U. S. Department of Housing and Urban Development 

Office of Inspector General for Investigations 

Inspections and Evaluations Division 

Inspection of HUD’s Recapture of Unspent 

Pre-2005 Disaster Recovery Grant Funds 

September 2009 

IED-08-005
ii 

Executive Summary 

The Office of Inspector General, Inspections and Evaluations Division, conducts 

independent, objective examinations of U.S. Department of Housing and Urban 

Development (HUD) activities, programs, operations, and organizational issues. 

We performed an inspection to determine whether HUD had appropriately recaptured 

unspent funds awarded from the more than $5.3 billion in Community Development 

Block Grant (CDBG) Disaster Recovery funding appropriated before 2005. According to 

HUD data, as of August 2008, grant awards totaling $4.7 billion had no unspent funds; 

121 grant awards had unspent funds, of which HUD recaptured or deobligated more than 

$17.5 million. 

We obtained an overview of the Disaster Recovery grant program through discussions 

with HUD Headquarters Office of Community Planning and Development (CPD). We 

queried and analyzed pre-2005 disaster related data from CPD’s automated Disaster 

Recovery Grant Reporting (DRGR) system. We selected 11 of the 121 grants in different 

parts of the country to review HUD’s process for recapturing unspent funds. We obtained 

and reviewed the grant files and discussed the grants with cognizant HUD managers and 

field staff. 

 

We found that HUD did recapture and deobligate unspent pre-2005 Disaster Recovery 

grant funds from expired grant contracts (appropriations statutes specify that the grant 

funds are to be spent within 36 months of the grant date). Unspent funds were recaptured 

or deobligated through HUD’s Line of Credit Control System (LOCCS) as the grants 

expired. However, we made three observations that warrant management attention. First, 

HUD did not ensure that expired Disaster Recovery grants were closed out and unspent 

grant funds were recaptured or deobligated on a timely basis. Second, the DRGR system 

did not contain accurate information regarding the closeout status of expired Disaster 

Recovery grants. Finally, closeout documentation was missing from five Disaster 

Recovery grant files we reviewed. 

HUD’s oversight of Disaster Recovery grants can be improved by implementing steps 

that ensure (1) closeout of disaster grants and recapture of unspent grant funds is 

completed timely, (2) correct and timely grant status information is entered into the 

DRGR system, and (3) that formal closeout documents are included in the grant files. 

HUD’s Deputy Director, Office of Block Grant Assistance, reported no major issues with 

our observations, found the recommendations to be feasible, and stated that corrective 

actions were in process. We did not receive a response to follow-up requests for a more 

detailed explanation of these statements. We have asked the Assistant Secretary, Office 

of Community Planning and Development, to provide a formal response to our 

observations and recommendations and advise us of corrective actions taken. 

If you have any questions concerning this report, please call Jennifer Sorenson, Director, 

Inspections and Evaluations Division, Office of Investigation, at (202) 708-0390. 
iii 

Table of Contents 

Introduction ......................................................................................................................... 1 

Scope and Methodology ......................................................................................................3 

Observation 1: Closeout of Disaster Recovery Grants and Recapture of 

 Unspent Funds Were Not Always Timely.... ......................................................... 3 

Observation 2: DRGR System Contained Inaccurate Grant Closeout 

 Status Information ................................................................................................... 4 

Observation 3: Disaster Recovery Grant Closeout Documentation 

 Was Missing............................................................................................................ 5 

Recommendations ................................................................................................................6 
1 

Introduction 

U.S. Department of Housing and Urban Development (HUD) Disaster Recovery Assistance 

provides supplemental Community Development Block Grant (CDBG) funds appropriated by 

Congress to communities in presidentially designated disaster areas. Each supplemental 

appropriations statute specifies the disasters or period of disaster declarations for which funding 

is available. Unless otherwise restricted by statute or provided by waiver, the disaster funds may 

be used for any activity eligible under section 105(a) of the Housing and Community 

