State 

Community 

Development 

Block Grant 

Program

METHODS 

FOR 

IMPROVING 

TIMELY

PERFORMANCE

January 2004

U.S. Department of Housing and Urban Development

Roy A. Bernardi, Assistant Secretary for Community Planning and Development

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 1

CONTENTS

Overview of the Timeliness Issue 2

Method of Distribution 5

1. Review and streamline the funding process. 6

2. Establish a multistage application process. 7

3. Identify ways to start the application cycle at an 

earlier point in time. 8

4. Use float funding to improve timely expenditure of 

funds and provide interim financing to communities. 9

5. Fund large or lengthy projects in phases. 10

Contracting Issues 11

1. Lay the groundwork for timeliness by preparing 

contracts promptly, incorporating project deadlines, 

penalties, incentives, and reporting requirements in 

contracts with grantees. Enforce contracts fairly 

and consistently. 12

2. Specify all funding sources in the contract whenever 

multiple sources are used to complete a project. 14

3. Amend contracts when UGLGs have a surplus of 

unexpended funds, as soon as the surplus becomes 

apparent. 14

4. Develop specific documentation requirements and 

contract provisions for economic development activities. 15

Program Administration and Sanctions 18

1. Provide technical assistance to UGLGs to improve 

performance. 19

2. Implement State and UGLG staff performance 

requirements. 20

3. Implement enforcement mechanisms. 20

4. Manage program income. 21

5. Focus on Information Technology. 22

Conclusion 23
2 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E

Spending funds in a timely manner is increasingly 

important for Federal grant recipients. Faced with 

tighter budgets, Congress wants to ensure that appropriated Community Development Block Grant (CDBG) 

funds are serving citizens in local communities and fulfilling the national objectives of the program. The U.S. Department of Housing and Urban Development (HUD) must 

justify its annual budget request to Congress based on the 

need and urgency for additional resources. Timely use of 

funds is one of the criteria that may determine future funding levels for the CDBG program.

OVERVIEW 

OF THE 

TIMELINESS 

ISSUE
HUD wants to ensure that 

CDBG funds are used in a timely 

fashion. As part of that effort, the 

Department presented a technical assistance workshop for States 

in the spring of 2003 to illustrate 

techniques to improve the timely distribution and expenditure of 

State CDBG grant funds. (The term 

“State” refers to a grantee of HUD’s 

State CDBG program.) A product of 

the technical assistance workshop is 

this booklet providing States with a 

summary of the concepts discussed 

at the workshop.

When is a State untimely? 

States—unlike Entitlement communities—are not bound by regulation 

to a timely expenditure standard. Determining whether a State is timely 

requires HUD to examine a State’s 

timely distribution of funds. Section 

104(e)(2) of the Housing and Community Development Act of 1974, as 

amended, indicates that HUD shall 

determine “ . . . whether the State 

has distributed funds to units of general local government in a timely 

manner . . ..” (A unit of general local 

government (UGLG) is a grantee of 

a State.) The State CDBG program 

regulations at 24 CFR 570.494(b)(1) 

indicate that a State’s distribution of 

funds is timely if (1) all of the State’s 

annual grant—excluding State administration—has been obligated 

and announced to UGLGs within 

15 months of the State’s signing its 

grant agreement with HUD; and (2) 

recaptured funds and program income received by the State are expeditiously obligated and announced to 

UGLGs. “Obligated and announced” 

means that grants do not have to be 

under contract, but the State has to 

commit the funds publicly within 

the 15 months. States are further encouraged to obligate and announce 

95 percent of funds to UGLGs within 12 months.

Although there is no timely expenditure regulatory standard for 

States, they should realize that such 

a requirement is likely to be established in the future. Congress and 

oversight agencies increasingly judge 

CDBG and other 

programs by “the 

bottom line.” Appropriators look at 

funds allocated in 

prior years but not 

yet expended and 

ask why additional funds should 

be appropriated. 

HUD is concerned 

that without a serious strategy to 

reduce the level 

of prior year funds unexpended by 

grantees, the CDBG program may 

see its appropriations reduced in the 

future. One of the goals of the spring 

2003 technical assistance workshop 

was to provide States with management tools, including methods to increase the timely distribution and

expenditure of funds. 

To help States analyze their performance, HUD provides a monthly 

report to allow them to determine 

how quickly they are spending their 

funds and how they rank against 

other States. One indicator in the 

report—the “Ratio of Unexpended 

ALTHO UG H 

TH E R E I S 

NO TIM E LY 

EXPE N DITU R E 

R EG U L ATO RY 

STAN DAR D 

FO R STATES, 

TH EY SHO U L D 

R E ALIZE 

THAT SU CH A 

R EQ U I R E M E NT 

I S LI K E LY 

TO B E 

ESTAB LI SH E D 

I N TH E 

FUTU R E. 

CO NG R ESS AN D 

OVE R SIG HT 

AG E N CI ES 

I N CR E A SI NG LY 

JU DG E CDBG 

AN D OTH E R 

PROG R AM S BY 

“TH E BOTTO M 

LI N E.”

