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S. Hrg. 109–964

COMMUNITY DEVELOPMENT BLOCK GRANTS:

THE CASE FOR REFORM

HEARING

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, AND INTERNATIONAL 

SECURITY SUBCOMMITTEE

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JUNE 29, 2006

Available via http://www.access.gpo.gov/congress/senate

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs

(

(II)

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

TOM COBURN, Oklahoma 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

MICHAEL L. ALEXANDER, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

TOM COBURN, Oklahoma, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

LINCOLN D. CHAFEE, Rhode Island 

ROBERT F. BENNETT, Utah 

PETE V. DOMENICI, New Mexico 

JOHN W. WARNER, Virginia 

THOMAS CARPER, Delaware 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

KATY FRENCH, Staff Director 

SHEILA MURPHY, Minority Staff Director 

JOHN KILVINGTON, Minority Deputy Staff Director 

LIZ SCRANTON, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Coburn ................................................................................................. 1

Senator Coleman .............................................................................................. 6

Senator Akaka .................................................................................................. 8

Senator Carper ................................................................................................. 13

WITNESSES 

THURSDAY, JUNE 29, 2006

Hon. Pamela H. Patenaude, Assistance Secretary, Office of Community Planning and Development, U.S. Department of Housing and Urban Development, accompanied by Todd Richardson ............................................................ 10

Hon. Kenneth M. Donohue, Inspector General, Department of Housing and 

Urban Development ............................................................................................. 110

Eileen Norcross, M.A., Senior Research Fellow for the Government Accountability Project, Mercatus Center, George Mason University ............................ 25

Cardell Cooper, Executive Director, National Community Development Association .................................................................................................................... 27

ALPHABETICAL LIST OF WITNESSES

Cooper, Cardell: 

Testimony .......................................................................................................... 27

Prepared statement .......................................................................................... 79

Donohue, Hon. Kenneth M.: 

Testimony .......................................................................................................... 11

Prepared statement .......................................................................................... 44

Norcross, Eileen, M.A.: 

Testimony .......................................................................................................... 25

Prepared statement .......................................................................................... 53

Patenaude, Hon. Pamela H.: 

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 39

APPENDIX 

Questions and responses for the Record from: 

Ms. Patenaude .................................................................................................. 88

Ms. Norcross ..................................................................................................... 97

Mr. Cooper ........................................................................................................ 99

Letters submitted for the record by Senator Coleman ......................................... 100

National Association of Housing and Redevelopment Officials, prepared statement ...................................................................................................................... 120

Charts submitted for the record by Senator Coburn ............................................ 131

(1)

COMMUNITY DEVELOPMENT BLOCK GRANTS: 

THE CASE FOR REFORM 

THURSDAY, JUNE 29, 2006

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL SECURITY, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:30 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Tom Coburn (Chairman of the Subcommittee) presiding. 

Present: Senators Coburn, Coleman, Carper, and Akaka. 

OPENING STATEMENT OF SENATOR COBURN 

Senator COBURN. The hearing will come to order. 

This is a hearing on Community Development Block Grants: The 

Case for Reform. It is not a hearing on the elimination of CDBG, 

in spite of the buttons I see out there, which leads me to conclude 

that oftentimes, when somebody wants to distort somebody’s position that they may, in fact, have a problem. 

When you have a goal of flexibility and consensus, you will have 

different results than if you have your goal of accountability and 

efficiency, and when you allow those two separate things, you 

never get to what we are looking for, which is accountability. And 

I do not think we are going to have any of the witnesses’ testimony 

today that is going to say they do not want accountability, and I 

do not think we are going to have any of the witnesses say they 

do not want transparency. And I am sure we are not going to hear 

any of the witnesses say we do not have results. 

So the purpose of this hearing is to have a frank and open discussion about how do we do the best job with the money that we 

put in CDBG to make the greatest different in the most number 

of people’s lives who are deserving? That is what it is about. It is 

not about playing games. It is not about politics. It is about an honest look at: Can we do this better? Can we account for it better? 

Can we get better results? And can we measure those results? 

The Community Development Block Grant program is a multibillion-dollar program that has exceptional flexibility compared to 

most other grant programs. That is one of the reasons it is liked 

so well. It operated out of the Department of Housing and Urban 

Development. It gives local officials broad discretion on the use of 

funds for housing, economic development activities, social services, 

and infrastructure. The authorizing legislation requires that the acVerDate 0ct 09 2002 10:31 Sep 07, 2007 Jkt 029510 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\29510.TXT SAFFAIRS PsN: PAT
2

tivity meet one of the following goals: To principally benefit low 

and moderate income individuals; to eliminate or prevent slums; or 

remedy urgent threats to the health or safety of the community. 

That is what the legislation says. 

When the program first began in 1975, HUD advertised that 

CDBG funds could be used anywhere within a local government’s 

jurisdiction to serve the needs of and provide better living environments for low and moderate income persons. This flexibility continues today, and it helps our communities meet localized needs 

that change on a case-by-case basis. That is a laudable goal. It is 

a great goal. 

Perhaps the first and most fundamental problem with the program is its lack of sunshine. And I want to redirect you to the accountability poster that this Subcommittee uses. When there is no 

sunshine, there is great opportunity for mischievous behavior. 

Transparency is the first and necessary step towards accountability. One of the interesting things our Subcommittee has found 

that we have asked for months to find out how CDBG funds are 

used, and no one can tell us. No one has accumulated all that. Nobody knows for total, if we take $3 billion or $4 billion, where did 

it go? Nobody knows that answer. 

HUD does not compile this information, much less make the information available to the public. That lack of transparency is simply unacceptable in the fiscal situation that we find ourselves 

today. How can supporters make a serious claim that the program 

as a whole is accomplishing its goals when nobody knows how the 

money is spent? Nobody is measuring the goals. 

Not surprisingly, with no transparency, other performance problems are inevitable. Critics of Community Development Block 

Grants, and I am not a critic; I am supportive; I just want them 

to be more effective and more efficient, argue that while flexibility 

abounds, the program has no standardized outcome indicators, insufficient accountability, and it has ambiguity goals. In the 39 

hearings I have chaired in this Subcommittee, I have found that 

when these factors coalesce within a Federal program, opportunities for waste, fraud, and abuse of tax dollars abound. For example, 

right here in Washington, DC, it has been reported $100 million in 

CDBG block grant funds were spent over a decade on revitalization 

projects, and there is little to nothing to show for it. That is $100 

million. 

According to the Washington Post’s assessment, the City’s use of 

this Federal funding is characterized by overspending, cronyism, 

and conflicts of interest. Another example is CDBG funds were appropriated to help in the September 11 aftermath in New York 

City. But due to the program’s lack of meaningful guidelines and 

enforcement, some of this desperately needed money went to fund 

very questionable projects that do not meet those three guidelines. 

Illustrating the lack of policy direction and management in the 

program, the Manhattan Institute reports that CDBG loans referred to as Section 108 loans have a 59 percent default rate. That 

is three out of every five loans default. Why are we looking at it? 

If that is the case, why are we not putting the loans into areas that 

will make a difference and continue to make a difference rather 

than default and make a short period different? Critics say that 

3

1The charts referred to appears in the Appendix on page 131. 

even though HUD has specific guidelines, transparency and oversight for its other lending programs under HUD, it has nothing 

similar for Section 108 loans. For example, after the 1992 Los Angeles riots, the Los Angeles Community Development Bank was 

created with CDBG funds. In that came a $6 million loan that nobody would give to this group for any other thing, and in the end 

of that, they put $24 million into it; lost all of it; and it closed with 

no effect, no positive long-term effect for the community that it was 

intended to help. 

A key flaw in the program, I believe, is its outdated funding formula. These formulas have not been updated since the midseventies, meaning the program has not updated its funding structure to reflect changes in poverty or community realization and 

need over the last 30 years. The grants are not consistently targeted to communities in need, and as a result, there are numerous 

funding anomalies. For example, the posters to my right, to your 

left,1 shows a great example: Temple, Texas has under $20,000 per 

year per capita income; receives $15 per capita in CDBG block 

grant funds. Then, if you look at Oak Park, Illinois, where they 

have almost double the per capita income, and they have $39 per 

capita in CDBG block grants. 

Now, if we go back to what the program was intended for, to help 

poor and moderately low-income communities to help an ever 

present health situation, how do we meet that when you see these 

kind of funding disparities? You can also see that Newton, Massachusetts, has three times the income of Hopewell, Virginia, but this 

wealthy community receives three times more CDBG funding per 

capita than Hopewell. These are just two of hundreds of examples 

that we have discovered as we have gone through and looked at 

this program, illustrating that different communities are receiving 

the exact opposite of funds that you would expect from the requirements of the legislation that authorizes this program. 

We all know that the communities that we live in have changed 

in the past few decades. Some have improved miraculously. Some 

have declined. There is no way for a community that was needy in 

the seventies but is now wealthier to graduate out of the program. 

Once a community is placed on the list, no matter how wealthy the 

community becomes over time, it is guaranteed a funding of CDBG 

block grants, no matter what: Even if it has no need, it is still 

guaranteed. And that means that somebody who has a more legitimate need is denied those funds. 

I value the goals of this program. I have several questions, and 

when we get into full transparency, where anyone can see on a 

public website how the money is spent; that is called accountability, and anybody who wants this program to survive and grow 

cannot adequately create a case to oppose sunshine for where the 

money is spent. When will the program adopt standardized performance measures that have teeth with the ability to compare success from city to city? I think the program is overdue for some reform. I believe the funds must be targeted based on need, which 

means the formulas need to be revised. I believe there needs to be 

transparency in enforcement of the planned use of grants under 

4

this program, which means that you have to publish a community’s 

proposal and the actual disbursements so that the community, as 

well as everybody else, can see where the money went. 

Potential waste, fraud, and abuse of funds needs to be averted 

before high risk plans are enacted and undertaken rather than 

afterwards. Funding must be conditioned also on performance. Performance measures need to be better defined, and grantees that 

consistently fail to perform need to face real and immediate consequences and maybe intervention, not taking away the money but 

intervention to show them how to use the money better. The question is not to eliminate CDBG but to make the dollars be more effective in the original intent of the authorizing legislation. 

Since 2000, the Administration, to its credit, has identified these 

program weaknesses and has attempted some reform. But these attempts have been met with open hostility in Congress. I am afraid 

that many of my colleagues view the program as an entitlement for 

their home districts. Last month, HUD delivered the latest Community Development Block Grant reform proposal to Congress. I 

hope that Congress will take our responsibility to Americans seriously and work to make this program for the needy communities 

it was created to help. As more and more accounts of waste and 

abuse surface, we simply cannot neglect our duty to the next generation in favor of the next election. 

[The prepared statement of Senator Coburn follows:]

PREPARED STATEMENT OF SENATOR COBURN 

The Community Development Block Grant (CDBG) program is a multi-billion dollar program that has exceptional flexibility compared to most other grant programs. 

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

gives local officials broad discretion on the use of the funds for housing, economic 

development activities, social services, and infrastructure. The authorizing legislation requires that the activity meet one of the following goals: To principally benefit 

low- and moderate-income individuals, eliminate or prevent slums, or remedy urgent 

threats to the health or safety of the community. When the program first began in 

1975, HUD advertised that CDBG funds could be used anywhere within a local government’s jurisdiction to serve the needs of and provide better living environments 

for low- and moderate-income persons. This flexibility continues today, and it helps 

communities meet localized needs that change on a case by case basis. 

Perhaps the first and most fundamental problem with the program is the lack of 

sunshine. Transparency is the first and necessary step towards accountability. We 

asked for months to fund out how CDBG funds are used and no one knows. HUD 

does not compile this information, much less make that information public. That 

lack of transparency is simply unacceptable. How can supporters make a serious 

claim that the program as a whole is accomplishing its goals when nobody knows 

how the money is spent. 

Without transparency other performance problems are inevitable. Critics of Community Development Block Grants argue that while flexibility abounds, the program 

has ambiguous goals, insufficient accountability, and lacks standardized outcome indicators. In the 39 hearings I have chaired in this Subcommittee, I have found that 

when these factors coalesce within a Federal program, opportunities for waste, 

frauds, and abuse of tax dollars abound. For example, right here in Washington, 

DC, the Washington Post reported in 2002 that more than $100 million in CDBG 

funds were spent over a decade on revitalization projects—and there is little to show 

for it. According to the Post’s assessment, the city’s use of this Federal funding is 

characterized by overspending, cronyism, and conflicts of interest. As another example, CDBG funds were appropriated to rebuild New York City in the aftermath of 

9/11, but due to the program’s lack of meaningful guidelines and enforcement, some 

of this desperately needed money went to fund questionable projects like the Tribeca 

Film Festival. 

