COMMUNITY 

DEVELOPMENT 

BLOCK GRANTS 

Reporting on 

Compliance with Limit 

on Funds Used for 

Administration Can Be 

Improved 

Report to Congressional Committees

March 2013 

GAO-13-247 

United States Government Accountability Office

GAO 
 United States Government Accountability Office 

Highlights of GAO-13-247, a report to 

congressional committees 

March 2013 

COMMUNITY DEVELOPMENT BLOCK GRANTS

Reporting on Compliance with Limit on Funds Used 

for Administration Can Be Improved 

Why GAO Did This Study 

CDBG is the federal government’s 

principal community development 

program. In fiscal year 2012, Congress 

provided CDBG with approximately $3 

billion for activities such as housing, 

economic development, and 

neighborhood revitalization. While a 

provision reducing the amount 

grantees can use for administration 

was considered but not enacted, GAO 

was required to examine grantees’ use 

of administrative funds up to the 

allowed 20 percent of program funds. 

This report discusses (1) the types of 

activities subject to the 20 percent limit 

and grantees’ use of their 

administrative funds, (2) trends in 

funds available to grantees for CDBG 

administration and the impact of these 

trends on grantees’ administrative 

spending, and (3) HUD’s reporting on 

compliance with the limit. GAO 

analyzed HUD data and program 

information, reviewed federal internal 

control standards, and interviewed 

HUD headquarters and field office staff 

and organizations representing 

grantees. GAO also interviewed 12 

grantees selected based on grant size 

and location, among other things, to 

obtain a range of experiences. 

What GAO Recommends 

GAO recommends that HUD develop a 

process for annually reporting on 

compliance across the program with 

the statutory limit on the use of funds 

for administration. In its response, 

HUD noted that it was not required to 

assess cumulative compliance with the 

limit. As discussed in the report, an 

annual report that summarizes 

individual grantee compliance is 

essential to effective monitoring. 

What GAO Found 

The annual appropriation for the Community Development Block Grant (CDBG) 

program allows grantees to use up to 20 percent of program funds for planning, 

management, and administration (collectively referred to as “administration”). 

Specifically, grantees may use these funds for a range of activities, including 

general management, oversight, and coordination; fair housing activities; 

preparing community development plans; and policy planning. The Department 

of Housing and Urban Development (HUD) uses broad categories, such as 

“general program administration” and “fair housing activities,” to record grantees’ 

administrative expenses. According to HUD’s data for the last decade, grantees 

primarily recorded their administrative expenses under the general program 

administration category, which includes staff salaries. Grantees GAO interviewed 

added that they also used administrative funds to cover general administrative 

costs such as supplies, training, and travel. 

The amount available to grantees for administrative costs decreased from 2001 

to 2012 by 47 percent, or about $532 million in 2012 constant dollars, as the 

amount of overall CDBG funding declined. Grantees GAO interviewed reported 

taking various steps to address this decline, including reducing the number of 

CDBG staff and changing the types of projects they administered. For example, 

one grantee determined that it could no longer administer its housing 

rehabilitation program. However, the vast majority of the grantees that GAO 

interviewed said that reducing the statutory limit on administration would 

negatively impact their ability to administer and oversee CDBG-funded projects. 

HUD does not routinely determine and report on compliance with the 

administrative limit across the program. HUD reviews financial summary 

reports—which contain information grantees enter in HUD’s Integrated 

Disbursement & Information System (IDIS) and their own internal accounting 

systems—to determine individual grantees’ compliance. Internal control guidance 

states that information needed to assess compliance with laws and regulations 

should be timely and reported in a manner that allows for effective monitoring. 

However, HUD managers cannot use IDIS to generate summaries of compliance 

with the administrative limit across the program. First, grantees are not required 

to save information from their own systems in IDIS. Second, when such data are 

saved, the information is not stored as separate data elements that can be 

extracted and analyzed. Rather, HUD officials must download each grantee’s 

report and manually create a summary of compliance across the program. HUD’s 

most recent attempt to assemble this information for a single year required a 

labor-intensive process that ultimately produced unreliable data. Without making 

changes to IDIS that allow for summaries of compliance across the program, 

HUD lacks the ability to monitor grantees’ compliance across the program. 

Further, GAO’s analysis of financial summary reports for program year 2010 (the 

most recent year available) showed that 60 percent of entitlement communities 

(eligible cities and counties) obligated between 15 percent and 20 percent of their 

funds for administration. Given these statistics, HUD could benefit from having 

the information it needs to determine how many grantees would be affected by 

reducing the administrative limit. View GAO-13-247. For more information, 

contact William Shear at (202) 512-8678 or 

shearw@gao.gov. 
Page i GAO-13-247 CDBG Administrative Costs 

Letter 1 

Background 3

The Administrative Limit Covers a Range of Activities 7

Grantees Have Cut Staff and Projects to Adjust to Reduced 

Administrative Funding 10

HUD Does Not Routinely Assess Compliance with the 

Administrative Limit Across the Program 14

Conclusions 20

Recommendation for Executive Action 21

Agency Comments and Our Evaluation 21

Appendix I Objectives, Scope, and Methodology 24 

Appendix II Comments from the Department of Housing and Urban 

Development 28 

Appendix III GAO Contact and Staff Acknowledgments 31

Tables 

Table 1: IDIS Matrix Codes for Activities Subject to the 20 Percent 

Administrative Limit, as of January 2013 8

Table 2: Illustration of How Compliance with the CDBG 

Administrative Limit for Entitlement Communities Is 

Calculated for a Program Year 16

Figures 

Figure 1: Use of Administrative Matrix Codes, from Fiscal Years 

2001 through 2011 9

Figure 2: CDBG Funding Available for Administrative Expenses in 

Nominal and Fiscal Year 2012 Constant Dollars, Fiscal 

Years 2001 through 2012 11

Figure 3: Percentage of CDBG Funds Entitlement Communities 

Obligated for Administration, Program Year 2010 19

Contents 
Page ii GAO-13-247 CDBG Administrative Costs 

Abbreviations 

CDBG Community Development Block Grant 

CHDO HOME Community Housing Development Organization 

CPD Office of Community Planning and Development 

ESG Emergency Solutions Grants 

HIV/AIDS human immunodeficiency virus/acquired immunodeficiency 

syndrome 

HOME HOME Investment Partnerships 

HOPWA Housing Opportunities for Persons with AIDS 

HUD U.S. Department of Housing and Urban Development 

IDIS Integrated Disbursement & Information System 

OMB Office of Management and Budget 

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Page 1 GAO-13-247 CDBG Administrative Costs 

United States Government Accountability Office

Washington, DC 20548 

March 21, 2013 

The Honorable Patty Murray 

Chairman 

The Honorable Susan M. Collins 

Ranking Member 

Subcommittee on Transportation, Housing and 

 Urban Development, and Related Agencies 

Committee on Appropriations 

United States Senate 

The Honorable Tom Latham 

Chairman 

The Honorable Ed Pastor 

Ranking Member 

Subcommittee on Transportation, Housing and 

 Urban Development, and Related Agencies 

Committee on Appropriations 

House of Representatives 

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

government’s principal community development program. In fiscal year 

2012, Congress provided approximately $3 billion for the program to fund 

housing, economic development, neighborhood revitalization, and other 

community development activities. Administered by the Department of 

Housing and Urban Development (HUD), the CDBG program provides 

funding to metropolitan cities and urban counties, known as entitlement 

communities, and to states for distribution to other communities.1

Activities undertaken with program funds must (1) principally benefit lowand moderate-income persons, (2) aid in the prevention or elimination of 

slums or blight, or (3) meet urgent community development needs. 