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 3
4 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E

Funds to Grant”—shows the number of years of funds that are unexpended in terms of the latest grant 

amount. States should pay careful 

attention to the trend of this ratio; 

is the ratio increasing over time 

(not favorable) or decreasing (favorable)? A ratio that increases from 

year to year because funds in the 

line of credit are increasing may be 

an indicator that projects are not on 

schedule. 

Another important indicator—

the “Ratio of Funds Expended in the 

Last 12 Months to 

Grant”—portrays a 

State’s drawdown 

rate in the last 12-

month period compared to the latest 

grant amount. If 

the ratio is less 

than 1.0, the State 

is spending less 

than 1 year’s worth 

of money per year 

and the “Ratio of 

Unexpended Funds 

to Grant” will eventually increase. 

If the ratio is greater than 1.0, the 

State is spending more than 1 year’s 

worth of money per year and the 

“Ratio of Unexpended Funds to 

Grant” will eventually decrease. 

Thus, a spending ratio of 1.0 or 

above will assure that excess funds 

do not accumulate in the State’s line 

of credit. States should focus on the 

trend of this ratio rather than a particular ratio each month. This ratio 

is best used to determine if a shortterm problem is occurring that will 

impact the “Ratio of Unexpected 

Funds to Grant.”

HUD uses the monthly report 

to keep States advised of their progress and of the progress of the other 

States, and the Department uses it to 

respond to requests for information 

from Congress, the U.S. Office of 

Management and Budget, and other 

interested parties. The aggregated 

report of all States’ spending rates is 

used to gauge the rate at which appropriated CDBG funds are reaching intended beneficiaries. 

HUD wants to prevent any 

State from losing funds if a regulatory timely expenditure standard 

is implemented. The remainder of 

this document is divided into three 

sections that provide specific information for States to consider for improving timely performance. These 

three sections are summarized by 

the conference breakout sections of 

the same name: Method of Distribution, Contracting Issues, and Program Administration and Sanctions. 

This document does not outline 

HUD’s recommendations or endorse 

any particular method for increasing timeliness but it does provide 

some methods States have used to 

improve timeliness in this area. 

STATES 

SHO U L D PAY 

CAR E FU L 

ATTE NTIO N TO 

TH E TR E N D O F 

THI S R ATIO ; 

I S TH E R ATIO 

I N CR E A SI NG 

OVER TIME (NOT 

FAVO R AB L E ) 

OR DECREASING 

( FAVO R AB L E )? 

A R ATIO THAT 

I N CR E A SES 

FRO M YE AR TO 

YE AR B ECAU SE 

FU N DS I N 

TH E LI N E O F 

CR E DIT AR E 

I N CR E A SI NG 

MAY B E AN 

I N DI CATO R 

THAT PROJECTS 

AR E NOT O N 

SCH E DU L E.
 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 5

States distribute CDBG funds to UGLGs to carry out 

housing and community development projects. Each 

State distributes the money according to its Method of Distribution (MOD), which is a description of what 

kinds of activities the State wants to fund and a process for 

soliciting funding applications from UGLGs. States have an 

important role in responding to community needs and priorities and the MOD is a reflection of how the State will respond to these items.

METHOD OF 

DISTRIBUTION
6 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 

 States should also simultaneously consider timely distribution 

of funding (by the State) and timely 

expenditure of funds (by UGLGs), 

which are closely interrelated and 

affect one another. Attention should 

be paid to timeliness considerations 

throughout all phases of the grant 

cycle. For this reason, program design issues need to be considered in 

tandem with local administrative 

capacity issues and the complexities typical of projects with multiple 

funding sources. The State can consider the entire program design process analogous to the completion of 

a marathon. The course is long and 

challenging, but if someone keeps a 

steady pace, continues making progress, and focuses on the finish line, 

it is much easier than trying to catch 

up and come from behind.

There are several methods that 

States may consider when reviewing 

or changing the MOD. States can:

 Review and streamline the 

funding process.

 Establish a multistage application process.

 Identify ways to start the application cycle at an earlier point in 

time.

 Use float funding to improve 

timely expenditure of funds and 

provide interim financing to communities.

 Fund large or lengthy projects 

in separate phases.

1. Review and streamline the 

funding process.

States sometimes discover that 

they have duplicative processes that 

make their programs more difficult 

to manage. Reviewing the internal 

processes and streamlining these, 

where appropriate, can lead to an 

improvement in the State’s timeliness. By “streamlining,” HUD 

means using any technique to make 

the funding process move along 

more efficiently. South Carolina, for 

example, reduced its application review time by 20 percent by eliminating 24 duplicative processes. 

Streamlining the process will make 

it more manageable for both the 

State and the applicant. 

There are several methods that States may consider 

when reviewing or changing the MOD. States can:

 Review and streamline the funding process.

 Establish a multistage application process.

 Identify ways to start the application cycle at an 

earlier point in time.

 Use float funding to improve timely 

expenditure of funds and provide interim financing to 

communities.

 Fund large or lengthy projects in separate 

phases.
 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 7

Some States have 

improved timeliness 

by establishing a 

multistage application 

award process. 

Using a multistage 

application process 

may help States 

award funds to 

UGLGs as soon as 

HUD makes them 

available to the 

State. 