Illustrating the lack of policy direction and management in the program, the Manhattan Institute reports that CDBG loans, referred to as Section 108 loans, have a 

5

59 percent default rate. Critics say that even though HUD has specific guidelines, 

transparency and oversight for its other lending program, they have nothing similar 

for Section 108 loans. For example, after the 1992 Los Angeles riots, the Los Angeles Community Development Bank was created using CDBG funds. This program 

initially awarded a $6 million loan to an individual who was turned down by every 

commercial lender he met with due to his extremely risky business plan. Violating 

its own spending limit, the CDBG funded bank ended up pouring $24 million dollars 

into this unsound business in a misguided attempt to keep the business afloat. 

While politicians were congratulating themselves, the business defaulted and was 

forced to shut down. Two-thirds of the businesses assisted through this loan program failed to create the required number of jobs and only a meager 11 percent created jobs that went to the area’s residents. 

A key flaw in the program is the outdated funding formula. These formulas 

haven’t been updated since the 70’s—meaning the program has not updated its 

funding structure to reflect changes in poverty over the past 30 years. The grants 

are not consistently targeted to communities in need, and as a result, there are numerous funding anomalies. For example, Temple, Texas has just under $20,000 per 

capita income and receives $15 per capita in CDBG funds. But Oak Park, Illinois 

has almost double the average per capita income of Temple and receives $39 per 

capita from the program. Newton, Massachusetts has three times the income level 

of Hopewell, Virginia but this community receives three times more CDBG funding 

per capita. These are just two of hundreds of examples illustrating that different 

communities are receiving the exact opposite amount of funds you’d expect. 

We all know that the communities we live in have changed in the past few decades—some have improved, some have deteriorated. There’s no way for a community that was needy in the 70’s but is now wealthy to ‘‘graduate’’ from the program. 

Once a community is placed on the list, no matter how wealthy the community becomes over time, it is guaranteed a portion of the CDBG funding every year. 

Even though I value the goals of the program, I have several questions. When will 

we get full transparency with a public website where anyone can see how the money 

is spent? When will the program adopt standardized performance measures to be 

used in comparing successes from city to city? The program is long overdue for 

meaningful reform. There are several key points that must be addressed in order 

for this program to be both effective and accountable.

• Funds must be targeted based on need. This means the formulas need to be 

updated and wealthy communities need to graduate from eligibility. 

• There must be transparency and enforcement of the planned use of grants 

under this program—publish a community’s proposal and actual disbursements on a public website. HUD needs to provide consistent oversight and 

transparent monitoring of what goes into a plan and how it is carried out. 

Communities must be able to comment on a grantee’s planned use of CDBG 

funds. Potential waste, fraud, and abuse of funds need to be averted before 

high-risk plans are enacted. 

• Funding must be conditioned on performance. Performance measures need to 

be better defined, and grantees that consistently fail to perform need to face 

real and immediate consequences.

Since 2000, the Administration, to its credit, has identified these program weaknesses and attempted reform. But, these attempts have been met with open hostility 

in Congress. I’m afraid that many of my colleagues view the program as an entitlement for their home districts. Last month, HUD delivered the latest Community Development Block Grant reform proposal to Congress. I hope that Congress will take 

our responsibility to Americans seriously and finally make this program work for 

the needy communities it was created to help. As more and more accounts of waste 

and abuse surface, we simply cannot neglect our duty to the next generation in 

favor of the next election. 

I want to thank all the witnesses for being with us here today. I look forward 

to hearing your testimony.

Senator COBURN. I want to personally thank all of our witnesses 

for being here and the efforts that you put into your testimony. I 

welcome my two companions on the panel, and I will go on the 

order of first here, first to speak. Senator Coleman, you are recognized. 

6

OPENING STATEMENT OF SENATOR COLEMAN 

Senator COLEMAN. Thank you very much, Mr. Chairman. Let me 

first start by applauding your passion and your focus to deal with 

fraud and to try to ensure transparency and accountability in government programs. In your time in the Senate, you have been a 

true champion. As a former prosecutor, and as the Chairman of the 

Permanent Subcommittee on Investigations, I think if we totaled it 

up, we would identify about $11 billion in fraud and mismanagement that we have been in the process of correcting, and by the 

way, even for government, that is a lot of money. 

I share a similar passion, and I also am appreciative of what you 

stated that the goal here is not to eliminate CDBG. I think we all 

agree on that. But a couple of observations, and I have a fuller 

statement I will enter into the record. No program is sacrosanct. 

Clearly, spending government dollars, there needs to be accountability. There needs to be transparency. I would like to commend 

the efforts of the HUD Inspector General to fight CDBG waste, 

fraud, and abuse. There are bad characters who fail their communities through criminal acts, and we have to kind of root those out. 

There is no question about that. 

My concern is, and let me just be very blunt here: For those of 

us who have seen CDBG work, as a former mayor, and I have, and 

we have seen the incredible positive things that they do in communities, urban communities, rural communities, that without them, 

we would lose the opportunity for jobs. We would lose the opportunity for economic development. Our communities would be much 

worse off. This is an important program. And part of the concern 

as we look at the last year, where the Administration was, for instance, last year, which was essentially to combine CDBG, kind of 

lump it in with a number of programs, that raises, I think, a degree of cynicism out there as to what the intention is towards this 

program, which across the board, and I appreciate the Assistant 

Secretary being with us today; my colleagues have spoken loud and 

clear. I think we had 65-plus votes last year to oppose the Administration’s proposal to essentially eliminate CDBG at least in its 

present form by combining it with a multitude of other programs 

and cutting its funding. 

So you have a very clear will of the Congress here, which is not 

inconsistent with anything the Chairman has talked about. Those 

of us who are passionate about this program and who know its successes are also passionate about it working effectively. And so, the 

issue becomes how do you do that? How do you get there? One of 

the challenges that we have that if we make any changes, and I 

am very sensitive as a former mayor, is you have to look at the impact it has on communities and give people the opportunity to kind 

of weigh that and to measure it. And if we are going to change it, 

you have to understand that. 

I am a great believer in public-private partnership. I am a great 

believer in folks working together. We have had cooperation between OMB, HUD, CDBG stakeholders, and they have produced an 

increased, improved performance system. We have to get about implementing that, that improved performance system, and improved 

performance measures. But I have serious reservations with HUD’s 

reform plan. I have serious reservations with respect to the forVerDate 0ct 09 2002 10:31 Sep 07, 2007 Jkt 029510 PO 00000 Frm 00010 Fmt 6633 Sfmt 6601 C:\DOCS\29510.TXT SAFFAIRS PsN: PAT
7

mula change. I have serious reservations with respect to the minimum grant threshold proposals. I would hope that we would, as 

we go about doing the reform that we all agree needs to take place, 

we want a better system, that we work closely with the shareholders; that we work closely with those who are impacted, and we 

figure out the right way to do it. We just want to do it the right 

way here. 

[The prepared statement of Senator Coleman follows:]

PREPARED STATEMENT OF SENATOR COLEMAN 

Thank you Mr. Chairman. I appreciate the opportunity to be a part of this hearing on a most important program for communities all across this country. 

Mr. Chairman, as you know, I have been a strong champion of the Community 

Development Block Grant (CDBG) program. I come to this afternoon’s hearing to 

tout the vital importance of this program to our communities. CDBG is a community 

development program that helps State and local governments tackle their most serious community development challenges. CDBG and public-private partnerships like 

it are the cornerstone for the economic revitalization occurring across the country 

and in many of our urban and rural communities in recent years. 

But just as importantly I also come to this hearing as someone who believes any 

government program can improve its performance and accountability. 

I can personally attest that dollar for dollar there is no better program to help 

States and localities renew and rebuild their communities and economies than 

CDBG. For every one CDBG dollar, nearly three dollars are leveraged from the private sector. I know CDBG works because I was the mayor of St. Paul before coming 

to Washington. During my time as Mayor, over 18,000 jobs were created in St. Paul 

and CDBG was undoubtedly a part of that success. 

CDBG grows jobs; CDBG builds communities. Whenever I talk to the folks back 

in Minnesota—to city administrators, mayors, or county commissioners, they all tell 

me the same thing—that CDBG is the lifeblood of their communities. 

That said, Mr. Chairman, I share the President’s goal of reducing the deficit and 

exercising strong fiscal accountability in Washington. As a former mayor, I know 

something about the challenges of crafting fiscally responsible budgets. during my 

time as mayor I streamlined the city’s bureaucracy and helped to turn budget deficits into surpluses—all without raising taxes. 

In my view CDBG is a fiscally responsible program that exponentially produces 

more than it costs and it is a truly conservative initiative enabling local leaders to 

meet local needs. I believe that government is beholden to the people. That individuals with the help of their local representatives can plan their lives better than bureaucrats in some distant capital. CDBG is a very conservative idea that we should 

not have command and control programs run out of Washington. Rather, we should 

help communities meet those needs and priorities through one block grant. 

With that in mind, I have respectfully disagreed with the Administration’s decision to eliminate the program last year and to effectively starve the program of the 

funding necessary to undertake its mission. Mr. Chairman, I do find it strange that 

while the Administration is seeking to undermine this successful program it is at 

the same turning to this program to provide emergency reconstruction relief to the 

Gulf Coast in the amount of $16.7 billion or more than five and a half times more 

than its FY 2007 budget request. 

I see that the Assistant Secretary is with us today and I would just like to relate 

to her that the Administration needs to accept the political reality here that there 

is overwhelming bipartisan support for this program and that it is unnecessary to 

fight a battle that it will consistently lose. As I am fond of saying, it is better to 

measure twice before cutting once. 

That said, Mr. Chairman, I also come to this hearing as a strong advocate for reasonable and appropriate reform of CDBG. Despite its past success, I do believe there 

is room for improvement within CDBG. On that account, I applaud the efforts of 

HUD, OMB and CDBG friends on developing a new performance measurement system for CDBG. I believe this new performance system is a significant step towards 

improving the transparency and accountability of CDBG. 

I would also like to commend the efforts of the HUD inspector general’s efforts 

against CDBG waste, fraud, and abuse. Unfortunately there are some bad characters who are failing their communities through their criminal acts. As a former 

prosecutor and Chairman of the Permanent Subcommittee on Investigations, I take 

very seriously waste, fraud, and abuse of taxpayer’s dollars. I have worked with my 

8

1The letters submitted for the record by Senator Coleman appears in the Appendix on page 

100. 

colleagues on identifying $11 billion in waste, fraud, and abuse. We must be the 

best stewards of taxpayer dollars and to the end I appreciate the efforts of HUD’s 

IG. 

Now while I am supportive of efforts to improve the performance, I do have serious reservations with HUD’s reform plan with respect to the formula change and 

minimum grant threshold proposals. 

According to HUD projections, my State’s CDBG program would experience a 31 

percent reduction in funding, and entitlement cities such as Minneapolis and St. 

Paul would respectively experience a 54 and 44 percent reduction in CDBG funding 

in FY 2007. Furthermore, the proposal would no longer provide guaranteed funding 

for Bloomington, Eden Prairie, Moorhead and several other smaller communities. 

These reductions would have a devastating impact on the ability of the State and 

communities to effectively undertake vital community development programs. 

Mr. Chairman, I have heard from the State, many of the affected communities 

such as Coon Rapids, Duluth, and St. Paul, and the U.S. Conference of Mayors and 

many other organizations as to the importance of this program. I request these letters be made a part of the record. 

Now I do believe that it is important to have a serious discussion regarding the 

formula. However we should not act in haste given the significant impact such a 

change would have on communities across this country. It is my understanding that 

GAO is currently studying this issue and is expected to issue a report within the 

year. 

I would say that since CDBG is a public-private partnership, all stakeholders 

should be brought together to address difficult issues such as a formula change. We 

have seen how cooperation between OMB, HUD, and CDBG stakeholders produced 

an improved performance system. I am optimistic that under a similar model we 

can also appropriately address the difficult issue of formula change and other reform issues. 

Mr. Chairman, I thank you for holding this hearing and I look forward to hearing 

from the witnesses.

Senator COLEMAN. Mr. Chairman, I have a number of the affected communities in my State, 13 communities plus the State 

itself have submitted letters in support of the program, and we 

have a good conservative Governor in Minnesota, and his principal 

has submitted a letter in support of this program. So I would like 

to have those entered into the record.1

Senator COBURN. Without objection, so ordered. 

Senator COLEMAN. And then, again, I want to thank you for holding this hearing. I want to thank you for your diligence is pursing 

these matters, and I just hope that we can work together in a way 

that continues to build strong communities, that recognizes that if 

something works, that is a thing you have got to keep. We have 

got enough that does not work in the Federal Government. CDBG 

works. It is working well, and if we need to make it more transparent, more effective, we will do that, but let us do it the right 

way with the right folks at the table. 

Senator COBURN. Thank you, Senator Coleman. 