Historically, the annual appropriation for the CDBG program has included 

language allowing grantees to use no more than 20 percent of program 

 

1

Entitlement communities are (1) principal cities of metropolitan areas, (2) other 

metropolitan cities with populations of at least 50,000, and (3) qualified urban counties 

with populations of at least 200,000 (excluding the population of entitled cities). Other 

communities must apply to states for CDBG funding because they do not qualify as 

entitlement communities. 

 
 

Page 2 GAO-13-247 CDBG Administrative Costs 

funds for planning, management, and administration.2 However, for 2012 

the House Appropriations Subcommittee on Transportation, Housing and 

Urban Development, and Related Agencies proposed to reduce the 20 

percent limit to 10 percent. According to the subcommittee’s report, this 

change was intended to direct limited funds to worthwhile community 

development activities and to reduce instances of waste, fraud, and 

abuse among CDBG grantees. In contrast, the Senate bill for HUD’s fiscal 

year 2012 appropriations retained the traditional 20 percent limitation for 

administration. To resolve the different versions, the Conference Report 

to the Consolidated and Further Continuing Appropriations Act of 2012 

included language allowing 20 percent of CDBG funds to be used for 

administration, as proposed by the Senate, but directed us to review how 

communities used these funds.3

 In response to this mandate, this report 

discusses (1) the types of activities that are subject to the 20 percent limit 

on administration and the ways in which grantees have used their 

administrative funds, (2) trends in funds available to grantees for CDBG 

administration and the impact of these trends on grantee spending, and 

(3) HUD’s reporting on grantee compliance with the limit. 

To identify and describe the types of activities subject to the 20 percent 

limit on administration, we examined and summarized relevant statutes, 

HUD regulations, and Office of Management and Budget (OMB) 

guidance. We also interviewed HUD officials and a purposive, nonrandom 

sample of 12 CDBG grantees: the cities of Albany, Georgia; Antioch, 

California; Bowling Green, Kentucky; Houston, Texas; Newark, New 

Jersey; Oshkosh, Wisconsin; and Tustin, California; the counties of 

Northampton in Pennsylvania and Oakland in Michigan; and the states of 

Alaska, North Carolina, and Ohio. We selected these grantees on the 

basis of factors such as grant size, percentage of funds used for 

administration, and geographic dispersion to obtain a range of 

experiences. To determine how grantees had used their administrative 

funds, we interviewed HUD officials, reviewed the selected grantees’ 

annual reports to HUD, and reviewed and summarized relevant data from 

HUD’s Integrated Disbursement & Information System (IDIS).4

 We 

 

2

HUD refers to “planning, management, and administration” as general administration. For 

purposes of this report, we will use the term “administration.” 

3

H. R. Conf. Rep. No. 284, 112th Cong., 1st Session (2011). 

4

IDIS is a management information system that contains CDBG funding data and reported 

expenditures, among other things. 
 

Page 3 GAO-13-247 CDBG Administrative Costs 

determined that these data were sufficiently reliable for analyzing different 

administrative spending categories. We also reviewed HUD’s guidance 

and training manuals to determine the extent to which HUD was providing 

guidance on use of funds for administration. 

To determine the availability of CDBG funds for administration, we 

interviewed HUD officials and analyzed CDBG allocation data for 2001 

through 2011. We also interviewed the selected grantees, HUD officials, 

and representatives from national organizations representing CDBG 

grantees to obtain their views on the 20 percent limit’s impact, if any, on the 

types of activities grantees chose to fund. To determine HUD’s ability to 

report on grantees’ compliance with the 20 percent limit, we interviewed 

HUD officials and the selected grantees. We then compared HUD’s 

reporting capabilities with internal control standards for the federal 

government. In addition, we analyzed financial summary reports on grantee 

compliance with the administrative limit for program year 2010, the most 

recent year for which such reports were readily available. We found these 

reports to be reliable for commenting on compliance with the limit. 

We conducted this performance audit from July 2012 to March 2013 in 

accordance with generally accepted government auditing standards. 

These standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. More information on our scope 

and methodology is contained in appendix I. 

The Housing and Community Development Act of 1974 created the CDBG 

program to develop viable urban communities by providing decent housing 

and a suitable living environment and by expanding economic 

opportunities, principally for low- and moderate-income persons. Program 

funds can be used for housing, economic development, neighborhood 

revitalization, and other community development activities. After funds are 

set aside for special statutory purposes, the annual CDBG appropriation is 

allocated to entitlement communities and states. Entitlement communities 

are principal cities of metropolitan statistical areas, other metropolitan cities 

with populations of at least 50,000, and qualified urban counties with a 

population of 200,000 or more (excluding the populations of entitlement 

cities). Entitlement communities may carry out activities directly or may 

award funds to subrecipients to carry out agreed-upon activities. States 

distribute CDBG funds to nonentitlement localities not qualified as 

Background 
 

Page 4 GAO-13-247 CDBG Administrative Costs 

entitlement communities. In fiscal year 2012, Congress appropriated about 

$3 billion for the CDBG program, $60 million of which was set aside for 

Native American tribes. The remainder (about $2.9 billion) was allocated to 

entitlement communities, states, and insular areas.5

Grantees can use CDBG funds for 28 eligible activities. For reporting 

purposes, HUD classifies the activities into eight broad categories—

acquisition, administration and planning, economic development, housing, 

public improvements, public services, repayments of section 108 loans, 

and “other” (including capacity building for nonprofit organizations and 

assistance to institutions of higher learning).6

 Some of the activities that 

can be funded, such as loans for housing rehabilitation, generate program 

income for grantees that must be used to fund additional activities.7

 There 

are statutory limitations on the amounts that grantees may use in two 

specific areas. According to provisions in annual appropriations laws, 

grantees may use up to 20 percent of their annual grants plus program 

income on administration. Grantees may also use only up to 15 percent of 

their annual grant plus program income on public service activities such 

as job training and crime prevention activities.8

 Entitlement communities 

comply with these requirements by limiting the amount of funds they 

 

5

The four insular areas are American Samoa, Guam, the Northern Mariana Islands, and 

the Virgin Islands. 

6

Congress established the section 108 program in 1974 as part of the CDBG program. 

This program allows communities to borrow against their current and future CDBG 

allocations to fund large-scale housing rehabilitation and community and economic 

development projects. 

7

Program income is gross income directly generated from the use of CDBG funds. 

Examples of program income include proceeds from the disposition of real property 

purchased or improved with CDBG funds and payments of principal and interest on loans 

made using CDBG funds. 