Coordination with other agencies may help States streamline the 

funding process. This strategy may 

allow agencies to coordinate application deadlines, discuss grant issues 

arising from each project, and arrive 

at solutions. This also works well 

with agencies funding large projects 

that need multiple funding sources, 

and helps prioritize projects. An 

agency can discuss the importance 

of a project in an interagency meeting and determine if providing funding to a project earlier or later in the 

process makes more sense. Some 

States have been able to streamline 

their environmental review process 

by creating programmatic agreements with other funding agencies, 

allowing statutory and regulatory 

review requirements to be met more 

expeditiously. 

2. Establish a multistage 

application process.

Some States have improved timeliness by establishing a multistage 

application award process. For example, States could structure their 

program to include three stages: (1) 

a preapplication stage to winnow 

the applicant pool, (2) a final application stage preceding HUD’s funding announcement, and (3) a final 

award stage when the State receives 

HUD’s grant. Using a multistage application process may help States 

award funds to UGLGs as soon as 

HUD makes them available to the 

State. This affects both timely distribution and expenditure because (1) 

funds can be distributed faster since 

the evaluation of applications has already occurred and (2) funds can be 

expended faster since projects can 

be started immediately upon receipt 

of HUD funds. 

States can establish applicant 

eligibility criteria tied to previous 

performance or refuse to accept applications from UGLGs with unexpended CDBG funds or with open 

projects. Many States develop waiting lists of eligible projects to fund 

as additional funds become available 

(from recaptures, program income, or subsequent allocations). 

The State must list 

the selection criteria, 

benchmarks, or other requirements, and 

it must provide for 

such a process in its 

MOD. 

The primary benefit of using performa nce - th reshold 

criteria and multistage application cycles is to identify 

those proposed projects that are most 

likely to be implemented promptly upon grant award. 

A few questions that States can use 

to judge project readiness include: 

 Has a project administrator 

been identified and what is administrator’s experience level?

 Is there a firm commitment 

for other funding required by the 

project?

 Are qualified contractors 

identified? 

 Have preliminary architectur-
8 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 

al or engineering work and environmental studies been undertaken?

 Have past performance measures (as established by the State) 

been met?

Other methods to consider for 

improving timeliness

Types of projects to fund

Some States have found that 

funding larger grants does not guarantee improved expenditure rates. 

While a larger project has the potential to draw down a large proportion of the State’s total allocation, a 

project’s complexity and timeline 

typically grows with the size of its 

budget. An unexpected delay in a 

large project can seriously hamper 

the State’s overall timeliness.

Building organizational capacity

Some States assert that providing 

technical assistance to UGLGs positively affects the expenditure rate. 

There is often a need to build organizational capacity among UGLGs 

through workshops, trainings, and 

onsite technical assistance. In addition, States and UGLGs may need to 

leverage technical assistance from 

other sources.

Establishing incentives

Some States offer incentives for 

timeliness, such as awarding more 

administrative funds to timely 

UGLGs. This is an incentive for 

UGLGs who are paying administrative expenses from their own 

funds. This does not pose a problem 

for HUD provided that the State is 

within its statutory limit for administrative expenses and that these 

expenses are eligible (refer to 24 

CFR 570.489(a)). Past performance 

thresholds are also an incentive for 

UGLGs because States are more 

likely to fund their next grant applications if past grants have been 

completed in a timely manner. 

3. Identify ways to start the 

application cycle at an earlier 

point in time.

Implementing a multistage application process to increase timeliness 

can be accomplished alone or as a 

part of a “fast forward” initiative instead of the traditional funding cycle. Usually, the UGLG application 

process starts after HUD awards 

funds to a State, and it can take 9–12 

months from that time to distribute 

funds to UGLGs and an additional 

12–15 months before the UGLG is 

ready to draw down funds. 

A “fast forward” initiative, used 

by some States, awards 2 years of 

funding in a single program year. 

This puts UGLGs on a fast track for 

year 2 since funds will have been 

distributed in year 1 for year 2 and 

expenditure of funds can begin 1 

year earlier. The “fast forward” initiative may reduce by 12 months 

the lag time for distribution and expenditure. The 2-year cycle allows 

States to conditionally announce 

year 2 awards well in advance of the 

start of the program year. Expenditure of funds can begin sooner and 

likely will occur at a faster rate, thus 

increasing timeliness. Both of these 

techniques give States increased 

flexibility to award funds so they 
 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 9

For protection from 

financial risk and 

possible litigation, 

States should make 

“conditional” grant 

awards subject to 

States’ actually 

receiving their funds 

from HUD.

will be expended expeditiously.

For protection from financial risk 

and possible litigation, States should 

make “conditional” grant awards 

subject to States’ actually receiving 

their funds from HUD. The conditional award could involve a legal 

contract—with funding coming after 

the execution of the grant agreement 

with HUD. UGLGs should be made 

aware of the risks involved with 

conditional grant awards. The State 

also needs to have a process for approving UGLGs to incur costs prior 

to receipt of funds. The State should 

be aware of the Consolidated Plan 

and citizen participation considerations indicating essentially that the 

year 2 selection process must be described in both years’ MODs and 

that the State has to conduct citizen 

participation for both years. States 

should refer to 24 CFR 91.115 and 

91.320 for further information on 

the applicable requirements. 

