These communities aligned award decisions with local priorities  and, in some cases, elected officials and the budget process factored  strongly in funding decisions. Use of Local Priorities to Review and Select Projects

Officials from a majority of the entitlement communities in our sample  noted that they based their funding priorities on various assessments of  local needs, and these priorities influenced the selection of CDBG  projects. Entitlement Communities Sought Public Input and Communicated about CDBG Funding through Methods such as Public Hearings, Citizen Advisory Committees, and the Internet

All of the entitlement communities in our sample reported that they held at  least two public hearings annually and some used citizen advisory  committees, surveys, and other outreach methods to involve and inform  the public about their distribution of CDBG funds. States also Used Different Methods to Distribute Funds to Non-Entitlement Communities and Communicate with Recipients and the Public

States used program flexibility to distribute CDBG funds by varying  combinations of three methods: competitive, open application, or formula,  and are also required to describe methods in annual plans and consult  with eligible non-entitlement community recipients in developing  methods. States also used the open application distribution method to fund a variety  of eligible activities that met certain threshold criteria as long as funds  were available. From our review of all 50 states’ methods of distribution described in  annual plans, we found that most states used a combination of the  competitive and open application distribution methods to distribute funds  to non-entitlement communities within defined CDBG-eligible categories,  while a few states utilized a formula to distribute some funds. States Used Several Feedback Methods to Communicate Methods of Distribution and Provide Feedback to Non- Entitlement Communities and the Public

All five states in our sample noted that they communicated their methods  of distribution to non-entitlement communities and the public through  their required annual plans. HUD Staff and Monitoring Results Reported Very Few Findings or Concerns Related to Methods of Distribution

HUD staff from the 17 field offices that monitor the entitlement  communities and states in our sample reported very few findings or  concerns related to methods of distribution. Because HUD monitors the program  using risk analysis and because of the flexibility granted to entitlement  communities and states to distribute funds, issues made about the choice  of methods of distribution are not rated high-risk. HUD’s monitoring tends to focus on higher-risk areas such as ensuring  funds are spent on eligible activities that meet one of the national  objectives. HUD staff also noted a few  cases relating to requirements for states to describe their methods of  distribution. Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) identify and describe examples of the various  methods by which entitlement communities use and distribute their CDBG  funds to individual projects within their jurisdiction; (2) identify and  describe examples of the various methods by which states distribute  CDBG funds to non-entitlement communities; and (3) describe and  examine HUD’s role in overseeing the methods by which entitlement  communities and states distribute their CDBG funds. To identify and describe the methods by which entitlement communities  use and distribute their Community Development Block Grant (CDBG)  funds to individual projects within their jurisdictions, we conducted a  literature review and examined reports on the CDBG program and a report  on managing CDBG grantees. We interviewed the CDBG administrators for each state to obtain an  understanding of their methods of distribution and the level of  transparency in their process and reviewed relevant documentation. In addition, we interviewed HUD staff from the 17 field offices  that oversee our sampled entitlement communities and states to gain an  understanding of their policies and practices relating to oversight of  methods of distribution and to determine how they ensure that states  complied with the requirement to publish their distribution methods. We also reviewed  these communities’ annual action plans and other relevant documentation.
Why GAO Did This Study

The Housing and Community Development Act of 1974 (act) creating the Community Development Block Grant (CDBG) program provides entitlement communities (metropolitan cities and urban counties) and states with significant discretion in how they distribute funds for eligible activities. Because of this discretion, entitlement communities may use a variety of processes to select individual projects and states may also use different methods to distribute funds to non-entitlement communities. GAO was asked to report on (1) the various methods by which entitlement communities use and distribute their CDBG funds to individual projects within their jurisdictions; (2) the various methods by which states distribute CDBG funds to non-entitlement communities; and (3) HUD's role in overseeing these methods. GAO interviewed CDBG administrators for 20 entitlement communities (the 10 largest by funding and 10 randomly selected) and 5 states (reflecting variety of methods used and geography) and reviewed documents related to their CDBG funding decisions, including the annual action plans for all 50 states. GAO also spoke with CDBG stakeholders, reviewed relevant statutes and regulations, interviewed HUD field office staff and reviewed monitoring documentation.

What GAO Found

Reflecting the program's flexibility, the 20 entitlement communities in GAO's sample distributed CDBG funds by various methods, but most used some level of competition in awarding funds. Distribution priorities and practices were based on various assessments of local needs, and in some communities, the funding decisions were also part of the local budget process. To communicate processes and award decisions to the public, all the communities in GAO's sample held at least two public hearings, more than half formed citizen advisory committees, and a few conducted needs assessment surveys, among other outreach methods. Sampled entitlement communities varied in the level of detailed criteria they used to evaluate applications, but they made the information available to potential applicants through published instructions, workshops, or the Internet. From a review of all 50 states' methods of distribution described in annual actions plans, GAO found that states used a formula, competition, open application, or a combination of methods to distribute funds to non-entitlement communities. Most states used a combination of competitive and open application processes. Whatever their method of distribution, the five states in GAO's sample evaluated applications to some degree against state priorities, which reflected a variety of needs assessments. States using some competitive distribution processes also incorporated their priorities into the scoring of applicants. All five states communicated their methods of distribution to non-entitlement communities and the public through their required annual plans and additional publications, workshops, and intergovernmental organizations. Of the non-entitlement community officials with whom GAO spoke in 10 localities, all agreed that their states clearly communicated their distribution process. HUD staff from 17 field offices (which monitor the entitlement communities and states in GAO's sample) reported very few findings or concerns related to methods of distribution. Staff told GAO that the lack of findings was due partly to program design (entitlement communities and states can choose distribution methods) and partly to HUD's risk-based monitoring. Because of the flexibility granted to entitlement communities and states, issues related to distribution methods are not rated high-risk. HUD has focused on higher-risk areas such as ensuring funds were spent on eligible activities. However, because states distribute funds to other government jurisdictions, they are required to describe their distribution methods in their plans. As part of its monitoring review, HUD staff check to ensure that the methods of distribution that state plans described were the methods used. Though few issues arose from the reviews, in a few cases HUD staff recommended that states enhance these descriptions. HUD staff also monitor grantees to ensure that public hearing and notice requirements have been met. Staff noted that none of the complaints to HUD offices had pertained to methods of distribution.