I would make note that the reform proposal that is before us 

today does not combine CDBG with other grant programs, and I 

would also make note that if you got CDBG where it was transparent and working well, what you might see is those grant programs would be folded into CDBG rather than the other way. 

Senator Akaka. 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you very much, Mr. Chairman, for holding this hearing, and I want to add my welcome to our witnesses 

9

as well. As you know, the Community Development Block Grant 

program provides essential Federal resources to help meet the specific needs of communities, and this is a special program, because 

it empowers communities in determining their priorities. 

In Hawaii, our counties have recently used CDBG resources to 

help provide affordable housing, assist the homeless, expand day 

care facilities, provide meals to low-income families, strengthen our 

medical infrastructure by making physical improvements to our 

community health centers, and expand opportunities to help individuals with disabilities find employment. As a former director of 

the Hawaii Office of Economic Opportunity, I care deeply about the 

success of these programs. I did work in and work on it and did 

help people in Hawaii over the years. 

Today, we face a severe shortage of affordable housing in Hawaii. 

In addition, increased construction costs have made building 

houses, apartments, community health centers, and other structures much more costly. Without Federal support, these programs 

will no longer be possible, as construction costs continue to rise. 

With CDBG facing cuts, we should be advocating for additional resources to provide our communities to meet their unique needs instead of having a formula fight to divide whatever scarce resources 

we have. I will continue to work to protect my home State of Hawaii and the CDBG program. 

We need to give our communities more resources to meet their 

needs, not less. As our counties struggle to meet the increased costs 

of providing housing, ensure that low and moderate income individuals have access to quality health care, and help expand access to 

economic opportunities, the Federal Government has an obligation 

to support these programs. Instead of misconceived tax cuts that 

benefit a small number of wealthy taxpayers, we must find the resources necessary to help our local communities find the solutions 

to their problems. 

It has been mentioned by the Chairman that there are problems 

and in some cases that reflect mismanagement. These, we need to 

take care of, but there are these communities that really need the 

help, and CDBG can help to do it. 

Thank you very much, Mr. Chairman. 

Senator COBURN. Thank you, Senator Akaka. I appreciate you 

being here. 

I am going to recognize our first two witnesses and introduce 

them. Your full testimony will be made a part of the record, and 

I have read your full testimony. I have spent a great deal of time 

looking at this program, and I recognize its value. Pamela 

Patenaude became Assistant Secretary for Community Planning 

and Development at the Department of Housing and Urban Development. Prior to this appointment, she served as HUD’s Assistant 

Deputy Secretary for Field Policy and Management, and before 

coming to HUD, she served as State Director and Deputy Chief of 

Staff for U.S. Senator Bob Smith. 

Kenneth Donohue is the Inspector General of Housing and 

Urban Development. Before serving at HUD, he had a distinguished 21-year career with the U.S. Secret Service as a Special 

Agent, culminating with the Assistant Director assigned to the 

CIA’s Counterterrorism Unit. 

10

1The prepared statement of Ms. Patenaude appears in the Appendix on page 39. 

Ms. Patenaude, we will recognize you now, and as you finish, we 

will then recognize Mr. Donohue. 

TESTIMONY OF HON. PAMELA H. PATENAUDE,1 ASSISTANT 

SECRETARY, COMMUNITY PLANNING AND DEVELOPMENT, 

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, 

ACCOMPANIED BY TODD RICHARDSON. 

Ms. PATENAUDE. Thank you, Mr. Chairman. Good afternoon, Senator Coburn, Senator Akaka, and Senator Coleman. I am pleased 

to be here today on behalf of Secretary Jackson to share the Administration’s proposal on the CDBG reform. The President’s fiscal 

year 2007 budget retains and consolidates the CDBG program at 

HUD. We have proposed the reform because the program’s intended impact to the Nation’s neediest communities has decreased 

over time. Quite simply, the current formula that allocates billions 

of dollars is no longer fair. 

Over the past three decades, demographic and socioeconomic 

changes, development patterns, and other factors have created significant distortions in the distribution of CDBG funds. There has 

been a steady erosion in the ability of the formula to target funding 

to places with greatest needs. The CDBG formula has remained 

untouched since the 1970s. Reform is also necessary because HUD 

must be able to hold grantees accountable for performance and provide incentives to maximize the impact of these limited and valuable funds. 

To address these issues, the Administration proposes the CDBG 

Reform Act of 2006. The three main elements of the Act are formula reform, the introduction of a competitive challenge grant, and 

enhanced performance measurement requirements. To explain further, Dr. Coburn, I call your attention to the irregular EKG on the 

chart to my right. [Laughter.] 

Senator COBURN. That patient is dead. [Laughter.] 

Ms. PATENAUDE. We have three charts here: Chart one, the solid 

red line on the chart indicates the community index needs. The jagged lines, the irregular lines, represent the more than 1,100 entitlement grantees, and each individual line represents the per capita grant for the entitlements. The Community Development Needs 

Index was developed as a measuring stick. 

On the left hand side of the chart, we have our low need grantees. On the right side, we have our high need grantees, and the 

numbers on our left are the actual per capita grant amounts. As 

you can see on the right, under the current formula, many high 

need grantees are receiving significantly smaller grants relative to 

the needs index. The biggest problem with the current formula is 

that grantees with similar needs are receiving widely different 

grant amounts, and that is where you see the swings. 

Chart two shows a more equitable distribution of the Community 

Development Block Grants under the new formula or the proposed 

formula. It demonstrates the ability of the new formula to more 

fairly target funds to communities with greatest needs. 

And finally, the lightly shaded area represents the current formula, and the dark vertical jagged lines represent the entitlement 

11

1The prepared statement of Mr. Donohue appears in the Appendix on page 44. 

grantees under the proposed formula. As you can see, there is significantly better targeting to communities with the greatest need. 

Grantees with similar need profiles will receive a more equitable 

amount per capita, and most importantly, the proposed formula 

will ensure more funding to the most needy communities. 

The second element of the CDBG Reform Act is the introduction 

of a $200 million competitive challenge grant. This fund would give 

communities the opportunity to compete for additional funding to 

carry out economic development and revitalization for distressed 

neighborhoods. In order to be considered for the challenge grant, 

distressed entitlement communities are required to have both a 

strategy and a track record of concentrating investment in distressed neighborhoods. Communities are selected based on objective criteria, including the extent to which they target assistance 

to distressed neighborhoods. HUD will award the challenge grants 

to communities that achieve the greatest results in their neighborhood revitalization strategies. 

And finally, the third element of CDBG reform strengthens the 

performance measurement requirements to improve the effectiveness and the viability of the program. HUD is currently implementing this new framework that clearly establishes measurable 

goals. The CDBG Reform Act of 2006 reaffirms the national objectives of the program and preserves local flexibility. By revising the 

formula, adding a challenge fund, and implementing performance 

measurement frameworks, we will improve the effectiveness of the 

program. 

Thank you, Mr. Chairman, for this opportunity to present the 

Administration’s proposal. 

Senator COBURN. Madam Secretary, thank you very much. Mr. 

Donohue. 

TESTIMONY OF HON. KENNETH M. DONOHUE,1 INSPECTOR 

GENERAL, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 

Mr. DONOHUE. Senator Coburn, Senator Coleman, and Senator 

Akaka, thank you for inviting me to testify today on this important 

topic. Through our audits and investigative efforts, the OIG hopes 

to strengthen HUD programs such as CDBG grants into a more 

targeted, unified program that sets accountability standards in exchange for the flexible use of the funds. The CDBG program provides annual grants to 1,180 general units of local governments 

and States, and results reflect each community’s ideas of a good 

use for the money that will, at least in the design, result in the 

elimination of slum and blight and foster economic development. 

Some community projects, however, do not always match the intent of their paper submission. We continue year after year to identify the same problems in our audit investigative efforts for the 

program and CPD activities in general. HUD OIG audit reports 

show that repeated problems fall into the following six categories: 

The improper use of funds; the lack of capacity; requirements are 

not followed, a lack of adequate management; national objectives 

not met; and a lack of monitoring and reviews. 

12

Over the past 21⁄2 years, we have issued over 35 audit reports. We have among other things identified $100 million in questionable costs and funds that could be put to a better use. We have indicted 159 individuals, pursued administrative actions against 143 

individuals, and made over $120 million in recoveries. 

An example of the lack of policy or adequate management is a 

community association in Kansas City, Missouri, that squandered 

CDBG funds to include company picnics, Christmas tree lighting 

ceremonies, luncheons, gifts, and bonuses. You see by the first 

chart, the poor recordkeeping, and that was one example of the office recordkeeping. 

An example of the entity now following HUD requirements is a 

nonprofit corporation in San Juan, Puerto Rico, which could not 

demonstrate that activities met at least one of the three block 

grant national objectives: That it directly benefits low and moderate income persons, that it aid in the elimination and prevention 

of slums or blight, and that it met other community needs that 

have a particular urgency. 

In another review, the Department repeatedly warned Utica, 

New York, that construction of a boat marina and ski chalet were 

not eligible activities. The city incurred $903,000 in ineligible costs 

and $214,000 in questionable costs for the marina. The city is still 

trying to establish that $255,000 of the ski chalet was an eligible 

activity; as you see in the right, a picture of the ski chalet. 

In reference to the lack of monitoring reviews, we found that 

CPD has management controls to minimize the risks that grantees 

and some grantees lacking capacity receive funding; however, 

unverified assumptions, incomplete and outdated guides, and limited ongoing monitoring undermine these controls. I have seen the 

success of active monitoring efforts with monitors used by the 

Lower Manhattan Development Corporation in preventing waste 

and fraud in post-September 11 rebuilding activities, and I have 

testified previously to this effective concept for use in disaster relief 

efforts in the Gulf States. 

Our investigative activities show there are five major fraudulent 

types of schemes affecting the program: False claims, soliciting 

bribes and kickbacks, procurement and contracting, theft or embezzlement, and public corruption. The City of Springfield, Massachusetts, was especially hard hit by the public corruption. In the past 

several years, a number of officials, including the public housing 

authority director and the directors of at least two CDBG-funded 

nonprofits or public agencies have been indicted and/or convicted of 

crimes that run the gamut, including conspiracy to defraud the 

United States, obstruction of justice, extortion, false statements, 

perjury, criminal contempt, and witness tampering. 

We endorse efforts to improve performance and accountability 

within the CDBG program and support some of the proposed 

changes by the Assistant Secretary. For example, I believe it is a 

worthy endeavor to give policy makers the opportunity to weigh 

new proposals to more fairly distribute the funds to address inequities that have arisen as demographics have changed. This said, I 

must say that we are concerned that what appears to be language 

designed to insert objective performance criteria into grant language by the Administration will be undermined by the implemenVerDate 0ct 09 2002 10:31 Sep 07, 2007 Jkt 029510 PO 00000 Frm 00016 Fmt 6633 Sfmt 6601 C:\DOCS\29510.TXT SAFFAIRS PsN: PAT
13

tation of vague criteria and a failure to improve deficient enforcement tools. 

These criteria may not be adaptable to quantitative measurement. CPD has not always established a consistent history in performance monitoring, specifically between its headquarters staff 

and field sites. I am concerned that this may set standards that are 

simply achievable rather than accountable. In some instances, CPD 

refused to pursue any type of sanctions against grantees on the 

ground that they should not be held responsible for the lack of success of the proposed activities as long as those activities are consistent with the statutory objective of the grant. In addition, if a 

grantee has not performed for 2 years, then, HUD should be required to intervene. Moreover, this legislation also appears to lack 

adequate enhancement to improve CPD enforcement tools under 42 

U.S.C. Section 5311. 

In regards to 42 U.S.C. Section 5311, we also believe it needs to 

be amended to eliminate the requirement for a formal hearing. In 

my view, without the authority to take prompt enforcement action, 

grantee noncompliance will not be deterred, and performance will 

not be encouraged. Alternatively, the CDBG program should retain 

the process of giving notice to the community of a grant and allow 

the community to comment on proposals. This check and balance 

and transparency appears to have been deleted in the proposed 

amendment, 42 U.S.C. Section 5304 (e). 

That concludes my testimony. I thank the Subcommittee for 

holding this important hearing. I look forward to answering any 

questions you may have. 

Senator COBURN. Thank you, Mr. Donohue. 

I want to welcome my co-chairman, Senator Carper from Delaware. I know he has a lot of experience with this program. We have 

already established that this is not a hearing about eliminating 

CDBG block grants, and we did that from the outset. And if you 

would care to say something, Ms. Patenaude, you are welcome to. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. First, let me say that I am delighted to hear 

that. The second thing I want to say is welcome to our witnesses. 

I apologize for having missed all of your testimony and part of 

yours, Mr. Douglas. 

