When developing annual monitoring plans, it is critical for PJs to carefully determine which organizations and program areas warrant on-site reviews. The likelihood that an organization or program will encounter compliance or performance problems can be based on an assessment of risk factors. This approach enables staff to identify "high-risk" areas where on-site monitoring and technical assistance may be required.

To assess risk, HOME monitoring staff should look at two broad areas:

• Compliance - the likelihood that the project, program, or entity may violate HOME regulations, fail to comply with program requirements, or be open to fraud and abuse.
  
  
• Performance - the likelihood that, even without actual compliance violations, the results of the activity may not be in proportion to the HOME funds allocated. For example, performance risk might include poor housing unit production, a low number of residents assisted with HOME funds, or slow expenditures under a HOME agreement.

This risk analysis should be an objective assessment of risk based upon information from a variety of sources, including:

• Recent desk reviews;
• Input from other HOME program staff;
• information from other local sources;
• Results of previous on-site reviews and follow-up activities; and
• Program application information.

PJ monitoring staff should develop a list of specific "signs" of risk, also called risk factors, to help assess risk.

To begin with, all risk factors previously used by the PJ should be reviewed. If a previous set of indicators worked well, it may be appropriate to use them again. If performance or compliance problems were missed, or if there have been changes in local conditions, the factors may need to be revised or updated. There are several groups of risk factors that may apply to organizations using HOME funds, including:

1. Previous Monitoring Results Recurring monitoring findings;
   • Inability to clear outstanding issues;
     
   • Implementation of actions to correct past findings; and
     
   • Not monitored last year.
     
     
2. Recent Problems
   • Letters of complaint;
     
   • Inaccurate/ incomplete/ late project submissions or progress reports;
     
   • Audit findings or no audit;
     
   • Failure to meet agreed-upon schedules;
     
   • Failure to comply with provision(s) of HOME Agreement; and
     
   • Poor performance/compliance in other programs administered by agency.
     
     
3. Project Specific Factors
   • Large number of units;
     
   • Inexperienced developer;
     
   • Inexperienced general contractor; and
     
   • Multiple funding sources.
     
     
4. Program Performance/Local Capacity
   • No previous experience with a certain type of activity;
     
   • Past difficulties in carrying out a certain type of activity;
     
   • Low productivity or unusually high productivity without explanation;
     
   • Low-quality program documentation;
     
   • Lack of progress in spending HOME funds;
     
   • Staff turnover/ inexperienced staff;
     
   • Change in agency or program leadership;
     
   • Significant change in goals and direction of administering agency; and
     
   • Poor quality business plan.
     
     
5. Program Complexity
   • Large amount of HOME funds awarded;
     
   • Large number of projects;
     
   • Use of several contractors;
     
   • Projects involving multiple transactions and several parties;
     
   • Programs that add a number of local conditions or preferences; and
     
   • Number of local lending partners or other funding sources.