Finally, States should be aware 

that the use of any “fast forward” 

techniques initially might require 

a greatly increased workload from 

staff without a comparable enhancement of staff resources, which can 

greatly increase pressure on both 

State CDBG administrators and 

CDBG applicants. 

4. Use float funding to improve 

timely expenditure of funds and 

provide interim financing to 

communities.

Some States are looking to float 

funding as an interim technique to 

improve their timely expenditure 

rates. Float funding involves the 

State making a grant to the UGLG, 

which in turn (usually) makes a 

loan to a business. States can use 

CDBG funds to provide float funding to finance two projects, and at 

the same time temporarily increase 

the expenditure of funds. For example, State CDBG funds are under 

contract to UGLG A for a large construction project, but UGLG A is not 

ready to draw down funds. Because 

UGLG A is not ready, the State 

awards the same amount of funds 

to UGLG B, which has a short-term 

project to complete. 

UGLG B repays the 

State prior to UGLG 

A’s needing the 

money. The money 

is, in essence, used 

twice. Float funding can improve 

the expenditure rate 

during the loan period if it is properly 

structured and if the 

State realizes and 

plans for the risks 

involved. The State 

should keep the following items in 

mind when deciding whether to implement float-funded activities:

 The State’s MOD must permit 

float-funded activities.

 The State’s program design 

must require that program income 

be returned to the State. States 

should carefully consider the program income implications contained 

in Section 104(j) of the Housing and 

Community Development Act of 

1974 (as amended). Section 104(j) 

addresses the return of program in-
come to States and the definition of 

“continuing the same activity.”

 The State must ensure that 

the second UGLG pays the funds 

back to the State before the original 

UGLG needs them. In addition, the 

State must ensure that the UGLG 

originally awarded the funds is 

ready to receive (and begin using) 

its funds on schedule.

Float funding can temporarily improve expenditure ratios. However, 

the State needs to ensure that, following the example 

above, UGLG A is 

ready to spend the 

funds repaid by 

UGLG B, because 

all of the funds returned to the State 

from UGLG B are 

program income. 

Program income 

must be spent before drawing other funds from the 

line of credit. If the 

State receives large amounts of program income repaid from float loans, 

it may be unable to draw funds from 

its line of credit for some weeks or 

months until the program income 

has all been disbursed. For this reason, float funding should be viewed 

as only a temporary solution to lower the State’s unspent funds. States 

considering float funding need a 

good management information system that is able to project fund availability and ensure liquidity.

5. Fund large or lengthy 

projects in phases.

Dividing large or lengthy projects into annual funding phases can 

be useful when the State is unsure 

that the UGLG has the capacity to 

administer a project of the size and 

scope proposed. Phasing allows the 

UGLG with housing rehabilitation 

projects, for example, to begin with 

a grant for a small number of units 

before receiving a grant for the entire project. This allows the State to 

determine the UGLG’s capacity before larger amounts of money are allocated. Another phased approach is 

to have the State award a public-facility grant for project design in the 

first year with project construction 

funded in a subsequent year grant. 

It is not possible to phase all 

large projects. Some projects that 

meet critical community needs may 

require a large advance commitment 

of CDBG funds. For example, a large 

affordable housing project typically 

has multiple funding sources, uses 

Federal tax credits, requires infrastructure improvements, and needs 

Federal and State reviews and permits. It may take the UGLG several 

years before such a project can be 

completed. Community needs may 

justify the large upfront commitment of CDBG funds, especially if 

other funders will not contribute 

money without a firm CDBG fund 

commitment. 

DIVI DI NG 

L ARG E O R 

L E NGTHY 

PROJECTS 

I NTO AN N UAL 

FU N DI NG 

PHA SES CAN 

B E U SE FU L 

WH E N TH E 

STATE I S 

U N SU R E THAT 

TH E UG LG HA S 

TH E CAPACIT Y 

TO ADMI N I STE R 

A PROJECT 

O F TH E SIZE 

AN D SCO PE 

PRO POSE D.

10 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E
CONTRACTING 

ISSUES

The Method of Distribution considerations discussed 

previously will assist in ensuring that funds get to 

the communities sooner. States also have to make 

sure that UGLGs do their part by implementing activities 

in a timely manner, because it is the State’s responsibility 

to ensure timely expenditures by localities (refer to Section 

104(e)(2) of the Housing and Community Development Act 

of 1974, as amended). The State’s legal contract with the 

UGLG can be used to ensure the requirements of the Act 

are followed. States can employ various contract provisions 

with UGLGs to increase the likelihood that funds will be 

spent in a timely manner. 

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 11
States can:

 Lay the groundwork for 

timeliness by preparing contracts 

promptly, by incorporating project deadlines, thresholds, penalties, 

incentives, and reporting requirements in contracts with UGLGs. 

Enforce contracts fairly and consistently.

 Specify all funding sources 

in the contract whenever multiple 

sources are used to complete a project.

 Amend contracts when 

UGLGs have a surplus of unexpended funds, as soon as the surplus becomes apparent.

 Develop specific documentation requirements and contract provisions for economic development 

activities.

1. Lay the groundwork for 

timeliness by preparing 

contracts promptly, 

incorporating project deadlines, 

penalties, incentives, and 

reporting requirements in 

contracts with grantees. Enforce 

contracts fairly and consistently.