Senator Coburn and I were part of a discussion that went well 

into the night last night trying to figure out what we can do to rein 

in our very large Federal budget deficits, and I think in the end, 

we have to look at everything and figure out what is working well 

and what is not, and programs I support as much as CDBG, we 

need to look at these programs, too, and figure out what we can 

do better. And so, we approach it with that spirit. 

I have a statement for the record, and I just look forward to the 

opportunity to question our witnesses and to maybe hear from 

some others. Thank you. 

Senator COBURN. Thank you. 

Madam Secretary, can you give me some examples of wealthy 

communities receiving larger CDBG grants than those given to 

poorer communities with much higher needs? 

14

Ms. PATENAUDE. Yes, I can. Thank you, Mr. Chairman. As a native New Englander, I think a very obvious example is Newton, 

Massachusetts, and Lawrence, Massachusetts, which is a declining 

community, an old mill town. Newton, Massachusetts is a wealthy 

community, a suburb of Boston, and under the proposed formula, 

it would be corrected, and we would restore equity. 

Senator COBURN. Do you think the resistance to restoring equity 

is that there are going to be some losers in terms of total dollars 

to communities? Is that the resistance that you are hearing as you 

talk about your reform plans? 

Ms. PATENAUDE. The most difficult part of the CDBG reform proposal is that some communities with high needs will lose, but it is 

relative to the needs index, and until 2 days ago, we had not received any formal feedback from our stakeholders, but we are in receipt of that now. 

Senator COBURN. So if a community, based on your minimum 

grant criteria, did not have enough to get the minimum grant, 

what happens to that money that they did not get? Where does it 

go? 

Ms. PATENAUDE. As you know, we have proposed a minimum 

threshold, which is a percentage of the appropriation, so that we 

will not have entitlement communities coming in and out of the 

program and that based on 2006 appropriations is approximately 

$500,000. So communities that do not meet the minimum threshold 

will be eligible to participate either through the State program or 

join an urban county. The demographics is not going to be a onefor-one, but the money should be redistributed based on that population and the poverty of the entitlement community. 

Senator COBURN. But the State does not really lose the money. 

Ms. PATENAUDE. No, I do not believe they do. 

Senator COBURN. The State still gets the money; the money just 

gets redirected in a priority that the State then makes a decision; 

is that correct? 

Ms. PATENAUDE. That is correct, Mr. Chairman. 

Senator COBURN. So even though you have a very wealthy community, and they fall out of this direct block grant does not mean 

they are not going to get money, correct? Because if the State decides to take that money through their State allocation, the State 

could very well still give it to them. 

Ms. PATENAUDE. That is correct. 

Senator COBURN. OK; when my staff attempted to obtain grantee-level spending data, it became evident that there is no consistent data collection process. Some cities have their reports online, while others have them only in paper format. Some even had 

them in the form that what we saw from Mr. Donohue, which is 

not in any format at all. Each city had a different process for sharing information. Furthermore, the data was not collected in a central location at your headquarters but rather stored all around the 

country. Most of the time, it was not computerized, even though it 

may have been computerized originally. 

Why does HUD not have a consistent reporting requirement for 

the grants today? 

Ms. PATENAUDE. Senator, I believe we do. All grantees are required to enter data into the IDIS system, and that system is curVerDate 0ct 09 2002 10:31 Sep 07, 2007 Jkt 029510 PO 00000 Frm 00018 Fmt 6633 Sfmt 6601 C:\DOCS\29510.TXT SAFFAIRS PsN: PAT
15

rently going through a reengineering to make it more user-friendly. 

We are moving to a web-based platform. But all grantees are required, with the new performance measurement framework that 

we are currently implementing, and we are training all of our 

grantees this summer in 10 locations throughout the country, we 

will obviously be requiring grantees to enter additional data under 

the performance measurement framework. 

Senator COBURN. What about Mr. Donohue’s idea that the language that you all have floated before the Congress is that you may 

intercede when there are vague criteria, lax enforcement, or problems versus should or shall? Why did you choose the option of 

could? Why should you not intercede? Why should you not intervene if somebody is failing? And why should the language not be 

that you have to intercede? 

Ms. PATENAUDE. The proposed legislation does give the Secretary 

the authority to take——

Senator COBURN. But it does not say they have to. 

Ms. PATENAUDE. It does say he may, but I do believe that Secretary Jackson was instrumental in the development of this legislation, and I believe that we interpret that the Secretary will take 

action when appropriate. 

Senator COBURN. Well, I certainly do not read it that way. I read 

it that it is an out. You do not have to enforce it if you do not want 

to. And I think it should be if you are going to have that type of 

program, you certainly ought to have that. 

Mr. Donohue, are there outstanding recommendations for increased accountability that your office has made to HUD which 

could be immediately enacted by Congress, by action from Congress, that would result in improvements in both the fraud, the lax 

enforcement, the vague criteria, and other things? Have you all 

made recommendations that we could act on? Rather than a reform, could we do something that would help us get more bang for 

the buck 

Mr. DONOHUE. Senator, we submit proposed legislation to the 

Hill annually, and two of the issues that we have spoken to is the 

ones that Madam Secretary has spoken about. One is the formal 

hearing requirement. I would submit to you that the Secretary 

should, as you indicated, should have the right to weigh in on programs that are ineffective and misspent funds and whatever. And 

I think that as the request indicated that if there were going to be 

hearings required and an appeal, I think that could take place, and 

there is ample room to go back and address those matters that 

might come back up. 

The other matter is the national objectives. The way it is designed right now is the applicant applies for a national objective, 

and then, what we found in some cases were they either did not 

meet that objective, or at the time of our audit or thereof, the objectives were reapplied. One of the other objectives was reflected. And 

we feel as though that if these objectives are part of the application 

process that at least the grantee should go back and submit a 

change at some appropriate time for HUD’s approval to go forward 

on the applied grant that they have now changed to. 

Senator COBURN. Senator Carper. 

16

Senator CARPER. Thanks, Mr. Chairman. I hate to mispronounce 

the names of our witnesses, and I pronounce your last name 

Donohue. 

Mr. DONOHUE. That is right, sir. 

Senator CARPER. I have no idea how to pronounce your last 

name. Would you just say it for me? Is it Patenaude? 

Ms. PATENAUDE. Patenaude. 

Senator CARPER. OK; good. I missed your testimony, as I said 

earlier. And would you just take the a minute and just give me my 

take-aways? If we remember nothing else from what you have had 

to say today, what are the couple of things that you would have 

us remember? 

Ms. PATENAUDE. The three elements of the CDBG reform: The 

proposed formula revision, the introduction of a competitive challenge grant, and the performance measurement requirements. 

Senator CARPER. OK; take a few more seconds and maybe another minute and talk about the three elements. 

Ms. PATENAUDE. Under the proposed formula revision, we believe 

it would restore equity. The current formula, as you can see from 

the chart, if we could put Chart One back up, that demonstrates 

the lack of targeting under the proposed formula. 

Senator CARPER. And how does it do so? 

Ms. PATENAUDE. The solid red line is a community needs index 

that was developed as a measuring stick. The light or the pink 

vertical jagged lines represent each entitlement community, more 

than 1,100 communities are laid out on this chart. 

Senator CARPER. Somewhere on that continuum, one of those 

spikes, probably right along the solid line, is Delaware? 

Ms. PATENAUDE. Todd, can you point out Delaware? [Laughter.] 

Senator CARPER. That is OK, Todd. I think she was kidding. 

Ms. PATENAUDE. Well, we could. It is in the 30—right there. 

Senator CARPER. Above average? 

Mr. RICHARDSON. It is above the line. 

Senator CARPER. That is pretty impressive. [Laughter.] 

Senator CARPER. OK; what else would you have me know about 

what you had to say? 

Ms. PATENAUDE. That HUD needs the ability to hold grantees accountable with this new performance measurement framework and 

also that the performance measurement framework was not developed in a vacuum. It was a 2-year process working with stakeholders and the Office of Management and Budget, and it was very 

much a consensus document. And because the program has such 

flexibility, it was obviously a very difficult framework to come up 

with. 

Senator CARPER. Does the new formula take into account the cost 

of housing and services in the local areas? 

Ms. PATENAUDE. Under the proposed formula, we have a fiscal 

capacity adjustment, and I believe that the fiscal capacity adjustment——

Senator CARPER. When we say fiscal capacity adjustment, can 

you just kind of translate that for me? 

Ms. PATENAUDE. I am going to attempt to. 

17

Senator CARPER. And you are welcome to bring somebody up to 

the desk who can translate it for me as well, just in layman’s language. 

Ms. PATENAUDE. That is the most complicated part of the formula, but we have the variables that play into the formula. And 

at the end, a fiscal capacity adjustment is applied so that communities with high per capita incomes we believe would have high 

cost of services, there is an adjustment made but no more than 25 

percent based on the per capita income. 

Senator CARPER. OK; I will have Senator Coburn explain it further to me later. [Laughter.] 

Senator COBURN. Does that mean there is a minimal penalty for 

the lower needs but yet higher income communities? 

Ms. PATENAUDE. Can you clarify what you mean by penalty? 

Senator COBURN. Well, the adjustment, it is limited to 25 percent, right? 

Ms. PATENAUDE. Todd, do you want to address that, please? 

Senator CARPER. And you may want to identify yourself, sir. 

Mr. RICHARDSON. My name is Todd Richardson. I am an analyst 

at HUD. 

The per capita adjustment essentially says that if you are a community whose per capita incomes are higher than the per capita incomes of the metro area, your grant is adjusted downwards, and if 

you are a community where your per capita incomes are lower than 

the metro area, your grant is adjusted upward. So if you are a particularly poor community—think about Camden, New Jersey, in 

the Philadelphia metro area—your grant, there is a base grant that 

is provided, and that grant gets adjusted upward, because your average per capita incomes are lower than the metro area. 

Whereas, if you were a wealthy suburb, for example, your grant 

would be reduced to reflect having higher per capita incomes relative to the metro area. 

Senator CARPER. My first reaction to that is that seems to make 

sense. What do you all think? 

Ms. PATENAUDE. Todd is the author of the formula study, so I 

think he would agree. [Laughter.] 

Senator CARPER. All right. Todd, who is your boss? [Laughter.] 

Ms. PATENAUDE. It is actually another Assistant Secretary. I am 

not his boss. 

Senator CARPER. Just checking. [Laughter.] 

Senator CARPER. Sort of a follow-up, because I want to make 

sure I got this right. So somebody in Delaware at the median income has to pay more relative to housing costs both to buy and to 

rent a home from someone in Oklahoma, for example? Delaware 

loses money, and Oklahoma gains? I am told by my staff that this 

gap could be even more pronounced in places like Hawaii, with 

very high housing costs. And I would just ask if that is true, and 

also, might it make more sense to consider the purchasing power 

of the grants, not just the absolute amounts of the grants themselves? 

Ms. PATENAUDE. I am looking at the numbers for Delaware and 

Oklahoma, and again, it is relative to the community needs index, 

so if a community was receiving a higher per capita grant under 

18

the current formula, they will lose under the proposed formula so 

that it is closer to the community needs index. 

Senator CARPER. Does the formula take into account other things 

that a State may try to do to address poverty, such as what we 

spend on education, on our schools, what we are spending on 

health care, Medicaid, and other things or spending on housing 

itself? And if so, how? 

Ms. PATENAUDE. Well, the formula is based on persons in poverty, excluding college students, female-headed households with 

children under 18, housing overcrowding, and housing 50 years or 

older occupied by a poverty household. And then, the fiscal capacity 

adjustment is applied. So I do not believe that the items that you 

listed would come into plan in the proposed formula. Perhaps they 

are recognized in the 17 variables that are used for the community 

needs index. 

Senator CARPER. OK; thanks very much. Thanks, Mr. Chairman. 

Senator COBURN. Senator Coleman. 

Senator COLEMAN. Thank you, Mr. Chairman. 

First, I have to ask you a question, Mr. Donohue: Are you aware 

of a GAO review of CDBG? 

Mr. DONOHUE. I believe I am, sir, and I looked over it a bit as 

well. 

Senator COLEMAN. And I read somewhere that there was an 

OMB PART evaluation. Do you know what that is? 

Mr. DONOHUE. I do know what that is. 

Senator COLEMAN. And are you familiar with that regarding 

CDBG? 

Mr. DONOHUE. I cannot recall, sir. 

Senator COLEMAN. Can you just tell me briefly what an OMB 

PART evaluation is? 

Mr. DONOHUE. I am going to have to bring one of my staff up 

to explain that if I can, sir. 

Senator COBURN. Can I answer that? 

Senator COLEMAN. Yes. 

Senator COBURN. It is a Program Assessment Rating Tool, and 

this program has a 17 score out of 100, 100 being running the program grant based on performance measurements—27 out of 100; I 

am sorry, not 17—which means this, in terms of measurement 

tools, we do not have measurement there. And that is part of the 

management, trying to get measurement to see if we are effective 

in how we are spending money. 