8

By law, entitlement communities that used in excess of 15 percent of CDBG funds 

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

use the higher of the actual dollar amount or percentage of assistance in either of those 

years. Due to this provision, a total of 41 entitlement communities are allowed to use more 

than the 15 percent they would have been allowed if they were subject to the limit. 
 

Page 5 GAO-13-247 CDBG Administrative Costs 

obligate for these activities during the program year, while states limit the 

amount they spend on these activities over the life of the grant.9

HUD has provided grantees with a variety of training classes, written 

guidance, and technical assistance to help them determine which 

activities are considered administrative and demonstrate compliance with 

the 20 percent administrative limit. For example, HUD has prepared a 

training manual that includes guidance on eligible administrative activities 

and instructions for showing compliance with the administrative limit. HUD 

has also developed video training modules on components of the CDBG 

program, including administrative planning and financial management. 

Within these materials, HUD has also provided links to relevant OMB 

guidance on determining program administrative costs, cost allocation, 

and indirect costs as well as links to relevant HUD regulations. 

The administrative activities subject to the 20 percent limit are separate 

from “activity delivery costs” that are related to carrying out specific 

CDBG activities. Activity delivery costs, such as staff and overhead costs 

linked directly to an eligible CDBG activity (e.g., economic development, 

housing rehabilitation), are not considered administration and are 

therefore not subject to the 20 percent limit. For example, if a grantee’s 

employees underwrite economic development loans that will be made 

with CDBG funds, the portion of their salaries spent on this function can 

be treated as costs of carrying out the economic development activity. 

Other costs that are considered activity delivery costs include the costs of 

printing brochures advertising the availability of housing rehabilitation loan 

funds and staff costs of housing rehabilitation specialists performing work 

write-ups and inspecting completed construction work. There is no 

statutory limit on the percentage of CDBG funds that may be used for 

 

9

For states, the expenditures subject to the 20 percent limit on administration are the sum 

of the states’ own administrative costs and the administrative costs of nonentitlement 

communities. A state may use CDBG funds to pay its own administrative costs of up to 

$100,000 and must match its administrative costs in excess of $100,000 on a dollar-fordollar basis. In addition, states may use CDBG funds for technical assistance, such as to 

improve nonentitlement communities’ reporting capabilities. Unlike funds used for a state’s 

administrative costs, funds used for technical assistance are not considered when 

calculating compliance with the 20 percent limit and do not need to be matched. However, 

CDBG funds used to pay a state’s administrative costs cannot exceed $100,000 plus 3 

percent of the state’s CDBG grant plus program income, and technical assistance cannot 

exceed 3 percent of the state’s CDBG grant plus program income. In the aggregate, these 

two cannot exceed $100,000 plus 3 percent of the state’s CDBG grant plus program 

income. 
 

Page 6 GAO-13-247 CDBG Administrative Costs 

eligible activity delivery costs, but they must be necessary and 

reasonable costs. 

Grantees must submit to HUD a strategic plan that addresses the 

housing, homeless, and community development needs in their 

jurisdictions every 3 to 5 years. This plan, known as the consolidated 

plan, covers CDBG and three other formula grants that the grantee may 

receive—the HOME Investment Partnerships (HOME) Program, the 

Emergency Solutions Grants (ESG) Program, and the Housing 

Opportunities for Persons with AIDS (HOPWA) Program.10 Annually, 

entitlement communities must submit an action plan that identifies the 

activities they plan to undertake to meet the objectives in their strategic 

plans.11 In their annual action plans, states describe their method for 

distributing funds. At the end of each program year, grantees must submit 

to HUD an annual performance report detailing progress they have made 

in meeting the goals and objectives outlined in their strategic and action 

plans and their compliance with statutory limits. HUD staff use detailed 

checklists to review recipients’ strategic and annual action plans and 

annual performance reports. 

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

administers the CDBG program through program offices at HUD 

headquarters and field offices located throughout the United States. 

Among other strategies, HUD field staff are to use data and reports 

generated through IDIS to monitor CDBG funds. Implemented in fiscal 

year 1996, IDIS is a management information system that consolidates 

planning and reporting processes across HUD’s four formula grant 

programs. Grantees are to use this system to enter information on their 

plans, establish projects and activities to draw down funds, and report 

accomplishments. Although it contains data on reported expenditures, 

IDIS is a reporting system and not an accounting system. Grantees are 

expected to use their own accounting systems in addition to IDIS to 

 

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

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

The ESG program provides homeless persons with basic shelter and essential supportive 

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

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

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

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

jurisdictions’ fiscal year. 
 

Page 7 GAO-13-247 CDBG Administrative Costs 

ensure proper management of funds. Information that grantees enter in 

IDIS is used to generate financial summary reports, which contain 

information on the CDBG funds available and expenditures incurred, 

including the percentage of funds used for low- and moderate-income 

persons, public services, and administration. 

As previously noted, grantees may use no more than 20 percent of the 

CDBG grant and program income received for a range of activities related 

to program administration. Examples of eligible administrative activities 

include 

 managing, overseeing, and coordinating the CDBG program; 

 providing local officials and citizens with information about the CDBG 

program; 

 conducting fair housing activities; 

 preparing reports and other HUD-required documents; 

 preparing comprehensive plans; 

 preparing community development plans; 

 developing functional plans for housing, land use, urban 

environmental design, and economic development; and 

 providing policy planning.12

IDIS has 10 broad categories, or matrix codes, for recording 

administrative expenses (see table 1).13 For example, grantees are to use 

the general program administration code to report overall program 

administration, including salaries, wages, and related costs of grantee 

 

12The regulations outlining eligible planning and administrative costs for entitlement 

communities are found at 24 CFR Secs. 570.205 and 570.206, respectively. Similar 

regulations for states are found at 24 CFR Sec. 570.489(a)(3). 

13Entitlement communities use eight of these codes, and states can also use two 

additional codes that were introduced in fiscal year 2009. 

The Administrative 

Limit Covers a Range 

of Activities 
 

Page 8 GAO-13-247 CDBG Administrative Costs 

staff or others engaged in program management, monitoring, and 

evaluation. 

Table 1: IDIS Matrix Codes for Activities Subject to the 20 Percent Administrative Limit, as of January 2013 

IDIS category IDIS description 

Planning Program planning activities, including the development of comprehensive plans (e.g., a 

consolidated plan), community development plans, energy strategies, capacity building, 

environmental studies, area neighborhood plans, and functional plans. 

State planning Should be used for awards to units of general local government for which planning is the only 

activity, or in which planning activities are unrelated to any other activity funded as part of the 

grant. These are often referred to as “planning-only grants” or “planning-only activities.” 

General program administration Overall program administration, including (but not limited to) salaries, wages, and related costs 

of grantee staff or others engaged in program management, monitoring, and evaluation. 

Indirect costs Costs charged under an indirect cost allocation plan. 

Public information Providing information and other resources to residents and citizen organizations participating in 

the planning, implementation, or assessment of CDBG-assisted activities. 

Fair housing activities Fair housing activities carried out as part of general program administration. 

