Report 2018-037 Recommendation 5 Responses

Report 2018-037: California Department of Housing and Community Development: Its Oversight of Housing Bond Funds Remains Inconsistent (Release Date: September 2018)

Recommendation #5 To: Housing and Community Development, Department of

To ensure that it appropriately monitors CalHome as required by statute, regulation, and program guidelines, HCD should immediately collect all required reports and follow up with recipients to obtain missing reports. Staff should withhold fund disbursements from recipients that have not submitted required reports. If the submitted reports reveal a problematic trend, such as a recipient not disbursing funds, HCD should take appropriate corrective action with the recipient.

Annual Follow-Up Agency Response From September 2021

The department is in the process of collecting required reports for the 2020-2021 annual report year, which ended on 7/31/2021. Approximately 72% of the required reports have been received so far. On 8/30/2021, any contractors who have not submitted their required reports will receive a 30-day delinquent notice. Any contractor who officially receives the 30-day delinquent notice will be in jeopardy of losing their eligibility to apply for future funding rounds. In addition, contractors who are non-compliant with current reporting requirements will face the potential of having future disbursement requests withheld. With these additional control measures in place to prevent future delinquency in required reporting, the department considers this item fully implemented.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

HCD provided us with a screenshot of the tracking system it uses to track the required reports and an example of the 30-Day Delinquent Notice that it sends to recipients who are out of compliance. As of November 2021, the tracking system screenshot shows that HCD has collected all required reports in the last collection cycle. To the extent that HCD continues to collect required reports and take appropriate correction action with the recipient, it will implement our recommendation.

Annual Follow-Up Agency Response From September 2020

The CalHome program has received 100% of past due Reuse Reports (for 2018/2019 and 2019/2020) and 91.3% (for 2018/2019) 86.7% (for 2019/2020 ) of past due Annual Reports as of 6/30/2020 . Please note that Annual Reports for 2019/2020 are still in the process of being collected. HCD has implemented a policy in the 2019 and 2020 CalHome General NOFAs, that makes up to date reporting a threshold requirement to apply for funds. Grantees who have not submitted reports in the last two years on their most recent award will be ineligible to apply for additional funding. The following applicants were disqualified at threshold for not submitting their reports by the deadline in the 2019 NOFA: Self Help Enterprises, City of Sanger, Habitat for Humanity Silicon Valley, Habitat for Humanity/Silicon Valley Sequoia Grove Townhomes, Habitat for Humanity/Silicon Valley South Jackson. HCD is working to obtain a legal opinion from our in-house counsel on whether or not funding disbursements can be withheld due to past due reporting.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

Management Memo 18-01 was sent to grantees in 2018, indicating that negative points would be assessed to grantees applying for HCD program funds, if they had outstanding program compliance reports for current grants. The newly revised CalHome guidelines make program reporting compliance a threshold requirement. Grantees who have outstanding compliance reports are ineligible to receive future funding under the new guidelines. In addition, applicants that submit reports just prior to application are still subject to negative points pursuant to the management memo.

California State Auditor's Assessment of 1-Year Status: Pending

HCD's revised CalHome guidelines state that failure to submit outstanding reports from previous CalHome grants to HCD will make recipients ineligible for a CalHome award. However, the revised guidelines do not state that staff should withhold fund disbursements from recipients that have not submitted required reports, which would be more effective and include recipients that will not apply for another CalHome award. Further, HCD did not provide evidence to show that it collected all required reports and followed up with recipients to obtain missing reports.

6-Month Agency Response

HCD continues to engage in outreach efforts for Reuse and Annual Report submittals. The following statistics reflect collection rates as of 2/6/19: CalHome Reuse Reports received 73% (as of 02/06/19) CalHome Annual Reports received 62% (as of 02/06/19) Additional outreach will be done for remaining non-compliant jurisdictions, with a compliance deadline of 4/30/19. An alternate compliance policy is being developed to address compliance issues in declared disaster areas, and remedy through appropriate due date revisions. Non-compliant grantees will be ineligible for future funding.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

HCD has updated policies and procedures regarding fund disbursement. HCD is actively calling grantees to collect current contract reports and annual reuse reports and is at approximately 69% submittal rate for reuse reports and 65% for annual reports. Continued weekly outreach is occurring to increase submittal rate. Review of the reports is ongoing to determine corrective actions that may need to be taken.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2018-037

Agency responses received are posted verbatim.