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 7 2001-SE-107-1801 Attachment B 8 2001-SE-107-1801 Attachment B 9 2001-SE-107-1801 Attachment B 10 2001-SE-107-1801 Attachment B 11 2001-SE-107-1801 Attachment B 12 2001-SE-107-1801 Attachment B 13 2001-SE-107-1801 Attachment B 14 2001-SE-107-1801 Attachment B 15 2001-SE-107-1801 Attachment B 16 2001-SE-107-1801 Attachment B 17 2001-SE-107-1801 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
Interior Regional Housing Authority�s Management of a Rehabilitation Project at the Native Village of Fort Yukon, Fairbanks, Alaska
Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-07-13.
Below is a raw (and likely hideous) rendition of the original report. (PDF)