For more than 30 years, HUD’s Community Development Block Grant (CDBG) program has channeled funds to municipal and county governments for affordable housing, economic development, social services, public works, and other programs. CDBG grantees often contract
with subrecipients — local nonprofit groups that provide public services, such as day care and job training.
Subrecipients account for the bulk of public service spending and about one-half of CDBG-based economic development activities.
Because subrecipients play such an important role in the CDBG program, HUD encourages grantees to adopt effective subrecipient-specific management strategies. In 2005, HUD released Managing Subrecipients of CDBG Grantees, a research report that showcases how some grantees effectively manage subrecipients. Based on HUD Field Office recommendations, a research team completed onsite visits with 11 entitlement grantees who have exhibited exemplary subrecipient management. The sample included cities, counties, and a range of CDBG award amounts.
Preaward Assessment
The selected grantees use various assessment strategies to evaluate a nonprofit’s proposal and organizational capacity before awarding funds. In Westchester County, New York, the CDBG administrator and staff accompany the mayor or city representatives on a tour of potential projects. They offer feedback about a proposal’s strengths and weaknesses before the subrecipients
prepare an application. Other grantees limit funding to certain types of activities. For example, Gwinnet County, Georgia approves subrecipient proposals for capital projects, but not for operating support, in the belief that such targeting screens out less capable organizations.
Subrecipient Agreements
HUD requires signed contracts between the grantee and a subrecipient. All 11 grantees clearly state what the subrecipient must do in the statement of work section of the contract, spelling out the performance benchmarks the grantee will use to track progress. To clarify these contractual obligations, Asheville, North Carolina requires each subrecipient to submit a proposed statement of work that includes specific accomplishments. The city’s CDBG staff then negotiates particular details with each subrecipient before signing an agreement. (A sample contract negotiated in this way appears in the appendix of the report.)
Orientation, Training, and Technical Assistance
To strengthen the ability of nonprofits to carry out CDBG activities and comply with federal regulations, grantees provide orientation, training, and technical assistance to all subrecipients. The 11 grantees differ in their training and technical assistance approaches. Many hold preapplication workshops. Los Angeles County, California relies on a website to provide online financial training. Westchester County, New York has in-house landscape architects who provide design services and help subrecipients develop bid packages. Palm Beach County, Florida, helped an emerging nonprofit develop an adequate accounting system.
Tracking Subrecipient Progress
Effective managers track the progress of subrecipient activities. They pay attention to subrecipient performance reports and requests for financial draws. Some jurisdictions use automated financial and reporting systems that allow constant supervision of performance. Online tools such as accounting software ease the task of complying with federal financial requirements. Several grantees use pay-for-performance incentives that not only permit subrecipients to draw up to a certain portion of their award, but also give them access to additional amounts on a pro rata basis. Such incentives are not available to subrecipients with unmet performance goals.
Monitoring Strategies and Procedures
Onsite monitoring is an effective tool for identifying areas of weak performance and providing subrecipients with technical assistance. The 11 study sites use different monitoring strategies to meet their oversight responsibilities and satisfy federal regulations. CDBG staff in Fairfax County, Virginia conducts onsite monitoring of each subrecipient at least twice a year and visits new subrecipients in the first three months of the contract period to identify and address problems early on. Asheville, North Carolina begins with a risk assessment to determine whether a subrecipient is a high, moderate, or low risk and tailors its monitoring plans accordingly.
Follow-up Procedures
Grantees skilled in managing subrecipient contracts provide continual feedback. They share the results of monitoring visits with subrecipients and offer suggestions for improving performance or resolving problems. For example, when the local CDBG staff in Gwinnett County, Georgia noticed that a subrecipient omitted the required labor standards language in advertising a construction procurement, the organization was instructed to rebid the project. Palm Beach County, Florida and Phoenix, Arizona give timely and regular feedback by promptly contacting the subrecipients with questions or concerns, especially those raised by monthly reports and payment vouchers.
Additional Practices
This research suggests that effective subrecipient management includes incorporating incentives and capacity building into management systems. The most effective oversight combines positive incentives for excellence, such as public recognition or increased funding, with sanctions — the ultimate sanction being the withdrawal of funding. Building nonprofit organizational capacity is an aspect of successful management that creates strong nonprofits that are able to comply with CDBG regulations, provides more effective community services, and leverages additional resources.
In addition to identifying effective subrecipient management practices, Managing Subrecipients of CDBG Grantees provides examples and contact information for readers who wish to learn more about particular initiatives. The report can be downloaded free of charge at www.huduser.org/publications/commdevl/CDBGgrantees.html, and printed copies can be ordered for a nominal fee by calling HUD USER at 800.245.2691 and selecting option 1.
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