Administration of the Water and Sewer Facilities Grant Program by HUD

Published by the Government Accountability Office on 1971-09-02.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                       %2-e           pw                  5iiske$
                                   UNITED STATESGENERALACCOUNTINGOFFICE
                                               WASHINGTON.     DC      20548

,,   CIVIL   DIVISION                                                                SEP - 2 1

                 Dear Mr. Hyde:

                        During our current reviews of community development programs of
                 the Department   of Housing and Urban Development (HUD) we noted certain
                matters relative    to the administration  of the Water and Sewer Facihties
                Grant Program which we wish to bring to your attention.         These matters
                concern the need for HUD to establish     policies  and procedures   for with-
                drawmg funds reserved      for water and sewer proJects when 1-t appears that
                grantees will not be able to construct     such proJects within    a reasonable
                tme period.

                        Cur work was performed primarily       at the HUD central     offlee.     Durmg
                 this review we obtalned pertinent       information   from four HUD reglonal         and
                 area offices    and also from selected grantees.        In addition,      we obtained
                 information    on specific  water and sewer projects      from the Environmental
                 Protection   Agency (EPA).

                        HUD records showed that as of February 28, 1971, the Department had
                 reserved    approximately     $62 million     111 Federal funds for 127 proposed
                 water and sewer proJects for periods ranging from 1 to 4 years after grant
                 agreements had been signed.           Construction     work on these proJects had not
                 been lnitlated     by the grantees.         HUD records showed also that as of this
                 date, HUD had 222 applications           requesting    about $lllmillion    in Federal
                 funds for projects       that it was unable to approve primarily         because of a
                 lack of funds.                                                      I

                       During this review, we selected 21 proJects for which, as of February
                 28, 1971, funds had been reserved    by HUD for about 2 years.    In view of
                 the length of time that Federal funds had been reserved,      we exarmned into
                 these proJects to ascertain  whether construction    was expected to begin in
                 the near future.

                        HUD central  office   officials told us in June 1971tha-t construction
                 had not been lnitlated     for 15 of these 21 projects.   As of June 1971 about
                 $12 rmllion    had been reserved by HUD for these 15 proJects for periods
                 ranging from 27 to 62 months as shown below.

                        Projects              Funds reserved     for    . . .            &unt       reserved

                                                    27 to 29 months                         '"5'3;":"'
                                                    34 to 37   "                                     3:o
                           3                        L,eOto 42  11                                   2.5
                           2                                                                        1.2

                                             50TH ANNlVERSARY          1921- 1971
       HUD officials       said that construction    of these projects    was delayed
for a number of reasons whxh included:            untimely   completion   of plans and
specifications;      difficulties    encountered   by grantees 1~1 obtaining     funds to
cover their     share of the proJect costs; high construction           costs; inability
to acquire land for the project          site; and major changes in the scope of

      HDD officials  said also, in June 19'71, that they expected that nine
of these projects   would be constructed     in the near future.    For the remain-
ing six proJects,   HUD officials    said that bids were currently    being adver-
tised for two proJects,     one proJect was being redesigned,     and construction
of another project was expected to begin in 1974. HUD officials           added that
they were unable to determine when construction       would begin for the remam-
ing two projects.

      Information     pertaining    to 2 of the 15 proJects        is presented     below.


       About $700,000 in Federal funds was reserved by HUD in March 1969 for
construction   of a $2.9 million   sanitary   sewage collection    system in Wall
Township, New Jersey.     Although construction     of this proJect was not expected
to begin until    sometuae in 1974, we noted that in August 1971, HUD con-
tinued to reserve funds for this project.

        HUD records showed that when HUD signed the grant contract            in May 1969,
construction      of the sewage collection      system.was expected to begin in 6
months, or in November 1969.          These records showed also that a local sewage
treatment     plant was to be constructed      xn conJunction   with the HUD-assisted
project    and that this plant, according        to EPA, would'meet     the applicable
Federal water quality      standards.      The sewage treatment     plant was to be con-
structed with Federal financial         assxtance     from EPA.

       In discussing     this proJect with HUD area office representatives,                 we
were advised that shortly         after HUD awarded a grant to the township and EPA
approved the plant, the township decided to Join with several nearby com-
munities    in constructing      a regional    sewage treatment       plantinstead      of the
local sewage treatment        plant.     We were further      advised that in January 1970
the township requested authorization            from HUD to use the sewage treatment
plant of a nearby township-- Belmar Township--until                the regional      sewage treat-
ment plant was completed.            HUD subsequently    requested EPA to determine
whether the Delmar Township sewage treatment               plant could satisfactorily          be
used xn connection with the Wall Township sewage collection                     system.

