Report 2020-611 Recommendation 3 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 #3 To: Housing and Community Development, Department of

To ensure its ability to more quickly provide CoCs with access to emergency funding that the federal government allocates to the State in the future, such as additional ESG-CV funding, the department should, by December 2021, develop a strategy that it can use in emergency situations to more efficiently complete or amend contracts and make funding available to recipients.

HCD has the procedures in place to address the CSA finding as communicated in our prior responses, but we have not memorialized the policy that CSA is requiring to clear this recommendation. The policy is being developed and will draft versions will be provided to CSA to ensure that the policy will address this recommendation

California State Auditor's Assessment of Status: Pending

The department has not provided the procedures it referenced in its response, which limits our ability to assess its progress towards implementing this recommendation.

To address CSA's recommendation HCD has enhanced existing processes. HCD management changed the draw review from once a week to bi-weekly and submits requests to the Federal Trust Unit the following business day. The Federal Trust unit then requests and approves HUD Integrated Disbursements and Information System (IDIS) vouchers. Once approval is obtained via IDIS, the Federal Trust Unit approves in Fi$Cal and submits to the State Controller's Office (SCO), which takes approximately 15 days.

Additionally, HCD has created and updates a 1) Grant Administrator Handbook, 2)Legal Affairs Division eCivis Processing Guide, and has various activity standard reporting memos to ensure consistent and efficient reporting. Training modules and webinars are also posted on our internal pages to assist staff in this process.

California State Auditor's Assessment of Status: Pending

The department did not provide documentation to support its response to our recommendation.

HCD received guideline authority in 2022 and ESG staff are developing a plan for new ESG guidelines. Stakeholder engagement is on track to begin in early 2023 with the expectation that the 2024 NOFA will be based on the new adopted guidelines.

As stated previously, all the previously undertaken steps as well as new guidelines will allow HCD to respond more quickly in the deployment of annual and special initiative ESG funding. HCD considers this recommendation to be fully implemented.

California State Auditor's Assessment of Status: Pending

As we stated previously, we disagree that the strategies the department indicated in its prior responses, and referenced in this response, would address our recommendation. We look forward to reviewing the departments new ESG guidelines once they are developed to determine whether they will allow the department to more efficiently complete or amend contracts and quickly make funding available to recipients.

HCD previously provided information on all steps HCD has taken to accelerate deployment of resources. The steps have included significant cross-divisional collaboration in the prioritization of programs when volume is high including a monthly review and prioritization of contracts by Deputy Directors or designee. HCD has also changed the Internal Loan Committee/Directors Award process to reduce the time it takes to go from approval recommendation to contract routing. These steps will help ensure HCD's ability to deploy resources more quickly in the future. HCD will be adopting guidelines to streamline the funding delivery process for both annual and special effort Emergency Solutions Grant funding. In early 2023, HCD will begin the process of soliciting stakeholder feedback on programmatic changes which will inform the development of the revised regulations or new guidelines. Some initial concepts being discussed by staff include the use of "Not to Exceed" multi-year contracts that would allow the Department to add funds to existing contracts. Because the regulations the program is operating under are highly prescriptive it is very difficult to deploy funds quickly. Those regulations require two Notices of Funding Availability, one with allocations, and the other with both allocations and a competitive portion, for a total HUD grant of only around $11 million. ESG-CV was successfully deployed because a waiver of provisions of the regulations was approved by the Governor's Office. With the efforts already undertaken by HCD to streamline contract deployment, as well as revised regulations or new guidelines, HCD will be well-prepared to address both annual funding and future emergency-related funding increases. As HCD has stated previously, these changes allow the flexibility to meet urgent funding situations and HCD considers this recommendation to have been fully implemented.

California State Auditor's Assessment of Status: Pending

As we stated previously, we disagree that the strategies the department indicated in its prior responses, and referenced in this response, would address our recommendation. We look forward to reviewing the departments revised regulations and new guidelines once they are developed to determine whether they will allow the department to more efficiently complete or amend contracts and make funding available to recipients.

