Report 2020-611 Recommendation 2 Responses

Report 2020-611: California Department of Housing and Community Development: It Failed to Expedite Access to Federal Funding to Address the Impact of the COVID‑19 Pandemic on California's Homeless Population (Release Date: August 2021)

Recommendation #2 To: Housing and Community Development, Department of

To ensure that the CoCs use their allocated ESG-CV funds by the March 2022 and the September 2022 deadlines, the department should immediately work with its contractor to establish a process for and begin monitoring CoCs' spending. It should use projections to identify those CoCs that are at risk of not spending their funds by the deadlines, and the department should work closely with its contractor to develop a plan to assist those CoCs. In addition, by October 2021, the department should establish a contingency plan to reallocate unspent ESG-CV funds among the CoCs to ensure that the State maximizes the intended benefit of this funding.

On April 18, 2022, HUD released CPD Notice 22-06, which can be found at: https://www.hudexchange.info/news/hud-issues-notice-cpd-22-06-waivers-and-alternative-requirements-for-the-esg-program-under-the-cares-act-esg-cv-amendments-and-clarifications. This Notice extended the final expenditure deadline to December 31, 2023 and imposed a new 50 percent drawn requirement, which must be met by June 16, 2022. California is currently 38 percent drawn and is working aggressively to convert accruals to draw requests. All subrecipients who have drawn less than 50 percent of their award have been sent a letter notifying them that if funds are recaptured, their contracts may be reduced under existing requirements in the Standard Agreement. In our weekly Office Hours on May 4, 2022 , HUD joined to discuss the Notice and HCD discussed deadlines and made additional assistance available to anyone who needs it. On May 10, 2022, HCD will join Cal ICH's Office Hours to further discuss the Notice. After the recapture date, HCD will continue to monitor subrecipients, and will take steps on a case-by-case basis to recapture funds, if needed, and to provide those resources to organizations who have expressed interest in additional funding and have demonstrated they can successfully deliver it within the available timeframe.

California State Auditor's Assessment of Status: Fully Implemented

The department previously established a process to monitor CoCs' spending. To implement the extended deadline that HUD communicated in April 2022, the department is amending its contracts with CoCs to extend the expenditure deadlines and, as part of those amendments, it will establish a time frame and process for determining the amount of ESG-CV funds it will recapture if needed.

The Full Response has been sent to CSA via email 2/24/2022:

In the message released by the Department of Housing and Urban Development (HUD) Office of Special Needs Assistance Programs (SNAPS) on February 4, 2022, HUD has determined it will not recapture funds from recipients who do not meet the March 31, 2022 deadline and is also considering whether it is necessary to establish a new overall ESG-CV expenditure deadline that is later than the current September 30, 2022 deadline. See attached memo from HUD which was issued on February 4, 2022, "HUD ESG-CV Expenditure Deadline Messaging 2-2022."

HCD is on track to fully expend all ESG-CV funds by the current HUD expenditure deadline of September 30, 2022. As allocation of funds and each community's needs are diverse, subrecipient's spending will be analyzed on a case-by-case basis. HCD will not set a specific date or amount for recapture of ESG-CV funds from subrecipients. HCD will work in partnership with high-risk subrecipients to ensure they have support and every resource available to fully expend ESG-CV funding in their communities.

HCD will offer additional resources, training, and technical assistance to high-risk subrecipients. HCD will monitor their progress through Request for Funds submissions and monthly spending plan updates. If there is a clear and egregious failure to utilize funding, HCD in its sole discretion will immediately recapture all ESG-CV funds not yet expended by the subrecipient.

California State Auditor's Assessment of Status: Partially Implemented

Although the department recently developed policies and procedures for recapturing ESG-CV funds, it has not established time frames for when it will recapture funds nor does it outline how it will determine the amount of funding it will recapture. Although HUD indicated in early February 2022 that it would not recapture funds at the March 2022 deadline, as it had previously planned, and that it is considering the need to modify the September 2022 deadline, HUD has not yet changed the final deadline the CARES Act established for the use of ESG-CV funds.

The department is on track to meet both the March 2022 and September 2022 expenditure requirements. As of 9/30/2021, HCD reported expenditures and accruals of 37% of the funding. The department has developed a monitoring strategy to help Administrative Entities (AEs) and Continuums of Care (CoCs) to be successful in their administration of ESG-CV funding.

The department and our contractor, ICF, are using a multi-disciplinary approach to track spending and to provide assistance to AEs and CoCs as well as their sub-recipients (called sub-sub-recipients in this document). HCD, ICF and the Grant Administrators (collectively "the Team") provide capacity building assistance through regularly scheduled meetings and weekly Office Hours. Grantees are required to submit weekly reports, Requests for Funds preferably monthly but no less than quarterly, and quarterly reporting for HUD.

Please see word document attached in email followup for more detail.

California State Auditor's Assessment of Status: Partially Implemented

Although the department and its contractor have established a process and begun to monitor CoCs' spending using monthly and quarterly projections, the department's plan to reallocate unspent ESG-CV funds does not include time frames for when it will recapture funds nor does it outline how it will determine the amount of funding it will recapture from CoCs.

All Recommendations in 2020-611

Agency responses received are posted verbatim.