7 tips for successful CDBG-DR grant closeout

There are several key considerations related to the closeout process for the U.S. Department of Housing and Urban Development (HUD) Community Development Block Grant–Disaster Recovery (CDBG-DR) program that grantees should keep in mind throughout the entire grant process since these best practices don’t just apply to the end of the grant cycle.

At ICF, our team has decades of experience managing CDBG-DR funds, from allocation to closeout. In this article, we share our recommended seven best practices for CDBG-DR practitioners to ensure a successful grant closeout. (This article uses program specific terminology. If you need an introduction to CDBG-DR, please review this resource from HUD.)

1. Start with the end in mind

Federal grant closeout is easiest when closeout is anticipated during the program design and activity setup. Understanding the specific accomplishments you’ll need to report to HUD enables you to gather the necessary information from the outset. Consistent reporting throughout your program’s lifecycle ensures readiness for a seamless and efficient closeout process.

Knowing the available selections for eligible activity types and correlating national objectives will allow you to design your action plan programs so that they are ready to be set up in HUD’s Disaster Recovery Grant Reporting (DRGR) System as soon as HUD issues a grant agreement. If your programs are eligible but don’t align with current DRGR selection options, you’ll need to coordinate closely with your HUD representative to set up activities and record notes explaining your selections.

Your action plan programs should reflect your unique recovery needs, but those may not always match up with current DRGR selection options. However, aligning them with standard DRGR selections can expedite your setup and facilitate a smoother closeout.

Think through your program design at the onset. Run through your programs from launch through closeout scenarios, asking yourself questions to test if you’re missing anything in your program launch. Here are some examples:

• What accomplishments do I need to report to HUD for the selected activity and national objective? As an example, are we reporting on:
• A completed facility?
• A number of households served?
• A distance of linear feet improved?
• Can we collect the accomplishment information from publicly available data such as census data or do we need an intake application to collect household data such as income and demographics?
• When will we report an accomplishment?
• Incrementally as units are completed?
• When a project claims their final funds?
• When the program has paid the final funds?

Understanding that financial transactions for CDBG-DR programs take a while and might carry over a QPR reporting cycle—it’s important to determine when you document an accomplishment.

• Does the program design contain a reasonable method for recapturing funds from projects that fail to meet a national objective?

2. Maintain accurate and detailed records

The CDBG-DR program is one of the most heavily regulated federal grant programs. With CDBG program rules and requirements layered with federal cross-cutting regulations and disaster-specific alternative requirements, you must have strong record-keeping procedures to document compliance, workflow, expenditures, and accomplishments.

Think about your record-keeping as the story of an activity or project. An auditor should be able to review your policies, procedures, and project files to understand the full picture of your program and your eligible activities. If any component of your program seems outside the normal process or doesn’t align with procedures, be sure to supplement your records with a memo to explain the anomaly or unique circumstances.

Record-keeping often includes checklists to make sure that all required compliance areas are included in your records and that the file is always audit ready.

Don’t wait until the end of a project to make the file ready for closeout. Always keep files up to date, so an auditor can review a file at any point in time and know the status of a program or activity. You should also periodically use the HUD Monitoring Checklists to perform self-audits of your various programs.

3. Use your System of Record (SOR)

To maintain strong record-keeping, use a system of record that allows you to manage documents, track expenditures, and generate reports. While all CDBG-DR activity setup and fund drawdowns occur through HUD’s Disaster Recovery Grants Reporting System (DRGR), it is critical that you maintain a local system of record to work through day-to-day grant management workflows. HUD will monitor this system of record for compliant grant implementation.

Utilizing technology like ICF’s grantTRAX that’s designed with CDBG-DR compliance in mind allows your team to collaborate, track performance projections and outcomes, and always be audit-ready.

4. Keep quarterly performance reports (QPRs) up to date and accurate

HUD requires all grantees to submit a QPR in DRGR for all quarters of a grant. These reports are due on the 30th day of the month following the close of each quarter. Here are the dates:

• Q1 (January 1 – March 31): QPR due April 30
• Q2 (April 1 – June 30): QPR due July 30
• Q3 (July 1 – September 30): QPR due October 30
• Q4 (October 1 – December 31): QPR due January 30

To submit a QPR, you must provide a written narrative of the overall grant progress, updates on each program and activity, and data specific to each activity’s progress toward the projected accomplishments.

