HUD Home Program Grants, B-322077

• Court: Comptroller General of the United States
• Parties: HUD Home Program Grants--Statutory Commitment Deadline
• Docket Number: B-322077
• Decision Date: 17 July 2013

HUD Home Program Grants--Statutory Commitment Deadline

No. B-322077

Comptroller General of the United States

July 17, 2013

Susan A. Poling General Counsel

DECISION

Section 218(g) of the HOME Investment Partnership Act (Act), 42 U.S.C. § 12748(g), imposes a two-year deadline by which participating jurisdictions must commit grant funds allocated to them under the HOME Investment Partnership Program (HOME program). Section 218(g) requires the Department of Housing and Urban Development (HUD) to recapture grant funds that remain uncommitted by participating jurisdictions after the statutory deadline and reallocate such funds through additional formula grants to participating jurisdictions. HUD's Office of Inspector General has identified instances where HUD has permitted some jurisdictions to retain and commit HOME program grant funds beyond the statutory deadline. By failing to recapture and reallocate uncommitted grant funds from the jurisdictions at issue, HUD has not complied with the requirements of section 218(g).

DECISION

In May 2011, the Office of Inspector General (OIG) for the Department of Housing and Urban Development (HUD) requested our decision regarding HUD's compliance with section 218(g) of the HOME Investment Partnership Act, ^[1] which requires that grantees commit grant funds under the HOME Investment Partnership Program (HOME program) within 24 months of receipt. Letter from Acting Inspector General, HUD Office of Inspector General (HUD OIG), to General Counsel, GAO, May 17, 2011 (Request Letter). Over the course of the next year, HUD OIG further developed the legal issues and factual background for the record. ^[2] HUD OIG asserts that HUD has not complied with the requirements of section 218(g) because HUD's method of assessing a grantee's compliance with section 218(g) has, in some instances: (1) resulted in HUD's failure to recapture HOME grant funds that remain uncommitted after the statutory deadline; and (2) permitted grantees to access grant funds beyond the period that such funds were available to the grantee. May 18 E-mail; June 13 E-mail. As we explain below, HUD must adjust grantees' accounts to comply with section 218(g), and recapture and reallocate funds that remain uncommitted after the statutory deadline.

Our practice when rendering decisions is to obtain the views of the relevant agency to establish a factual record and to elicit the agency's legal position on the subject matter of the request. GAO, Procedures and Practices for Legal Decisions and Opinions, GAO-06-1064SP (Washington, D.C.: Sept. 2006), available at www.gao.gov/legal/resources.html. In this case, HUD provided us with several letters setting out its legal views. See Letter from Acting Chief Financial Officer, HUD, and General Counsel, HUD, to Assistant General Counsel, GAO, Feb. 17, 2012 (HUD Response); Undated Letter from Acting Chief Financial Officer, HUD, and General Counsel, HUD, to Assistant General Counsel, GAO, received Jan. 7, 2013 (HUD First Supplemental Response); Undated Letter from Deputy Chief Financial Officer, HUD, and General Counsel, HUD, to Assistant General Counsel, GAO, received Apr. 5, 2013 (HUD Second Supplemental Response). In light of the extensive development of this record, a detailed chronology is set forth in the Appendix.

BACKGROUND

The HOME program authorizes HUD to make formula grants to participating state and local jurisdictions (participating jurisdictions). See 42 U.S.C. §§ 12741, 12746. The participating jurisdictions must utilize HOME grant funds to invest in a wide range of affordable housing projects or to provide direct rental assistance to low-income people. 42 U.S.C. § 12742. Historically, Congress has appropriated a lump sum for the HOME program in HUD's annual appropriation, and since fiscal year 2002, such funds have been 3-year funds. ^[3] Prior to fiscal year 2002, the HOME appropriations were no-year funds. ^[4]

The Act requires HUD to establish for each participating jurisdiction a HOME Investment Trust Fund (trust account) in the U.S. Treasury with a line of credit that represents its annual HOME grant allocations. ^[5] 42 U.S.C. § 12748(b). Among the statutory terms and conditions of the grant is a period of availability by which a participating jurisdiction must commit its HOME grant allocation to permissible projects.

Specifically, section 218(g) of the Act provides as follows:

“(g) Expiration of Right to Draw Funds. If any funds becoming available to a participating jurisdiction under this subchapter are not placed under binding commitment to affordable housing within 24 months after the last day of the month in which such funds are deposited in the jurisdiction's HOME Investment Trust Fund, the jurisdiction's right to draw such funds from the HOME Investment Trust Fund shall expire. The Secretary shall reduce the line of credit in the participating jurisdiction's HOME Investment Trust Fund by the expiring amount and shall reallocate the funds by formula in accordance with section 217(d).”

42 U.S.C. § 12748(g). Section 217(d)(1) specifies that the Secretary of HUD “shall make any reallocations periodically throughout each fiscal year so as to ensure that all funds to be reallocated are made available to eligible jurisdictions as soon as possible, consistent with orderly program administration.” 42 U.S.C. § 12747(d)(1).

HUD has implemented regulations for the HOME program that define a binding commitment as: (1) a legally binding agreement between the grantee and a contractor or local government to use a specific amount of HOME grant funds toward affordable housing or rental assistance; (2) a written agreement between the grantee and a community housing development organization (CHDO) that commits grant funds to the CHDO; or (3) a written agreement between the grantee and a family or purchaser to acquire or rehabilitate housing within a certain period of time set out in the regulations. 24 C.F.R. § 92.2 (2012).

HUD administers the HOME grants via its Integrated Disbursement Information System On-line (IDIS) and assesses compliance with section 218(g) based on reports generated from IDIS. When HUD awards a grant and credits the amount to a jurisdiction's trust account, the amount is also recorded in IDIS. Upon review of several IDIS reports, HUD OIG identified several instances in which: (1) a participating jurisdiction did not fully commit its 2010 HOME grant allocation within the statutory deadline of 24 months of receipt, and (2) HUD did not recapture the amount of the shortfall in accordance with section 218(g). May 18 E-mail; see also June 13 E-mail; E-mail from Audit Manager, HUD OIG, to Assistant General Counsel, GAO, May 1, 2012.

HUD OIG reviewed the relevant IDIS reports for the 73 participating jurisdictions that received fiscal year 2010 HOME grant allocations in April 2010, and thus had a statutory commitment deadline of April 30, 2012. May 18 E-mail. By comparing the fiscal year 2010 HOME grant allocation with the total commitments recorded in IDIS as charged to the 2010 grant allocation, HUD OIG determined that 44 of the 73 jurisdictions committed less than 100 percent of their 2010 HOME grant allocation as of April 30, 2012. For these 44 jurisdictions, HUD OIG calculated that approximately $22, 937, 036 remained uncommitted as of April 30, 2012. HUD OIG subsequently examined a small subset of the 44 jurisdictions and determined that a number of them had committed 2010 grant funds after the April 30 statutory deadline. June 13 E-mail.

HUD OIG asserts that HUD's failure to recapture uncommitted funds is a direct result of HUD's method of determining grantees' compliance with the statutory deadline. HUD determines a grantee's compliance with this statutory commitment deadline by applying what it calls a “cumulative method of calculation.” For each participating jurisdiction, HUD compares the “cumulative commitment amount” with the “cumulative allocation amount.” The cumulative commitment amount is that jurisdiction's total commitments from the start of its...