States can lay the groundwork 

for timeliness by preparing contracts 

once grant recipients have been identified, rather than waiting for formal 

grant announcements. There may be 

several weeks’ lag time between the 

completion of staff review work and 

the public announcement-of-awards 

event. Preparing contracts before 

grant announcements could allow 

the State to issue, and the UGLGs 

to sign, grant contracts sooner. The 

UGLG can begin incurring project 

STATES CAN 

L AY TH E 

G RO U N DWO R K 

FO R TIM E LI N ESS 

BY PR E PAR -

I NG CO NTR ACTS 

O N CE G R ANT 

R ECI PI E NTS 

HAVE B E E N 

I DE NTI FI E D, 

R ATH E R THAN 

WAITI NG FO R 

FO R MAL G R ANT 

AN NO U N CE -

M E NTS.

12 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E
In addition to 

preparing contracts 

promptly and permitting UGLGs to incur 

pre-agreement costs, 

States have incorporated a variety of other 

provisions directly in 

the contracts.

costs after a contract is executed—

subject to the environmental release 

of funds. In some States, though, the 

Attorney General reviews all grant 

contracts in advance, and the CDBG 

agency may have little control over 

how quickly that review occurs. 

Hence, it may be worthwhile to negotiate with the Attorney General’s 

office to determine if the review process can be streamlined.

States also have the authority to 

allow their grant recipients to incur 

project costs prior to grant award. 

UGLGs can be reimbursed for eligible preagreement costs, provided 

the project is funded and all environmental requirements are met. 

By authorizing the UGLG to incur 

costs prior to grant award, the State 

may allow UGLGs to complete environmental reviews, appraisals, engineering, and other preliminary steps 

ahead of actual contract execution, 

thereby leading to a faster project 

start and a better chance of timely 

completion. Some States go even further, requiring UGLGs to complete 

some of these steps at their own 

(non-reimbursable) expense before 

submission of the application, as evidence that a project will be ready to 

go as soon as funds are awarded.

In addition to preparing contracts 

promptly and permitting UGLGs to 

incur pre-agreement costs, States 

have incorporated a variety of other 

provisions directly in the contracts 

with the UGLGs. Some of these 

contract provisions are described 

below. 

 Deadlines specify a particular timeframe (30–120 days, for example) for the UGLG to complete an 

action. This may include requiring 

the UGLG to complete startup actions, such as setting up files and 

bank accounts, preparing detailed 

milestone schedules, and performing preliminary tasks such as environmental reviews. Other examples 

include: submitting specifications, 

plans, or permits; requesting the 

first drawdown; expending 25, 50, 

or 100 percent of project funds; or 

closing out a project. Project deadlines that are listed in the contract 

encourage timeliness, by signaling 

to UGLGs that the 

State takes timely 

implementation seriously, and by giving 

the State the legal 

mechanisms to take 

action against noncompliant UGLGs.

 Penalties are 

imposed when the 

UGLG fails to comply with a threshold in the contract. 

Some States reduce 

the UGLG’s award 

by a certain dollar amount for each 

day the locality fails to reach the required threshold. Other States recapture all funds not obligated within 

24 months or another time period. 

States need to carefully consider the 

impact of penalties, especially for 

partially complete projects. 

 Incentives are rewards for 

surpassing contract thresholds and 

can be used in various ways to reward the UGLG for completing a 

project ahead of schedule. For ex-

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 13
ample, States can reward UGLGs 

with administrative money in cases where administration is paid for 

with local funds.

 Reporting requirements or 

monitoring visits stated in the contract can enforce timeliness. Several States have added language in 

contracts requiring regular progress 

reports to be submitted. Failure to 

provide these or to meet established 

performance benchmarks results in 

remediation measures, such as onsite monitoring, unannounced visits, 

or letters. Monitoring and providing 

technical assistance to the UGLG 

early in the process 

helps the State find 

and correct problems before they 

get out of hand.

States must enforce specific thresholds, incentives, or 

penalties consistently and fairly. The 

State’s legal counsel should be aware 

of, or approve of, all contract provisions (as applicable). Gaining the 

support of State and local elected officials or of agency political leadership in advance may be necessary 

to withstand inevitable challenges to 

the State’s efforts to enforce contract 

provisions. If the process is managed 

fairly, it typically gains support from 

elected officials, because elected officials realize that properly managed 

projects contribute to the improvement of their communities. 

2. Specify all funding sources in 

the contract whenever multiple 

sources are used to complete a 

project.

When projects have multiple 

funding sources, States may want 

the project budget in the contract 

to delineate the amount of funds 

expected from the CDBG program 

and from all other sources to ensure 

that all funding is in place. Deadlines should be set for commitment 

of other funds. For timeliness reasons, many agencies want to be the 

last funding agency, because it provides some sense of security that the 

project will proceed. Other States 

choose to be the first agency to commit funds to a project to show other 

prospective funders the importance 

of the project and to encourage joint 

funding, despite potential negative 

effects on timely expenditure.

3. Amend contracts when UGLGs 

have a surplus of unexpended 

funds, as soon as the surplus 

becomes apparent.