Senator COLEMAN. Assistant Secretary Patenaude; is that——

Ms. PATENAUDE. That is correct. 

Senator COLEMAN. When you are talking about the change in the 

program, one of the changes is in the amount of funding for CDBG 

under the Administration’s request. Was CDBG appropriated $3.7 

billion last year? 

Ms. PATENAUDE. This fiscal year, 2006, that is correct. 

Senator COLEMAN. And that the Reform Act of 2006 posits a $200 million set aside, so if you take that, so we put the challenge 

grants aside, then, you have $2.7 billion. You talk about one of the 

concerns, you are starting out with a 25 percent cut. 

Ms. PATENAUDE. Well, they are separate issues. The President’s 

fiscal year 2007 budget does propose a cut for the CDBG program. 

19

1The prepared statement of the National Association of Housing and Redevelopment Officials 

appears in the Appendix on page 120. 

Senator COLEMAN. Is it about 25 percent? Are the numbers I 

have given you——

Ms. PATENAUDE. They are correct, sir. 

Senator COLEMAN. And so, and I am one who measure twice, cut 

once. [Laughter.] 

Measure before you do your cuts. And I think that is part of the 

issue here. I think the work being done by the Inspector General 

in terms of performance measures, formal hearings, giving the Secretary a chance to be involved when there are problems, I do not 

think anyone is going to argue with that. So when you kind of look 

at the hallmarks of this, it is not just fairness in the program. One 

of the hallmarks of it is a substantial cut in the program before we 

even begin. That raises a level of concern. 

I think there is also a level of concern, at least I read it. I have 

had a chance to review the National Association of Housing and 

Redevelopment Officials’ document which is now part of the 

record.1 I cannot tell you whether it is gospel or not, but they give 

figures here in terms of the impact of these cuts that are pretty 

substantial. And in fact, every grantee in Minnesota, which sees its 

allocation decline by at least 18 percent; all three of Delaware’s entitlement communities would lose at least one-third of their funding. 

Senator COBURN. Do we lose any money? 

Senator COLEMAN. Norman, Oklahoma would experience a 35 

percent reduction in CDBG grant. One of the concerns here, and 

I say this as a former mayor, is these kind of ups and downs. You 

cannot plan a city’s future, you cannot do long-term development 

unless you have a process by which you look at these and you 

measure the impact. That is why the GAO has a study. And the 

GAO report, as I understand it, is working with stakeholders. I 

think it may be a good model. Did you work with the Conference 

of Mayors when you proposed the Reform Act of 2006? 

Ms. PATENAUDE. The performance measurement framework that 

was——

Senator COLEMAN. No, the funding of the other formula. You are 

talking about getting fairness. Let me say that one of my concerns 

is that mayors who deal with this thing—I have to tell you, they 

have not been knocking on my door about lack of fairness. And so, 

you have the folks who are most directly impacted, who are your 

stakeholders, and I think the GAO is working with them; I think 

it is a good model, and I am just not sure whether HUD has had 

that same kind of consultation, discussion. Can you help me on 

that? 

Ms. PATENAUDE. Sure; I do not believe that HUD consulted with 

the stakeholders on the actual funding proposed in the President’s 

budget, but we did have consultations over a 2-year process developing the performance measurement framework. 

Senator COLEMAN. One of the other issues, and it goes to this 

question of why there are concerns. I think there are concerns 

about the real impact. One of the great sins in Congress is the law 

of unintended consequences. We say we are going to do something, 

20

and then, we get an impact and then try correcting it afterwards. 

Again, I am just relating to this report. They cite your testimony 

before the Subcommittee on Housing and Community Opportunity 

held on the House side, Financial Services Committee, Housing 

and Community Opportunity, in which you indicated you gave an 

example of two cities, Santa Monica and Santa Maria. And this is 

your quote: ‘‘Under the current formula, they receive about $1.3 

million. In terms of need, they are very different. Santa Monica, 

large per capita income; Santa Maria, low per capita income. Under 

the formula the Administration will propose, Santa Maria’s grant 

would increase to $1.6 million, while Santa Monica’s would fall to 

$750,000.’’ That sounds reasonable. 

Their analysis says Santa Monica received a CDBG formula grant in the amount of $1.382 million for fiscal year 2006; Santa 

Maria received $1.307 million. If Congress were to adopt the Administration’s proposal exactly as written, Santa Monica’s grant 

would in fact fall to $558,000, while Santa Maria’s grant would fall 

to $1.180 million. 

So in other words, what you have there is a 60 percent cut for 

Santa Monica, and you have a 10 percent cut for Santa Maria. 

Ms. PATENAUDE. I believe they are using two fiscal years, 

though. They are not using level appropriations for 2006. They are 

comparing 2006 to proposed 2007. 

Senator COLEMAN. Right; so they are looking at your 2007 budget. And your 2007 budget, this community that has great need, 

they are going to also get a cut. And I have trouble with that. And 

so, I think we agree on the goals, but we are looking at communities that have need that are going to be cut, and I have trouble 

explaining that. 

And so, I think as we go forward in this, let’s bring in the mayors. Let’s bring in the folks who are supposedly impacted by the 

lack of fairness and other local officials and have them talk about 

this and see if we get where the Chairman and the Ranking Member want us to go, because that is where I want to go: Transparency and accountability. But I do not want to see cuts if something is working. And that is my trouble: If it is working, if it is 

actually growing jobs and doing the housing things and growing 

our communities, cut somewhere else where it is not working. 

But this program and this proposal cuts, using your own example, you are going to see a cut in a program that you are touting 

perhaps as something that has the need. And I just find that problematic. 

Ms. PATENAUDE. Senator, if I may, we do have an increase in 

other areas in CPD. There was an increase in the proposed 2007 

budget for the homeless and for the Home Program. 

Senator COLEMAN. I am just saying I know this program, and I 

have seen the impact in communities across Minnesota, rural as 

well as urban, and my deep concern is—again, I spend my time 

fighting fraud and abuse. But if I have something that is working, 

and my mayor is telling me they are getting something out of this, 

I want to be real careful about what we cut. 

Senator COBURN. I want us to go back and clarify. The Administration proposes a budget, and that does not mean we are going to 

do it. And you know we are not going to probably do it on CDBG 

21

grants. So I want us to clarify what the reform proposal is outside 

of what that is. Because if we get caught up in what the Administration is proposing in terms of their total budget, which they get 

the right to recommend; we get the right to legislate what it will 

be. If we get caught up in that, we take our eye off the ball. The 

problem is you cannot measure whether this program is effective. 

You can on an anecdotal basis, and that is the whole point of trying 

to get some measurement data to see if what we are accomplishing 

is worth the value of what we are putting into it. And I think that 

is important. 

The other thing, the point I would make is one of the reasons 

that the Administration comes by and cuts this is because of what 

the IG says in terms of fraud, what the GAO says, what the PART 

analysis says, says that it is not working. There is no measurement 

goal. So the whole purpose for thinking about reform—and I will 

tell you right now, I do not think this reform proposal as it is written is probably not going to go anywhere in Congress, but that does 

not mean that we do not need to have some reform in terms of 

measurements and refinements and how do we measure outcomes, 

and how do our grandchildren, since we are borrowing this money 

from them, get the best value for their dollar? 

And so, I would hope that what we would do from the basis of 

this hearing is establish a way to—how do we measure fairness? 

How do we measure the effectiveness of the program? There is no 

measurement. That is one of the reasons we are having this hearing is we need to find out. We have less than 9 years before this 

program is really going to get crunched. I mean, everybody can 

deny that is all they want, but we are on a path to where discretionary spending is going to get squeezed. And the way to protect 

CDBG is to put in a system that shows how effective it is so it will 

be able to compete for the dollars that should be there to help these 

very communities. 

And so, I hope we will keep our focus on measuring—maybe we 

do not need to reform it at all until we have measured it. Maybe 

what our reform needs is let us put in good measurement criteria, 

performance criteria, reporting criteria, and sunshine criteria so we 

can really find out what we are doing. 

Senator Carper, your turn. 

Senator CARPER. Mr. Donohue, I think you may have mentioned 

before I came in something about a project in Utica, New York, 

that may have involved a chalet. And would you just go back and 

just tell me again what you were talking about? 

Mr. DONOHUE. Well, sir, this was a program funded in Utica. It 

was, I believe, a CDBG program, and the money turned up based 

on our audit. We did, as was mentioned, about 1,180 grants that 

were awarded in the past year, we have done 35 audits over the 

past 21⁄2 years, which is very few, actually. One is this Utica. What 

we found in the case was this was a sampling and a photograph, 

we found the ski chalet and a marina being built and completed 

on that same money. That was not its intended purpose as designed and did not fit into the application in any way whatsoever. 

Senator CARPER. The project did not marry up with the application? 

Mr. DONOHUE. That is correct, sir. 

22

Senator CARPER. And is there no way under current laws or regulation that could have been caught? 

Mr. DONOHUE. Well, that is the whole question, sir, is that what 

happens is when we go back and take a look at these, and we have 

just got into this about 21⁄2 years ago on the CPD program, the 

ones we have seen is—really, the concern that I have is at the subgrantee level, and their application process, what they are asking 

to do, it seems to change at times. 

And when we look at these audits, we find more times than not 

that it is used for criminal activity often the case. We have had a 

host of indictments. But we also find that there is a lack of capacity in many of these audits as well. 

Senator CARPER. I am sorry; lack of——

Mr. DONOHUE. Lack of capacity; lack of being able to deliver on 

what their intended purpose was, particularly on the subgrants. 

Senator CARPER. So, it seems to me that you have a jurisdiction; 

they applied for a grant for a particular purpose. Somebody, presumably HUD, reviews that grant application and decides whether 

or not it has merit and comes up with a dollar value. Later on, once 

the project is underway or completed, who has responsibility to 

make sure that what is being done with the money is what was initially proposed? 

Mr. DONOHUE. Well, that really gets to the heart of my point 

today, sir, is that what I believe, one of the things I found, a classic 

example was the Lower Manhattan Development Corporation. We 

went in there and took a proactive approach to the expenditures of 

about $2.5 billion, and one of the things we came away with was 

the need and the success of monitors. I truly believe that if I leave 

anything with you today, it is the idea that I believe that in the 

disbursement of these funds, the administrative funds or some of 

these funds of those grants need to include a monitor or monitors 

that will literally look at these programs, development utilization 

of the funds, and report back to us in this case to let us know it 

is being effectively applied. 

It has been a success, I believe, in the Lower Manhattan Development Corporation, and it is one of the things I am trying to 

spearhead in the Gulf States region. 

Senator CARPER. Ms. Patenaude, would you respond to that recommendation, please? 

Ms. PATENAUDE. Thank you, Senator Carper. Under the current 

statute, if an activity is eligible, the grantee can change the activity 

as long as it still meets one of the three national objectives. And 

if I could comment on the ski chalet, the creation of jobs that benefit low and moderate income, that is eligible under the statute, so 

we would have to respectfully disagree that we do not have the authority to tell a grantee they cannot do something if it is an eligible 

activity. 

Senator CARPER. Whose job is it to catch it if it is not? 

Ms. PATENAUDE. We have very effective monitoring in place. We 

monitor more than one-third of the 1,100-plus grantees a year. We 

do front-end risk assessments to identify activities that could be 

high-risk, and we have more than 600 employees located in 45 field 

offices that conduct these. And if I may comment on the application, grantees are required to submit a consolidated plan. And 

23

then, we look at the reports at the end of the year to compare 

them, and there is a requirement to hold a public hearing. 

Senator CARPER. Mr. Donohue, would you respond to that? 

Mr. DONOHUE. Yes, I would, sir. I have looked at my audit report. It states the fact that the grantee in a case with regard to 

the ski chalet used the CDBG funds to help finance the renovation 

of a ski chalet in spite of a warning by HUD that the activity may 

not have been a national objective of the CDBG program. And that 

was not its intended purpose, and yet, it went ahead and built it 

anyway. 

Senator CARPER. Last word, Ms. Patenaude. 

Ms. PATENAUDE. I think we have a wonderful partnership, and 

we cooperate fully with the IG. We have, since Labor Day, been 

working with the IG on the appropriations. Now, there are the two 

supplementals for the Gulf Coast. We do follow up. We take their 

audits very seriously, and oftentimes, there is some disagreement 

at the end whether or not an activity was eligible. 

Senator CARPER. All right. My colleagues, Mr. Chairman and 

Senator Coleman, sounds like we have a difference of opinion here. 

Senator COBURN. We have a vote on. What we are going to do 

is give you an opportunity, if you like. 

Senator COLEMAN. I just wanted to put a couple of things in the 

record. I know the Chairman raised a concern about Section 108. 

