by Marion McFadden, Vice President, Disaster Recovery

Last week, the U.S. Department of Housing and Urban Development (HUD) released a second revision to the Universal Notice governing Community Development Block Grant – Disaster Recovery (CDBG-DR) funds. These revisions, released March 31, will apply to the more than $12 billion in disaster recovery funding announced in the January 2025 CDBG-DR allocations. Building on IEM’s prior analysis, this post delves into the Administration’s latest updates to the CDBG-DR guidelines.

The changes signal a need for readiness, compliance, and strategic alignment with Administration goals for state and local governments preparing to administer these funds. Agencies deploying these funds must act quickly and precisely to stay ahead of these shifts.

What’s New in the Universal Notice?

HUD’s March 31 memo outlines two significant updates to the Universal Notice (90 FR 1754):

1. Immigration Compliance Requirements: Grantees must follow additional verification protocols under the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). This includes using federal verification systems, such as SAVE, to ensure disaster recovery benefits are not extended to ineligible individuals. This update increases the administrative complexity of program delivery and raises the stakes for documentation, verification, and training.
2. Expanded Termination Authority: HUD added a provision allowing it to terminate awards under 2 CFR 200.340 “if HUD determines that the award no longer effectuates the program goals or agency priorities.” This provision underscores the importance of continuous performance monitoring and reinforces the expectation that grantees demonstrate strategic use of funds throughout their federally-funded program’s lifecycle.

Why These Updates Matter

These changes reflect the Administration’s broader push toward greater transparency, accountability, and alignment in the use of federal funds. For grantees, the implications are clear:

• Compliance is more complex: Legal and administrative requirements demand meticulous planning and execution.
• Grant stewardship is under sharper scrutiny: Funding that drifts from HUD’s stated goals may now face early termination.
• Strategic alignment is essential: Jurisdictions must demonstrate that their programs reflect community needs and federal priorities.

Simply put, these updates elevate the federal government’s expectations for what a successful CDBG-DR program should look like.

What Should Jurisdictions Do Now?

State and local governments should start preparing immediately. Key steps include:

• Reviewing and updating policies and procedures to incorporate the PRWORA and related verification requirements.
• Conducting internal risk assessments to identify potential vulnerabilities in program design, execution, or oversight.
• Enhancing performance tracking systems to monitor compliance in real-time and document alignment with federal objectives.
• Engaging community stakeholders early and often to ensure that program goals reflect real needs and build public
• Staying connected with policymakers to understand program goals and agency priorities, to reduce the risk of grant termination.

Agencies that build flexibility into their programs and maintain a proactive posture will be best positioned to adapt as HUD leadership continues to refine its approach.

Moving from Compliance to Impact

Although federal disaster funding is a powerful tool, it must be managed with strategic foresight and operational discipline. Jurisdictions that treat these updates as an opportunity to elevate program design and delivery will turn grant dollars into compliant, lasting outcomes for their communities.

If your state or locality is administering CDBG-DR funds, now is the time to act. Use this moment to reassess, realign, and strengthen your programs for the future.

IEM can help. With four decades of experience supporting state and local governments nationwide and a footprint in Washington, IEM brings the compliance confidence and technical rigor necessary to ensure our client’s success. Building housing programs that restore neighborhoods, managing infrastructure upgrades, assisting small businesses, streamlining grant management systems that cut red tape, and leading mitigation strategies that ensure communities are more resilient to future disasters, we are here to support you.