Rating: Ineffective 1.1 Is the program purpose clear? Answer: NO Question Weight: 20% Explanation: The program does not have a clear and unambiguous mission. Both the definition of "community development" and the role CDBG plays in that field are not well defined. Evidence: Throughout CDBG's legislative history there has been ambiguity between flexible, steady funding given to localities and the requirements to benefit low- and moderate-income individuals and neighborhoods. The program's statute cites multiple purposes, but the primary objective of the program is stated as "the development of viable urban communities." In describing the means to achieve this end, the statute includes, "providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income." Another purpose was "consolidating a number of complex and overlapping programs of financial assistance to communities of varying sizes and needs." HUD will attempt to operationalize a definition or definitions for what represents a "viable urban community." 1.2 Does the program address a specific and existing problem, interest or need? Answer: NO Question Weight: 20% Evidence: The need to revitalize distressed urban communities certainly exists; however, the CDBG is unable to demonstrate its effectiveness in addressing this problem. Explanation: CDBG is not well designed to achieve its stated purpose. The program's targeting requirements allow grantees to spread resources thinly, thereby minimizing the ability of the funds to have an impact on its mission of developing communities. 1.3 Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort? Answer: NO Question Weight: 20% Evidence: Federal, state, and local programs as well as other for-profit and non-profits address similar objectives. Although CDBG pulls together several funding sources into one program, the funding mechanisms or beneficiaries of CDBG are often served by other programs. Explanation: CDBG funds are rarely the only resource for the community development activities of public agencies or nonprofits. CDBG is the only place-based community and economic development program in the Federal government that provides a steady stream of funding to local governments; however, several activities duplicate other local and Federal activities. Funds are typically delegated to local agencies or nonprofits to supplement projects. Other Federal agencies also fund similar activities while targeting funds to low- and moderate-income persons or areas include (HOME; Economic Development Administration; Community Services Block Grant). 1.4 Is the program design free of major flaws that would limit the program's effectiveness or efficiency? Answer: NO Question Weight: 20% Evidence: The model of providing flexible annual block grants to State and local governments is a strength of the program. However, the lack of standards and evidence of targeting funds limits the programs effectiveness and efficiency. Explanation: Concentrating CDBG dollars in specific areas represents a more effective use of these resources compared with communities that spread funds more thinly; however, the program provides few incentives (and no measures) for communities to target most funding to a specific neighborhood. The CDBG formula does not effectively target funds to the most needy communities and insufficient information exists regarding leveraging of private funds or cost effectiveness of the program's activities. 1.5 Is the program effectively targeted, so that resources will reach intended beneficiaries and/or otherwise address the program's purpose directly? Answer: NO Question Weight: 20% Evidence: CDBG funds can be targeted in two ways -- 1) by the CDBG formula to States and localities and 2) by grantees to benefit neighborhoods or households. The CDBG formula has become less targeted to community need over time. Further, the two main types of activities -- direct benefit and area benefit -- do not require maximum benefits for low- and moderate-income persons or areas. Explanation: Formula Targeting -- As new Census data was included in 1980, 1990, and 2000, the effect each time has been a weakening of the formula's targeting to needy communities. The formula does give more funding per capita to communities with greater need; however, the share going to the two hundred communities with the highest poverty rates has decreased from 50 to 40 percent of the total since their first year of funding (this represents a decrease of about $300 million each year). The 200 communities with the highest poverty rates receive 35 percent less CDBG funds for each poor resident than 200 communities with the lowest poverty rates. Grantee Targeting -- Requirements allow grantees to thinly spread resources across different specific neighborhoods. CDBG does not commit to a performance measure that encourage or track the extent to which grantees target funds (current measure tracks amount of funds spent on low- and moderate-income activities, not the targeting of funds to benefit low-income neighborhoods). For an activity that benefits individuals directly, only 51 percent of the beneficiaries must be low- or moderate-income. For a single family housing rehabilitation activity, however, this standard can only be meet if each dwelling unit is occupied by a low- or moderate-income household. Also, CDBG law allows nearly 40 percent of their grantees to fund activities that serve areas below the standard of 51 percent low and moderate income required of most grantees (however, only 13 percent of entitlement grantees used this exception for activities that amount to less than 2 percent of all CDBG expenditures). 