Development Act of 1974, as amended, that meets a national objective under the Act and is 

related to the disaster. Generally, at least 50 percent of the funds must be for activities that 

principally benefit persons of low and moderate income. Grantees must report program progress 

quarterly via a Web-based Disaster Recovery Grant Reporting (DRGR) system.1

CDBG Disaster Recovery Assistance is authorized under Title I of the Housing and Community 

Development Act of 1974 as amended. Program rules are published in the Federal Register 

pursuant to specific appropriation acts. The Office of Community Planning and Development 

(CPD), Office of Block Grant Assistance administers the program. CDBG Disaster Recovery 

Assistance funds are made available to States, units of general local governments, Indian tribes, 

and insular areas designated by the President of the United States as disaster areas.2

HUD provides notice of these funds to eligible governments, which then develop and submit an 

action plan for disaster recovery to HUD for approval before receiving CDBG Disaster Recovery 

grants. The action plan describes the needs, strategies, and projected uses of the Disaster 

Recovery Assistance funds. Generally, the grant agreement contract requires that grant funds be 

spent within 3 years of the grant contract date. 

 

 

1

 U.S. Department of Housing and Urban Development, “Disaster Recovery Assistance,” 

http://www.hud.gov/offices/cpd/communitydevelopment/programs/drsi/driquickfacts.cfm, (Content current 25 

August 2009) 

2

 U.S. Department of Housing and Urban Development, “CDBG Disaster Recovery Assistance,” 

http://www.hud.gov/offices/cpd/communitydevelopment/programs/drsi/index.cfm, (Content current 25 August, 
2 

Pre-2005 Disaster Recovery Grant Funding

Congress appropriated more than $5.3 billion in CDBG Disaster Recovery Assistance funding 

before 2005, as shown below.3

Fiscal year  Amount  Purpose 

2002  $2.783 billion To assist with recovery post‐Sept. 11 in New York 

City 

2001   $700 million To assist with recovery post‐Sept. 11 in New York 

City 

1999    $20 million To assist with recovery from multiple disasters 

1998   $130 million To assist with recovery from multiple disasters 

1997   $500 million To assist with recovery from upper Midwest 

floods 

1996    $50 million To assist with recovery from multiple disasters 

1995    $39 million To assist with recovery from the Oklahoma City 

bombing 

1994   $580 million To assist with recovery from Tropical Storm 

Alberto ($180 million) and Northridge 

earthquake ($400 million) 

1993   $450 million To assist with recovery from Midwest floods 

1992    $85 million To assist with recovery from Hurricanes Andrew 

and Iniki and Typhoon Omar 

Total  $5.337 billion

HUD Rules and Notices

Per HUD Handbook 6509.2 REV-5, Chapter 6, Disaster Recovery grants are made from CDBG 

supplemental appropriations. HUD’s basic requirements for a Disaster Recovery grant mirror 

standard CDBG entitlement and State program grants and include similar monitoring protocols 

and program risk analyses. When HUD waives or makes modifications to the supplemental grant 

rules, these changes are published in a Federal Register notice. HUD does not waive or modify 

financial management, environmental, labor, or civil rights requirements. 

As provided at 24 CFR (Code of Federal Regulations) 1003.508, grantees must submit grant 

closeout documents within 90 days after program expiration. Disaster Recovery grant closeout is 

guided by Notice CPD-98-03 for grants to states and governed by 24 CFR 570.509 for grants to 

entitlement cities or counties. 

Special contract conditions attached to the grant funding approval/agreements (form HUD-7082, 

Section B) state that all funds made available under the grant agreement must be expended 

within 36 months. 

 

3

 See footnote 1. 
3 

Scope and Methodology 

We initiated the review by researching general background information on disaster funding, 

HUD grant requirements, and related regulations. We contacted CPD in headquarters (HQ) and 

obtained a schedule of pre-2005 disaster funding and recaptured funds. As of August 2008, 

HUD’s records showed that a total of 121 pre-2005 Disaster Recovery grants had unspent funds 

totaling more than $17.5 million. 