I went back; I used Section 108. I thought it was a pretty good program, and I am going to have to check the record on this, but your 

figure was pretty substantial before. At least in Minnesota, I do not 

have any default rate. I have got to go back and find any; so there 

is a huge——

Senator COBURN. That is why you are from Minnesota. [Laughter.] 

Senator COLEMAN. That is why I do not want to kill the program. 

Senator COBURN. Again, there is no intention to kill programs 

here. And that is the problem. And there is a real structural problem. You get accused that you want to eliminate a program if you 

want to make it efficient. And that is a political bushwhack that 

belies what we need to do for our kids. The fact is if we spend $10 

million on something we should not be spending, that is $10 million that did not go to help somebody accomplish something better 

and give jobs. But it is also lost opportunity to do it right, get it 

right, and make it meet one of the three goals. 

Senator COLEMAN. Just for the record, the two other things, because I have a copy of the OMB program evaluation. And on the 

question has the program taken meaningful steps to correct its 

strategic planning deficiencies? The answer is yes. And they are 

saying that HUD is actually in the process of correcting these. Are 

all funds, Federal and partners, obligated in a timely manner and 

spent for the intended purpose? And the answer to that is yes. 

There are challenges in this. And we are in fundamental agreement on the need to fix this program. My big concern, Assistant 

Secretary, is the process. My big concern is moving forward with 

a significant budget cut in a program that universally among cities 

and throughout this country, urban and rural, I think it is making 

a big difference. It is growing jobs; which, by the way, HUD says 

that in its own—I think I have the 2004 highlight accomplishments 

24

of fiscal year 2004 CDBG, ‘‘this is a HUD document, approximately 

95 percent of the funds expended by entitlement grantees and 96 

percent of State CDBG funds were expended for activities that 

principally benefited low and moderate income persons; overall, a 

full half of persons directly benefitted from CDBG assisted activities, minorities, including African-American, Hispanic, Asian-Americans, or American Indians.’’

This is a program that is making a difference. And so, I think 

we have a shared interest. I am going to work with the Chairman 

to make sure that we put in place, make sure there are strong performance measures; make sure that we can root out the specific instances of abuse. But I am also going to urge the agency to work 

with your shareholders. If you are going to talk about redistributing funds that are going to have a significant impacts on the 

communities of all of us, and make it very difficult to plan longterm to meet the economic and housing needs in those communities, you have got to work with them. 

And I do not think that has been done to date, and I think that 

is the need that changed. And then, we do that and work with the 

GAO, then, I think we can agree, Mr. Chairman, on some changes 

that need to be made. 

Senator COBURN. One comment I would make is there is no way 

HUD can make that statement, because they do not have the performance criteria or measurements as stated by PART, as stated 

by IG, as stated by GAO. So there is no way that they know that, 

for sure, that 95 percent of the funds were spent in the way that 

they were intended, and that is the whole purpose of the hearing 

is let us put the measurement—and much like you said, measure 

twice, cut once—and let us put the measurement functions in in 

terms of reforming so that we can know what we are getting and 

then move from there. 

It is important to know, I think we need to reform the program. 

In declining dollars, we are going to have to redirect some of the 

funds to the poorer communities. We have to have some change in 

the funding formula if, in fact, we are going to accomplish the purposes of this program, which means the wealthier communities 

may have to take a little bit less so that those who are most dependent can have more, and we can really create more opportunity. 

I am going to ask, if we could, if both of you could have someone 

stick around for our second panel; we will empanel the second 

group when we come back from the vote, and we will recess until 

that time. Thank you. 

[Recess.] 

Senator COBURN. The hearing will reconvene. 

For the record, I want to make sure we clarify that the information submitted for the record by Senator Coleman on the cuts for 

the cities reflected, the cuts in the Administration’s requests for 

total CDBG and they were not necessarily reflective of the cuts 

from the reform bill before us. 

Eileen Norcross is a Research Fellow at the Mercatus Center at 

George Mason University, where she works on the Government Accountability Project. Before coming to the Mercatus Center, she 

was a fellow in journalism at the Competitive Enterprise Institute, 

25

1The prepared statement of Ms. Norcross appears in the Appendix on page 53. 

a consultant with KPMG, and a research analyst with Thompson 

Financial Securities Data. 

Cardell Cooper is the Executive Director of the National Community Development Association. He is the former mayor of East Orange, New Jersey, and served as the Assistant Secretary for Community Planning and Development at the Department of Housing 

and Urban Development in the Clinton Administration. 

Ms. Norcross, you are recognized. Your complete testimony has 

been made a part of the record. 

TESTIMONY OF EILEEN NORCROSS, M.A.,1 SENIOR RESEARCH 

FELLOW FOR THE GOVERNMENT ACCOUNTABILITY 

PROJECT, THE MERCATUS CENTER AT GEORGE MASON UNIVERSITY 

Ms. NORCROSS. Thank you, Senator Coburn, Senator Carper, and 

Members of the Subcommittee for inviting me to testify on the 

Community Development Block Grant case for reform. I am currently engaged in a study to determine whether Federal economic 

development programs are able to meet their intended goals. Our 

research does not reflect an official opinion of George Mason University. 

According to its statute, CDBG was created to increase the viability of urban communities by addressing housing needs and creating healthy living environments by expanding economic opportunity, primarily for low and moderate income persons. The activities grantees engage in must principally benefit low and moderate 

income people, eliminate or prevent slums, and remedy urgent 

threats to the health or safety of the community. 

CDBG faces several barriers to assessing its impact. First, it is 

difficult to obtain data. For now, only aggregate data is available 

on HUD’s website. Grantee-level data is available from local HUD 

offices. We tried to get this information for 71 cities and could obtain most reports online or through the mail, though 15 cities did 

not return our calls, and several cities could not mail or upload the 

report due to the size of the document exceeding 1,000 to 2,000 

pages in some cases. 

Providing grantee-level data in a more easily accessible format 

allows citizens to better understand how the program operates in 

their community as well as throughout the Nation. It permits enhanced monitoring of how funds are used, and it improves oversight, and it also permits researchers to analyze the program’s effects. 

Second, outcome measures will better enable data collection. 

HUD has developed and is beginning to use more measures, though 

many are still output-oriented, and must also show that granteereported outputs serve the program’s goals. 

I applaud HUD’s efforts but caution that a simple count of jobs 

or businesses assisted is not enough. We need to know if the creation of jobs or businesses led to economic revitalization that would 

not have occurred in the absence of CDBG dollars in order to truly 

assess the program’s effectiveness. 

26

And third, determining the effects of CDBG rests not only on the 

quality and consistency of the data but also on the difficulty of establishing what would have happened in the absence of funding. 

We can use econometric studies or case studies. These should rely 

on good economic theory. If done correctly, empirical studies that 

involve field work, interviews, and surveys can be valuable and 

complement statistical inference. Case studies are not anecdotes. 

The hazard with anecdotes is that the experience of one community 

is offered as evidence for what all communities are accomplishing 

nationwide. Depending on their quality, they may not tell the full 

story. 

The following is not a case study but an example of how CDBG 

dollars are spent in Madison, Wisconsin, highlighting the need to 

dig deeper behind the current measures in order to get a picture 

of its effects. In 2005, Madison, Wisconsin spent over $1.4 million 

of its CDBG funds on economic development, claiming the creation 

of 99 jobs, including jobs for two coffeehouses, a bakery, restaurant, 

several biotech firms, and information technology companies. 

Madison, Wisconsin is a college town. Fifty-nine percent of its 

students are classified as living in poverty, and the current formula 

does not exclude them. Eight percent of Madison’s residents are actually in poverty. According to the CDBG statute, these loans in 

Madison are legitimate uses of CDBG funds, and these 99 jobs 

went towards HUD’s 2005 total of 91,237 jobs created. 

The deeper question is was CDBG created to create coffeehouse 

jobs for college students in relatively wealthy communities? Did the 

biotech firms create jobs for truly low to moderate income people 

as envisioned by the statute’s intent or for graduate students? Did 

taxpayers subsidize private businesses to do something they would 

have done anyway? 

Are these negative outcomes? It depends on whether you consider this an effective use of CDBG dollars. Could these funds have 

been used to help with disaster relief in the Gulf, an area in urgent 

need of revitalization? 

Madison, Wisconsin, was legitimately awarded funds according to 

the current formula to legitimately fund economic development activities to serve the objective of job creation. Congress must determine if this is the outcome they are seeking to achieve with this 

program. 

CDBG was created with a particular outcome in mind: Alleviate 

slums and blight to revitalize communities and generate economic 

opportunity for residents. However, it has drifted from its original 

mission. I believe Congress should change the formula recommended by HUD, improve transparency, and make grantee-level 

data publicly available; require the measures designed by HUD; 

and consider what aims Congress is trying to accomplish when it 

created this program to determine if current activities are serving 

that aim. 

Further empirical testing of this program is needed to know its 

effects. This is only possible with better data collection. The measures offered by HUD will facilitate this. HUD is to be commended 

for identifying structural and management deficiencies in the 

CDBG program. Better targeting of funds, data collection, and empirical evaluation of this program will help HUD and the public 

27

1The prepared statement of Mr. Cooper appears in the Appendix on page 79. 

identify what activities are best serving the communities this program was designed to help. Thank you. 

Senator COBURN. Thank you, Ms. Norcross. 

Mr. Cooper, welcome. We are glad you are here. You obviously 

have a great deal of experience with this, and we look forward to 

your testimony. 

TESTIMONY OF CARDELL COOPER,1 EXECUTIVE DIRECTOR, 

NATIONAL COMMUNITY DEVELOPMENT ASSOCIATION 

Mr. COOPER. Thank you very much, Chairman Coburn. It is an 

honor to be before the Subcommittee today, to Senator Coleman; I 

always affectionately called him mayor. We served together as colleagues during my tenure as mayor. It is good to see you, and certainly, Senator Carper hopefully will be back for the rest of the 

hearing. 

As the Executive Director of the National Community Development Association, I am pleased to appear before you today. I have 

served previously, as you know, as an Assistant Secretary of Community Planning and Development at U.S. Department of Housing 

and Urban Development. And it is sort of interesting: You are seeing the person who has to do it now and the person who was there. 

I have spent time in various hearings, and we tend to have a need 

to change things and fix things, and clearly, when they are broken, 

they ought to be fixed. There is no question. I commend the Assistant Secretary for her presentation. However, I do not necessarily 

agree that the answer is that CDBG is in need of reform. 

I believe, Senator, that you made a very cogent point, as other 

Members did. There is no one who can disagree with that accountability chart, and agreeing with the accountability chart, if there 

was enforcement and monitoring is done correctly, we can achieve 

that goal. Back in January 2001, the GAO submitted a report to 

the Congress specifically about HUD being on the high-risk list as 

an agency within the Federal Government. At the same time, during that report, it submitted that CPD programs, in particular 

CDBG, had made significant strides and improvements that warranted it to be taken off of the high-risk list. 

That was done with a combination of partners, both mayors and 

practitioners as well as the Department, to come up with a better 

tool of how we measure and monitor those programs. I commend 

the U.S. Department of Housing and Urban Development for working on performance measures. That was a time where partnership 

did exist. The Conference of Mayors, the NCDA, a number of other 

national organizations were all involved in having a candid discussion about how do you best measure a program for the 30 years 

that it has been in existence, has proven results, but at the same 

time, the data collection to support that and back that up needed 

to be improved? And that is what the performance measures under 

their proposal would do. 

That does not require reform. That was a partnership. It is being 

implemented. They are starting, as we speak, to train the various 

communities how to access that system, how to use it, how to report the very data, Mr. Chairman, that you talked about. And I beVerDate 0ct 09 2002 10:31 Sep 07, 2007 Jkt 029510 PO 00000 Frm 00031 Fmt 6633 Sfmt 6601 C:\DOCS\29510.TXT SAFFAIRS PsN: PAT
28

lieve that if we give that an opportunity to work, then, some of the 

underlying questions automatically get answered. 

Let me for the record also state I heard the IG talk about the 

anecdotal stories of people who have done some things that quite 

frankly, if they do not meet the smell test and are against the laws 

of this land, there is enforcement capability in that Department, 

and I know Senator Coleman as a former prosecutor would agree. 

When people violate the law, and it is proven that they have violated the law, there are measures that can be taken to deal with 

that. 

Unfortunately, when we use anecdotal stories on the negative 

side, it gives the general appearance of waste, fraud, and abuse. 

The issue of waste, fraud, and abuse for any community, if it is 

monitored correctly on the front end and enforced on the back end, 

I think you could limit that problem, and over the years, that has 

been the tool that has been used and constructively. I also want to 

add that as we talk about CDBG and its flexibility, over the 30 

years of being a practitioner as a mayor and one who had to govern 

in a very difficult community under deep financial constraints and 

as a former Assistant Secretary who has traveled around the country in both urban and rural areas, large cities and small cities, for 

the majority of people who are involved in this program, they are 

doing the job, and they are doing it well. 

