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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of the Administration of the Community Services Block Grant Program by the State of New Jersey Department of Community Affairs," (A-02-96-02003)

June 18, 1997

Complete Text of Report is available in PDF format (1.4 MB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This report provides you with the results of our "Review of the Administration of the Community Services Block Grant Program by the State of New Jersey, Department of Community Affairs, during the period October 1, 1994 through September 30, 1995. The primary objective of the audit was to evaluate the State of New Jersey's Department of Community Affairs (DCA) administration of the Community Services Block Grant (CSBG) program. Our audit included coverage of both fiscal and programmatic aspects of the program.

Our review of fiscal matters disclosed that, in general, the State of New Jersey had established adequate fiscal controls and fund accounting procedures regarding the receipt, disbursement and accounting for Federal CSBG grant funds. We also found that the methodology used by DCA to resolve audit findings and recommendations included in its grantee audit reports was adequate. Further, we verified that DCA complied with the requirement that administrative costs be limited to five percent of its CSBG allotment and that DCA's administrative costs as well as ,selected costs tested at three grantees were reasonable, allocable and allowable.

However, on the programmatic side, we identified two major weaknesses in DCA's administration of the CSBG program. First, the current methodology of distributing awards to grantees is not consistent with program requirements that CSBG grant funds are to be directed to those programs which offer the greatest opportunity for addressing poverty needs in the communities. DCA officials advised us that the amount of funds awarded to each grantee was based on historic, predetermined proportions of New Jersey's total CSBG award and that this funding method was established by DHHS at the program's inception in 1982 and has never been changed. The system merely allocates the available grant funds on the same proportional basis as has been used since the inception of the program. Because funding allocations are basically known, grantees were quite lax in preparing, maintaining or utilizing timely, competent and relevant needs assessments. In addition, DCA did not have any procedures to perform technical evaluations of the merits of the proposed projects. Accordingly, there is no incentive among grantees to improve existing programs since neither project results nor a ranking factor is used in the allocation of grant funds.

Another related programmatic weakness is that once grant funds were awarded, DCA did not have in place an effective monitoring program as provided for in the State plan. Controls over the receipt and technical evaluation of the grantee progress reports were lax and there was no organized or formal monitoring protocol in place. Few on-site monitoring visits were made and documentation for those visits was inadequate to establish the nature, scope or results of the visits.

Management attributed part of the problem to a shortage of personnel to conduct on-site visits. In the absence of a system directing grant awards to projects with the most potential for meeting program objectives and due to the lack of programmatic monitoring, we have no assurance that $10.7 million of CSBG funds awarded during our audit period were utilized in the most effective manner possible in addressing poverty in New Jersey communities.

We recommend that DCA develop a system for allocating funding to approved programs that have the most potential for ameliorating the causes of poverty in the communities. In this manner, grantees would compete for funding rather than be assured of receiving the same funding percentage each year. We are also recommending that the DCA develop and execute an effective grantee monitoring program, including on-site monitoring visits to ensure grantees are operating the programs on a programmatically sound basis.

In their response dated May 7, 1997, DCA officials concurred with our findings and recommendations and included a statement of improvements implemented and those in progress.