oversight

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)

                           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

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                                                                      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
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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




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