If the UGLG is nearing the 

completion of a project and it appears that there will be unexpended 

funds, discuss possible modifications to the project and amend the 

original contract to reflect the modifications. The State should do this 

as soon as it becomes aware of the 

surplus, rather than waiting until 

the project is completed. Of course, 

this should be done only if there is 

a need for the project expansion, not 

just to improve timeliness. Leaving funds with a good performer 

may allow for a faster expenditure 

WH E N 

PROJECTS 

HAVE M U LTI PL E 

FU N DI NG 

SO U RCES, 

STATES MAY 

WANT TH E 

PROJECT 

BU DG ET I N 

TH E CO NTR ACT 

TO DE LI N E ATE 

TH E AMO U NT 

O F FU N DS 

EXPECTE D 

FRO M TH E 

CDBG PROG R AM 

AN D FRO M 

AL L OTH E R 

SO U RCES TO 

E N SU R E THAT 

AL L FU N DI NG 

I S I N PL ACE. 

14 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E
of funds than reallocating them to 

another UGLG. In contrast, recapturing and reallocating the unexpended funds would involve more 

staff time and may result in slower 

expenditures and drawdowns. The 

State should keep in mind that modifying the original project will only 

help timeliness when the modified 

project can be done quickly, meets 

a national objective, and fits into the 

State’s MOD. If these criteria cannot 

be met, recapturing and reallocating 

funds may be faster, especially if the 

State has a list of alternate projects.

A good example of this is a waterand-sewer project where the UGLG 

has unexpended funds and could extend the line within the project’s target area. Not only would this project 

modification meet CDBG eligibility 

requirements, it is likely that the 

UGLG could complete the project 

and draw down the funds in a timely manner. An example where recapture and reallocation may make 

sense is an architectural barrier removal project that has had numerous delays and problems within the 

UGLG’s control, and for which construction bids have not yet been advertised and the UGLG has failed to 

address the problems.

4. Develop specific 

documentation requirements 

and contract provisions for 

economic development activities.

Economic development is a very 

important part of the CDBG program. Each year, States collectively 

spend more than 15 percent of their 

grant funds for economic development activities. Economic development activities differ from most 

other CDBG activities in that a national objective (e.g., job creation) 

may not be met until after the 

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 15

States can:

 Lay the groundwork for timeliness by preparing 

contracts promptly, by incorporating project deadlines, 

thresholds, penalties, incentives, and reporting 

requirements in contracts with UGLGs. Enforce 

contracts fairly and consistently.

 Specify all funding sources in the contract 

whenever multiple sources are used to complete a 

project.

 Amend contracts when UGLGs have a surplus 

of unexpended funds, as soon as the surplus becomes 

apparent.

 Develop specific documentation requirements 

and contract provisions for economic development 

activities.
physical completion of the project. 

In addition, meeting the national objective is dependent on the actions 

of an entity other than the UGLG. 

For these reasons, there are unique 

issues involved with the timely expenditure of economic development 

funds.

States must have a clear understanding of the business’ timeline 

prior to making the award (this assumes that the business is identified 

by the UGLG at the time the UGLG 

applies for funds). States can develop certain administrative policies 

and contract provisions that address 

the unique issues involved in economic development activities and 

at the same time encourage timeliness. Documents submitted by the 

business in the application process 

help States understand the scope of 

the project and help forecast timing 

of the project so the State can minimize the time between grant award 

and construction commencement. 

Two examples of documents that 

States may want to request include:

1. The agreement between the 

UGLG and the job-creating 

company

This agreement should outline 

the responsibilities of both parties. 

States may prefer to prescribe the 

format or draft the agreement for 

the UGLG. States should consider 

requiring UGLGs to submit final 

agreements for State approval prior 

to release of funds.

TH E R E AR E 

U N IQ U E I SSU ES 

I NVO LVE D WITH 

TH E TIM E LY 

EXPE N DITU R E 

O F ECO NO MI C 

DEVE LO PM E NT 

FU N DS. STATES 

M U ST HAVE 

A CL E AR 

U N DE R STAN DI NG 

O F TH E 

BU SI N ESS’ 

TIM E LI N E PR IO R 

TO MAK I NG TH E 

AWAR D (THI S 

A SSU M ES THAT 

TH E BU SI N ESS 

I S I DE NTI FI E D 

BY TH E UG LG AT 

TH E TIM E TH E 

UG LG APPLI ES 

FO R FU N DS ). 

16 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E
2. Job creation proposal

This is a staffing plan that the 

company will execute. Careful attention should be given to this document to determine if the plan for 

job creation is feasible and can be 

completed within the anticipated 

timeframe. States should refer to 

Appendix I, pages 4–6, of the “State 

CDBG Guide to National Objectives 

and Eligible Activities Guide” for information on properly documenting 

job creation. 

 States should also consider 

the unique requirements inherent 

in economic development projects 

when contracts are drafted between 

the State and the UGLG. The State 

should consider: 

1. Three-party contracts

 If State law permits, use 

three-party contracts signed by the 

State, the UGLG, and the company. 

This gives the State more direct authority over the job-creating company.

2. Deadlines and milestones

 Because economic development projects can sometimes be 

long-term projects, it is important for 

contracts to contain prescribed deadlines and milestones to be achieved. 