Submission of applications for 

federal programs 

Preparation of (1) documents that must be submitted to HUD to receive CDBG funds or (2) 

applications to other federal programs for community development assistance. 

CDBG funding of HOME 

administration 

CDBG funding of administrative costs for eligible HOME program activities. 

CDBG funding of HOME 

Community Housing Development 

Organization (CHDO) operating 

expenses 

CDBG funding of CHDO operating expenses for eligible HOME program activities.a

State administration Costs incurred by the state to administer the CDBG program. 

Source: HUD IDIS state and entitlement community manuals. 

a

A HOME CHDO is a private, nonprofit, community-based service organization whose primary 

purpose is to provide and develop decent affordable housing for the community it serves. 

IDIS expenditure data show that for each of the last 11 fiscal years, 

grantees have recorded more than 80 percent of CDBG administrative 

expenses under the general program administration matrix code, which 

captures salaries among other things (see fig. 1).14 Our analysis showed 

that the second most used matrix code (ranging from about 11 to 14 

percent from fiscal years 2001 to 2011) was the planning code, which 

 

14In fiscal year 2009, HUD introduced state planning and state administration matrix codes 

for state grantees to use. As a result, the states’ use of the general program administration 

code decreased slightly in fiscal years 2009 through 2011, but states still used it to report 

over 70 percent of their administrative expenses in fiscal year 2011. 
 

Page 9 GAO-13-247 CDBG Administrative Costs 

captures program planning activity costs such as the development of 

grantees’ consolidated plans. The amount charged under the remaining 

matrix codes ranged from about 5 percent to 9 percent. 

Figure 1: Use of Administrative Matrix Codes, from Fiscal Years 2001 through 2011 

The matrix code used most often, general program administration, is 

broad. HUD’s guidance indicates that this category is to include salaries 

but allows other general expenses to be charged to it. Therefore, using 

HUD’s matrix code data to determine how much of the expenses were for 
 

Page 10 GAO-13-247 CDBG Administrative Costs 

salaries is not possible.15 However, officials from all 12 grantees we 

interviewed told us that they primarily used their CDBG administrative 

funds to pay the salaries of employees who oversaw and managed the 

grant. They also noted that they used some funds to pay for supplies, 

training, travel, and planning costs. 

As overall CDBG allocations have decreased, the funding available to 

states, entitlement communities, and insular areas for administrative 

expenses has also fallen. Specifically, total CDBG funding for these 

grantees decreased from about $4.4 billion in fiscal year 2001 to about 

$2.9 billion in fiscal year 2012 (a reduction of about 33 percent). As a 

result, the amount of funding available to grantees from CDBG grants for 

administrative costs decreased by 33 percent in nominal dollars from 

fiscal years 2001 through 2012.16 Once adjusted for inflation, the funds 

available for administrative costs decreased by 47 percent.17 Specifically, 

the aggregate amount available to CDBG grantees for administrative 

costs for fiscal year 2012 was $590 million, down from approximately 

$881 million in fiscal year 2001 nominal dollars (see fig. 2). This amount 

represents a reduction of about $292 million in nominal dollars, or $532 

million in fiscal year 2012 constant dollars. 

 

15Because the administrative matrix codes in IDIS were general in nature, we reviewed 

the 2010 or 2011 annual performance report for the 12 grantees we interviewed to 

determine if they included detailed information about these expenses. Our review showed 

that these reports did not include such information. Specifically, although 5 of these 

reports included some information on the administrative tasks the grantees performed, 

none of the 12 reports included a section that provided detailed information on the CDBG 

administrative activities and their associated costs. According to HUD officials, grantees 

are not required to include this information in their annual performance reports. They 

stated that the agency collects data on administrative expenses only through IDIS. 

16CDBG grantees may also use a portion of their program income to fund administration. 

As noted above, grantees may use no more than 20 percent of the sum of their CDBG 

grant and program income for administration. Because program income data were not 

readily available, our analysis of available administrative funding may be underestimated. 

In addition, not all grantees use 20 percent of their funds for administration. 

17We evaluated the amount of funding available to grantees from CDBG grants for 

administrative costs after adjusting for the general effects of inflation using a Bureau of 

Economic Analysis gross domestic product price index. We expressed these data in fiscal 

year 2012 constant dollars. 

Grantees Have Cut 

Staff and Projects to 

Adjust to Reduced 

Administrative 

Funding 
 

Page 11 GAO-13-247 CDBG Administrative Costs 

Figure 2: CDBG Funding Available for Administrative Expenses in Nominal and 

Fiscal Year 2012 Constant Dollars, Fiscal Years 2001 through 2012 

The 12 grantees we interviewed reported that they had taken various 

steps to address this reduction in available funding, ranging from reducing 

staff to improving record keeping to better enable them to allocate 

expenses. 

Reducing staff. Three grantees we interviewed told us they had reduced 

the number of staff that administered the CDBG program. For example, 

officials from one grantee said that the organization had placed a 

moratorium on hiring CDBG staff, and representatives from another said 

that the organization had reduced its staff by half and hired a consultant 

to administer the program. 

Leveraging supplemental funding sources. Officials from two grantees 

told us they had begun paying the salaries of existing staff with nonCDBG funding. For example, one grantee used its local funds to 

supplement the salaries of CDBG staff. 

Limiting the number and types of projects. Three grantees told us that 

they had limited the number and types of projects they administered to 

address the reduction in funds. For example, officials from a grantee we 
 

Page 12 GAO-13-247 CDBG Administrative Costs 

contacted told us that they had revisited the consolidated plan to determine 

which CDBG activities the city could continue to fund and had determined 

that it could no longer administer its housing rehabilitation program. 

Similarly, an official from another grantee told us that the city had reduced 

the number of CDBG subrecipients it administered by half and developed a 

strategy of selecting less administratively burdensome grants. 

Some grantees also said that they selected projects based on the 

priorities and needs of the communities they served and not on the need 

to reduce administrative costs, but six indicated that the administrative 

limit did affect the type of projects they chose. For example, one grantee 

told us that it did not fund economic development projects under CDBG 

because it did not have the capacity to administer them. Similarly, officials 

from another grantee told us that funding a planning grant could depend 

on whether the grantee was close to the limit. In addition, an official from 

another grantee told us that the staff tried to manage many of their 

projects through larger subrecipients as a way to mitigate administrative 

expenses. 

Sharing grant administration. An official from a grantee we interviewed 

told us that a group of grantees had decided to share CDBG 

administrative costs. According to the grantee’s website, the group 

coordinates activities conducted by the six participating entitlement 

communities, which are located in the same county. Group members 

have jointly prepared the 5-year consolidated plan, analyzed impediments 

to fair housing choice, and coordinated and collaborated in the CDBG 

application process and monitoring practices. According to the official, 

joining this group has helped participating entitlement communities save 

millions of dollars and made program administration more efficient. 

