Oversight of the HOME program involves monitoring both processes and outcomes. Monitoring processes includes ensuring that HOME funds are committed and expended according to the timelines specified in statute and regulation and that program requirements are followed.
Monitoring outcomes includes ensuring that investments of program funds ultimately help to achieve the program’s goal, namely, providing housing that is affordable to low-income households.
Given HOME’s structure as a block grant program, participating jurisdictions (PJs) bear much of the responsibility for ensuring that subrecipients adhere to HOME program requirements and that specific projects result in their intended outcomes. Nonetheless, HUD is ultimately responsible for overseeing PJs’ use of HOME funds to ensure that HOME funds are spent properly.
HUD’s Oversight of PJs
HUD’s oversight of PJs includes activities that occur both before and after funds are granted to PJs. Before granting funds to PJs, HUD must approve PJs’ Consolidated Plans. As described earlier in the “The Consolidated Plan” section of this report, PJs submit Consolidated Plans to HUD describing their affordable housing needs and specifying how HOME funds will be used to meet those needs. Prior to approving a PJ’s Consolidated Plan, HUD reviews the plan to ensure that it is complete, consistent with the purposes of the HOME statute, and meets all regulatory requirements.
After funds are granted to PJs, HUD’s oversight includes ensuring that PJs’ activities match their Consolidated Plans and monitoring how and when PJs spend their funds. PJs report their commitments and expenditures of HOME funds to HUD through a computer system known as the Integrated Disbursement & Information System (IDIS), along with the activities to which funds are committed or expended. HUD uses this system to track PJs’ commitments and expenditures of HOME funds and the progress of projects that are using HOME funds. HUD also publishes a number of reports related to PJs’ activities and the status of HOME funds on its website.
The HOME statute and regulations include provisions requiring PJs to lose or repay HOME funds to HUD if they are not spent in a timely manner or are not used for housing that meets the HOME requirements. HOME funds that are not committed by PJs within 24 months will expire, and those funds will be reallocated by formula to eligible PJs. PJs must expend HOME funds within five years. PJs are required to repay HOME funds used for any activities that do not meet the affordability period requirements or for activities that are terminated before project completion.
PJs must also repay any funds spent on projects that are not completed as of four years of the date the funds were committed. The Secretary of HUD also has the authority to impose penalties on PJs that misuse HOME funds, such as preventing PJs from drawing down HOME funds, restricting PJs’ activities, or removing PJs from formula allocations.
PJs’ Oversight of Entities Receiving HOME Funds
While HUD is responsible for overseeing PJs, PJs are responsible for ensuring that their HOME-funded activities meet program requirements. PJs oversee subrecipients and any other entities that receive HOME funds from the PJ, and are supposed to monitor performance and address any problems. Participating jurisdictions must also comply with record-keeping and monitoring requirements to ensure that they are using funds appropriately, making progress toward their housing goals, and generally funding activities in line with their Consolidated Plans.
Before disbursing any HOME funds to an entity (including a subrecipient, a contractor, or a household), a PJ must enter into written agreement with that entity. These written agreements may vary based on the project type and the entity’s role, but all must ensure compliance with HOME program requirements. Certain minimum provisions that must be included in different types of agreements are described in the HOME program regulations at 24 CFR §92.504.
PJs must review the performance of subrecipients and contractors on an annual basis. PJs must also perform on-site inspections of HOME-assisted projects when a project is completed and, for HOME-assisted rental housing, throughout the affordability period. HOME-assisted rental units must be inspected at least every three years during the affordability period (or more frequently if problems related to health and safety are discovered) and the property owner must certify annually that the project and the HOME-assisted units are “suitable for occupancy.” Units occupied by households receiving HOME-funded TBRA should be inspected by the PJ annually. PJs must also examine the financial viability of HOME-assisted rental projects with ten or more units at least annually during the affordability period.
Concerns Related to Oversight of HOME Funds
Over the past several years, several concerns have been raised about whether PJs have adequately overseen projects that use HOME funds and, ultimately, whether HUD has adequately monitored PJs’ uses of HOME funds.
Some concerns related to HUD’s oversight of PJs have been raised by HUD’s Office of the Inspector General (OIG).A 2009 OIG report questioned several aspects of HUD’s monitoring of program funds, including whether HUD’s methodology for tracking when PJs had spent their
funds was appropriate; whether the IDIS system allows HUD to adequately monitor information reported by PJs; and whether funds had been expended on projects that should have been classified as terminated. Other OIG reports have raised questions about whether HUD has ensured PJs’ compliance with program rules. For example, a 2010 OIG audit report found that, in some cases, HUD had not ensured that PJs included appropriate resale and recapture provisions in projects that used HOME funds. The OIG has also reported conducting over 60 external audits of specific PJs in recent years, some of which were undertaken at the request of HUD.
Another source of concern about HUD’s oversight of the HOME program was a series of investigative articles published in the Washington Post beginning in the spring of 2011. These articles focused on PJs’ alleged mismanagement of HOME funds used for rental housing developments and problems with HUD’s oversight of PJs. The articles suggested that nearly 15% of HOME-assisted rental projects were experiencing significant delays, and that almost 700 rental housing projects that had been awarded a total of $400 million in HOME funds over the program’s life had since stalled and were either incomplete or unoccupied. The article also claimed that HUD did not properly oversee funds that are awarded to PJs in order to identify such stalled or abandoned projects, that it had difficulty tracking program funds, and that it did not adequately demand reimbursement from PJs for misused funds.
In response to the articles, HUD maintained that the Post’s methodology for identifying troubled projects was flawed and that the amount of funds that were mismanaged or committed to stalled projects was much smaller than the Post articles suggested. It also noted that some stalled projects were the result of a weak economy rather than mismanagement or other problems. HUD argued that its oversight of the program was adequate and that it had de-obligated HOME funds from PJs that did not meet commitment and expenditure deadlines and recovered additional funds that were spent improperly by PJs.
Questions about HUD’s oversight of HOME funds led Congress to hold hearings on the topic in 2011, during which several Members of Congress expressed concern about HUD’s ability to ensure that HOME funds are used in a way that produces the program’s intended results. Congress also included a number of provisions related to the oversight or use of HOME funds in both the FY2012 and FY2013 HUD appropriations laws, the Consolidated and Further Continuing Appropriations Act, 2012 (P.L. 112-55) and the Consolidated and Continuing Appropriations Act, 2013 (P.L. 113-6). (These provisions only apply to the HOME appropriations included in those laws, not HOME funds appropriated in other fiscal years.)
The 2013 HOME program final rule, described next, included a number of provisions to better ensure that HOME funds were being spent properly, including similar provisions to those that were included in the FY2012 and FY2013 appropriations laws. The provisions in the 2013 final rule apply to all HOME funds, rather than just the funds that were appropriated within a specific appropriations law.
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