And what is being produced is lifting people who are low-income 

and moderate income people to a level where they can sustain 

themselves. We are talking about families where two parents are 

working. CDBG was not designed as a poverty program only, and 

I think sometimes, we get caught up in that side of it. And the reality is that we have lifted people up and moved them to a point 

where they are contributing to society. They are paying taxes. The 

neighborhoods are improving. And I think that it is important for 

us as we make these efforts to enforce the accountability issue that 

we not lose sight that we do not need to reinvent the wheel and 

reform something that works. We need to enforce that which is 

working, and we need to hold those who are accountable for the 

things that they do that are not within the construct of what 

CDBG was designed for. 

We also recognize that CDBG is flexible because the answer to 

Hurricane Katrina was let’s use CDBG because of its flexibility on 

the grounds to help those who were devastated by this major disaster in our Nation. In New York City, when September 11 happened, CDBG was one of the answers. The point I want to make, 

though, in New York City, because it was labeled a disaster, as 

many of these other issues are, the Department has the authority 

to grant waivers, and when they grant those waivers, it changes 

how those regulations are employed, and I think they need to be 

very honest about when that occurs, whether a waiver was granted 

that allowed them to do an activity that may be out of the general 

scope under those rules. 

I do believe that if we talk about winners and losers, the American people lose when we make disinvestment. We have finally gotten to a point where you have the business community and bankers 

and developers who are willing to step deep into the pool because 

of the Federal investment in neighborhoods and communities 

29

around this country. They have been our partners; they continue 

to be our partners; the money is spent wisely; it helps produce jobs; 

it changes the face of neighborhoods. 

The losers in this deal, quite frankly, are all of America. We look 

at the various States. I will give you an example: In Alaska, 16 

percent decrease; Ohio, 10 percent; Utah, 13 percent; Michigan, 6 

percent; Hawaii, 19 percent; Minnesota, 26 percent; New Jersey, 11 

percent. I could go down the list. And where we are making what 

appears to be increases, at the same time, we are reducing the 

budget on the other side; it is going to have some devastating consequences. 

So I ask you and implore you on behalf of the people who are 

the practitioners to ask HUD, in fact, if we work together so well 

on the performance measures, and we all agree that is a proper 

way to go, then, they need to sit down and talk to the practitioners 

and those who are responsible on the ground and come up with a 

workable way to deal with this formula issue. And the answer is 

not in this reform package. There are so many things that are 

going on right now. The GAO has a study. Congressman Turner 

has a study. The Department is rolling out reform. The Department rolled out reform and had not had one conversation, as my 

dear friend Assistant Secretary Patenaude said, and not that that 

makes them bad people; it is just that if that dialogue had taken 

place, we might be here talking about how we get to the accountability pieces without going through a reform track but simply enforcing and holding people accountable for their responsibility, because after all, the Federal dollars belong to the American people, 

and we should be good stewards of the public trust. 

Let me conclude by saying that our partners stand ready, as we 

always have, to work closely with the Department, but there are 

many mixed signals that are being sent. And I appreciate the fact 

this Subcommittee has this hearing today, but then, again we do 

not always have to reinvent something in order to correct it. I do 

believe that the rules and the tools are in the Department to correct the very things that the Secretary and the Department are 

trying to cure. 

Having sat in that seat, I know it is easier said than done. But 

the independent remarks of GAO over the last few years of where 

we are headed make sense, and the GAO, to their credit, called in 

all of the stakeholders most recently, all of the stakeholders, spent 

an entire morning with them——

Senator COBURN. Could you summarize, if you would? 

Mr. COOPER. I will summarize by saying that if we want to get 

to the heart of the issue and to use the public funds in the way 

they were designed, to continue the most flexible program in the 

Federal portfolio that was created out of a Republican Administration and enacted by a Democratic Congress in a bipartisan spirit, 

delivering services to America and improving these communities, 

then, CDBG reform is not the answer. It is a matter of working together collectively on the accountability issues. 

Thank you, Mr. Chairman. 

Senator COBURN. I am a little bit confused because of your written statement that says, ‘‘holding grantees accountable for performVerDate 0ct 09 2002 10:31 Sep 07, 2007 Jkt 029510 PO 00000 Frm 00033 Fmt 6633 Sfmt 6601 C:\DOCS\29510.TXT SAFFAIRS PsN: PAT
30

ance is redundant, and you oppose the accountability provisions in 

the reform package.’’

Mr. COOPER. No, I said it is redundant in the sense that the Secretary needs a special provision to enforce that which they have already enacted. That is the point. The performance measures were 

part of the Department of Housing and Urban Development and 

the list of organizations who helped develop those standards. And 

they are now training people to put those standards into place. To 

say that now, in addition to that, there should be another review 

by the Secretary, give the standards that they have put into place 

that OMB agrees with an opportunity to work. 

Senator COBURN. One of the things, and it is important, and I 

tried to define this with Senator Coleman a little bit, and the last 

part of your testimony, not just the most recent but before, confused a declining request for CDBG funds with reform. My goal 

would be that we could measure performance and that measurement—accountability without teeth, accountability without the 

ability to change things is not accountability. If, in fact, you have 

to report, but there is no problem if you are not reporting accurately or the fact that, which is my greatest worry, is there is great 

flexibility in this program, and it does accomplish a great deal of 

good. 

In a declining budget, and everybody here in this room; you can 

kid yourself, but 10 years from now, there is not going to be a $5.2 

billion CDBG supplemental, and there is not going to be a $3.7 billion CDBG appropriation, because the money is not going to be 

there. So the way to assure that it is more likely that the money 

is going to be there is to design a measurement and management 

assessment program that assures that this money is well spent. 

And I do not think anybody would disagree with that, and I do not 

think your testimony disagrees with that. 

Mr. COOPER. My testimony does not disagree with that at all. 

Senator COBURN. You do not oppose outcome measures. 

Mr. COOPER. I am a firm believer in outcome measures. I think 

during my tenure as the Assistant Secretary, of all reports submitted by GAO and OMB that yes, indeed, we do support that. 

What I am saying is that you have the ability within the Department, as they have stated, and we support, we were part of developing these outcome measures. So, yes, we are on the same page. 

Senator COBURN. And you would not oppose online data collection for the materials associated with the CDBG block grants so 

that what is out there is easily accessible not only by HUD but by 

the members of the community that know where their tax dollars 

are going? 

Mr. COOPER. What I am saying to you is that they have to have 

a system to do that. The IDIS system has been that four-letter 

word that has plagued everyone on the Hill and in the Department 

for so many years as a corrective system and the data that is entered into the system; the data which is public information ought 

to be able to be made available. 

Senator COBURN. OK. 

Mr. COOPER. The question that I think the Assistant Secretary, 

if she was here, would agree, any sensitive data as it relates to individual people and that kind of thing ought not be there. 

31

Senator COBURN. We are not talking about that. I want to get 

a yes or no answer. Your group and you do not oppose online data 

collection for CDBG grants, protecting privacy information——

Mr. COOPER. As long as it protects privacy information. That information is public information. 

Senator COBURN. You would support that. 

Mr. COOPER. That is public information. 

Senator COBURN. And you all would support that. 

Mr. COOPER. I have no objections to it. 

Senator COBURN. Would you also, and Ms. Norcross, comment, if 

you have outcome measures, and there is no consequences to the 

outcome measures, what good are the outcome measures theoretically? 

Mr. COOPER. It is not a theoretical question. It is a very honest 

question. The Department has within its ability that when people 

are not meeting the standards that are set by the Department, 

there are certain actions the Department can take. The question 

that I would have is why not on the enforcement end through the 

Department? If the issue is capacity, and I heard that argument, 

then, we have in the past, you work with those communities to give 

them assistance in capacity-building. 

Senator COBURN. OK; but the Department can. My question is 

should the Department? And that is the difference between the authority they have now versus what I would like to see is I would 

like to mandate that the Department help those people be compliant. I would like to mandate if their outcome is not good that there 

is a consequence to it. 

Mr. COOPER. I always believed, at least in my tenure, that was 

the case, and that is what they did. I do not know why they believe 

they cannot do it. 

Senator COBURN. They did not testify they could not do it. That 

was not their testimony. What I am saying is something very different, and that is having oversight to where they have to so that 

we can hold the Department accountable of doing the best management techniques. They can do it, and I agree. I am saying they 

should do it. 

Mr. COOPER. I believe in many cases, they do, but perhaps they 

need to document for this Subcommittee where they have enforced 

those things, and I think you will find that for the most part, they 

can. And if you are suggesting that language is placed there that 

says they shall or they must, I would think that should apply to 

every Department in this country. 

Senator COBURN. Don’t worry. I am getting to all of them. 

Mr. COOPER. I figured you would be. 

Senator COBURN. This Subcommittee is getting to all of them. 

Under the current formula, East Orange, New Jersey, is a very 

distressed community with high needs and currently receives about 

$25 per capita. Bloomfield, New Jersey, on the other hand, according to HUD’s need index, is not as needy. I am not saying they are 

not needy; I am just saying they are not as needy, about half as 

needy as East Orange by their index. The City of Bloomfield receives the same amount per capita as East Orange. 

As the former mayor, do you really think that meets the intent 

of what was intended when this legislation was originally put into 

32

effect, that somebody who has less need gets the same amount of 

money as somebody who has more need? 

Mr. COOPER. It all depends on how you identify need, Senator. 

Bloomfield, New Jersey is located directly next to East Orange, 

New Jersey. I represented both East Orange and Bloomfield in the 

county legislature. There are pockets of poverty in very wealthy 

communities, and those pockets of poverty that are in those communities are just as entitled, the low and moderate income people 

in those communities, to benefit from this program as any other 

community. 

Senator COBURN. So therefore, the assumption would then be 

that every community ought to get the exact same amount per capita. 

Mr. COOPER. No, that is not what I am saying, Senator. If we 

want to get to the heart of the issue, I think if appropriate funding 

was made, we could eliminate this debate because——

Senator COBURN. That is not going to happen. 

Mr. COOPER. Whether it happens or not is not my call. I can only 

express to you how I see it. If we address the accountability issues, 

get the data that is required, that everyone wants to see and let 

the performance measures work once they implement them, and to 

say that—you mentioned that in 10 years, the program will not be 

here unless people can defend it, well, let’s do the first part right 

first. 

Senator COBURN. That is not the question I am asking. The question I am asking you: Is it fair or is it appropriate, let me ask it 

that way, is it appropriate; take fairness out that if we have a community that gets $45 per capita, that has twice the per capita income as the community over here that gets $22 and has one-half 

the per capita income, is that an appropriate response for the 

needs in terms of CDBG block grants? 

Mr. COOPER. If you talk about low and moderate income people. 

Senator COBURN. I am talking about low and moderate——

Mr. COOPER. No, because——

Senator COBURN. So you are saying that it is an appropriate response? 

Mr. COOPER. They are targeting down, and we are turning the 

issue to having CDBG no longer as a low and moderate income program but a program that will address the poverty in the Nation. 

It was not created as a poverty program, and perhaps we need to 

look at what we are doing to tackle poverty overall in the Nation. 

But if that is the case, low and moderate income is the standard 

in which CDBG——

Senator COBURN. So the answer is either yes, it is appropriate, 

or no, it is appropriate. 

Mr. COOPER. I believe that it is the will of the people in those 

communities to provide for the people under current law, and that 

is the law, so I do not support the HUD Reform Act as defined——

Senator COBURN. I am not talking about the Reform Act. I am 

just asking you is it appropriate? Do you believe it is appropriate? 

Mr. COOPER. Senator, I have answered your question. For the 

record, I believe that people at the local community under the rules 

of this program have the right to deal with low and moderate inVerDate 0ct 09 2002 10:31 Sep 07, 2007 Jkt 029510 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 C:\DOCS\29510.TXT SAFFAIRS PsN: PAT
33

come people in their community who are in need. That is the answer, and that is what the program has done for 30 years. 

Senator COBURN. So it is appropriate, and we will let the record 

show that. 

Mr. COOPER. In your words. 

Senator COBURN. Senator Coleman. 

Senator COLEMAN. Thank you, Mr. Chairman. First, a general 

statement. I think we are in agreement about 90 percent of things 

here. I think we are in agreement about transparency; I think we 

are in agreement about performance standards. I think we are in 

agreement about outcome measures. I think we are in agreement 

about accountability. It is how you get there. 

My frustration has been how we have gotten there. As the Secretary said, there has not been a conversation with the stakeholders. 

Mr. COOPER. No, there has not. 

Senator COLEMAN. GAO is doing it, but there has not been that. 

