U. S. Department of Housing and Urban Development
Office of the Inspector General for Audit
Northwest/Alaska District
909 First Avenue, Suite 125
Seattle, WA 98104-1000
Phone 206-220-5360
Fax 206-220-5159
Audit Memorandum
No. 2001-SE-107-1801
July 13, 2001
MEMORANDUM FOR: Marlin Knight, Administrator, Alaska Office of Native
American Programs, 0CPI
/s/ Robert H. Woodard
FROM: for Frank E. Baca, District Inspector General for Audit, 0AGA
SUBJECT: Interior Regional Housing Authority’s management of a
rehabilitation project at the Native Village of Fort Yukon
Fairbanks, Alaska
In response to a request from the Native Village of Fort Yukon’s Tribal Council, we conducted a
limited review of Interior Regional Housing Authority’s (IRHA) management of a rehabilitation
project at the Native Village of Fort Yukon. The Tribal Council alleged that IRHA did not
adequately manage the funds used for the rehabilitation. The review resulted in one audit
finding, included in the attachment.
Within 60 days please give us, for each recommendation in this report, a status report on:
(1) the corrective action taken; (2) the proposed corrective action and the date to be completed;
or (3) why action is considered unnecessary. Also, please furnish us copies of any
correspondence or directives issued because of the audit.
If you have any questions, please contact Robert Woodard, Assistant District Inspector General
for Audit at (206) 220-5360.
Attachments
cc: Mr. Joseph Wilson, Executive Director
Interior Regional Housing Authority
Ms. Linda Fields, Acting Executive Director
Native Village of Fort Yukon
Attachment A
Summary of Review Results
Interior Regional Housing Authority (IRHA) did not have adequate management systems to
administer a housing rehabilitation project assisted with Native American Housing Assistance
and Self-Determination Act of 1996 (NAHASDA) funds in accordance with federal regulations.
Specifically, IRHA had weak management controls and did not (1) have a formal process by
which all parties would approve changes to the original work, (2) adequately supervise foremen
at the project, and (3) have an accounting system that assigned costs to individual houses.
Consequently, the project had $385,514 in cost overruns and IRHA did not know the extent of
the work being done in Fort Yukon or have up-to-date information about how much it cost.
Moreover, IRHA could not provide the Native Village of Fort Yukon or HUD’s Alaska Office of
Native American Programs (AONAP), who have oversight responsibility, with accurate progress
reports.
Background
Background Congress has assumed a trust responsibility for working
with Indian tribes to improve housing conditions and
socioeconomic status so that tribes can take greater
responsibility for their own economic condition.
NAHASDA provides federal assistance to meet this
responsibility in a manner that recognizes the right of Indian
self-determination and tribal self-governance. NAHASDA
funds can only be used for affordable housing activities that
are consistent with an approved Indian Housing Plan and for
reasonable administrative and planning expenses.
NAHASDA provides assistance directly to either the tribe or
to a separate Tribally Designated Housing Entity (TDHE).
A TDHE carries out affordable housing activities for one or
more tribes.
NAHASDA recipients must have the administrative capacity
to undertake the affordable housing activities proposed,
including the internal control systems necessary to administer
the activities effectively without fraud, waste, or
mismanagement. Evaluation of a recipient’s administrative
capacity is part of the Office of Native American Program’s
(ONAP) oversight responsibility under NAHASDA. ONAP
evaluates a recipient’s administrative capacity by assessing
the recipient’s (1) history of satisfactory performance,
(2) financial stability, (3) management systems,
(4) development and operating policies, (5) independent
audits, and (6) overall responsibility.
IRHA was the Tribally Designated Housing Entity for the
Native Village of Fort Yukon for fiscal years 1998 and 1999.
