HUD policy CDBG time expensesU.S. Department of Housing and Urban Development
Nebraska State Office
Executive Tower Centre
10909 Mill Valley Road
Omaha, Nebraska 68154~39B6
Honorable Terrance M. Duggan
Mayor
City of Dubuque
50 W. 13th Street
Dubuque, IA 52001
Dear Mayor Duggan:
November 26, 2001
This is a follow-up to Assistant Secretary Bemardi's letter of November 20, 2001, (facsimile
enclosed) that was recently sent to the chief elected official of all entitlement grantees, regarding HUq)
policy on corrective actions for failure to meet the timeliness requirements of the Community
Development Block Grant (CDBG) program. The purpose of this letter is to apply that policy on
corrective actions to the specific situation in your community, which is currently in non-compliance with
the timeliness standard with a 60 day ratio of 1.76.
The city of Dubuque has a July 1 program year start date. Failure to meet the 1.5 timeliness
standard 60 days in advance of that date, by May 2, 2002, will result in a partial reduction of your FY
2002 grant, calculated as folloWs: new 60 day ratio minus 1.50 = x.xx times FY 2001 grant times 21%.
There are two exceptions to this reduction policy. The grant will not be reduced iff
1. the grantee is drawing down funds at a 12-month rate that is projected to bring it into compliance
at 1.5 or less by the next 60 day test, or
2. HUD determines that the untimeliness was caused by factors beyond the reasonable control of the
grantee.
Each grantee that fails to meet the 1.5 standard and the criteria for the first exception will be invited
to an informal consultation. At that time, the grantee will have the opportunity to demonstrate how
factors beyond its reasonable control caused significant delays in program implementation and affected
timely performance. The burden will be on the grantee to present a compelling argument that it qualifies
for this exception. Grantees should not, however, delay actively worldng to improve their drawdown
performance on the assumption they will meet this criteria. These determinations will be made only at
such time as the grantee has not met the 1.5 standard and HUD is otherwise prepared to make a reduction.
Each grantee will be advised of the HUD decision following the consultation.
If 60 days prior to the end of your program year the following year, the city again fails to meet the 1.5
standard, the FY 2003 grant will be reduced by an amount equal to 100% of the amount in excess of 1.5
times the annual grant, with a single exception, where HUD determines that untimeliness was caused by
factors beyond the grantee's reasonable controli HUD would again hold an informal consultation prior to
any grant reduction.
2
As of November 2, 2001, the city is drawing down funds at a 12-month rote of 185% of its
current year grant. If the city continues to draw funds at this rote, its next drawdown ratio is projected to
be 0.85, 60 days prior to the end of the program year, which is sufficient to meet the regulatory faneliness
standard. I hope you will make every effort to continue at this pace, so that on May 2, 2002, your
community will be in compliance with the CDBG timeliness requirements.
We remind you that the IDIS timeliness reports are a helpful tool for keeping track of your
drawdown progress. IDIS will calculate a current drawdown milo and the exact dollar amount you will
need to draw down to reach the 1.5 standard.
This office is available to assist you in any way possible.
Sincerely,
Gregory A. Bevitt
Director
Enclosure
Community planning and
Development Division
cc: Mr. David Harris
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D.C. 2041 ~7000
OFFICE OF THE ASSISTANT SECRETARY FOR
COMMUNITY PLANNING AND DEVELOPMEI~T
Honorable Terrance M. Duggan
Mayor
City of Dubuque
50 W. 13th St.
Dubuque, IA 52001
November 20, 2001
Dear Mayor Duggan:
The purpose of this letter is to advise grantees participating in the Community Development
Block Grant (CDBG) program of a new pohcy to reduce furore grants when a grantee fails to meet the
timely expenditure requirements of the program. As previously indicated in letters, at timeliness
conferences, and in one-on-une discussions with grantees administering the CDBG program, the
Department has made clear its high priority to reduce the number of entitlement grantees that exceed the
regulatory standard for carrying out their program in a timely manner. Under the Provisions of 24 CFR
570.902 of the CDBG regulations, a grantee is considered to be timely, if 60 days prior to the end of the
grantee's program year, the balance in its line-of-eredit does not exceed 1.5 times the aunual grant. For
currently timely grantees, and that is 85% of you, I congratulate you on your excellent record in
providing CDBG funds effectively to principally benefit low- and moderate-income persons. Keep up
the good work.
