WASHINGTON — Municipalities in fiscal crisis faced diminished abilities to manage federal grants because of workforce reductions, decreased financial capacities and outdated information technologies, the U.S. Government Accountability Office concluded in a report.

The report, released Friday, came after Rep. John Conyers and Sen. Gary Peters, both Michigan Democrats, requested GAO to examine the oversight of federal grants to municipalities in fiscal crisis.

GAO focused on four municipalities — Detroit and Flint in Michigan; Stockton, Calif.; and Camden, N.J. — and eight grant programs that related to housing, transportation and public safety. Officials with the office conducted site visits to the four cities and reviewed grant oversight policies and actions for fiscal years 2009 to 2013.

All four of the cities had workforce declines from 2009 to 2013, though the effect of the reductions on grant management varied, according to the report.

In Detroit, Flint and Stockton, downsizing directly affected staffing responsible for grant management and oversight. Detroit's Planning and Development Department, which administers Community Development Block Grants and HOME Investment Partnerships Program grants received by the city, lost more than one third of its workforce between 2009 and 2013, the report said. This made it hard for the remaining staff to carry out all of the grant compliance and oversight tasks, Detroit officials told GAO.

Staff reductions due to fiscal crisis led to "grant management skills gaps" in the Detroit, Flint and Stockton workforces, according to the report.  In Detroit and Stockton, turnover in senior and mid-level staff particularly created challenges. The skills shortages sometimes led to violations of grant agreements or unspent grant money in Detroit and Flint, officials in those cities told GAO.

Camden's Department of Planning and Development did not suffer as severe staffing issues as its other departments, according to the report. Officials in the city told GAO that this was because the Department of Housing and Urban Development allows CDBG grantees to use some funds for planning and administrative costs.

In Detroit and Stockton, a lack of investment in information technology made it harder for the municipalities "to oversee and report on grants in an accurate and timely way," GAO said.

Decreased financial capacity in Flint and Stockton reduced the cities' abilities to apply for certain federal grants. Flint needed to postpone submitting an application for a Transportation Investment Generating Economic Recovery (TIGER) grant for at least three years because the city had limited budgetary resources and grant applications are evaluated in part by the level of local funds that cities can contribute to the proposed project. And both Flint and Stockton didn't apply for competitive federal grants with "maintenance of effort" requirements because they couldn't guarantee that they could maintain their non-federal funding levels, GAO said.

To improve their management of federal grants, Flint, Stockton and Detroit have consolidated management processes, GAO said. Flint and Stockton have instituted new grant application pre-approval processes for city departments. In 2014, then-Detroit Emergency Manager Kevyn Orr directed the city's chief financial officer to establish a central grant-management department.

Additionally, Detroit, Flint and Camden have collaborated with local nonprofit organizations to apply for federal grants, helping them deal with limited staffing, according to the report.

GAO reviewed eight federal grant programs and found that they "used, or had recently implemented, a risk-based approach to grant monitoring and oversight," the report said. When grant program officials found deficiencies, they often required grantees to take corrective actions, but the municipalities did not always take these actions, GAO said.

A White House Working Group on Detroit and individual federal agencies took steps to improve collaboration with municipalities in fiscal crisis. "These actions included improving collaboration between selected municipalities and federal agencies, providing flexibilities to help grantees meet grant requirements, and offering direct technical assistance," GAO said.

However, federal agencies have not formally documented and shared the lessons learned from the federal efforts to help Detroit. "If these lessons are not captured in a timely manner, experiences from officials who have first-hand knowledge may be lost," GAO said. The office recommends that the Office of Management and Budget director require federal agencies involved in the Detroit working group to collect good practices and lessons learned and share them with other federal agencies and local governments.

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