Congress
has split oversight of the RCs and urban EZs between the Department
of Housing and Urban Development and the Department of Health and
Human Services. Each plays a different, but important role in ensuring
program integrity.
By
statute, HUD is the designating agency for urban and rural RCs and
for urban EZs. HUD is also statutorily responsible for making a
periodic progress determination for each of its designees. The HHS
Office of Community Services administers the federal funding for
the Round I EZ projects. OCS has awarded the funds to state agencies
that, in turn, pass them to local-level organizations that implement
EZ projects. In many cases, the city planning department receives
the federal grant funding and coordinates the EZ activities at the
local level, but in several cities, a private not-for-profit organization
has that responsibility. The federal grants are authorized in Section
2007 of the Social Security Act and they are a special component
of the Social Services Block Grant program. The HHS
website for the EZ program provides more details about the Round
I grants. HHS regulations concerning the grants are found at 45
CFR Part 96.
Congress
has provided a different funding source for the 15 Round II EZs
and a different mechanism must be followed to distribute that funding.
HUD uses a process similar to the HUD Community
Development Block Grant (CDBG) program to distribute the EZ
funding. HUD sends its funding to the lead locality (city or county)
which in turn may distribute the funding to a non-profit 501c(3)
corporation.
Framework
Governing HUD'S Legal Responsibility for Monitoring & Auditing the
RC/EZ Initiative
HUD's
legal responsibility regarding monitoring the EZs derives primarily
from section 1391(d)(2) of the Omnibus Budget Reconciliation Act,
which provides for the revocation of an EZ's designation if the
Secretary determines, among other things, that a designated EZ has
failed "to make progress in achieving the benchmarks set forth in
the strategic plan." This provision applies to Round I - Round III
designations, and implies that information must be submitted to
and reviewed by HUD in order for the Department to make such determinations.
To further implement this responsibility the Department's regulations
at 24 CFR §597.400-403 provide for reporting, performance reviews,
validation of designation and revocation of designation under appropriate
circumstances. Similar provisions apply to Empowerment Zones designated
in Round II pursuant to 24 CFR §§ 58.415-430.
Provisions
for monitoring the RCs derives from section 1400E of the Omnibus
Budget Reconciliation Act, which provides in paragraph (b)(2) for
the revocation of an RC's designation if the Secretary determines
that the local government or the State in which the RC is located
has modified the boundaries of the RC or the RC is not complying
substantially with, or fails to make progress in achieving, State
or local commitments.
HUD'S
Process for Monitoring Progress of RCs and Urban EZs
HUD's
Office of Community Renewal has full-time staff devoted to monitor
and communicate with each RC and EZ. In addition, to help ensure
compliance with applicable laws and regulations, HUD's Assistant
Secretary for CPD has assigned a CPD Representative to monitor and
assess the progress of these communities. The CPD Representatives
work with the Office of Community Renewal to help ensure full compliance
with HUD's statutory monitoring responsibilities for the RCs and
EZs. These representatives have received training from the Office
of Community Renewal on monitoring the designees. This Office will
use annual assessments from these CPD representatives and other
pertinent information to determine if a designee will maintain its
good standing and retain its designation.
RC/EZ
Initiative Performance Measurement System (PERMS)
To
satisfy its monitoring and evaluation responsibilities, HUD's Office
of Community Renewal instituted an Internet-based performance measurement
system called PERMS. The RC/EZ designees use PERMS to document the
projects and programs they are implementing to achieve their local
strategic plan and Course of Action. The CPD Representatives use
PERMS to monitor and evaluate the progress of each RC/EZ. Each year
the designees use PERMS to submit an annual performance report that
identifies progress made in achieving project/program milestones
and output measurements and tracks the performance of governance
boards and, for RCs, the Coordinating Responsible Agency (CoRA).
The CPD Representatives use PERMS to evaluate the information contained
in the RC/EZ annual reports. PERMS not only cuts down on the paperwork
burden facing the designees, it provides HUD with a low-cost mechanism
for continually monitoring the progress of each designee.
Statutory
and Regulatory Framework Concerning HHS's Responsibilities for the
Round I Grants
Section
13761 of the Omnibus Budget Reconciliation Act of 1993 authorizes
the Department of Health and Human Services' Office of Community
Services to provide funds to appropriate State agencies for designated
Round I Empowerment Zone projects. The grants are subject to that
department's regulations and procedures.
Legal
Responsibility of the States Regarding Monitoring and Auditing
In
general, HHS has delegated some oversight responsibilities for the
EZ funds to the States. The States are responsible for ensuring
program integrity. The States are responsible for monitoring EZ
spending to ensure compliance with legal requirements. Regarding
HUD and the States, Section 597.400 of the implementing regulations
provides that the required periodic reports submitted by designees
must include "State actions which have been taken in accordance
with the strategic plan," but no further State action is specified.
For Round II §598.415(b) specifically provides that the States
must submit periodic reports to HUD, demonstrating compliance with
the certifications they must submit to HUD pursuant to the statute
and regulations. Other than these reporting requirements, progress
determinations are left to HUD. The State agencies that receive
federal grants from HHS for the EZ projects are also required to
provide annual reports to HHS about the grants.
Statutory
Framework Governing Designees' Legal Responsibility for Monitoring
& Auditing the Initiative
Pursuant
to 24 CFR §597.400, EZ designees must present periodic reports of
actions taken pursuant to their strategic plans. Under §597.401,
HUD will regularly evaluate that progress, and on the basis of these
performance reviews may reevaluate designations, pursuant to §597.402
or revoke designations, under §597.403. Designees under Rounds II
and III must submit periodic reports to HUD pursuant to 24 CFR§598.415(a).
HUD must periodically review and evaluate progress in implementation
of the strategic plan, in accordance with §598.420, and may validate
designations, pursuant to §598.425 or revoke designations under
§598.430. HUD considers input from the states in making its progress
determination.
With regard to monitoring the RCs, §599.511 indicates that each
CoRA and the State or local governments where the RC is located
must submit period reports as HUD may require. Pursuant to §599.513,
HUD may revoke a designation if it determines that the RC has modified
its boundaries without authorization or is failing to achieve progress
in meeting commitments under its Course of Action.
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