2.1 Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program? Answer: NO Question Weight: 12% Explanation: The measurable long-term goals CDBG identifies in their strategic plan and annual performance plan/report have a weak connection to the program purpose and do not focus on outcomes. CDBG has not to developed a quantifiable measure that corresponds to its primary objective -- the development of viable urban communities -- or corresponding to the nine specific statutory program objectives. Evidence: CDBG, one of the Department's largest programs, is one of the only HUD programs unable to identify itself with any of the approximately 20 quantifiable long-term outcome goals included in HUD's strategic plan. The HUD Strategic Plan objective to "Strengthen Communities," includes: 1) provide capital and resources to improve economic conditions in distressed communities; and 2) help organizations access resources they need to make communities more livable. The outcome measure, "neighborhoods in which significant CDBG investments have been made will demonstrate increases in measures of neighborhood health" represents an start; however, the indicator has not yet been quantified. 2.2 Does the program have ambitious targets and timeframes for its long-term measures? Answer: NO Question Weight: 12% Explanation: The long-term outcome goal of increasing neighborhood quality has not yet been quantified. Therefore, it can have no targets or timeframes. Evidence: Measures in strategic plan and annual performance plans do not focus on long-term outcomes or have not yet been quantified. 2.3 Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals? Answer: NO Question Weight: 12% Explanation: CDBG's GPRA measures fall short of demonstrating progress toward achievement of the program purpose or strategic goals. CDBG is a flexible program that allows grantees to set their own program priorities, however, the program has not established a procedure to measure the extent to which grantees meet their own goals or the degree to which they meet the objectives of the program. Evidence: HUD reports CDBG accomplishments as two measures: number of households receiving housing assistance and number of jobs created. The number of households assisted with housing assistance does not contributes to our understanding of the program's contribution to the community or the person assisted (e.g., number assisted versus increase in home value or amount of annual energy savings). Likewise, the Annual Performance Plan measure, "the share of funds for activities that principally benefit low-and moderate-income persons" does not reflect grantee performance. Instead, the measure represents the percentage of funds spent on that national objective. The CDBG program does not have a targeting, leveraging, or efficiency measure. 2.4 Does the program have baselines and ambitious targets for its annual measures? Answer: NO Question Weight: 12% Explanation: Annual measures fail to inform about program's purpose (see 2.3). Evidence: See 2.3, but of the measures HUD reports, the goals for both jobs created and households assisted with housing assistance in 2003 are below 2002 actual. Furthermore, goals for 2004 are below the 2003 goal. 2.5 Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program? Answer: NO Question Weight: 12% Explanation: Grantees do not currently commit to national program goals. Evidence: The program does not take steps to influence grantee funding decisions according to program goals. HUD will begin to work with stakeholders and grantees to identify common objectives and goals of local CDBG programs. 2.6 Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need? Answer: YES Question Weight: 12% Explanation: There have been several independent evaluations of the CDBG program. Evidence: The most comprehensive was the 1995 study by the Urban Institute, " "Federal Funds, Local choices: An Evaluation of the Community Development Block Grant Program." As a result of this study, the Department created a concept for the CDBG program called "neighborhood revitalization strategy areas" (NRSAs) in to provide regulatory benefits to CDBG grantees who concentrated their CDBG expenditures in neighborhoods. In 2002 "The Impact of CDBG Spending on Urban Neighborhoods," conducted by the Urban Institute for HUD, provides some empirical evidence larger CDBG investments are linked to improvements in neighborhood quality. HUD is working to operatioinalize this study into measures of performance. 