Don’t Leave CDBG Money on the Table: Fix These 4 Common Compliance Gaps

Jessica Bryan
Jun 4, 2025
3 min read

CDBG funds are one of the most flexible, community-driven tools local governments have to tackle housing, infrastructure, and economic development. But year after year, cities and counties lose out—either by underspending or facing findings during HUD reviews—because of avoidable compliance gaps.

The good news? These issues are fixable. And HUD isn’t out to get anyone—they’re looking for clear documentation, transparent processes, and responsible stewardship of federal dollars. When something goes wrong, there’s usually room to correct course.

Let’s walk through four of the most common compliance gaps—and how other communities successfully addressed them.

1. Incomplete or Inaccurate Low-Mod Income (LMI) Documentation

What Happened:A mid-sized city reimbursed a nonprofit $180,000 for a job training program, but participant files lacked key LMI verification. HUD couldn't confirm if the right population was served.

How They Fixed It:

Trained all subrecipients on HUD’s current LMI guidelines
Standardized intake forms with logic tied to local income limits
Built in quarterly internal file reviews

Outcome: HUD allowed partial reclassification under presumed benefit categories and reduced the repayment ask by over 75%.

2. Environmental Review Oversights

What Happened:A southern city began rehabilitation work on 22 homes before completing its required environmental review under 24 CFR Part 58. HUD monitoring flagged the $395,000 in expenses.

How They Fixed It:

Established a “no procurement before clearance” rule
Built an ERR tracking dashboard visible to all project leads
Sent key staff through HUD’s ERR training portal

Outcome: HUD accepted late documentation due to low-risk project scope and allowed future ERRs to be reviewed by a third party to prevent recurrence.

3. Inconsistent Subrecipient Oversight

What Happened:A large metro disbursed over $1.2 million to subrecipients with no performance or financial monitoring for nearly three years. HUD questioned $340,000.

How They Fixed It:

Conducted on-site and desk reviews for all active subrecipients
Developed a monitoring calendar and internal compliance dashboard
Partnered with a compliance consultant to create tailored fiscal tools

Outcome: After corrective action, HUD cleared the questioned costs and the city implemented a risk-based monitoring approach moving forward.

4. Timeliness of Spending (The 1.5 Rule)

What Happened:A Midwestern county exceeded HUD’s 1.5x timeliness threshold, risking a $500,000 cut in future funding.

How They Fixed It:

Fast-tracked procurement for shovel-ready capital projects
Issued a special RFP round for microenterprise assistance
Created quarterly spend-down benchmarks across all program areas

Outcome: The county reduced their balance under the 1.5 threshold in time and avoided any loss in funding.

Bottom Line

CDBG compliance doesn’t have to be overwhelming. With strong systems, proactive monitoring, and responsive partnerships, you can avoid findings and focus on impact. Most compliance gaps are the result of unclear processes—not bad actors.

If you’re unsure where your program stands, we offer CDBG Health Checks and compliance tools to help your team stay ready for monitoring—and make the most of your funding.

How The Housing Desk Can Help:

Whether you're trying to get ahead of your next HUD monitoring visit, clean up your subrecipient files, or build better compliance systems from the ground up—I can help.

I offer:

CDBG Health Checks and mock monitoring reviews
Subrecipient training on income eligibility, documentation, and procurement
Custom compliance tools and dashboards tailored to your program
Audit resolution support when findings or concerns arise

The best part? These services can often be covered under your CDBG planning and administration budget, or charged as an eligible program delivery cost when tied to specific activities. We’ll work with you to ensure all costs are allocable, allowable, and fully documented.

If you want to protect your funding and strengthen your impact, book a free consultation today. Let’s fix what’s broken—or build something even better.

⚠️ Disclaimer:

Examples in this blog are modeled after actual HUD audit findings and resolutions but may not reflect every program’s circumstances. Always consult HUD guidance or your CPD representative before applying similar strategies.