And as I look at the bottom line, not philosophical discussions 

about East Orange versus somewhere else. If you took the change 

in this Department that was recommended, Anoka County, Minnesota, 34 percent reduction; Dakota County, 41 percent; Duluth, 

57 percent; Hennepin County, 45 percent; Minneapolis, 54 percent; 

Webster County, 42 percent, in all of these, there are some communities that are strong, and there are some that are very weak. 

Senator COBURN. Senator Coleman, is that relationship to the 

formula? 

Senator COLEMAN. To the formula. 

Senator COBURN. Or the reduction plus the formula? 

Senator COLEMAN. It is proposed 2007 appropriation based on 

the formula that is there. 

Senator COBURN. But that is based on a decreased funding. I will 

make that real clear in the record. 

Senator COLEMAN. A decrease overall of 25 percent; in many 

cases, almost double that. And these are communities, every one of 

them have—and I do not want to debate; just to say that you look 

at that, well, we have agreement on these things. How do we get 

there? 

And the other issue I want to talk about, I think there is agreement, and Ms. Norcross, I was going over your recommendations, 

which actually, as I kind of went through them, I am for changing 

the formula, but I want to have a discussion about how you get 

there. I do not want to impose upon communities massive reductions, 54 percent, when they have not been part of the conversation. I think it is the arrogance of Washington. I think it is the arrogance of the Federal Government to come in and to tell communities this is what we are doing without having them at the table. 

I agree with your recommendations, but I have one, Ms. Norcross, I want to ask you about: Improved transparency; require performance measures; we can reconsider what the mission is, take a 

look at that; the question about infrastructure, I do want to stress 

that. I have a community, Brewster, Minnesota; got a half million 

dollar CDBG grant for infrastructure. As a result of that grant, 

they were able to accommodate a soybean oil processing plant 

34

about, I do not know, about $30 million worth of new investment 

and jobs in a small rural community. 

Ms. Norcross, the one thing I have to ask about your testimony 

is, at least in your testimony, you talk about San Jose State economist Benjamin Powell summarizes the misguided idea behind the 

government directly financing job creation. What I want to understand, does that mean 7(a) loans, small business loans? Is that directly financing job creation? 

Ms. NORCROSS. That is correct; if you are subsidizing job creation 

in that way, by handing a loan to business rather than the——

Senator COLEMAN. So you would think that is misguided. 

Ms. NORCROSS. I think that first, you would want to identify 

there is a market failure. 

Senator COLEMAN. We may have a disagreement. 

Ms. NORCROSS. I respect that. 

Senator COLEMAN. And again, I think there are a number of 

things government does, and government does not grow jobs. The 

private sector grows jobs. We shape an environment. We do infrastructure; that is pretty clear. But there are other things we do to 

support, I think, the entrepreneurs. And you look at some companies, I mean, they start in a garage because they got a 7(a) loan 

or something like that. They are producing a lot. So we may just 

have a philosophical disagreement about that. 

I hope where we go from here, Mr. Chairman, is that we take 

a look at these things upon which we agree and that we engage the 

communities that are impacted, that we make sure that we do not 

impose drastic cuts on folks without having them part of the conversation. And I want to work with the GAO, work with some others, and I think we can have a better program. But I do think it 

is one in which job creation is part of it, and that is where we disagree. 

Mr. Cooper. 

Mr. COOPER. Senator Coleman and Senator Coburn, perhaps 

some of the contentions that you see is because as part of a major 

reform without having had a meeting with the stakeholders and 

the providers, it leads to a bit of distrust, whether it is imaginary 

or not. There are those who believe that when the Department was 

scheduled to—and I know this meeting is not for that, but when 

it was scheduled to go to Commerce, there was almost a closing out 

of CDBG; then, the cuts. And people began to think that it is being 

bled to death quietly. And then, when you have this massive reform that is introduced without the dialogue without any partners 

involved, it does send very bad signals. 

Senator COBURN. That is an absolutely legitimate criticism. 

Mr. COOPER. And I think your point you made earlier to the Secretary that if, in fact, the kind of dialogue that has taken place, 

we might really be here getting to the accountability questions that 

you want to get to. Because I think in that kind of meeting with 

mayors who are practitioners and community activists and other 

people, they would absolutely agree that there are priorities here 

that need to be corrected. So again, just for the record, I just want 

to state that if in fact we are talking about accountability, let us 

wrestle with the accountability issue and come up with the kind of 

35

accountability that we all know is required, but at the same time, 

you cannot do that if your partner is not dialoguing at all. 

So you have some people who are feeling pretty blue about this 

these days, because for the last 3 years, there has been this consistent sort of slicing away, bleeding, if you will, of a program. 

Senator COLEMAN. And if I could say just one more thing for the 

record, Mr. Chairman, as I sit here and defend this program, I was 

a mayor for 8 years. I did not raise taxes in 8 years; cut my economic development agency at least by a third. And I was a conservative mayor. I merged, consolidated units of government. I was a 

conservative mayor, and those principles work. But as a conservative mayor, one of the things that I saw, and this was where we 

simply philosophically disagree: I think there are things that we 

do, infrastructure being part of it, some others that CDBG does, 

housing for first-time employees; you cannot grow jobs unless folks 

have a place to live that in the end made my community much 

stronger, much less reliant in the end. 

I tell people I may have Senator in front of my name. I still have 

mayor stitched in my underwear. You do not forget where you come 

from. And I think CDBG is a conservative program that allows—

and my concern is I think there is an arrogance in the way this 

proposal was laid out there, that the Federal Government telling 

people here is what we are going to do; major shift in a program 

without being part of the conversation. And I think that has to 

change. 

Senator COBURN. Thank you. First of all, Mr. Cooper, you have 

a legitimate complaint. 

Mr. COOPER. It is just an observation. 

Senator COBURN. No, it is a legitimate criticism. And the fact is 

that is what is wrong with the Federal Government. Just to clarify 

for the record, the SBA 7(a) program has never been measured effectively. How it is measured is how many dollars it has loaned, 

not how many jobs it has created. So we are trying to do that. We 

are trying to get how do you measure the effectiveness? Because 

the problem is with the 7(a) loan, we know that we have got $70 

billion on the hook for loans, but nobody has ever actually done the 

matrix to make the measurements is did those loans create those 

jobs? 

We ought to know whether or not that did that. So the whole 

purpose of this hearing is not to endorse or not endorse a reform 

movement. The purpose of this hearing is not to say we want 

CDBG to go away. The real purpose of this hearing is like in every 

other hearing is how do we put measurements on so we know how 

to make the best decisions with the limited dollars that are going 

to be coming forward? 

And I believe that Senator Coleman has hit it right, and I think 

everybody agrees: The question is what are the parameters that we 

measure? What are the teeth that we put into those so that if 

somebody is not working, not appropriately responding, that we 

can measure, can we send the money somewhere where it will? In 

other words, the whole goal, if this is a legitimate function of the 

Federal Government, and I believe it to be, if it is, how do we make 

it the best it can be, and how do we assume to move to that point? 

36

And I think Senator Coleman and I agree, and I think Senator 

Carper would agree, and we are looking forward and how do we 

put the type of parameters and measures on. I am not convinced 

that the performance measures that they have now have any teeth 

with them. And I also am not convinced that they create the proper 

expectation from the grantees to comply. What I would like to see 

is not create a burden on them but make it easy, make it streamlined and easy for them to do it and have a program that has some 

teeth. 

Because what happens is when you change expectations that you 

are going to be accountable in a program, people become accountable, because there is a consequence to it. If there is no consequence to it, and you are not accountable, then they will not be. 

And so, the goal is not to micromanage but is to set out some parameters and make sure that we get some—and I agree with you 

that once we get the measurements, then we can know what to do, 

and then we have to work with the agencies to do that. 

There are some good ideas in this program of reform. I am not 

saying there are not some. I think the idea, if we increased CDBG 

block grants $200 million so we could create this challenge, there 

are things you could have done in East Orange, New Jersey, where 

you were doing better, and you could have gotten some extra 

money for that to make it even better. So that idea is not necessarily a bad one. It is a bad one because you are taking it away 

from the shrinking pool. Would you agree with that? 

Mr. COOPER. Well, there were other incentives that we granted 

to communities who were doing well, and just for the record, and 

I think it is good work of the Senate as well as the House some 

years ago; remember the issue years ago was that people were not 

spending their money out at a certain rate. We could not figure out 

why, and we got together with all of the partners involved, and we 

did the analysis. We found out that there were certain communities 

who had phase one, two, and three of projects that, for example, 

in land acquisition, they purchased the land, so they got that part 

done, and they went to develop, and they found out they had environmental problems, and then they got a lawsuit. 

So those things are real problems that communities have, and it 

should not be viewed that we cannot fix those things. There is enforcement, and I agree with you: If you really think about this 

whole accountability issue, and I know you have, I do not think 

there is an argument anywhere against that. I would just like us 

to be able to get to those measurement tools so when OMB raises 

the question of how can we account for the number of jobs developed, and how do we know the impact of this, that we have a series 

of accountability tools to get there, and I just do believe that there 

are enough wheels on the wagon, quite frankly, right now to do 

that, and let us get that part fixed first, and then, we can determine where we go from there, because right now, we are sort of 

chasing budget fights and reforms and hearings——

Senator COBURN. We do not want to confuse the two. 

Mr. COOPER. Exactly, and I think the safest way not to do that, 

and you could attach, I believe that you can have the accountability 

discussion, but if you get into the reform discussion, particularly if 

you look at how the dollars are going to be generated in and out 

37

in any given community; politically, it may be a difficult job for the 

Congress and the Senate to deal with, but in reality, it is even a 

greater difficulty for mayors on the ground to deal with, because 

if you are losing money, and you still have people who are in need 

of services, and if you are gaining money, people go where the services are provided, Senator. And we have seen that. 

Senator COBURN. A couple of final questions for Ms. Norcross. 

Ms. Norcross, in your testimony, you make the important point 

that jobs do not create economic growth but rather the exact opposite: Economic growth creates jobs. Besides the number of jobs created, what performance measures do you think would best gauge 

whether or not the use of CDBG funds is stimulating economic development in communities? 

Ms. NORCROSS. I would like to see if unaided capital investment 

came into that community; what were the overall economic effects, 

the macroeconomic effects; what does employment look like; the 

number of people on public assistance. And I am glad that HUD 

is going down the road of establishing these outcome measures, 

jobs created, businesses assisted but want us to go further and 

show that these measures are having overall macroeconomic effects 

in a community, and I think that is the way they need to go. 

Senator COBURN. And you do not disfavor the Federal Government having a role in that. What you are saying is you ought to 

measure it to make sure the dollars go to the best place to get the 

greatest impact? 

Ms. NORCROSS. That is correct; I think there is disagreement 

among economists as to whether job creation should be a goal, but 

that is for Congress to decide. If that is to be a goal, then, let us 

try to tease out whether CDBG dollars are having larger economic 

effects. Are they leading to increased prosperity in that community? And that would be HUD’s role to take the grantee data that 

is being reported on jobs created and try to demonstrate if that is 

having a larger impact, economic impact, on that community. 

Senator COBURN. Are there ways a grantee could game a new 

performance measurement system and appear to be meeting goals 

when, in fact, they are not? 

Ms. NORCROSS. I do not know if I would use the word game. 

When I looked more closely at Madison, Wisconsin, what I saw was 

here, we have HUD reporting it created 91,000 jobs last year. I 

looked a little deeper at Madison, Wisconsin, and I inferred that 

these jobs were going to potentially college students in that town. 

Here is a case where, looking at the macro number, we get the impression that HUD is creating jobs for low to moderate income people. When you look a little more deeply behind the numbers, is that 

necessarily the case? 

So I think with a job creation figure, you want to be certain that 

you go a little deeper, make sure that these jobs are actually going 

to low to moderate income people as envisioned by the program’s 

intent. Are these temporary jobs? 

Senator COBURN. How do you differentiate a job created by a 

CDBG program versus a job created by somebody coming in at the 

same time with capital and then assessing, either rightly or wrongly, that came from the CDBG money? As an economist, can you 

have metrics or statistics where you can ferret that out? 

38

Ms. NORCROSS. I think it would be fairly difficult to establish the 

counterfactual, but I think there are ways around that, and certainly, that was one of my motivations in trying to get HUD data. 

So I think there are methods, econometrics you can use. 

Senator COBURN. I want to thank all our witnesses for being here 

today. We will be submitting questions to each of you that I would 

very much appreciate that you would answer, questions that I 

would like to ask but we do not have the time here today to do it. 

Mr. Cooper, thank you for your experience. Thank you for your 

service in the Clinton Administration and serving our country, and 

thank you for serving the people that you represent today. We appreciate it very much. 

Mr. COOPER. Thank you very much, Senator. 

[Whereupon, at 4:36 p.m., the Subcommittee adjourned.] 

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