are 

in the two handbook chapters that are specific to the CDBG program.

7. We agree that the meetings referenced by HUD can be helpful in 

sharing information on current operational issues with IDIS. However, 

the meetings that HUD has referenced are either regularly scheduled 

management meetings or training on HUD’s new performance 

measurement system. None of these meetings are the field office 

sessions that are specifically mentioned in the statement of work for 

the reengineered IDIS system. When we asked about the status of 

sessions that the statement of work said would be held with field staff 

regarding user requirements, accomplishment reporting, and proposed 

navigation approaches, the HUD official that is overseeing development 

of the new system stated that these sessions would not be held until 

late summer 2006 at the earliest, although a functional requirements 

document had already been drafted. Further, additional statements 

made by that official and HUD’s written comments indicate that the 

focus of future meetings with field staff will only be on reporting 

requirements. We continue to believe that soliciting input from end 

users on system requirements is consistent with best practices for 

system development and recommend that field office staff should 

participate in project management throughout the system’s life cycle to 

ensure that the completed system supports both HUD’s business needs 

and the end user field office needs.
Appendix IV

Comments from the Department of Housing 

and Urban Development

Page 66 GAO-06-732 Community Development Block Grants

8. We agree that monitoring low- or medium-risk grantees can serve a 

useful and valid program purpose, especially considering the large 

number of grantees designated as such. The report acknowledges that 

HUD policy permits the monitoring of medium- and low-risk recipients 

by noting that they can be reviewed using remote, or off-site, 

monitoring. Therefore, we made no change to the report.

9. We agree that monitoring recipients is critical to fulfill statutory and 

regulatory responsibilities to assess compliance as well as carry out 

stewardship responsibilities. In our report, we are providing one reason 

why monitoring is critical, not an all-inclusive list, so we did not change 

the report. 

10. We revised the text as suggested.

11. We agree that grant monitoring is a critical stewardship responsibility. 

This section of our report is highlighting the fact that program funding 

cuts are being made at the same time as the number of grant recipients 

is increasing, which creates challenges as HUD carries out its 

stewardship responsibilities.

12. We agree that it is easier to develop policies and procedures to address 

timeliness deficiencies than it is to develop guidance that addresses the 

myriad of deficiencies identified during monitoring. However, given the 

importance of holding CDBG recipients accountable for how they use 

their funds, we recommend that HUD consider issuing additional 

guidance for field staff that establishes the parameters within which 

field offices should operate and provides greater transparency to the 

sanctioning process. 
Page 67 GAO-06-732 Community Development Block Grants

Appendix V

GAO Contact and Staff Acknowledgments ApendxiV

GAO Contact William Shear, (202) 512-8678

Staff 

Acknowledgments

In addition, Paul Schmidt, Assistant Director; Nima Patel Edwards; Cynthia 

Grant; Curtis Groves; Alison Martin; John McGrail; Marc Molino; David 

Noguera; David Pittman; Nitin Rao; and Paige Smith made key 

contributions to this report.

(250253)
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