CDBG-DR Expenditure Reporting and Status Designations: Updated Methodology

CDBG-DR Expenditure Reporting and Status Designations: Updated Methodology

INSIGHTi

CDBG-DR Expenditure Reporting and Status
Designations: Updated Methodology
March 1, 2022
In January 2022, the U.S. Department of Housing and Urban Development (HUD) published a new
version of its monthly expenditure report on Community Development Block Grants for Disaster
Recovery (CDBG-DR). The Monthly CDBG-DR Grants Financial Report provides a snapshot of grant
amounts, unexpended balances, and spending status (“on pace” or “slow spender”). Prior to the January
publication, HUD had postponed publication of monthly reporting on expenditure status since April 2020,
citing potential effects of the COVID-19 pandemic on grantee administration and implementation of
CDBG-DR projects. With the January report, HUD unveiled an updated methodology for designating
grant spending status, with the intent to “more accurately reflect State and local government long-term
disaster recovery efforts.”
This Insight reviews CDBG-DR monthly financial reporting and expenditure status designations. It also
describes HUD’s recent methodological change for assessing expenditure status and concludes with some
observations for congressional consideration. For more background information on CDBG-DR, see CRS
Report R46475, The Community Development Block Grant’s Disaster Recovery (CDBG-DR) Component:
Background and Issues, by Joseph V. Jaroscak.
CDBG-DR Financial Reports
Under 2 C.F.R. §200, HUD is required to monitor and track grantee performance. HUD uses the monthly
reports to track the status of individual grants based on the amount of funds expended and the rate of
expenditure. The Monthly CDBG-DR Grants Financial Report currently includes data on six descriptive
components and four analytical components. The descriptive data components are:
1. grantee name;
2. grant identification code;
3. grant award amount;
4. unexpended balance amount;
5. disaster year; and
6. grant age in months.
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The analytical components included in the monthly CDBG-DR financial reports are:
1. anticipated spending percentage;
2. percent of funds drawn down;
3. spending status (i.e., “on pace” or “slow spender”); and
4. amount behind pace.
These analytical components provide the basis for HUD’s assessment of grantee capacity in carrying out
CDBG-DR activities and expending funds in a timely manner.
Methodological Change
Previously, HUD assessed CDBG-DR grant expenditure using a “linear-burn rate” methodology which
compared a grantee’s three-month rolling average of expenditure to the rate of expenditure necessary to
meet its target grant closeout date (i.e., the unexpended balance divided by the remaining months until the
target closeout date). Since 2015, CDBG-DR grant agreements have required grantees to expend their
entire allocation within six years (unless extended).
A 2019 analysis by the U.S. Government Accountability Office (GAO) indicated potential discrepancies
between “slow spender” designations published in the monthly reports and HUD’s internal assessments
and documentation of grantee status. More recently, HUD’s Office of Inspector General (HUD-OIG)
published a report—during the postponement—that included recommendations for improvements to a
range of HUD tools for CDBG-DR grant monitoring, including the Monthly CDBG-DR Grant Financial
Report. Regarding the monthly reporting, HUD-OIG observed fluctuations in spending status for some
grantees, month-to-month, under the previous methodology. The analysis indicated that such fluctuations
might have limited the efficacy of HUD’s monthly financial reporting as a tool for assessing and
projecting long-term grantee performance, needs, and risk. In its report, HUD-OIG acknowledged that
HUD’s Office of Community Planning and Development (HUD-CPD) was in the process of updating its
methodology at the time of publication.
The updated methodology adopts a “best-fit” model, which accounts for actual grantee spending patterns
at different stages in a grant period, by calculating a baseline expenditure rate using data from all grants
with the same target closeout date. Recognizing that a variety of factors may contribute to the pace of
grant expenditure, the methodology allows for some variance, but establishes a threshold below the
baseline at which a grantee would be designated as a “slow spender.” Based on its reporting on the
updated methodology, HUD anticipates that this new approach will be more predictive of a grantee’s
ability to spend funds in a timely manner, on a long-term basis.
The final monthly spending report published with the previous methodology, for March 2020, identified
approximately 65% of active grants in the slow spender category. In HUD’s February 2022 report—the
second monthly report using the revised methodology—about 30% of grants were designated as slow
spenders.
Concluding Observations
HUD analysis of past CDBG-DR grants indicates that the majority of grant funds are expended within
three to four years, and the majority of recovery activities are completed after six years. Furthermore,
HUD has concluded that new activities related to the covered event are unlikely eight or ten years after
the disaster. Analysis from a 2021 GAO report suggests that the length of time CDBG-DR grants typically
remain open may contribute to potential fraud risks. To that end, accurate reporting on CDBG-DR

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spending status plays an important role in HUD’s ability to assess and mitigate potential fraud risk, as
well as performance and capacity.
In addition to methodological changes for the Monthly CDBG-DR Grants Financial Report, HUD-OIG
has identified recommendations to enhance several of HUD’s CDBG-DR monitoring tools. HUD-CPD
responded to HUD-OIG with actions that it has taken or plans to take to address most of the
recommendations. However, HUD-CPD also expressed concern that the recommendations are not tied to
regulations, allowing for potential discrepancies in interpretation and challenges in implementation.
CDBG-DR, unlike other federal recovery assistance programs provided by the Federal Emergency
Management Agency and the Small Business Administration, is not permanently authorized. Consistent
with GAO’s recommendation, some Members of Congress have introduced legislation that would
permanently authorize CDBG-DR or a similar program. For example, the Reforming Disaster Recovery
Act of 2021 (H.R. 4707 and S. 2471), introduced in the 117th Congress, would authorize CDBG-DR as a
standing program and set in place a series of statutory requirements for grantee performance and
reporting. Under the bill, grantees would be required to meet annual spending thresholds set by the HUD
Secretary. In the 116th Congress, a substantially similar bill, H.R. 3702, was passed by the House. Another
bill introduced in the 117th Congress, H.R. 2809, the Natural Disaster Recovery Program Act of 2021,
would establish a separate program to address unmet needs of states and tribal entities in disaster
recovery.

Author Information

Joseph V. Jaroscak

Analyst in Economic Development Policy

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