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We audited the U.S. Department of Housing and Urban Development (HUD), Office of Community Planning and Development’s (CPD) risk assessment and monitoring of its grantees.  We initiated this assignment due to significant findings previously reported, which showed that CPD did not have effective risk assessment or monitoring of the State Community Development Block Grant program at either the field office or national level.  Accordingly, we examined other CPD programs, reviewing grantee risk analysis and monitoring performed by field offices across the Nation.  Our objective was to determine whether CPD appropriately assessed grantees’ risk to the integrity of CPD programs and adequately monitored its grantees.

CPD’s risk assessment and monitoring did not provide effective oversight of programs and grantees.  Risk analyses, annual work plans, and monitoring of grantees did not conform to requirements.  These conditions occurred because CPD headquarters did not have effective supervisory controls and structured the risk assessment and monitoring model so that CPD field office directors would have substantial responsibility for ensuring the accuracy and effectiveness of the model.  CPD headquarters’ responsibility for the model was limited to the design and general policy development, along with administrative matters.  As a result, CPD did not have assurance that it correctly assessed grantee risk, prepared accurate work plans, or monitored grantees in compliance with requirements.  Accordingly, CPD could not have confidence regarding accuracy, validity, or conclusions drawn.

We recommended that the Deputy Assistant Secretary for Operations require CPD headquarters’ substantive involvement and responsibility for risk assessment and monitoring, to include (1) oversight of risk assessment, including ensuring all grantees are assessed; (2) review of annual work plans; (3) evaluation of monitoring performance and findings; (4) institution of functional supervisory controls; (5) enforcement of field office compliance with requirements; and (6) establishment of a field office-based multiyear monitoring tracking system allowing assessment of monitoring findings, resolution, and coverage.