The Indian Housing Plans for those years indicated that
IRHA would renovate 72 homes at Fort Yukon. IRHA
2 2001-SE-107-1801
Attachment A
budgeted $840,508 for the project. IRHA’s performance
goals for the project were to complete work on 10 percent of
the units, and preparatory work on all units, by December 31,
1999. Fort Yukon’s Tribal Council provided IRHA with a
list of houses for rehabilitation. IRHA inspected the houses
and prepared material and labor estimates. In its 1999
Annual Performance Report dated April 5, 2000, IRHA
reported that all work was completed on the original 72 units.
IRHA files also contained evidence that work had been done
on 4 additional units. According to IRHA records, the
project cost $1,226,022 and exceeded the budgeted amount
by $385,514.
In January 2000, the Tribal Council asked HUD-OIG to
conduct an audit of the IRHA’s administrative and financial
management of fiscal years 1998 and 1999 NAHASDA
funds used for the Village’s rehabilitation project, alleging
a breakdown in the entire process. Members of the Fort
Yukon Tribal Council said that IRHA did not keep track of
expenses and the Acting Executive Director stated that
IRHA did not provide Fort Yukon with financial
information about the project.
Background
Objective, Scope, and Our objective was to determine if Interior Regional Housing
Methodology Authority (1) had adequate management systems to
administer the fiscal years 1998 and 1999 rehabilitation
project at the Native Village of Fort Yukon and
(2) administered the project in accordance with program
regulations. To accomplish our objective, we interviewed
Alaska Office of Native American Programs program
officials, IRHA staff, and Fort Yukon Tribal Council
members and reviewed IRHA program and financial records.
The review was conducted at various times from June 2000
through April 2001 and covers NAHASDA funds allocated
to Fort Yukon for fiscal years 1998 and 1999.
Background
Finding Interior Regional Housing Authority did not have adequate
management systems in place to administer the 1998 and
1999 rehabilitation project at the Native Village of Fort
Yukon in accordance with federal requirements. As a result
of weak management controls, the project had cost overruns.
In addition, IRHA did not properly account for labor and
material costs, and could not provide the Native Village of
Fort Yukon and HUD the information needed to adequately
perform their oversight responsibilities.
3 2001-SE-107-1801
Attachment A
Regulatory requirements
Federal regulations (24 CFR 1000.502) hold the Tribally
Designated Housing Entity responsible for (1) monitoring
grant activities, (2) ensuring compliance with federal
requirements, and (3) monitoring performance goals under
the Indian Housing Plan. The TDHE is also responsible for
preparing at least annually, a performance report that
includes an assessment of program progress and goal
attainment under the Indian Housing Plan. The TDHE’s
monitoring should include an evaluation of its performance.
These same regulations hold the Indian tribe as the grant
beneficiary responsible for monitoring programmatic and
compliance requirements of the Indian Housing Plan and
NAHASDA. The TDHE must submit its monitoring
evaluation and results to the Indian tribe so that the tribe can
carry out its oversight responsibilities under NAHASDA.
HUD also reviews records, reports, and audits to determine
whether the TDHE has carried out its eligible activities in a
timely manner, had met the primary objective and
requirements of NAHASDA, and has complied with the
IHP of the grant beneficiary.
Federal regulations (24 CFR 85.20) also require TDHE’s
to have a financial management system that (1) makes
accurate, current, and complete disclosure of the financial
results of financially assisted activities, (2) maintains
records which adequately identify the source and
application of funds, (3) maintains effective control and
accountability for all grant assets, and (4) compares actual
expenditures to budgeted amounts. Further, 24 CFR 85.40
holds TDHE’s responsible for managing the day-to-day
operations of grant supported activities to assure that
performance goals are being achieved.
Need for good management controls
We found that IRHA did not administer the rehabilitation
project in accordance with federal requirements. IRHA did
not have the reasonable management controls in place to
prevent or to timely detect unauthorized activities or cost
overruns. Specifically, IRHA did not:
• Have a formal change order process by which
additional or emergent work could be approved by all
concerned parties. For example, if IRHA found that a
foundation needed repair during the renovation,
4 2001-SE-107-1801
Attachment A
IRHA’s foremen would perform the additional work
without always informing management.
