In 2002 and 2006, Californians voted to provide a total of nearly $5 billion in bonds (housing bonds) for use in financing affordable housing. The California Department of Housing and Community Development (HCD) oversees the majority of housing bond programs for the State and is responsible for ensuring that target populations receive bond‑funded housing. Since 2007 our office has performed five required audits, including this one, of HCD's housing bond program management. In each audit, we found similar problems related to HCD's monitoring of certain housing bond programs, particularly CalHome and Building Equity and Growth in Neighborhoods (BEGIN), both of which generally enable low‑income and very low‑income households to become or remain homeowners. We also identified concerns related to HCD's implementation of its housing bond database and its adherence to administrative spending limits. To ensure HCD addressed the problems we identified, we made a total of 28 recommendations in the first four reports, which HCD previously asserted that it implemented. However, during this review, we determined that HCD had not followed through on half of these recommendations. This report concludes the following:
The housing bond programs that HCD oversees generally award funds to recipients, such as local government agencies and nonprofits, that in turn use the funds to benefit target populations. To verify that these populations receive the intended benefits, HCD's policies require its staff to monitor the award recipients. However, we found significant differences between HCD's monitoring of its loan‑based programs, which require recipients to pay back the funds, and its monitoring of its grant‑based programs, which do not require the recipients to pay back the funds. Specifically, HCD has failed to perform critical steps when monitoring grant‑based programs, including CalHome and BEGIN. It has not obtained required performance reports detailing how the recipients have used the funds to help target populations, nor has it performed on‑site visits to verify whether recipients have provided assistance only to those who qualify.
HCD Is Unable to Fully Use Its Housing Bond Database, Impeding Its Ability to Ensure That Staff Adequately Monitor Award Recipients
Although HCD has put into service a centralized database—the Consolidated Automated Program Enterprise System (CAPES)—it has not ensured the system has the necessary functionality for it to monitor its housing bond programs. As a result, HCD staff do not use CAPES to monitor CalHome or BEGIN. Because HCD staff do not use CAPES consistently, HCD management is limited in its ability to verify that staff receive and monitor the reports that recipients must submit, and HCD therefore lacks assurance that the bond funds are reaching the target populations.
HCD Risks Exceeding Some Statutory Administrative Spending Limits, Which Could Threaten Its Ability to Meet Its Monitoring Requirements
According to its tracking tool and its bond fiscal manager, HCD has exceeded the 5 percent statutory administrative spending limit for at least two of its programs, including BEGIN. HCD projects it will also exceed this limit for CalHome before it can complete its monitoring obligations. When it exceeds statutory spending limits, HCD is potentially violating state law and risks being unable to monitor recipients as required. Further, HCD management lacks a plan for addressing administrative spending overages.
Summary of Recommendations
The Legislature should require HCD to annually report to it in detail on its monitoring of CalHome and BEGIN awards and to include performance metrics to demonstrate that recipients have issued loans to eligible homeowners.
The Legislature should require the Business, Consumer Services and Housing Agency to annually report to it on the status of HCD's implementation of our recommendations.
HCD should immediately obtain all required performance reports for its grant‑based programs, including CalHome and BEGIN, and it should also develop a plan for performing on‑site visits of the CalHome recipients.
HCD should determine CAPES's usability for the housing bond programs, decide based on that determination if management should enforce the use of the database by its staff, and develop a plan to address the feasibility of continuing to develop CAPES.
HCD should develop a long-term plan describing how it will address instances when it has exceeded its administrative spending limits and how it will avoid exceeding the limits of the additional programs in the most immediate danger of overage.
The Business, Consumer Services and Housing Agency agreed with our recommendations and indicated that HCD has begun implementing them.