What happens when a business assisted with CDBG funds fails to create the number of jobs expected or the business closes?
Date Published: May 2015
If the business is unable to create the number of jobs they were expected to (or if the business closed) a finding must be made that the grantee failed to meet a national objective and, as a result, HUD may advise them to repay their CDBG line of credit. The funds repaid to the line of credit will be credited to the original activity and zero out the draws. Otherwise, the grantee may subsequently cancel the activity. However, if the local HUD field office agrees that the grantee has exercised due diligence in managing this activity, then the field office may allow the grantee to cancel this activity with draws.
If the economic development activity is eligible, the public benefit standards apply. A job filled is a job that counts toward the public benefit standards. 24 CFR 570.209(d) addresses the actions HUD may take if the public benefit standards are not met as projected. Conversely, if the activity is deemed ineligible, the public benefit standards do not really matter except as for the ability of the grantee to do due diligence in its underwriting capacity. The grantee is also responsible for repayment of CDBG funds with non-federal funds. However, the grantee is always allowed to pursue repayment from the assisted business.