Improving record keeping. Officials from one grantee told us that they 

had taken steps to improve record keeping so that they could link more 

administrative costs to specific projects (i.e., claim more activity delivery 

costs) as a way of reducing administrative costs. Specifically, officials 

said that historically they had shared the 20 percent of funds available for 

administration with their subrecipients. However, in 2011 the grantee 

decided to end this practice because of the reduction in available 

administrative funding. As part of this decision, the grantee evaluated the 

costs each subrecipient was charging as administrative and determined 

that they were more aligned with the definition of an activity delivery cost. 

The grantee instructed the subrecipients to report these costs as activity 

delivery costs. 
 

Page 13 GAO-13-247 CDBG Administrative Costs 

While the grantees have taken a number of steps to address declining 

funds available for administering CDBG as the program has gotten 

smaller, the vast majority of the grantees we spoke with told us that a 

reduction in the statutory limit on using funds for administration would 

have a significant impact on their ability to administer and oversee the 

projects they implemented with CDBG funding. Nine of the grantees we 

contacted said that lowering the limit would require them to reduce the 

number of CDBG staff or limit the number and type of projects they 

administered. For example, officials from a grantee said that they would 

be required to further reduce their CDBG staff and that the reductions 

would have an impact on their ability to manage and monitor the program. 

In addition, officials from other grantees said that a reduction might 

require them to cut back on their planning activities or undertake relatively 

large construction and infrastructure projects that carried a smaller 

administrative burden than projects such as mortgage assistance. 

Limiting the type or number of projects grantees administer could reduce 

some of the administrative burden of the program, but some grantees and 

national organizations representing CDBG grantees that we interviewed 

pointed out that certain fixed costs were associated with administering the 

CDBG program. These include preparing the required plans and reports 

and complying with other reporting requirements. Finally, officials from 

three grantees told us that grantees receiving relatively small CDBG 

grants might need to evaluate their ability to continue administering the 

CDBG program if the funds that could be used for administration were 

further limited. Officials explained that administering a small CDBG grant 

might not be cost-effective because of the program’s complex reporting 

requirements. 
 

Page 14 GAO-13-247 CDBG Administrative Costs 

Incomplete data, technical limitations of IDIS, and reliance on field office 

oversight have meant that HUD has not routinely assessed compliance 

with the limit on the use of funds for administration across the program. A 

recent congressional request for HUD to provide information on 

compliance across the program resulted in a labor-intensive process that 

we determined produced unreliable results. Internal control standards 

state that information should be recorded and communicated in a form 

and within a time frame that enables management and others to carry out 

their internal control and other responsibilities.18 Specifically, internal 

control guidance states that operating information should be provided to 

managers so that they may determine whether their programs comply 

with applicable laws and regulations.19 The guidance also states that 

information should be presented appropriately and available on a timely 

basis to allow for effective monitoring and prompt action if shortcomings 

are found. Further, as noted previously, there has been congressional 

interest in reducing the limit on administration in order to direct limited 

funds to worthwhile community development activities and to reduce 

instances of waste, fraud, and abuse among CDBG grantees. We found 

that HUD’s process for assessing compliance with the administrative limit 

for CDBG funds did not allow for effective monitoring across the program 

or for providing data that would inform Congress about the efficient use of 

these funds. 

Annually, each grantee generates a financial summary report that 

contains information on the CDBG funds available and expenditures 

incurred, including the percentage of funds used for administration. HUD 

relies on this report, which shows all the information needed to complete 

the calculation as well as the final percentage of funds the grantee has 

obligated or spent on administration, to determine if grantees are within 

the statutory limit.20 As noted previously, entitlement communities are 

 

18GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 

19GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, 

D.C.: August 2001). 

20HUD officials told us that if a grantee was found to have exceeded the administrative 

cap, HUD field office officials determined the appropriate corrective action, which 

generally was to require grantees to reimburse to their CDBG program account the excess 

amount, using nonfederal funds. Additionally, HUD’s monitoring strategy calls for its field 

offices to consider various risk factors when determining which recipients to review. 

Compliance with the administrative limit is one of many factors considered in assessing 

the risk level of grantees. 

HUD Does Not 

Routinely Assess 

Compliance with the 

Administrative Limit 

Across the Program 
 

Page 15 GAO-13-247 CDBG Administrative Costs 

considered to be in compliance if their total obligations for administration 

during the most recent program year are no more than 20 percent of the 

grant and program income for that year. Meanwhile, states are in 

compliance if their total expenditures for administration are no more than 

20 percent of each grant and program income. 

Grantees generate the financial summary report using data from IDIS and 

make any needed adjustments based on data in their internal accounting 

systems. The information on expenditures and program income is 

available in IDIS, because grantees use it to request funds for CDBG 

activities they administer and report their program income. However, 

because compliance with the administrative limit for entitlement 

communities is assessed based on obligations and not just on 

expenditures, they may need to use additional information from their own 

internal accounting systems to report unliquidated obligations.21 For 

example, one entitlement community we spoke with had to enter 

unliquidated obligations when a planning project ultimately took less staff 

time than anticipated and not all of the funds obligated to that activity 

were disbursed during that program year. According to the grantee, the 

unused funds eventually were reallocated to other eligible activities. In 

addition, according to several grantees we spoke with, grantees may 

need to make other adjustments for a number of reasons. For example, 

grantees may need to reconcile differences between data in their internal 

accounting systems and information in IDIS, account for program income 

or administrative expenditures that were not assigned to the correct 

program year in IDIS or entered after the program year was complete, or 

correct other errors in IDIS.22 Table 2 provides an example of how 

compliance is determined for entitlement communities. In this hypothetical 

example, the grantee is in compliance with the 20 percent limit. 

 

21States do not need to make this particular adjustment, because their compliance with 

the administrative limit is based not on obligations during a program year but on the 

percentage of each grant that is actually spent on administration over the life of the grant. 

States must generate a separate financial summary for each open grant when submitting 

annual performance reports. States’ compliance with the statutory limit on administrative 

activities can be determined only when the entire grant has been spent. 

22According to HUD officials, in recent years IDIS has been changed to allow grantees to 

record disbursements for a completed program year up to 90 days after the close of that 

program year and to flag them as the previous year’s disbursements. However, grantees 

do not always use this functionality and therefore need to enter adjustments in the 

financial summary report to ensure that they are accounted for in the correct year. 
 

Page 16 GAO-13-247 CDBG Administrative Costs 

Table 2: Illustration of How Compliance with the CDBG Administrative Limit for 

Entitlement Communities Is Calculated for a Program Year 

Total grant amount $1,000,000

Program income 50,000

Adjustment to total subject to the administrative limita 0

Basis for calculating the administrative limit 1,050,000

Multiplied by 20 percent x 0.20

Maximum dollar amount that may be obligated for administration $210,000

Disbursed in IDIS for administration $150,000

Unliquidated obligations for administration at end of current program year 35,000

Unliquidated obligations for administration at end of previous program yearb (20,000)

Adjustment to total obligations for administrationc 5,000

Total obligations for administration $170,000

Percent of funds obligated for administration 16.19%

Source: HUD guidance. 