     EPA ad-vised HUD in April 1970 that the Belmar Township plant would not
be capable of adequately   treating the additional   sewage from the Wall Town-
ship sewage collection   system and, therefore,    EPA could not certify that
this system would meet applicable   Federal water quality    standards.

       Officials   of Wall Townsh~~p advised us in August 1971 that the
regional     sewage treatment    plant would not be completed until  about 1975.
Construction     of the Wall Township sewage collection     system was scheduled
to begin, according       to these officials,   sometime in 1974..

        In August 1971, 16 months after    EPA advised HUD that it could not
certify    the Wall Township sewage collection      system's use of the Belmar
Township plant,    and 21 months after   construction     of the original Wall Town-
ship sewage trea-txnent plant was supposed to begin, JXiD continued to reserve
funds for this project     which, as previously     mentioned,  would not be com-
pleted until    about 1975.


      Our review of another project--Forrest         City, Arkansas--showed  that
HUD reserved    about $460,000 m Federal funds in March 1969 to financially
assist the city in xmproving its water and sanitary           sewer systems and that
at the time HUD approved the project,        construction    was expected to begin 8
months after the date of the grant contract,           or in January 1970. We noted
that 29 months later--in     August 1971--m       continued to reserve funds for
this proJect although construction     had not been initiated.

       Prior ta the HUD grant approval,    EPA approved the use of a sewage
treatment    plant that was to be constructed   in conjunction with the HUD-assis-
ted project.      EPA then awarded the city funds to assist it in the construc-
tion of the plant.

        Officials     of Forrest   City advised us in-August          1971 that the con-
struction       of this project    had been significantly         delayed primarily   because
the city encountered         a number of problems in acquiring           land for the sewage
treatment       plant site and also experienced       difficulties       in obtaining  funds
for the construction         of this project.

        We discussed these matters with HUD area office          representatives       who
advised us that, subsequent to our inquiry,          they requested      Forrest     City
officials     to take action to resolve    the problem of site acqulsltion,            and
also asked that they submit to HUD, within 90 days, final               plans for the
construction      of the project.   HUD area office     representatives       advised us,
however, that, even If the grantee did not comply with this request,                    as a
matter of policy they still       would not withdraw      the Federal funds reserved
for this project.

       As discussed above, our review of the administration        of the Water and
Sewer Facilities        Grant Program shows that HUD reserved,   and continues     to
reserve,   funds for long periods of time although       grantees may not be in a
position    to initiate      the proposed construction of thexr projects    within    a
reasonable    time frame.

       ti view of the large number of applicants               seeking Federal financial
assistance      under this program, we believe           that certain   HUD actions are
needed to help ensure that the limited               amount of Federal funds available       for
water end sewer projects          are being utilized        by grantees to accomplish
program objectives        in a timely manner.          In this regard,   there does not
appear to be a Departmental          policy,      or the necessary procedures,     to effect
the transfer        of Federal funds to other projects          when grantees are unable
to initiate--within         a reasonable     period of time--their      proposed projects.


        Accordmgly,     we reccnmnend that you examine into the status of water
and sewer projects       for which the Department has reserved             funds and con-
struction     work has not been initiated         within    a reasonable     period of tme
after the expected starting          date has passed.         On the basis of the results
of this examination,        we recommend also that you consider establishing                a
policy for HUD regional          and area offices      to follow with respect to with-
drawing and transferring          to other acceptable       projects   those funds which
were reserved       for projects    which apparently      will not be initiated      within
a reasonable      period of tune.

     We appreciate    the cooperation   given to our representatives   during
this review,    and we shall be pleased to discuss wi%h you or members of
your staff the matters discussed in ths report.         A copy of this report                    is
being forwarded    to the Assistant   Secretary for AdminIstration.

      We would appreciate your views and comm;nts on any action                   taken   or
planned with respect to the above matters.

                                                         Sincerely    yours,

                                                         B. E. Birkle
                                                         AssMznt,    Director

The Honorable Floyd Hyde
Assistant   Secretary for
  Community Development
Department of Housing and
  Urban Development