It’s important to know that the QPR data submitted in DRGR gets added each quarter to show the total progress of the grant. This means that, if you report that three homes were rehabbed in Q1 and seven homes were rehabbed in Q2, HUD will see that you have completed 10 rehabs.

It is very important to know when the program considers a project complete and counts it as an accomplishment in a QPR. We’ve seen grantees use systems of record that report out running totals instead of quarterly results. As an example, a rehab program may have only completed seven rehabs. If they report three in the first quarter and seven in the second quarter (due to using a running total), they will have over-reported the number of properties rehabbed.

To prevent this from happening, they should have reported three in the first quarter and four in the second quarter for a total of seven. These small errors can compound over the many quarters and years of a CDBG-DR grant and require complicated adjustments prior to closeout to make sure that the final activity counts are accurate.

We recommend that you cross-check your system of record with your DRGR submissions before submitting a QPR. Validate that the per-quarter data adds to the total accomplishments and that the current reporting quarter and the prior submitted quarters total the program’s running totals.

QPRs are also a great time to compare performance projections from the action plan with your actual outcomes. HUD allows grantees to update projections to align with current program performance. HUD’s requirements to have clear program projections and outcomes is rooted in the need for programs to provide transparent and accurate information to the public. Use your QPR to cross check your progress and make updates where needed to keep the public informed of your progress.

Likewise, if your program has seen significant change in participation (either over or under), you may need to update budgets and the action plan. The QPR is a great time to review your current allocations and adjust as needed to ensure program success and timely expenditure. If your reallocation requires an action plan amendment, you’ll need to be sure to communicate the rationale for these changes. QPRs allow grantees to make data-driven decisions. HUD understands that programs will change from beginning to end, and it is your responsibility to ensure a third-party auditor understands why, when, and how changes occurred.

5. Monitor with compliance checklists

CDBG-DR, like all other HUD programs, has a series of monitoring checklists. They should be used in the assessment of a project or program’s overall compliance with the implementation of grants funded under specific Federal Register Notices (FRNs) issued following presidentially declared disasters. Obtaining these and other relevant monitoring checklists at the start of your activities will provide critical information regarding documentation needed to verify all funds were used compliantly when HUD or internal monitors review the project.

Due to the unique and binding requirements of each allocation’s FRN for CDBG-DR funds, HUD developed monitoring checklists (also referred to as “exhibits”) to verify those requirements were met for the events covered under the notice.

It is important to understand how HUD integrates these disaster-specific monitoring checklists with their entire portfolio of HUD funded activities. Therefore, when pulling your monitoring checklists for your project or program, start with the relevant FRN that aligns with the disaster funds you will be closing out. For example, if the funds to be closed out were allocated in 2016 CDBG-DR FRN (i.e., exhibit 6-13), you will see that form directs you to also supplement that checklist with the forms 6-1 thru 6-6 (as applicable). However, if your funding is allocated in the 2017 CDBG-DR RFN (i.e., 6-14), you will see that the form directs you to also supplement that checklist with the forms 6-1 thru 6-8.

Additionally, once you start to complete these supplemental checklists, you will also be directed to supplement that checklist with other checklists in different chapters of the handbook. For example, if completing exhibit 6-8 regarding procurement, the checklist further refers you to complete exhibit 34-3a regarding specific 2 CFR 200 compliance requirements.

Beyond verifying compliance with the CDBG-DR specific requirements, HUD has checklists for cross-cutting federal requirements that must also be met when included as a component of your CDBG-DR program. These cross-cutting federal requirements include environmental monitoring (Chapter 21), Fair Housing and Equal Opportunity (Chapter 22), Lead-Based Paint (Chapter 24), and Relocation and Real Property Acquisition (Chapter 25).

