Community Development Block Grants: the Case for Reform
June 29, 2006
The Community Development Block Grant program is a multi-billion dollar program that has exceptional flexibility compared to most other grant programs. Operated out of the Department of Housing and Urban Development, Community Development Block Grants give local officials broad discretion on the use of the funds for housing, economic development activities, social services, and infrastructure.
Critics of Community Development Block Grants argue that while flexibility abounds, the program has insufficient accountability, ambiguous goals, untargeted funding and no standardized outcome indicators. The purpose of this hearing is to review the issues surrounding program formulas, recipient communities, and management of grants within the Community Development Block program. The hearing will also consider aspects of the reform package, the "CDBG Reform Act of 2006," that was drafted by the Department of Housing and Urban Development and recently delivered to Congress.
Grantee and sub-grantee level spending information is not available to Congress, the Administration, or the public, making it difficult to accurately gauge the effectiveness of the Community Development Block Grant (CDBG) program.
In 2006, HUD has started to collect new performance measurements for the CDBG program, but according to the Inspector General’s office, performance measures will likely be undermined by vague criteria and a failure to improve deficient enforcement tools.
The CDBG formulas have not been updated since the late 1970’s. As a result, many wealthy communities receive 3-4 times more CDBG funds per capita than many poor communities.
As one example of unfair targeting, Temple, TX has an average $20,000 per capita income and receives $15 per capita in CDBG funds. Meanwhile, wealthy Oak Park, IL averages $36,000 per capita income and receives $39 per capita from the program.
Once a community becomes a CDBG “entitlement community,” no matter how wealthy the community becomes over time, it is guaranteed CDBG funding every year. There is no mechanism for graduating out of the program, resulting in real per capita CDBG funding to all communities declining from $48 in 1978 to $13 in 2006.
Impact on Taxpayers:
During the past 2.5 years, the Inspector General has audited a small number of grantees (only 35 audits for 1,180 grantees) and yet found more than $100 million in waste, fraud and abuse of CDBG funds. If the Inspector General had the resources to comprehensively audit the program, the total waste and abuse of funds could be many times greater.
The public has no access to community’s plan for how it will use CDBG funds missing a valuable opportunity to provide local oversight.
Communities that don’t need the help are raiding funds from the neediest communities.
These Findings Demand a Response:
The CDBG program should be fully transparent as defined by making available on a public website every grant application, itemized expenditure, standardized performance measurement and other similar information.
HUD should standardize performance measures and require grantee performance. Congress should empower the Secretary to ensure that grantees consistently wasting or abusing funds face real and immediate consequences.