We selected 11 of the 121 Disaster Recovery grants for detailed review. The selected grant files 

were associated with HUD disaster recovery efforts in different parts of the country and grants 

with large recaptured amounts, and represented various HUD field offices. To augment our file 

review, we conducted one site visit to the San Francisco field office to meet with HUD CPD 

management and staff, review selected grant files, and discuss our observations and obtain 

comments. 

We also were provided access to the DRGR database and Line Of Credit Control System and 

queried information on Disaster Recovery grants. 

We initiated the review in August 2008. The review was suspended in October 2008 at the 

request of HUD CPD at HQ until January 2009 because of workload conflicts related to ongoing 

disaster recovery and new funding appropriations. The field work resumed in January 2009 and 

was completed in March 2009. 

We conducted the inspection in accordance with the Quality Standards for Inspections issued by 

the President’s Council on Integrity and Efficiency. 

Observations 

HUD did recapture and deobligate unspent pre-2005 Disaster Recovery grant funds from expired 

grant contracts, as required. Unspent funds totaling $17.5 million were recaptured or deobligated 

through HUD’s Line of Credit Control System (LOCCS) as the grants expired. However, in our 

review of the grant files, we noted three observations that warrant management attention. 

Observation 1: Closeout of Disaster Recovery Grants and Recapture of Unspent Funds 

Were Not Always Timely 

Our inspection found that HUD did not always close out or recapture unspent or unobligated 

grant funds from expired Disaster Recovery grants in a timely manner. As illustrated below, the 

closeouts and recaptures for six grants that we reviewed occurred from several months to more 

than two years after the grant contract expired. 
4 

Grant  Contract 

expiration 

date 

Date 

closeout 

signed 

Recaptured 

amount 

Date recaptured 

B‐98‐DD‐12‐0001  03/31/04  08/18/04  $2,374,242 08/19/04 

B‐98‐DD‐26‐0001  10/18/03  09/07/05  $2,553,350 09/21/04 

B‐98‐DD‐33‐0001  10/30/03  08/29/05    $829,337 After 08/08/05 

B‐98‐DD‐42‐0001  09/30/06  04/21/08   $320,244 After 02/08/08 

B‐98‐MU‐72‐0008  09/30/05  11/30/05  $1,197,983 After 09/27/05 

B‐98‐DD‐06‐0001  04/25/04  03/19/08    $720,940 About 09/27/06

We reviewed the chronology for each of the six grants. For example, grant number 

B-98-DD-33-0001 was administered by HUD’s Manchester, NH, office. This $3 million grant 

was awarded on October 30, 2000, to the State of New Hampshire for unmet disaster recovery 

needs related to two severe storm disasters in 1998. Our review disclosed that the grantee had 

spent $2,170,663 as of December 18, 2003. However, the grant was not closed out until August 

29, 2005, or 22 months after contract expiration. Similarly, HUD did not recapture the unspent 

grant balance of $829,337 until after August 8, 2005, more than 21 months after contract 

expiration.

Observation 2: DRGR System Contained Inaccurate Grant Closeout Status Information 

Our inspection showed that the DRGR database system did not contain accurate closeout status 

information. Although HUD’s CPD program staff at HQ stated in September 2008 that all of the 

1998 disaster recovery grants were closed, we discovered conflicting information on the 1998 

grants in the DRGR system. As of February 11, 2009, the DRGR system showed that most (67 

percent) of the 1998 Disaster Recovery grants were still active. 