2.7 Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget? Answer: YES Question Weight: 12% Explanation: HUD budget submissions link performance information and budget requests. Evidence: The program will develop better performance measures to document how the budget request directly supports achieving the performance goals of the Department. See the Department's FY 2005 Congressional Justifications regarding the link between budget requests and accomplishments of performance goals. Has the program taken meaningful steps to correct its strategic planning deficiencies? Answer: YES Question Weight: 12% Explanation: HUD has taken several meaningful steps to address their lack perforamnce measures and improving timeliness among grantees. Evidence: HUD has taken the following steps to develop new performance indicators: 1) issued CPD notice 03-09 on performance measurement on September 3, 2003 to encourage and survey the extent of State and local performance measurement systems; 2) contracted with National Academy for Public Administration (NAPA) to recommend a performance measurement framework and potential indicators; 3) operationalize results of recent Urban Institute Study; 4) work with Council for State Community Development Agencies (COSCDA) to develop a outcome-oriented framework for measuresing State's accomplishments; 5) improve IDIS; and 6) testing pilots that make the Consolidated Planning process more results oriented and useful to communities. 3.1 Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance? Answer: NO Question Weight: 11% Explanation: CDBG collects a considerable amount of information from grantees; however, very little is organized and disseminated in a way that is useful for HUD and grantees to manage the program and improve performance. Evidence: According to a 1999 GAO report, "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. IDIS has major design flaws that make it difficult for grantees to enter information accurately and for field office officials and grantees to use the information to monitor performance." Grantees report to HUD over 800 data fields (300 unique to CDBG program); however, this program data is not organized and made publicly available in a way that encourages grantees to use CDBG funds in the most effective and efficient way. HUD has also begun to take steps to define the data system needs of CPD. 3.2 Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results? Answer: YES Question Weight: 11% Explanation: HUD managers are rated for performance based upon the Performance Accountability and Communication System (PACS) and the Leadership Development and Recognition System (LDRS) and have been for the last several years. Evidence: Under this system, the elements used to rate a manager's performance are linked to the Department's GPRA goals. Ratings, promotions and monetary awards are appropriate to the manager's accomplishments, or lack thereof. HUD has anecdotal evidence that suggest its aggressive policy regarding timely expenditure of CDBG funds resulted in the loss of some local Department heads jobs. 3.3 Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose? Answer: YES Question Weight: 11% Explanation: CDBG's unobligated balances are significant, but largely result from conflicts between the fiscal and program year of grantees. CDBG is not able to compare actual expenditures with intended use of funds, as required by the CDBG statute. HUD plans to develop a more rigorous mechanism for comparing actual expenditures against their intended use. Evidence: FY 2003 unobligated balances for CDBG were $1,104 million. From 1998 through May of 2003, HUD's IG issues 61 CDBG grantee audits and identified $28 million in findings or questioned costs and raised 638 concerns. There were approximately $5.2 million in sanctions in which grantees repaid their program accounts from non-Federal sources. Grantees submit annual action (spending) plans and at the end of the year HUD generates Consolidated Annual Performance and Evaluation Reports for each grantee, which details expenditures and accomplishment data. 3.4 Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution? Answer: NO Question Weight: 11% Explanation: The program does not have procedures in place to encourage the most efficient use of each dollar; however, staff are beginning to take some steps to improve program execution. Evidence: The program does not have efficiency measures and targets. According to a 1999 GAO report, "CPD has not established standard criteria for determining the level of performance grantees achieve, which means that CPD has no assurance that the grantees most at risk of failing to meet program requirements are consistently being identified for more intensive review." CPD will work to demonstrate how IDIS improvements will improve the productivity and efficiency of the program. HUD efforts have been successful at decreasing the number of grantees with more than 1.5 times their CDBG funds unspent. CPD has reduced the number of grantees failing to met this standard from a high of 330 to fewer than 40. Current policy requires any grantee that fails to meet the standard to do so within 12 months or risk losing funds. HUD dropped this performance goal because it no longer serves management purpose. 