Note: This example is for illustrative purposes only. 

a

Used by grantee only if necessary to adjust the total amount subject to the administrative limit (i.e., 

adding program income not reported in IDIS). 

b

By subtracting the unliquidated obligations for administrative activities that were reported in the 

previous program year, the grantee can avoid double-counting any disbursements made for those 

activities in the current program year; these are captured in the disbursements from IDIS for the 

current program year. 

c

Used by grantee only if necessary to adjust the amount obligated for administration (i.e., adding 

disbursements for administrative activities not assigned the correct year in IDIS). 

While HUD can use a financial summary report to determine an individual 

grantee’s compliance with the administrative limit, two factors limit HUD’s 

ability to use IDIS to determine compliance across the program. First, as 

noted previously, the financial summary reports used to assess 

compliance with the limit allow for certain adjustments, but grantees are 

not required to save these adjustments in IDIS. In July 2006, we reported 

that adjustments entered in financial summary reports were not saved in 

IDIS.23 We recommended that HUD centrally maintain this information, 

and in 2010 HUD made changes to IDIS to allow grantees to save the 

adjustments in the system but did not make the “save” function automatic. 

Instead, grantees must manually select a “save” option in order to save 

 

23GAO, Community Development Block Grants: Program Offers Recipients Flexibility but 

Oversight Can Be Improved, GAO-06-732 (Washington, D.C.: July 28, 2006). 
 

Page 17 GAO-13-247 CDBG Administrative Costs 

their changes in the system. If they do not choose this option, the 

information is not saved. In addition, HUD officials told us that grantees 

were not required to complete their financial summary reports in IDIS. In 

such cases, the system would not reflect any adjustments grantees made 

to the amount of funds they used for administration. While HUD officials 

do receive copies of the financial summary reports from all grantees, they 

do not have electronic access to the adjustments if grantees did not save 

the information.24

Difficulties in determining compliance across the program that were 

associated with saving adjustments in IDIS are further exacerbated when 

corrections have to be made to financial summary reports. When 

reviewing the reports, HUD officials have found that grantees have 

sometimes made reporting errors. These include miscategorizing 

expenditures for administration, failing to report program income, and 

failing to enter unliquidated obligations or other adjustments. HUD allows 

grantees to revise the information in IDIS or on their financial summary 

reports if such errors occur. However, if a grantee makes any changes to 

the report and does not save the adjustments in IDIS, the updated report 

that HUD officials download will not reflect the actual percentage of funds 

used for administration. 

Second, HUD does not maintain the necessary information in an easily 

accessible format and therefore has no simple way to monitor or report on 

compliance with the administrative limit across the program. Currently, 

each financial summary report that a grantee submits is saved as a 

separate document in IDIS. The adjustments made to calculate 

compliance are not separate data elements in IDIS that can be extracted 

and analyzed. Rather, the information is contained only in the individual 

reports. As a result, HUD officials must review each individual financial 

summary report to determine grantees’ compliance with the limit. To 

report on compliance with the limit across the program, they must compile 

all of these reports and manually create a summary. HUD undertook such 

an exercise in 2011 in response to a congressional request to report on 

compliance across the program with the statutory limit on funds used for 

administration. HUD officials told us that staff at HUD’s field offices went 

through a laborious process of compiling a database of grantees’ financial 

 

24Not all compliance calculations require adjustments. 
 

Page 18 GAO-13-247 CDBG Administrative Costs 

summary reports for a single program year (2010) and manually entering 

the percentage that each grantee used for administration. 

For the purposes of this report, we also requested a summary of 

grantees’ compliance with the statutory limit and were provided with this 

same database. In addition to the fact that the exercise covered only one 

year, we found the results to be unreliable. During our review of the 

database that HUD prepared for program year 2010 and the financial 

summary reports that supported it, our analysis revealed a number of 

data entry errors. Additionally, information was either missing or could not 

be verified based on the source reports. While a number of these errors 

were resolved during the course of our communications with HUD, we 

determined the database was unreliable for the purpose of describing 

grantees’ compliance in program year 2010. Instead, we used the 

individual financial summary reports to create our own summary showing 

the percentages of funds used for administration that grantees reported.25

Our analysis showed that in program year 2010 less than 2 percent of 

entitlement communities exceeded the limit on administration. Almost 60 

percent obligated between 15 percent and 20 percent of their funds for 

administration (see fig. 3). 

 

25We created our summary using the financial summary reports attached to the database 

HUD provided and financial summary reports HUD provided to us during the course of our 

review. The reports from the database were compiled by HUD field office staff. Of the 

1,134 entitlement communities included in HUD’s database, we did not report on the 

percentage obligated for administration for 44 entitlement communities. We excluded 36 

entitlement communities because the reports HUD provided were not for program year 

2010, 7 entitlement communities because HUD did not provide their reports, and 1 

entitlement community because HUD provided two different versions of the report. For 

additional information on our scope and methodology, see appendix I. 
 

Page 19 GAO-13-247 CDBG Administrative Costs 

Figure 3: Percentage of CDBG Funds Entitlement Communities Obligated for 

Administration, Program Year 2010 

The financial summary reports HUD provided for states were for program 

year 2010 or 2011. We could not use these reports to describe state 

grantees’ compliance with the administrative limit because, as mentioned 

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

spent on administration rather than the percentage of each program 

year’s obligations, as is the case for entitlement communities. HUD 

officials said that they determined compliance with the limit when grants 

were fully spent by using data on expenditures in IDIS to generate a 

financial summary report. 

Although they did not provide specifics, HUD officials told us that 

technical changes would have to be made to IDIS in order to give it the 

capability to generate reports on compliance with the administrative limit 

across the program. They also told us that any changes would need to be 

approved by the IDIS Change Control Board and then assigned to 

contractors. They added that such changes would not be possible for at 

least 12 to 18 months because a number of IDIS updates were already 

planned for 2013. Further, they noted that the changes were unnecessary 

because the agency’s practice was to rely on field office staff to monitor 
 

Page 20 GAO-13-247 CDBG Administrative Costs 

and assess, at least annually, individual grantees’ compliance with the 

administrative limit rather than to assess compliance across the program. 

Without information on annual compliance across the program, however, 

HUD lacks the ability to monitor the grantees across the program. As 

noted previously, its recent attempt to do so was labor intensive and 

yielded unreliable results. In addition, because our analysis showed that 

the majority of entitlement communities in program year 2010 obligated 

between 15 percent and 20 percent of their funds for administration, 

HUD’s lack of information on compliance across the program limits its 

ability to determine how many may be affected by more stringent 

requirements. 

A recent proposal by a House appropriations subcommittee to reduce the 

percentage of CDBG program funds that may be used for administration 

below the traditional 20 percent has highlighted the need for HUD to 

analyze and report on grantees’ compliance with the current limit across 

the program. While grantees are responsible for complying with the limit, 

internal control guidance states that information needed to assess 

compliance with laws and regulations should be timely and reported in a 

manner that allows for effective monitoring. However, HUD faces difficulty 

in routinely reporting compliance across the program. Because of 

limitations in IDIS, HUD’s recent attempt to report on grantee compliance 

across the program for a single year required a labor-intensive process that 

ultimately produced data that were not reliable. Specifically, grantees are 

able to save in IDIS certain information needed to determine the amount 

they used for administration, but they are not required to do so. As a result, 

these data may not be readily available to HUD officials. Furthermore, 

system limitations prevent HUD officials from extracting and analyzing data 

contained within grantees’ financial summary reports that would allow HUD 

to assess and report on compliance across the program. Without this 

information, HUD cannot provide timely assurance that recipients are 

adhering to the limit or the number that are close to the limit. Additionally, a 

standard report listing the percentage that each grantee spent on 

administration would be a useful evaluative tool. For example, it would help 

determine the potential impact of any change to the statutory limit on 

administrative funds. 