• Adequately supervise the rehabilitation work. IRHA
management did not ensure that the foremen were only
doing the work that had been budgeted.
• Assign costs to the project on a per-house basis.
Therefore, IRHA could not keep track of labor and
materials being used or compare actual expenditures to
budgeted amounts, and thus could not prepare accurate
progress and performance reports for the project.
Weak controls result in increased costs and less
accountability
Due to its weak controls, IRHA management could not
detect or prevent extra work nor could it prepare accurate
progress reports. IRHA management stated that the extra
work resulted in cost overruns of $385,514. Also, IRHA
management stated they did not know the extent of the
work being done or have up-to-date information about
how much it cost.. IRHA management could not show
if $684,919 and $471,897 in labor and material costs,
respectively, were correctly charged to the project.
Because IRHA did not have the information needed to
prepare accurate progress reports, neither the Native
Village of Fort Yukon nor HUD’s Alaska Office of Native
American Programs could adequately perform their
oversight responsibilities.
Background
IRHA has implemented a IRHA has implemented a new computerized accounting
new accounting program and program for tracking materials and labor. Each project is
says it will cover cost budgeted for material and labor by specific line items, such
overruns as earthwork, rough carpentry, and doors. The accounting
system then tracks the cost for each line item. Based on our
review of IRHA’s accounting records for a recently
completed project, we believe the program will provide
IRHA with an adequate financial management system if
used correctly. IRHA’s Executive Director stated that
IRHA would implement a formal process for its
rehabilitation program.
IRHA used $326,380 of Fort Yukon’s 2000 NAHASDA
fund allocation to cover part of the cost overruns and used
$59,134 of non-NAHASDA funds for the remainder.
5 2001-SE-107-1801
Attachment A
IRHA Comments
Interior Regional Housing Authority generally agreed with our finding. In their comments,
IRHA detailed the changes they have made to upgrade their systems and processes. The
complete text of those changes is included as Attachment B.
OIG Evaluation of IRHA Comments
IRHA was already implementing some of these changes, including the accounting system, during
our fieldwork. The new computerized accounting system coupled with the new processes
should, if properly used and followed, allow IRHA to comply with federal requirements in their
role as a Tribally Designated Housing Entity.
IRHA Comments
IRHA decided to use Fort Yukon’s 2000 NAHASDA allocation to help pay for the overruns
because (1) the work benefited Fort Yukon, (2) IRHA employed many people from the Village
to do the work, and (3) the Villagers employed received training in construction skills that will
be of long-term benefit. IRHA used $59,134 of its reserve funds to pay for the cost overruns that
were in excess of Fort Yukon’s 1998, 1999, and 2000 NAHASDA allocations.
OIG Evaluation of IRHA Comments
NAHASDA states in Section 101(g) that NAHASDA grant amounts may only be used for
affordable housing activities that are consistent with an approved Indian Housing Plan. We
believe Alaska Office of Native American Programs should obtain a legal opinion to determine
whether a given year’s NAHASDA funds may be used for the approved activities of a prior
year’s Indian Housing Plan. AONAP should also determine if IRHA should repay the $326,380
of cost overruns paid for with Fort Yukon’s 2000 NAHASDA funds.
Recommendations
We recommend that AONAP:
1A. Determine if IRHA should repay the $326,380 of cost overruns paid for with Fort Yukon’s
2000 NAHASDA funds.
1B. Obtain a legal opinion on whether it is appropriate to use a given year’s NAHASDA funds
to pay for activities in a previous year’s Indian Housing Plan.
1C. Confirm that the $59,134 of reserve funds IRHA used to pay for part of the cost overruns
were not NAHASDA funds.
1D. Monitor IRHA’s new computerized accounting system and to ensure they meet federal
financial management system requirements.