3.5 Does the program collaborate and coordinate effectively with related programs? Answer: YES Question Weight: 11% Explanation: Because of CDBG's broad flexibility, localities often use CDBG to fill programmatic gaps not covered by other Federal, State, or local programs. For example, homeless programs may provide funds for operation, but CDBG can provide funds for the facility. Evidence: In a sample survey of CDBG communities, about 39 percent of funds were channeled through nonprofits. Another recent study showed that 43 percent of all economic development spending was allocated to so-called "sub-recipient" agencies. Seventy-five percent of CDBG public service spending is carried out by non-governmental organizations. CDBG will work with other Federal community and economic development programs to improve coordination and focus on results. 3.6 Does the program use strong financial management practices? Answer: YES Question Weight: 11% Explanation: All participating units of general local government are required to have adequate financial accounting systems. Grantees, subgrantees and subrecipients are covered by OMB Circular A-133 governing periodic audits. HUD OIG staff audits selected grantees and HUD Field Office staff monitors approximately 400 grantees annually - such reviews include examination of appropriate source documentation. Evidence: HUD's OIG audits grantees and the program as a whole for existence of proper financial management systems, financial information that is timely and accurate, and whether grantees have financial statements and no material internal control weaknesses. From 1998 through May of 2003, HUD's IG issued 61 CDBG grantee audits and identified approximately $28 million in findings or questioned costs. In addition, HUD's Grants Management Program tracks all monitoring findings and corrective actions and resolutions to such findings. During FY 2002, HUD Field Office staff conducted 448 program monitoring visits of CDBG grantees and reviewed over 607 areas of financial program requirements with 294 findings, 234 areas of concern, 45 areas that have resulted in sanctions on over $3 million in funds returned to the program. Grantees, subgrantees and subrecipients are also required to have A-133 audits conducted. Has the program taken meaningful steps to address its management deficiencies? Answer: YES Question Weight: 11% Explanation: HUD has identified deficiencies in program management and performance and taken several steps to improve the planning and reporting processes. Evidence: The CPD Grants Management Program resulted from a series of deficiencies GAO identified. The system supports annual grantee reviews, risk analysis, monitoring workload identification, monitoring trips, results, and tracking of findings, concerns, corrective actions, sanctions, and dollars recovered. CDBG program took a series of management actions to significantly reduce the number of "untimely" grantees from over 300 to less than 50. The Department, as part of the President's Management Agenda, has taken steps to streamline the Consolidated Plan process and make it more results oriented. CDBG has procured funds to give the public an easily understood summary of grantee performance and use of funds. Program staff attempted to undertake extensive data clean-up to address the problems of over 100,000 incomplete and erroneous data entries; however, the effort only reduced the number to 70,000. The Department must determine the ability of IDIS, even with improvements, to continue to meet the needs of CPD to demonstrate performance accomplishments. CPD has posted individual expenditure and accomplishment data for its grantees. 3.BF1 Does the program have oversight practices that provide sufficient knowledge of grantee activities? Answer: YES Question Weight: 11% Explanation: The CDBG program has several levels of oversight that provide information about grantee activities. Evidence: HUD's IDIS system is a real-time disbursement system that collects detailed funded activity information with each draw made. In 1998 only 38 of the 85 grantees HUD had originally designated for on-site monitoring were determined to be among the lowest performing grantees. The Inspector General and an independent study performed in 1998 of six field offices and 11 grantees also reported that CPD's monitoring is inadequate. According to representatives of an independent accounting firm that reviewed CPD's actions to correct material weaknesses in CDBG, CPD headquarters' oversight of the field offices is almost nonexistent. HUD has taken several steps since to correct these deficiencies. In response, CPD developed a Grants Management Program to determine the relative risk to the Department that each grantee and its program pose. During FY 2002 HUD Field Office program staff monitored 448 CDBG grantees (roughly a 45 percent of all grantees) and identified 772 findings, 638 concerns and have taken 130 sanctions. Voluntary repayment to CDBG program accounts totaled approximately $5.2 million. 