Establish internal controls that align with the HUD monitoring checklist and documentation requirements. At least quarterly, review all activities being performed in support of the CDBG-DR funded activities. This includes reviewing expenditures to ensure there is a separation of duties in the approval process and a chart of accounts that appropriately tracks the CDBG-DR funds. Review and manage budgets and expenditure projections to ensure requirements for Most Impacted and Distressed (MID) area expenditures, LMI expenditures, and administration and public services caps are being met.

Develop a risk assessment and an annual monitoring schedule for all funded projects and programs, including any awards to subrecipients, and monitor each activity using the relevant HUD monitoring form, or equivalent. If deficiencies are identified, immediately assess how the compliance requirement was missed and then develop a corrective action plan to ensure the deficiency does not occur again. Document all corrective actions and follow-up to ensure their implementation.

6. Understand program income

Program income can be a powerful resource to increase the impact of your CDBG-DR allocation. However, it’s very important to know how to report program income and have policies in place for the treatment of program income, even if you don’t anticipate receiving any program income. Simply put, program income is any funding generated by a CDBG-DR activity (over a $35,000 annual threshold amount, above which ALL funds become program income). HUD regulations for program income can be found at 24 CFR 570.504 for Entitlements, and 24 CFR 570.489(e) for State grantees. Typical examples of program income generated from CDBG-DR programs include:

• Loan payments from a multi-family developer where CDBG-DR funding contributed to the development of the project.
• Funds paid back after a first-time homebuyer sells their home within the period of affordability recorded in their restrictive covenants.
• Fees paid to a community facility funded with CDBG-DR.

All of those funds come back to the CDBG-DR grantee, are reported into DRGR, and increase the total amount of CDBG-DR funding available for approved programs (with 5% of those funds being allowable as administrative costs). The grantee must then expend those funds on current or added action plan approved programs and are subject to the same disaster specific alternative rules and waivers.

You must have a detailed plan for the treatment of program income to be ready for closeout. CDBG-DR grants cannot be closed out until all funding intended to be used is drawn down. At the time of closeout, HUD will recapture any remaining funds, and the grantee will no longer have access to draw down funding. Therefore, grants can remain open for extended periods of time resulting from large amounts of program income cycling through a grantee.

In order to be ready for closeout, grantees must determine a point in time when they will no longer enter program income into DRGR, and instead document a plan for future program income. As program income retains its federal CDBG identity and must be used for CDBG eligible activities, one of the easiest ways to plan for future program income after closeout is to have a policy in place for all future program income to be receipted into the annual CDBG program.

This can be done for both entitlement communities and states and small cities programs. Any future program income will simply be entered into IDIS with a notation that it is program income from the specific DR Grant. These funds will then be subject to the annual program’s method of distribution and will lose any disaster specific alternative requirements or waivers.

7. Run DRGR closeout reports

When all of your grant fund requests have been vouchered and submitted in DRGR, and you have closed all activities, you will provide a final program narrative in your last QPR, complete the HUD closeout checklist (provided to you by your HUD representative), and run the closeout reports in DRGR. DRGR closeout reports are available to all CDBG-DR grantees at any time. Knowing how to access and run these DRGR closeout reports allows you the ability to run them in advance of closeout and check them for any errors or issues.

MicroStrategy Reports (DRGR)

Global Finance

• F21-AP–Grant Budgets by National Objective–Activity Level
• F63-CUM–Fin Data–Grant Level
• F67-CUM = Grant Financial Summary–by Activity, Resp Org, Act Type and Nat Obj

Global Performance

• P33-QPR–Household Characteristics for Direct Benefit Activities by Tenure and Ethnicity
• P41-CUM–Planned and Actual Performance Measures by Activity and Income Level

Global Compliance

• C14-GEN = Flag Details (Activity Level)

We hope these seven tips help you confidently set up your CDBG-DR program with compliance and successful closeout in mind. Remember: the longer it takes CDBG-DR grants to close, the longer Congress must wait for outcomes of long-term disaster recovery investment.

When grantees prove their ability to offer, execute, and close meaningful recovery programs, Congress is more likely to continue to allocate these transformative funds. To help preserve CDBG-DR funding, be sure to set up your program for a timely closeout.

Resources

CDBG-DR Problem Solving Clinic