States have the right to withdraw 

award funds from UGLGs that fail 

to meet deadlines. The State may 

want to consider inserting a requirement for the submission of progress 

reports into the contract.

Because economic 

development projects 

can sometimes be 

long-term projects, 

it is important for 

contracts to contain 

prescribed deadlines 

and milestones to 

be achieved. 

3. Consequences of various 

“events of contract default”

 For example, if the job-creating company fails to perform, the 

State can take the action of requesting the tax commissioner to withhold tax credits.

 The State can monitor economic development projects similar 

to other projects and may consider 

requiring the job-creating company 

to attend all meetings held between 

the State and the UGLG. In addition, the State may want to consider 

holding some of the meetings at the 

company location 

and consider making unannounced 

visits to monitor 

job reports, financial statements, 

loan payments, insurance, and other 

documentation.

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 17
PROGRAM 

ADMINISTRATION 

AND SANCTIONS

S ome States have implemented administrative procedures that have improved their programs and their expenditure rates. The strategies employed can affect all phases of program management—from selecting projects to sanctioning untimely UGLGs. 

18 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E
1. Provide technical assistance 

to UGLGs to improve 

performance.

States recognize the importance 

of providing technical assistance to 

UGLGs and approach it in various 

ways. Some States provide technical assistance when problems occur, 

while others provide assistance on a 

routine basis so that problems are 

less likely to occur. States have adopted a variety of successful technical assistance strategies. States may 

want to consider the following ideas 

described below. 

1. Discuss timeliness with 

applicants and grant recipients at 

every phase of the project—project 

development, application stage, and 

implementation. 

Technical assistance should be 

considered before small problems 

become unmanageable. Open projects should be examined, and targeted technical assistance should 

be provided for those projects that 

are exhibiting slower-than-expected 

progress.

2. Encourage UGLGs to 

undertake concurrent processes 

where feasible, thereby completing 

one or more tasks simultaneously. 

3. Present regularly scheduled, 

mandatory workshops and training 

seminars covering all phases of the 

grant cycle. 

Show prospective applicants and 

new administrators the application 

process, project management, compliance, and practical issues, such 

as using spreadsheets to create milestone reports. Host regularly scheduled training for new staff. This 

training will assure that important 

information is conveyed on a regular basis. The training is most effective when elected officials, UGLG 

staff, and State CDBG staff are assembled to see that each project gets 

off to a good start. Require the attendance of key staff at meetings as 

a contract condition. 

4. Promote and foster peer-topeer technical assistance in which 

top performers are teamed with 

poor performers to identify ways to 

improve their timeliness.

States are encouraged to:

 Provide technical assistance to UGLGs to 

improve performance.

 Implement State and UGLG staff 

performance requirements.

 Implement enforcement mechanisms.

 Manage program income.

 Focus on information technology to track 

contract compliance.

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 19
2. Implement State and UGLG 

staff performance requirements.

A good knowledge and understanding of CDBG regulations by 

both State and UGLG staff can help 

both parties meet milestones and 

improve timeliness. Some States 

have placed performance requirements on their own staff to make 

sure grant administrators are providing UGLGs with accurate, timely technical assistance. For example, 

the State of South Carolina’s grant 

administrators are held accountable 

for the progress of 

their projects and 

are measured on 

factors such as the 

number of days an 

administrator takes 

to respond to a 

UGLG’s request. 

All grant administrators (both State 

and local) should 

receive training. 

In addition, States 

may want to consider requiring local grant administrators be certified. For example, 

the State of Indiana requires grant 

administrators who work on CDBG 

grants to take CDBG courses and to 

pass a 3-hour certification exam to 

become certified CDBG administrators. 

3. Implement enforcement 

mechanisms.

Performance requirements without mechanisms to ensure compliance are rarely successful. 

Consistently applied enforcement 

mechanisms can be key in helping 

States meet their timeliness goals. 

Many States currently employ successful enforcement tools, while 

other States are exploring and comparing various tools to enforce timeliness. Some ideas States can use to 

enforce timeliness efforts include:

 Awarding funds to an alternate applicant when the originally 

funded UGLG fails to meet readiness tests as prescribed in the contract. For example, the State can 

consider canceling a grant and 

awarding the funds to another applicant if the UGLG is not showing substantial progress within 6 

months (or another established time 

period) of grant award. The State 

would define “substantial progress” 

and advise UGLGs of the definition.

 Establishing a deadline to 

begin construction. For example, 

Indiana’s UGLGs have 8 months to 

begin construction. When UGLGs 

fail to meet the 8-month threshold, 

they have 30 days to rectify the situation or risk having their grant terminated.

 Placing restrictions on UGLGs 

when unspent portions of program 

income balances exceed levels determined by the State. The State 

would define these levels and advise 

UGLGs of the definition.

 Barring UGLGs from applying for additional CDBG funds 

when they fail to meet milestones.

 Revoking grant administrators’ ability to work on CDBG 

projects when they fail to perform 

their duties or fail to pass a CDBG 

A good knowledge 

and understanding 

of CDBG regulations 

by both State and 

UGLG staff can help 

both parties meet 

milestones and 

improve 

timeliness.

20 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E
administration certification course, 

if applicable.

4. Manage program income. 

The management of program 

income is a very important consideration when examining ways to 

improve timeliness because unexpected program income can greatly 

impact the State’s ability to spend 

funds quickly. States can review 

the program income requirements 

found at Section 104(j) of the Housing and Community Development 

Act of 1974, as amended. 

The State may permit the UGLG 

that receives or will receive program income to retain the program 

income. The State must permit the 

UGLG to retain the program income 

if the program income will be used 

to continue the activity from which 

the program income was derived. 

However, the State defines when an 

activity will be considered to be continued, and States have wide latitude 

in determining whether the activities being proposed by the UGLG 

are, in fact, the “same activity.” 

States can be very strict in making 

this determination.

With regard to timeliness issues, 

the State needs to consider the effects of its policy decisions to either 

permit the UGLG to retain the program income or require the UGLG 

to return the program income to the 

State. States should carefully consider both options, because they have 

differing affects on timeliness.

1. Program income retained at 

the local level

The State and the UGLG need to 

plan for these funds and have the 

capacity to expend the program income, or else the grant closeout will 

be delayed or the ability to administer the next grant will be hampered.

2. Program income returned to 

the State

This affects timely expenditure 

in the short run (as program income 

has to be expended before drawing 

from the line of credit, negatively 

affecting the ratios, as discussed in 

the “Overview” section) and timely 

distribution in the 

long run (as program 

income will eventually be used to 

make more grants to 

UGLGs). 

To properly manage program income, 

States should consider the following:

 Identify potential sources of 

program income and 

decide whether activities that generate program income should be funded. If the State 

decides to fund these activities, it 

must make decisions on whether 

the income should be returned to 

the State. Some examples of sources 

of locally retained program income 

include loan repayments, property sales, rental income, special assessments, and interest earned on 

revolving loan funds. An example 

of program income returned to the 

State is income from float-funded activities. 

 Create program income agreeTHE 

MANAGEMENT 

OF PROGRAM 

INCOME 

IS A VERY 

IMPORTANT 

CONSIDERATION 

WHEN 

EXAMINING 

WAYS TO 

IMPROVE 

TIMELINESS 

BECAUSE 

UNEXPECTED 

PROGRAM 

INCOME CAN 

GREATLY IMPACT 

THE STATE’S 

ABILITY TO 

SPEND FUNDS 

QUICKLY.

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 21
ments with UGLGs (subject to the 

statutory and regulatory requirements referenced above).

 Establish reporting requirements for UGLGs. Some States 

require UGLGs to submit reports every 6 months indicating the amount 

of program income received, expended, and on hand. 

 Identify program income expected to be returned to the State 

in the MOD and account for how it 

will be distributed. The State may 

need to improve 

the accuracy of estimating the flow 

of program income 

back to the State.

5. Focus on 

Information 

Technology. 

Automated systems assist States in 

monitoring compliance. Many States 

have purchased or developed software that automates and tracks 

CDBG projects from application to 

closeout. These systems allow staff 

from CDBG offices, public works 

departments, and other agencies 

to approve and monitor the various stages of a project—from permits to required progress reports to 

drawdowns. Systems can generate 

reminder letters, overdue notices, 

flag deadlines not met, etc. An automated process to electronically approve, route payment requests, and 

electronically wire transfer funds 

to the UGLG’s bank account saves 

time over issuing and mailing paper checks. Many of the current automated systems are also linked to 

the Integrated Disbursement Information System, HUD’s online drawdown and reporting system for the 

CDBG program.

These automated systems can be 

used by States to track expenditures 

and provide information about slow 

expenditure rates. As a result, States 

can monitor and offer technical assistance to assist UGLGs in completing projects and drawing down 

funds expeditiously.

AUTO MATE D 

SYSTE M S 

A SSI ST STATES 

I N MO N ITO R I NG 

CO M PLIAN CE. 

MANY 

STATES HAVE 

PU RCHA SE D 

O R DEVE LO PE D 

SO FT WAR E 

THAT 

AUTO MATES 

AN D TR ACK S 

CDBG PROJECTS 

FRO M 

APPLI CATIO N 

TO CLOSEO UT.

22 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E
CONCLUSION

States have many options to consider for improving 

their timely performance. A focus on timeliness 

should permeate throughout the entire grant cycle—

throughout a State’s chosen MOD, in its contracting instruments, and in its program administration and enforcement 

strategies. The techniques described in this document can 

be used alone or as part of a comprehensive strategy to focus on timeliness issues. States should consider partnering 

with other States that have experienced similar issues in order to obtain real-world solutions to their problems.

 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E 23
I F YO U HAVE Q U ESTIO N S ABO UT TH E O PTIO N S 

DI SCU SSE D I N THI S DO CU M E NT, PL E A SE CO NTACT 

YO U R H U D FI E L D O FFI CE O R TH E STATE AN D 

SMAL L CITI ES DIVI SIO N O F H U D’S O FFI CE O F 

B LO CK G R ANT A SSI STAN CE I N WA SHI NGTO N, DC, 

AT (202) 708 –1322.

24 State CDBG Program  M ETH O DS FO R I M PR OVI N G TI M E LY PE R FO R M A N C E

http://www.hud.gov/offices/cpd/communitydevelopment/library/statetimeliness.pdf

JANUARY 20 04 HUD - 20 04 - 4031 - CPD