3.BF2 Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner? Answer: NO Question Weight: 11% Explanation: HUD collects a significant amount of data from CDBG communities, but has struggled to use this information in a meaningful way. CDBG staff are in the process of taking steps to make this information more accessible and useful to grantees. Evidence: According a 1999 GAO report, "IDIS does not require grantees to enter performance information before it releases grant funds to them. Grantees can obtain all funds for an activity without entering any performance information about it." Grantees are not currently required to report actual accomplishment data for all activities before it is listed as "completed" in IDIS. HUD staff have taken an initial step by posting on the Internet each grantee's CDBG expenditure data for over 90 different categories. The public can evaluate any grantee's use of funds expenditures at: http://www.hud.gov/offices/cpd/communitydevelopment/budget/disbursementreports/index.cfm HUD plans to contract the development of individual grantee performance summaries that will allow manipulation of program and performance data by the public. Results are expected during FY 2004. Some grantee accomplishment data is also available at http://www.hud.gov/offices/cpd/communitydevelopment/library/accomplishments/index.cfm. 4.1 Has the program demonstrated adequate progress in achieving its long-term performance goals? Answer: NO Question Weight: 20% Explanation: Since CDBG received a No in Question 2.1, they must also receive a no for this question. Evidence:HUD has begun to develop measures of neighborhood revitalization and other outcomes that relate to the program's purpose. 4.2 Does the program (including program partners) achieve its annual performance goals? Answer: NO Question Weight: 20% Explanation: Since CDBG received a No in Question 2.1, they must also receive a no for this question. Evidence: While some types of activities do not easily correspond to performance indicators (e.g., public improvements), HUD will work to develop annual measures (e.g., number of units rehabilitated) as well as measures that demonstrates the targeting of CDBG funds by grantees to low-income neighborhoods. 4.3 Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year? Answer: SMALL EXTENT Question Weight: 20% Explanation: CDBG is not able to compare cost per unit or other efficiency information over time in a systematic way. Most CDBG activities are subject to competitive pricing under OMB's Circulars; however, the program does not have performance or efficiency targets it attempts to achieve. Evidence: Analysis is difficult given lack of reliable reporting data and limited measures used. Grantees are not currently required to report actual accomplishment data for all activities before it is listed as "completed" in IDIS. Actual jobs created data became available only for 2002. 4.4 Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals? Answer: SMALL EXTENT Question Weight: 20% Explanation: Other programs with similar purposes compare favorably in some ways to CDBG. CDBG is one of the only HUD programs without a long-term outcome measure. Evidence: HHS' Community Services Block Grant (CSBG) is implementing a performance measurement system called Results Oriented Management and Accountability (ROMA); however, the effectiveness of their approach has not yet been determined. Small Business Administration has a few outcome measures it tracks each year to assess progress (e.g., percent of start-up firms surviving three years after assistance). Although HUD's HOME program has a more defined mission, it excels at using performance information to manage its program, demonstrates annual outputs, and has adopted a longterm outcome measure in the 2005 performance plan focusing on neighborhood change and affordable housing. 4.5 Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results? Answer: LARGE EXTENT Question Weight: 20% Explanation: CDBG has had two main evaluations to determine its effectiveness at a national level; however, CDBG still lacks an evaluation that compares areas that receive CDBG dollars with those that do not. Evidence: The 1995 study conducted by the Urban Institute found CDBG made positive contributions to the capacity of cities - both governments and community institutions - to respond to community needs and played a vital role in neighborhood stabilization and revitalization in a number of U.S. cities. The 2002 study found that larger CDBG investments are linked to improvements in neighborhood quality in the 17 cities studied, but was not broad enough to conclusively prove CDBG investments are positively correlated with measurable results. Other studies have focused on other aspects of the CDBG program. Performance Measures: