Investigative Group

At Least A Quarter Of Every Tax Dollar For HUD Grants May Be Wasted

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Ethan Barton Editor in Chief
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A federal program that spends $3 billion annually to combat poverty, provide affordable housing and develop needed public infrastructure is plagued with mismanagement and may be wasting a fourth or more of its annual budget, an analysis by The Daily Caller News Foundation Investigative Group has found.

Nine of the 10 most recent audits of funding awarded through the Department of Housing and Urban Development’s (HUD) Community Development Block Grants (CDBG) program found serious flaws that allowed significant waste, TheDCNF’s analysis found.

The audits questioned how grant recipients spent nearly $39 million of the almost $160 million they received. One of the audits questioned how a recipient spent 69 percent of its expenses. The overall program would waste about $750 million each year if that trend is true for all $3 billion in grants awarded.

The CDBG funds are awarded to state and local governments to improve the quality of life for low- and moderate-income families through a wide variety of programs and development projects. The program was created in 1974 to “ensure decent affordable housing, to provide services to the most vulnerable in local communities and to create jobs through expansion and retention of businesses,” according to HUD’s website.

The program gives local governments significant flexibility in deciding how to spend CDBG funds, which may provide at least a partial explanation for the amount of waste and mismanagement. President Donald Trump proposed axing the program, and HUD Secretary Ben Carson suggested his agency should move funding away from the grants.

TheDCNF analyzed the 10 most recent audits of CDBG funds awarded to local governments that HUD’s Inspector General (IG) conducted, which were released between May 2016 and August 2017. TheDCNF also reviewed two broader audits released during that timeframe, which found problems with grants to state governments and the program’s property acquisitions.

The IG questioned how every recipient spent a portion of their CDBG funding except Houston city government. The watchdog did, however, find relatively minor problems with the Texas city’s grant management system, which the IG said could result in the future misuse of federal funds if they remained uncorrected.

The IG’s Houston audit scrutinized nearly $36 million in CDBG funds, which was awarded between 2013 and 2015 – the second largest among the 10 recipients TheDCNF analyzed.

The remaining nine audits frequently included statements describing how recipients “disregarded HUD requirements” or were “not aware of all CDBG requirements.”

Honolulu wasted the most CDBG funding, both in the dollar amount and as a share of its total awards. The IG questioned how the city government spent nearly $16.9 million, which accounted for 69 percent of the total funding it received during the audit period.

Most of that money was used to purchase two unneeded apartment complexes, according to the IG’s audit. The Honolulu government bought the buildings to spend enough of its CDBG awards to ensure it didn’t lose future funding.

The city purchased one of those complexes for $21 million, even though it was appraised for $16.7 million.

“The city appeared to have wastefully spent the funds on an unnecessary acquisition,” the audit said.

A 2013 independent review HUD previously commissioned also found problems with how Honolulu managed its CDBG grants.

The IG’s Pittsburgh audit scrutinized the largest amount of funding, totaling more than $39 million awarded between 2013 and 2015. The IG questioned how $4.7 million of that was spent.

Pittsburgh officials couldn’t show if those expenditures “complied with applicable requirements,” the audit said. Both the IG and HUD found problems verifying that the city government completed required environmental reviews of its CDBG-funded projects.

Some city governments paid their employs with CDBG funding, even when they weren’t doing program-related work. Others didn’t always ensure that CDBG-funded programs were primarily benefiting low- to moderate-income families as required.

The cities faced a variety of other problems.

One Fresno, Calif., official received CDBG training between 10 and 15 years ago. He was the only city employee who had received instruction. Huntington Park, Calif., inappropriately spent $7,000 of CDBG funding on items like decorations, glow sticks and helium gas.

The board director of a sub-recipient in Pasadena, Calif., hired his relative’s company with CDBG funds to install solar panels, which the IG said allowed “an unfair competitive advantage.” Additionally, the IG’s May 2016 report on Camden, N.J., was the watchdog’s first audit of the city’s CDBG funding in a decade.

Meanwhile, HUD didn’t closely oversee grants awarded to state governments that had a high potential of wasting CDBG funds, the IG found. HUD awarded around $1.8 billion in CDBG funding to state governments between 2015 and 2016.

HUD also had poor oversight of more than $26 million spent on property acquisition and questioned if $12 million was used properly, the IG reported. The agency also didn’t always ensure recipients corrected identified problems, threatening additional waste.

Neither HUD nor the IG responded to TheDCNF’s requests for comment.

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