HCD continues to develop and refine strategies to speed the deployment of resources in urgent situations, as was successfully demonstrated in the deployment of Homekey and Emergency Rental Assistance Program funds. The strategies include a dynamic contract prioritization process wherein the Executive Leadership Team determines which funding streams or uses are the highest priority. In the event of a backlog, those decisions determine which contracts get priority . Once a month the Executive Leadership Team meets to review a report of pending contracts. Prior to this meeting each program area updates a spreadsheet, providing information about the number of pending contracts, needed execution timeline, and program's proposed priority. All Deputy Directors and many Assistant Deputy Directors attend this meeting. Based on the projected volume for the upcoming month, leadership determines priority and whether additional resources need to be made available to keep contracts moving. HCD has implemented additional processes when a high volume of contracts needs to be processed in a short time. Program staff have provided contract spreadsheets to the Contracts Branch to enable quicker tracking of contracts. Program leadership and contracts leadership have quick weekly check-ins (often less than 30 minutes) to ensure no contracts have problems getting through the system. This has speeded up contract execution. As HCD has stated previously, the above changes allow the flexibility to meet urgent funding situations and HCD considers this recommendation to have been fully implemented.

California State Auditor's Assessment of Status: No Action Taken

The department's response is substantially the same as the response it provided in February 2022. As we stated previously, we disagree that the strategies the department states that it has developed would address our recommendation. New in this response, the department asserts that it implemented additional processes when a high volume of contracts needs to be processed in a short time. However, the department has not documented those processes and therefore could not substantiate its claims.

HCD continues to develop and refine strategies to speed the deployment of resources in urgent situations as was successfully demonstrated by HCD in the deployment of Homekey and Emergency Rental Assistance Program funds. The strategies include a dynamic contract prioritization process wherein the Executive Leadership team determines which funding streams or uses are the highest priority, and in the event of a backlog, those decisions determine which contracts get priority. HCD has also streamlined the Internal Loan Committee and Director's Office award process to allow funds to be awarded in a shorter time while maintaining the high level of quality that HCD and its stakeholders expect. HCD revised the Standard Agreement routing process with contract routing beginning while awards are being reviewed by the Internal Loan Committee and Director. This streamlining will likely reduce contract deployment times by at least 3 months. Staff in the Contracts Branch have been cross-trained to allow greater flexibility in staffing and staff in other branches can be redeployed if needed.

As HCD has stated previously, the above changes allow the flexibility to meet urgent funding situations and HCD considers this recommendation to have been fully implemented.

California State Auditor's Assessment of Status: No Action Taken

The department's response is substantially the same as the response it provided in November 2021. As we stated previously, we disagree that the strategies the department states that it has developed would address our recommendation.

The Department has developed strategies to speed the deployment of resources in urgent situation as was successfully demonstrated by the department in the deployment of Homekey funds. The strategies include a contract prioritization process wherein the Executive Leadership team determines which funding streams or uses are the highest priority and in the event of a backlog those decisions determine which contracts get priority. The department has also streamlined the Internal Loan Committee and Director's Office award processes to allow funds to be awarded in a shorter time while maintaining the high level of quality that the department and our stakeholders expect. Finally, the department has revised the Standard Agreement routing process whereby contract routing begins while awards are being reviewed by the Internal Loan Committee and Director. This streamlining will likely reduce contract deployment times by at least 3 months. Other options are also being explored such as the use of "Not to Exceed" contracts and "Multi-year" contracts. These may be implemented if all legal and contracting issues are successfully resolved.

California State Auditor's Assessment of Status: Pending

We disagree that the strategies the department states that it has developed would address our recommendation. Although it cites a new strategy that the executive leadership team determines which funding streams or uses are the highest priority and in the event of a backlog determines which contracts get priority, we noted during our audit of ESG-CV that there were competing priorities and ESG-CV was not the priority. As a result of not being a priority and as we discuss in our report, the department failed to expedite access to federal funding for CoCs. The department's second strategy, streamlining the internal loan committee process, was not a relevant factor for the second round of funding because the department did not include the internal loan committee in its process for that round of funding, yet the department still failed to give access to the funding to CoCs in a timely manner. For the third strategy, its revised contract routing process, the department has not provided documentation to demonstrate that this revised process is more efficient.

All Recommendations in 2020-611

Agency responses received are posted verbatim.