Report 2020-611 All Recommendation 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 #1 To: Housing and Community Development, Department of

To ensure that CoCs are able to use their ESG-CV funds before the September 2022 deadline, the department should prioritize completing the one remaining contract amendment for the second round of funding.

All contracts for ESG-CV funding have been executed. The final ESG-CV2 contract was executed on 8/23/2021.

See spread sheet for contract execution dates:

ESG-CV Contract Execution Dates Spreadsheet

California State Auditor's Assessment of Status: Fully Implemented

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.

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.

Recommendation #4 To: Housing and Community Development, Department of

To ensure that the contractor it hired to manage the ESG-CV program effectively performs the numerous critical tasks contained in its contract, the department should immediately develop a formal plan and processes to track the contractor's progress and to verify that the contractor's work products comply with ESG-CV federal requirements.

To ensure the contractor performs tasks contained in its contract, HCD have dedicated key staff to work closely with and monitor the performance of the ICF team under the contract. Key staff from HCD include the HCD Branch Chief, HCD Contract Manager, HCD Grant Administrator Manager, and a HCD Specialist. The HCD Branch Chief provides project oversight, support, and leadership on ESG-CV program implementation and operations. The HCD Contract Manager is responsible for monitoring progress of work to ensure that the services are performed according to the quality, quantity, objectives, time frames and manner specified in the contract. The HCD Grant Administrator Manager works with the Grant Administration team to ensure tasks are carried out in accordance with HCD policies and expectations. The HCD Specialist is responsible for providing the first level of review and approval for Request for Funds and coordinating between the ESG-CV and ESG teams. HCD has established various methods to ensure compliance with task deliverables in the contract.

Please see e-mailed document response for more detailed implementation.

California State Auditor's Assessment of Status: Fully Implemented

In addition to working closely with its contractor, the department established a formal process to track the contractor's progress on tasks assigned. Additionally, the department developed policies and procedures to ensure the contractor's work products comply with federal and state regulations and meet the department's needs. Diligently adhering to its process, policies and procedures will help ensure that its contractor effectively performs the numerous tasks contained in its contract and that the contractor's work products comply with ESG-CV federal requirements.

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

To ensure that it has the data necessary to measure the effect the ESG-CV program has in addressing homelessness, the department should immediately develop and implement a plan to collect outcome information either independently or through HDIS. Also, by March 2022, the department should begin reporting annually the outcome information it collects so that it can demonstrate the effectiveness of its programs and so that decision makers can use the reported data to inform budget and policy decisions.

The HCD response does not have any additional updates from the last response on 03/21/2023 since the annual data is still not yet available. HCD will continue to work with BCSH's HDIS team to refine the reporting.

California State Auditor's Assessment of Status: Pending

The HCD response does not have any additional updates from the last response on 11/18/2022 since the annual data is still not yet available. HCD will continue to work with BCSH's HDIS team to refine the reporting.

California State Auditor's Assessment of Status: Pending

CSA has requested annual data and that is not yet available. HCD continues to work with BCSH's HDIS team and expects to have annual outcome data available in late 2022 or early 2023.

California State Auditor's Assessment of Status: Partially Implemented

We continue to assess the status of department's implementation as partial because it has taken steps to receive data from the State's Homeless Data Integration System in order to measure the performance of the ESG-CV program, but it has not yet begun to report information annually to demonstrate the effectiveness of its programs.

In previous responses, HCD provided the plan to collect outcome information and detailed the steps HCD has taken to develop both outcome measures and the logic to obtain the outcome information. The previous responses also detailed the steps taken to date to fully implement the use of HDIS for outcome reporting. Data is being pulled quarterly by BCSH HDIS staff and runs three months in arrears. The last report was from the beginning of the program through March 2022. After pulling the data, the BCSH HDIS team goes through a validation process to ensure the information is reported accurately. The March report reflected the total universe of ESG-CV funding, not just HCD's ESG-CV funding. The next report (the data will be through June 2022 and the report would likely be available in October) will have both the correct logic and the correct universe. HCD's contractor, ICF, has provided two pre-outcome measurement trainings to all California HMIS Lead Organizations to ensure that ESG-CV are set up correctly to allow accurate reporting of outcomes obtained with ESG-CV funding. An additional training is planned for the week of August 15th. HCD reports the ESG-CV outcome data requested by HUD on a quarterly basis through the HUD Sage reporting system. Each year, HCD prepares the Consolidated Annual Performance and Evaluation Report (CAPER) to report the outcomes for all HUD's annual grants to HCD. Information for ESG and ESG-CV is provided via an attachment of the Sage report to the CAPER. This reporting is for HUD's outcomes which are different from the outcome measures HCD established for ESG-CV. There is no other required reporting for ESg or ESG-CV however HCD may elect to use some of this data in the future in broader HCD reporting.

California State Auditor's Assessment of Status: Partially Implemented

Although the department has taken steps to receive data from the State's Homeless Data Integration System in order to measure the performance of the ESG-CV program, it has not fully implemented the recommendation, because it has not yet begun to report information annually to demonstrate the effectiveness of its programs. Further, the department states in its response that it prepares the Consolidated Annual Performance and Evaluation Report (CAPER) to report the outcomes for all HUD's annual grants to the department. However, as we stated in our report, the department's outcome measures focus only on output information, such as the types of services the CoCs have provided and the number of people they have served. We continue to stand by our recommendation that the department should begin reporting annually the outcome information it collects so that it can demonstrate the effectiveness of its programs and so that decision makers can use the reported data to inform budget and policy decisions.