6 2001-SE-107-1801
Attachment B
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Attachment B
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Attachment B
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Attachment B
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Attachment B
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Attachment B
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Attachment B
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Attachment B
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Attachment B
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Attachment B
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Attachment B
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Attachment C
Distribution
Deputy Secretary, SD (Room 10100)
Chief of Staff, S (Room 10000)
Assistant Secretary for Administration, A (Room 10110)
Assistant Secretary for Public and Indian Housing, P (Room 4100)
Assistant Secretary for Congressional & Intergovernmental Relations, J (Room 10120)
DAS, Office of Public Affairs, W (Room 10222)
DAS for Administrative Services, Office of the Executive Secretariat, AX (Room 10139)
Deputy Chief of Staff, S (Room 10226)
Deputy Chief of Staff for Program and Policy, S (Room 10226)
Special Counsel to the Secretary, S (Room 10226)
Special Assistant for Inter-Faith Community Outreach, S (Room 10222)
Executive Officer for Administrative Operations and Management, S (Room 10220)
General Counsel, C (Room 10214)
Assistant Secretary for Housing-Federal Housing Commissioner, H (Room 9100)
Assistant Secretary for Policy Development and Research, R (Room 8100)
Assistant Secretary for Community Planning and Development, C (Room 7100)
Assistant Deputy Secretary for Field Policy and Management, SDF (Room 7108)
Assistant Secretary for Fair Housing and Equal Opportunity, E (Room 5100)
Director, Office of Departmental Equal Employment Opportunity, U (Room 5128)
Chief Procurement Officer, N (Room 5184)
Chief Financial Officer, F (Room 2202)
Chief Information Officer, Q (P-8206 L’Enfant)
Acting Director, Enforcement Center F (Portal Building)
Director, Real Estate Assessment Center, X (Portal Building)
Audit Liaison Officer, A (Room 10110)
Audit Liaison Officer, CFO (Room 2206)
Acquisitions Librarian, AS (Room 8141)
Inspector General, G (Room 8256)
Assistant Inspector General for Audit, GA (Room 8286)
Deputy Assistant Inspector General for Audit, GA (Room 8286)
Assistant Inspector General for Investigation
Public Affairs Officer, G (Room 8256)
Counsel to the Inspector General, GS (Room 8260)
The Honorable Fred Thompson, Chairman, Committee on Governmental Affairs, 340 Dirksen
Senate Office Building, United States Senate, Washington, DC 20510
The Honorable Joseph Lieberman, Ranking Member, Committee on Government Affairs,
706 Hart Senate Office Building, United States Senate, Washington, DC 20510
The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185 Rayburn
Building, House of Representatives, Washington, DC 20515
The Honorable Henry A. Waxman, Ranking Member, Committee on Government Reform,
2204 Rayburn Building, House of Representatives, Washington, DC 20515
18 2001-SE-107-1801
Attachment C
Armando Falcon, Director, Office of Federal Housing Enterprise Oversight, 1700 G Street
NW, Room 4011, Washington, DC 20552
Cindy Fogleman, Subcommittee on Oversight and Investigations, Room 212, O’Neil House Office
Building, Washington, DC 20515
Stanley Czerwinski, Associate Director, Resources, Community, and Economic Development
Division, United States General Accounting Office, 441 G Street, NW, Room 2T23,
Washington, DC 20548
Steve Redburn, Chief Housing Branch, Office of Management and Budget, 725 17th Street, NW,
Room 9226, New Executive Office Building, Washington, DC 20503
Andrew R. Cochran, Senior Counsel, Committee on Financial Services, U.S. House of
Representatives, 2129 Rayburn House Office Building, Washington, DC 20515
19 2001-SE-107-1801
Computer Learning Center Greater Hartford Realty Management Corporation, Hartford, Connecticut
Published by the Department of Housing and Urban Development, Office of Inspector General on 2000-06-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)