The Deparlment, working hand in hand with entitlcmaent communities, has had substantial results
over the past several years in reducing the number of grantees in non-compliance with the timeliness
standard. Despite our considerable efforts, there is still a significant number of grantees that exceed that
standard. In order to remedy this continuing problem, HUD has found it necessary to establish and
make public its policy for dealing both with entitlement grantees bat are currently in non-compliance
with the 1.5 performance standard for timeliness and those that come into non-compliance in the future.
HUD will no longer accept promised action, but needs to see actual performance.
HUD prefers fostering compliance over sanctions, but will take the necessary steps to institute
grant reductions where necessary. Loss ora grant is a serious step, not one to be taken lightly by either
the Department or the grantee. It is our intention by announcing this policy now, to put all grantees on
notice that HUD is serious about reducing the backlog of unspent CDBG funds.
Currently Untimely Grantees
'HUD will impose the following corrective actions that could reduce future-grants over two
program years for all currently untimely grantees.
Step 1:
HUD will partially reduce the next grant of any currently untimely grantee that fails to reach the
timeliness standard of 1.5 at their next 60-day test, starting with those grantees with program years
beginning May 1, 2002. The grant will be reduced on a graduated basis, ranging from 15% to 30% of
the amount in excess of 1.5 times the annual grant, depending on the amount of time between policy
announcement and the program year start date, as indicated below. There are two possible exceptions to
the reduction for:
· Any grantee drawing down funds at a rate that, if cont'mued, would bring it into compliance
by the following 60 day test, or
· Any grantee where HUD determines that untimeliness resulted from factors beyond the
grantee's control.
The percentage of reduction by program year start date is as follows:
Program Year Start Date % Reduction
Program Year Start Date % Reduction
May 1, 2002 15% October 1, 2002 30%
June 1, 2002 18% January 1, 2003 30%
July, 1, 2002 21% February 1, 2003 30%
August 1, 2002 24% March 1, 2003 30%
September 1, 2002 27% April 1, 2003 30%
Step 2:
If, at the 60 day test the following year, a currently untimely grantee still does not meet
the 1.5 standard, the next grant will be reduced by 100% of the amount in excess of 1.5 times the
annual grant, except:
· Where HUD determines that untimeliness resulted from factors beyond the grantee's
control.
The above policy applies to grantees that are currently untimely. Tins letter also
establishes HUD policy for dealing with grantees that are currently in compliance with the
timeliness standard, but become untimely (newly untimely grantees).
Newly Untimely Grantees
All newly untimely grantees (grantees with program years start'rog February 1, 2002 and
later) have 12 months, to their next 60 day test, to reach 1.5. Failure to meet the 1.5 standard
will cause HUD to reduce the next grant by 100% of the amount in excess of 1.5 with one
exception for:
· Any grantee where HUD determines that the untimeliness resulted from factors
beyond the grantee's control.
General Issues Related to Grant Reductions
Prior to a grant reduction, each grantee is entitled to an informal consultation as provided
for in 24 CFR 570.911 of the CDBG regulations. At that time, grantees will have the
oppommity to demonstrate how factors beyond their reasonable control caused significant delays
in program implementation and affected their timely performance. The burden on grantees will
be to clearly demonstrate with compelling information that the circumstances were truly beyond
their control. Grantees should not delay improving their drawdown ratio on the basis that they
may meet this criteria, as HUD will not make these determinations until such time as the grantee
has not met the standard and is subject to a grant reduction.
All grant reductions will be based on the dollar amount in excess of 1.5 times the annual
grant. For example, ifa grantee's annual grant is $1 million and the 60 day ratio is 1.57, the
maximum amount of the reduction is $70,000 (1.57 - 1.50 = .07 x $1 million = $70,000). As
indicated, there may be a pro-ration of that amount for currently untimely grantees.
Please note that any grant reduction will affect the amount of CDBG funds available for
planning and administration. By law, no more than 20% of any grant may be used for these
purposes. If there is a significant grant reduction or a reduction to zero of a new grant, there will
be limited or zero CDBG funds to pay the grantee's administrative staff.
HUD field office staff is available to provide technical assistance to grantees and to assist
with reformatting workout plans to conform to the current policy.
Each currently untimely grantee will shortly receive a letter from the HUD field office
indicating specifically how this policy affects that individual grantee and what that grantee must
do to improve performance sufficiently to avert a reduction.
Should you have general questions about this policy, please contact Nelson R. Breg6n,
Deputy Assistant Secretary for Grant Programs at (202) 708-1506. For information about how
this policy specifically affects your community, please contact your local HUD field office.
Sincerely,
Roy A. Bemardi
Assistant Secretary
Cc: Mr. David Harris
City of Dubuque