We audited the U.S. Department of Housing and Urban Development's (HUD) administration of the Community Development Block Grant (CDBG) program. Our audit objectives were to determine whether HUD (1) had a system to measure the impact and outcome of its significant investment in grantees, which specifically determined whether (a) investments demonstrated increases in neighborhood health and (b) the primary CDBG objective of developing viable urban communities was attained, and (2) had implemented a system to measure the impact of its monitoring efforts for improving grantee performance and effectiveness.

HUD performance measurements did not demonstrate how grantees were increasing neighborhood health and attaining the primary CDBG objective of developing viable urban communities. In addition, while HUD monitoring of CDBG entitlement communities identified numerous grantee deficiencies and offered meaningful recommendations for corrective actions, grantee performance had often not improved over time.

We recommend that HUD's Office of Community Planning and Development (CPD) implement a system to measure the impact of its monitoring efforts for improving grantee performance and effectiveness. Specifically, we recommend that HUD design a performance measurement system that allows HUD to report meaningful outcomes and not just outputs. HUD needs to design a ranking and rating system for individual grantees so that HUD and its stakeholders can identify and address both good and poor performance. Further, we recommend that HUD establish controls to ensure that CPD monitoring efforts emphasize high-impact activities so that recommendations can focus on promoting improvements in program participants' performance. Also, HUD should assess the impact of its CPD monitoring on performance and increase incentives to improve grantee performance and compliance by using all of its available sanction authority.