Status as of 02/11/09  Number of grants  % 

Active  73  67% 

Ready to close  26  24% 

Closed  10  9% 

Total  109   

We specifically reviewed the six 1998 disaster recovery grants shown in observation 1 in the 

DRGR system. None were listed as closed—two were active and four were “ready to close”—as 

shown on the following page: 

 
5 

Grant  Contract 

expiration 

date 

Date closeout 

signed 

Recaptured 

amount 

Grant status in 

DRGR (as of 

2/11/09) 

B‐98‐DD‐12‐0001  03/31/04  08/18/04  $2,374,242 Active 

B‐98‐DD‐26‐0001  10/18/03  09/07/05  $2,553,350 Ready to close 

B‐98‐DD‐33‐0001  10/30/03  08/29/05    $829,337 Ready to close 

B‐98‐DD‐42‐0001  09/30/06  04/21/08    $320,244 Ready to close 

B‐98‐MU‐72‐0008  09/30/05  11/30/05  $1,197,983 Active 

B‐98‐DD‐06‐0001  04/25/04  03/19/08    $720,940 Ready to close 

It is important to have accurate data in the DRGR system because these data are used by HUD 

staff to review Disaster Recovery grant activity and provide quarterly reports to the Congress. 

HUD developed the DRGR system to assist grantees in identifying activities funded under their 

grant’s action plan and amendments, along with budgets and performance goals for those 

activities. After the action plan is submitted and approved, grantees submit their quarterly reports 

summarizing obligations, expenditures, drawdowns, and accomplishments for activities funded 

by each grant using the system. 

HUD staff can access the DRGR system online and review the information entered. The required 

quarterly report contains space for HUD field staff to make notes about each grant activity. HUD 

staff can also query the DRGR to identify active users, locate timely and late reports and 

reviews, and answer various other questions. HUD may reject the grantee’s quarterly reports as 

many times as necessary to ensure that the reports have been completed correctly. 

About 37 days after the end of each calendar quarter, HUD HQ draws Disaster Recovery grant 

data from the DRGR system. These data provide the basis for quarterly reporting to Congress. 

Observation 3: Disaster Recovery Grant Closeout Documentation Was Missing 

We noted that closeout documents for several 1997 and 1998 Disaster Recovery grant were 

missing from official files. These formal documents included closeout agreements and closeout 

certifications that should be signed by HUD staff and the respective grantees and a financial 

status report (Standard Form 269). 

While the files for the grants listed in observations 1 and 2 above did contain closeout 

documents, files for the five grants listed below did not, and they were also incorrectly reported 

as being active or “ready to close” in the DRGR system. 

 
6 

Grants  Date grant 

expired 

Recaptured 

amount 

Grant status in DRGR (as 

of 2/11/09) 

B‐98‐NU‐06‐0030  05/21/03   $36,730 Active 

B‐97‐DU‐06‐0001  01/23/01  $252,723 Active 

B‐98‐MU‐06‐0003  09/30/02   $51,105 Ready to close 

B‐97‐UU‐06‐0009  02/03/01   $77,928 Active 

B‐99‐RK‐06‐0004  09/04/01  $247,199 Active 

HUD staff stated that the unspent funds were recaptured for each of the five grants, but 

acknowledged that they did not have the closeout agreements or closeout certifications. 

Consequently, it appears that HUD had not formally closed out these five grants with the 

grantees. 

Recommendations 

 

We recommend that HUD improve its oversight of Disaster Recovery grants and grantees by 

implementing procedures to ensure 

1. Disaster Recovery grants are closed out and unspent funds are recaptured or deobligated in a 

timely manner. 

2. Grantees enter correct and timely Disaster Recovery grant status information into the DRGR 

system. 

3. Formal closeout documents are completed in a timely manner and included in Disaster 

Recovery grant files. 

HUD’s Deputy Director, Office of Block Grant Assistance, reported no major issues with our 

observations, found the recommendations to be feasible, and stated that corrective actions were 

in process. We did not receive a response to follow-up requests for a more detailed explanation 

of these statements. We have asked the Assistant Secretary, Office of Community Planning and 

Development, to provide a formal response to our observations and recommendations and advise 

us of corrective actions taken.