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Community Development Block Grants |
Issue Background The Community Development Block Grant program (CDBG) is operated by the Department of Housing and Urban Development (HUD) giving local officials broad discretion on the use of funds for housing, economic development activities, social services and infrastructure. In Fiscal Year 2006 HUD received $4.2 billion for community development activities. Beneficiaries of funding include cities, states, Public Housing Authorities, Multifamily Housing projects and HUD approved lenders. Yearly, CDBG provides grants to 1180 general units of local government and states. Funds can be used anywhere within a local government’s jurisdiction to serve the needs of and provide better living environments for low to moderate income persons. These activities must meet one of the following goals: • Benefit low to moderate income individuals • Prevent slums • Remedy urgent threats to the health or safety of the community Program Flaws While CDBG holds an important place in the effort to build strong communities, the program has some fundamental flaws. The program has flexibility but lacks transparency in how funds are used. There are no standardized outcome indicators, there is insufficient accountability and goals are notoriously ambiguous. This causes waste and fraud. CDBG loans or Section 108 loans have a 59% default rate. There are no clear guidelines for the utilization of the grants. Issues with funding can be partially attributed to the fact that the funding formula has not been revised since the 1970s. The funding structure reflects poverty calculations that are decades old and communities that have improved drastically are still being given grants. Additionally, grantees with similar needs often receive different levels of funding because of a lack of uniformity in the process of awarding the funding. The Office of the Inspector General (OIG) audited CDBG programming to investigate systematic weaknesses. The audit found that problems fall within six categories: an improper use of funds, requirements not being followed, goals or national objectives not met, a lack of capacity, policy direction or adequate management and a lack of monitoring reviews. OIG identified over $100 million that could be put to better use between 2004 and 2006. In the same time period OIG found that 25% of the systematic weaknesses could be attributed to improper use of funds and nearly 22% was attributed to lack of capacity. Clear oversight and a more efficient system could solve a large portion of the problems within CDBG. Legislation The 109th Congress is considering the Community Development Block Grant Reform Act of 2006. Analysts at the Department of Housing and Urban Development suggest the passage of this act would improve the targeting of funds. Congress would revise the funding formula, implement a performance assessment system and impose a minimum grant size to better serve communities. An entirely new element would be the creation of the CDBG Challenge Grant. Grantees would compete for additional funding for community and economic development. Applicants would be required to prove they are following an effective strategy and have a successful track record. Recommendations The Alliance for Children and Families and the United Neighborhood Centers of America recognize the importance of programs that ensure that communities are able to grow in stability, safety, and economic viability. To promote this growth they support federal policies that: • Expand funding for CDBG to allow communities to pay for needed services such as affordable housing. • Revise the funding process so that it is based upon performance and standards. • Revise the formula used to distribute funding so grantees with similar needs receive comparable and appropriate amounts. Updated 7/14/06 |
(c) 2006 - Alliance for Children and Families: www.alliance1.org |