Conclusions 
 

Page 21 GAO-13-247 CDBG Administrative Costs 

In order to demonstrate compliance across the program with the statutory 

limit on funds that can be used for administration, the Secretary of HUD 

should direct the Assistant Secretary for Community Planning and 

Development to develop a process for generating annual reports on 

compliance across the program, including making any requisite changes 

to IDIS to better ensure that the agency has complete and analyzable 

data to support such reporting. 

We provided a copy of this draft report to HUD for its review and 

comment. HUD provided written comments on the draft, which are 

summarized below and appear in their entirety in appendix II. HUD did 

not specifically state whether it agreed or disagreed with our 

recommendation but did provide comments on some of our findings and 

conclusions. 

First, HUD responded to our conclusion that it lacks information across 

the program on grantees’ compliance with the 20 percent limit on 

administration. HUD stated that our conclusions incorrectly implied that 

the agency was subject to a statutory or regulatory requirement to 

determine cumulative grantee obligations relative to the limit on a 

nationwide or programwide basis. HUD noted that determining a 

nationwide statistic on the percentage of funds obligated for 

administration would reveal nothing about individual grantee compliance. 

However, our recommendation would not require HUD to determine 

cumulative obligations or a nationwide statistic on the percentage of funds 

obligated. Rather, our recommendation would require that HUD generate 

annually the same type of compliance report it prepared in 2011 in 

response to a congressional request. That report included the percentage 

that each CDBG grantee used for administration across the program. 

Rather than being statutory or regulatory, our conclusion speaks to 

general management of the program. Specifically, internal control 

guidance states that information needed to assess compliance with laws 

and regulations should be timely and reported in a manner that allows for 

effective monitoring and prompt action if shortcomings are found. Such an 

approach would also be consistent with congressional concerns about the 

efficient use of CDBG funds. As a result, we clarified that we were 

recommending that HUD report on compliance across the program. We 

also added language to further stress the importance of such reporting. 

Second, HUD said that it was unclear why we concluded that the 

database the agency compiled to report on compliance with the limit on 

administration in program year 2010 was unreliable. HUD pointed out that 

Recommendation for 

Executive Action 

Agency Comments 

and Our Evaluation 
 

Page 22 GAO-13-247 CDBG Administrative Costs 

we used the financial summary reports contained within the database to 

prepare our own analysis. Our draft report did note that we had 

determined that these financial summary reports were reliable for the 

purposes of describing grantees’ compliance with the administrative limit. 

What we found to be unreliable was HUD’s analysis of them. For 

example, as noted in the scope and methodology appendix, we found a 

number of data entry errors in the database field that was to indicate the 

percentage of funds each grantee used for administration. We also were 

unable to verify some of the percentages that were based on the source 

reports. While a number of these errors were resolved during the course 

of our communication with HUD, we decided that it would be more 

reliable to use the financial summary reports to create our own summary 

analysis of the percentages of funds that grantees used for administration 

in program year 2010. We made no change in response to this comment. 

Third, HUD responded to our conclusion that almost 60 percent of 

entitlement communities obligated an amount that was at or close to the 20 

percent limit. HUD commented that this conclusion implied that if HUD had 

more accurate data, it would find that some grantees were actually 

exceeding the 20 percent limit. Our draft report made no such linkage; 

instead, it noted that because our analysis showed that the majority of 

entitlement communities in program year 2010 were at or near the 

administrative limit (between 15 and 20 percent), HUD’s lack of information 

on compliance across the program limits any type of analysis to determine 

how many may be affected by more stringent requirements. HUD also 

observed that 15 percent was not “just under” the 20 percent limit. In 

response to this comment, we revised how we presented these data. 

Finally, HUD responded to a statement in the draft report concluding that 

HUD’s process for assessing compliance with the administrative limit did 

not allow for effective monitoring across the program. HUD provided 

additional information about the types of reviews that its field office staff 

conduct annually of state grantees’ compliance with the limit on 

administration. However, our point was related not to HUD’s assessment 

of state grantees’ compliance but to our conclusion that HUD did not 

routinely report on compliance across the program. As our draft report 

noted, HUD can determine an individual grantee’s compliance with the 

administrative limit but has to review each individual grantee’s report and 

manually create a summary of compliance across the program. We made 

no change in response to this comment. 

HUD also provided a technical comment, which was incorporated into the 

report as appropriate. 
 

Page 23 GAO-13-247 CDBG Administrative Costs 

We are sending copies of this report to appropriate congressional 

committees and the Secretary of Housing and Urban Development. In 

addition, this report will be available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staff have any questions on the matters discussed in this 

report, please contact me at (202) 512-8678 or by e-mail at 

shearw@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. 

GAO staff who made major contributions to this report are listed in 

appendix III. 

William B. Shear 

Director, Financial Markets and 

 Community Investment 
Appendix I: Objectives, Scope, and 

Methodology 

Page 24 GAO-13-247 CDBG Administrative Costs 

The objectives of this report were to describe (1) the types of activities 

that are subject to the 20 percent limit on administration and the ways in 

which grantees have used their administrative funds, (2) trends in funds 

available to grantees for Community Development Block Grant (CDBG) 

administration and the impact of these trends on grantee spending, and 

(3) the Department of Housing and Urban Development’s (HUD) reporting 

on grantee compliance with the limit. 

To identify and describe the types of activities subject to the 20 percent 

limit on funds that can be used for administration, we examined and 

summarized relevant statutes, HUD regulations, and Office of 

Management and Budget guidance. We also interviewed HUD officials 

and a purposive, nonrandom sample of 12 CDBG grantees: the cities of 

Albany, Georgia; Antioch, California; Bowling Green, Kentucky; Houston, 

Texas; Newark, New Jersey; Oshkosh, Wisconsin; and Tustin, California; 

the counties of Northampton in Pennsylvania and Oakland in Michigan; 

and the states of Alaska, North Carolina, and Ohio. We used a database 

HUD field staff compiled that included the percentage that each grantee 

used for administration for program year 2010 as a starting point for 

selecting these grantees and used a two-step purposeful sampling 

procedure to select grantees with a range of experiences.1

 The 

entitlement communities list contained 1,134 grantees (including 

Washington D.C. and territories) and the state list contained 49 states 

and Puerto Rico. In the first step, we selected 47 grantees. We 

intentionally chose entitlement communities based on the percentages 

obligated for administration (less than or equal to 15 percent, 16 percent 

to 20 percent, and greater than 20 percent) and region of the country 

(Midwest, Northeast, South, and West).2

 From the entitlement community 

list, we selected three grantees within each of the 12 subgroups created 

by the combination of the four regions and three administrative spending 

levels. Applying these criteria resulted in 35 entitlement communities.3

 

1

For state grantees, the percentage included in the database was generally for the most 

recently completed grant year. Compliance with the administrative limit for entitlement 

communities is based on obligations in a given program year. Compliance for states is 

based on expenditures over the life of the grant. 

2

We combined the West and Pacific U.S. Census regions into one region and called it 

“West.” 

3

Because there were only 2 entitlement communities in the Northeast that met our other 

criteria, we could select only 2 in that region, resulting in 35 instead of 36 entitlement 

communities. 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology 

Page 25 GAO-13-247 CDBG Administrative Costs 

From the state list, we randomly selected three grantees from each region 

for a total of 12 states. In the second step, we selected 12 grantees from 

the 47 entitlement communities and states initially selected. Specifically, 

for the 47 entitlement communities and states, we determined their fiscal 

year 2012 CDBG allocations and categorized them as above or below the 

median allocation of entitlement communities or states, based on the type 

of grantee. We then selected 12 grantees based on diversity in allocation 

amount, percentage used for administration, and region of the country. 

Because we used a nongeneralizable, purposive sample to select 

grantees, our findings cannot be used to make inferences about other 

grantees not in the sample. However, we determined that the selection of 

these grantees was appropriate for gaining an understanding of grantees’ 

experiences with the administrative limit and that the selection would 

generate valid and reliable evidence to support our work. We found 

HUD’s database reliable for selecting our sample; however, as described 

later in this appendix, we did not find the database reliable for the 

purpose of describing grantees’ compliance in program year 2010. 

To determine how grantees have used their administrative funds, we 

interviewed HUD officials, reviewed the selected grantees’ annual reports 

to HUD for 2010 or 2011, and reviewed and summarized expenditure 

data from HUD’s Integrated Disbursement & Information System (IDIS).4

Specifically, we analyzed the expenditures reported under broad 

categories, or matrix codes, used to record administrative expenses to 

determine which codes were the most often used to report the grantees’ 

administrative expenditures from fiscal years 2001 through 2011. We 

assessed the reliability of these data by performing basic electronic 

testing of relevant data elements, reviewing HUD’s data dictionaries, and 

interviewing HUD officials knowledgeable about the data. We determined 

that these data were sufficiently reliable for analyzing different 

administrative spending categories. We also reviewed HUD’s guidance 

and training manuals to determine the extent to which HUD was providing 

guidance on funds that can be used for administration. 

To determine the availability of CDBG funds for administrative expenses, 

we interviewed HUD officials and analyzed CDBG allocation data. 

Specifically, we used the programwide CDBG allocation amount to 

 

4

IDIS is a management information system that consolidates reporting processes across 

HUD’s Office of Community Planning and Development programs. 
Appendix I: Objectives, Scope, and 

Methodology 

Page 26 GAO-13-247 CDBG Administrative Costs 

calculate the aggregate amount available to grantees for administrative 

expenses under the 20 percent limit for each year from 2001 through 

2012.5

 To assess the reliability of these data, we reviewed information 

about the data and compared selected allocation amounts with other 

sources. We determined that the data were sufficiently reliable for 

estimating the amount of CDBG funding that could be available for 

administrative expenses. We also interviewed the selected grantees, 

HUD officials, and representatives from national organizations 

representing CDBG grantees to obtain their views on whether the 20 

percent limit had affected the types of activities grantees chose to fund. 

The national organizations we interviewed were the Council of State 

Community Development Agencies, National Association for County 

Community and Economic Development, and National Community 

Development Association. 

To determine HUD’s ability to report on grantee compliance with the 

administrative limit, we interviewed HUD officials and the selected 

grantees about how HUD verifies and reports grantees’ compliance. We 

then compared HUD’s reporting on grantee compliance with internal 

control standards for the federal government. In order to describe 

grantees’ compliance in program year 2010, we first attempted to use the 

database HUD had compiled that included the grantees’ financial 

summary reports—showing the calculations used to determine 

compliance with the administrative limit—and the percentage that each 

grantee used for administration in program year 2010. According to HUD 

officials, the database was compiled by field office staff manually in 

response to a congressional request. The staff entered the percentage 

that each grantee used for administration, as reported in the grantee’s 

financial summary report, and then attached the report to the database. In 

order to assess the reliability of the database, we compared the 

percentages entered in the database to the percentages in the attached 

financial summary reports. We found a number of data entry errors and 

were unable to verify some of the percentages based on the source 

reports. While a number of these errors were resolved during the course 

of our communication with HUD, we decided it would be more reliable to 

 

5

CDBG grantees may also use a portion of their program income to fund administrative 

expenses. Grantees may use no more than 20 percent of the sum of their CDBG grant 

and program income for administration. Because program income data were not readily 

available, our analysis of available funds for administration may be underestimated. In 

addition, not all grantees use 20 percent of their funds for administration. 
Appendix I: Objectives, Scope, and 

Methodology 

Page 27 GAO-13-247 CDBG Administrative Costs 

use the attached financial summary reports to create our own summary of 

the percentages of funds that grantees used for administration in program 

year 2010. As previously discussed, the reports from the database were 

compiled by HUD field office staff. For some individual grantees, we used 

updated financial summary reports and information provided to us by 

HUD or grantees. Of the 1,134 entitlement communities included in 

HUD’s database, we did not report on the percentage obligated for 

administration for 44 entitlement communities. We excluded 36 

entitlement communities because the reports HUD provided were not for 

program year 2010, 7 entitlement communities because HUD did not 

provide their reports, and 1 entitlement community because HUD 

provided two different versions of the report. We determined that the 

financial summary reports we used in our analysis were reliable for the 

purposes of describing grantees’ compliance with the administrative limit 

by reviewing documents describing how the reports were prepared and 

interviewing HUD officials about their oversight of the reports. As noted 

previously, we assessed IDIS data on administrative expenses, which are 

included in the financial summary reports, and determined they were 

reliable for our purposes. 

We conducted this performance audit from July 2012 to March 2013 in 

accordance with generally accepted government auditing standards. 

These standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 
Appendix II: Comments from the Department 

of Housing and Urban Development 

Page 28 GAO-13-247 CDBG Administrative Costs 

Appendix II: Comments from the Department 

of Housing and Urban Development 
Appendix II: Comments from the Department 

of Housing and Urban Development 

Page 29 GAO-13-247 CDBG Administrative Costs 
Appendix II: Comments from the Department 

of Housing and Urban Development 

Page 30 GAO-13-247 CDBG Administrative Costs 
Appendix III: GAO Contact and Staff 

Acknowledgments 

Page 31 GAO-13-247 CDBG Administrative Costs 

William B. Shear, (202) 512-8678 or shearw@gao.gov

In addition to the individual named above, A. Paige Smith, Assistant 

Director; Emily Chalmers; Pamela Davidson; Anar Ladhani; John McGrail; 

Josephine Perez; and Deena Richart made key contributions to this 

report. 

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(250683)
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