In fiscal year 1998, the Congress appropriated about $4.9 billion for the Community Development Block Grant Program. In particular, we examined whether (1) HUD’s on-site monitoring of grantees under the Grants Management System is adequate and (2) the Integrated Disbursement and Information System provides the data HUD needs to accurately assess grantees’ performance. Monitoring Under the Grants Management System Does Not Ensure That Grantees Are Managing Their Funds Appropriately to Achieve Program Objectives

While the Grants Management System provides a logical, structured approach to managing the four block grant programs, CPD’s monitoring under the system, of which IDIS is a critical part, does not ensure that program objectives are being met and that funds are being managed appropriately. Furthermore, CPD headquarters has reduced its oversight of the field offices because of a desire for a more collaborative relationship and because of resource constraints. Such breakdowns in monitoring make the Department vulnerable to fraud, waste, and abuse in its formula grants programs. CPD’s Implementation of the Grants Management System Does Not Ensure That On-Site Monitoring Occurs and That the Poorest Performing Grantees Are Reviewed

While HUD’s Grants Management Policy Notebook emphasizes the importance of on-site monitoring in implementing the Grants Management System, stating that on-site monitoring is an essential tool for determining whether important program requirements are being met, the five field offices we visited have generally conducted limited on-site monitoring of grantees and of those grantees CPD identifies as most in need of oversight or assistance. As we discuss in chapter 3, we found during our visits to field offices that grantees were not always entering complete and accurate information into IDIS and that the system cannot provide timely and accurate information on grantees’ performance. HUD’s Inspector General has also specifically faulted CPD’s monitoring of grantees. According to the directors of the field offices, the level of on-site monitoring is also lower because of a combination of a lack of staff resources and travel funds and increased responsibilities. Financial and Management Information System Is Not Providing the Information Needed to Manage and Monitor Grant Programs

CPD’s chief monitoring tool for the Grants Management System—the Integrated Disbursement and Information System (IDIS)—does not produce the complete, accurate, and timely information that the Department should obtain from a computerized database to effectively manage and monitor almost $6 billion in block grants. Furthermore, CPD cannot ensure that IDIS is safe from fraud and abuse because it has not put into place the security controls needed to safeguard the formula block grant funds. Specifically, (1) the process for establishing and maintaining grant activity information is time-consuming and cumbersome and provides ample opportunity for major data entry problems, (2) correcting major data entry problems in IDIS is difficult, (3) IDIS does not readily enable grantees to accurately report income generated by grant-funded revolving funds (program income), and (4) grantees find it difficult to produce comprehensive and timely reports using IDIS.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on whether controls are in place to ensure that block grant programs' objectives are being achieved and that funds are being managed appropriately, focusing on whether: (1) the Department of Housing and Urban Development's (HUD) on-site monitoring of grantees under the Grants Management System is adequate; and (2) the Integrated Disbursement and Information System provides the data HUD needs to accurately assess grantees' performance.

What GAO Found

GAO noted that: (1) while the Grants Management System provides a logical, structured approach to managing the four block grant programs, HUD's monitoring under the system--including on-site monitoring of grantees and the Integrated Disbursement and Information System--does not ensure that the programs' objectives are being met and that grantees are managing their funds appropriately; (2) HUD considers its on-site monitoring of grantees essential, but GAO found this monitoring is inadequate; (3) the five field offices GAO visited (accounting for about 20 percent of all block grant funds in fiscal year (FY) 1998, or $1.18 billion) conduct on-site monitoring infrequently because of a shift to a more collaborative relationship with the grantees and because of a lack of resources, according to the directors of the field offices; (4) furthermore, on-site monitoring seldom targets the grantees that receive the poorest evaluations from the field officers compared with other grantees, and this monitoring is not uniform or comprehensive because the field officers lack specific guidance; (5) the reviews of some grantees conducted by GAO and others, especially HUD's Inspector General, have identified significant problems in grantees' finances and performance; (6) while such reviews are not generalizable to all block grant programs, these reviews, along with the breakdowns in monitoring, call into question the integrity of programs funded at nearly $6 billion in FY 1998, including their safeguards against fraud, waste, and abuse; (7) for its part, HUD's Integrated Disbursement and Information System does not provide the information HUD needs to accurately assess grantees' performance and thus does not compensate for these breakdowns in monitoring; (8) fraught with major design flaws, the information system makes the process for establishing and maintaining accounts difficult and provides ample opportunity for major problems with entering data, does not allow such problems to be corrected easily, cannot track the program income from the revolving funds that grantees establish, does not provide timely and accurate information, and has difficulty producing reports; and (9) GAO also determined that the security controls for the information system are weak and therefore do not provide assurance that the system is safe from fraud and abuse.