With the completion of Phase I in February, HCD moved to Phase II in March and April. HCD worked with local HMIS leadership to assure that all HCD funded projects had the correct contract number entered data element 2.06 2 "Grant Identifier". The combination of ESG-CV (Project Type = 47) and Grant Identifier (2.06 2) provides HDIS leadership sufficient data to create the universe of projects specific to the HCD funded ESG-CV program. During the second HDIS data pull, HCD and HDIS leadership will adjust for any changes that arose from the ESG-CV outcome data measures logic from Phase I and the completion of the data universe data quality efforts that assure data element 2.06 2 "Grant Identifier" contains HCD contract numbers, thereby assuring the correct ESG-CV universe. HCD will also collect the HCD-funded ESG-CV project ids and organization ids from each subrecipient. This Phase will allow HCD to perform the first analysis of the ESG-CV data Following the successful completion of Phases I and II, the ESG-CV outcome data measures logic will be applied to the annual ESG program, and the template(s) used for ESG-CV universe identification will be turned into a job aid for annual ESG leadership that allows them to tell HDIS leadership on a quarterly basis what the changing universe of programs are that are funded and must be represented in the outcome data.

California State Auditor's Assessment of Status: Partially Implemented

Although the department has taken steps to receive data from the State's Homeless Data Integration System in order to measure the performance of the ESG-CV program, it has not fully implemented the recommendation, because it has not yet begun to report information annually to demonstrate the effectiveness of its programs.

Please see full implementation sent directly to CSA on 02/24/2022

In partnership with the Homeless Coordinating Financing Council leadership who manage the Homeless Data Integration System (HDIS), HCD developed outcome data to measure the performance of the ESG-CV program. The ESG-CV outcome measures will provide HCD the tools necessary to measure the performance of the ESG-CV program, and HCD will modify the logic below for annual ESG. This outcome performance data will be used to prioritize funding for those projects that demonstrate higher levels of performance, while deploying HCD staff to help increase the capacity of those projects that demonstrate lower levels of performance. See the attached document "ESG-CV Outcome Data Specifications."

The process to obtain outcomes measures will be completed in three phases:

Phase I: (currently in progress): Homeless Data Integration System (HDIS) leadership will pull data from HDIS in February 2022 that covers the period of ESG-CV program onset to 9.30.2021.

Phase II (will begin February 2022): HCD will work with local Homeless Management Information System (HMIS) leadership to assure that all HCD funded projects have the correct contract number.

Phase III: following the successful completion of Phase I and II the ESG-CV outcome data measures logic will be applied to the annual ESG program, and the template(s) used for ESG-CV universe identification will be turned into a job aid for annual ESG leadership.

HCD will request quarterly data pulls from HDIS Leadership through the end of the ESG-CV program and on-going for the annual ESG program to demonstrate the effectiveness of the programs and has approved ICF to provide a series of pre-outcome measure trainings with all CA HMIS Lead Organizations to ensure that ESG-CV projects are set up correctly, using HMIS as required by HUD and HCD, and reporting quality data to HDIS.

California State Auditor's Assessment of Status: Partially Implemented

In early March 2022, the department received data from the State's Homeless Data Integration System and demonstrated that it is moving forward with its process to measure the performance of the ESG-CV program. However, the department has not fully implemented the recommendation because it has not yet begun to report information annually to demonstrate the effectiveness of its programs.

HCD is working with BCSH to develop outcome data to measure the performance of the ESG-CV program. Should this ESG-CV outcome measures yield HCD with the tools necessary to measure the performance of the ESG-CV program, HCD will modify the logic below for annual ESG. At the discretion of HCD, ICF will proceed with a series of pre-outcome measure trainings with all CA HMIS Lead Organizations to ensure that ESG-CV projects are set up correctly, using HMIS as required by HUD and HCD, and reporting quality data to HDIS. This is the proposed plan; however, further work with BCSH HDIS staff will be necessary to determine what outcome data will be relevant to HCD's management of the ESG-CV Program.

After working with BCSH HDIS staff and acquiring outcome data, HCD will implement an annual process to evaluate the effectiveness of the ESG-CV program and ultimately the ESG annul program. This outcome performance data will be used to prioritize funding for those projects that demonstrate higher levels of performance, while deploying HCD staff to help increase the capacity of those projects that demonstrate lower levels of performance.

- See HDIS - ESG-CV Outcome Measures

California State Auditor's Assessment of Status: Partially Implemented

The department has developed a plan to collect outcome information and measure the performance of the ESG-CV program using the State's Homeless Data Integration System. To measure program performance, the department has identified seven outcome measures, such as the percentage of people who remained in permanent housing for a designated length of time and the percentage of people who returned to homelessness from permanent housing within a specified period of time. However, the department did not provide documentation to substantiate that it has begun collecting data to evaluate the seven outcome measures in its plan. Additionally, it has not yet begun to report information annually to demonstrate the effectiveness of its programs.

All Recommendations in 2020-611

Agency responses received are posted verbatim.