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HUD responds to attacks on block grant program

Proposed rule would tighten oversight of low-income home construction.

The Housing and Urban Development Department on Friday moved to improve monitoring of a key block grant program for affordable home construction, following charges of fraud, delays and mismanagement aired by the media, Congress and the HUD inspector general.

A proposed rule published in Friday's Federal Register would tighten state obligations for oversight in the HOME Investment Partnerships Program, the largest federal block grant to state and local governments designed to boost the stock of available low-income housing.

"The HOME program is a success story for housing low-income Americans and creating jobs," HUD Secretary Shaun Donovan said in a statement on the program that was created in 1992. "However, there's more we can do to improve performance and accountability. Through these new steps, we want to expand HOME's impact and ensure that every dollar is used smartly to help families afford their homes."

The proposed rule would require state and local governments to strengthen their oversight of construction projects, develop a system for assessing the relative risk of projects and more closely monitor HOME-funded subrecipients. Block grant recipients also would be asked to assess the capacity and long-term viability of housing project developers, and they would be made to better track construction progress and report results more frequently. In addition, the proposed rule would establish more precise deadlines for completing projects or for actions to address delays.

The Washington Post earlier this year published a series showing that dozens of projects funded under HOME nationwide had been abandoned or delayed. The series was mentioned in a September report from the House Appropriations Subcommittee on Transportation, Housing and Urban Development and Related Agencies, which stated that "HUD has done a poor job in some instances of overseeing grantees and that some grantees have squandered and misappropriated large amounts of federal taxpayer dollars." The reported also said, "the block grants are especially susceptible to waste, fraud, and abuse because, by design, they are flexible dollars given to communities to undertake a wide range of community development activities with little input or constraint by the federal government."

On Nov. 2, acting Deputy HUD Inspector General John McCarty testified to Congress that his office had conducted 60 audits of the HOME program during the past five years. "We believe that HUD's information systems used to administer the HOME program are incapable of producing complete and reconcilable audit trails throughout the entire grant life cycle and are unable to produce reports which would facilitate timely identification of fraud waste and abuse in the programs," he said.

He said such fraud, which is "facilitated through opportunity, desperation and greed," is often "motivated by ease of access to the funds and by their ability to deceive program oversight by manipulating the grant procedures."

The committee soon afterward approved a final conference report that cut for the HOME program's funding by 37.5 percent.

Sheila Crowley, president and chief executive officer of the National Low Income Housing Coalition, said that "while the Washington Post series certainly encouraged Congress to make deep cuts to the HOME program, it's hard to say how much it influenced the rule, as HUD has been considering accountability reforms for a year or more." Overall, her group considers the proposed rule to be positive, despite some wariness of on-site inspections.