oversight

HUD Indian Housing Block Grant Program, Sicangu Wicoti Awanyakape Corporation, Rosebud, South Dakota

Published by the Department of Housing and Urban Development, Office of Inspector General on 2002-10-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

           AUDIT REPORT




HUD INDIAN HOUSING BLOCK GRANT PROGRAM

SICANGU WICOTI AWANYAKAPE CORPORATION
        ROSEBUD, SOUTH DAKOTA

                    2003-DE-1001

                  OCTOBER 8, 2002


    U.S. Department of Housing and Urban Development
           Regional Inspector General for Audit
               633 17TH Street 14TH Floor
             Denver, Colorado 80202-3607
                                                             Issue Date
                                                                     October 8, 2002
                                                            Audit Report Number
                                                                     2003-DE-1001




TO: Randall R. Akers, Administrator, Northern Plains Office of Native American
                         Programs, 8API




FROM: Robert C. Gwin, Regional Inspector General for Audit, 8AGA

SUBJECT: HUD Indian Housing Block Grant Program
         Sicangu Wicoti Awanyakape Corporation
         Rosebud, South Dakota

We have completed an audit of the HUD Indian Housing Block Grant Program operations being
carried out by the Sicangu Wicoti Awanyakape Corporation, also known as the Rosebud Housing
Authority (hereinafter referred to as the Housing Authority), Rosebud, South Dakota. At the
beginning of our review, numerous tribal members, Housing Authority participants and Housing
Authority staff and officials presented to us information and concerns relating to the various
aspects of the administration and operations of the Housing Authority in connection with its
Indian Housing Block Grant Program. To address the numerous concerns, we focused our review
on the Housing Authority’s management controls over its HUD funded Block Grant Program
operations and financial systems and compliance with HUD program requirements.

Our audit resulted in six findings and concluded the Housing Authority needs to establish
necessary management controls over its operations and financial systems to ensure it functions in
accordance with HUD requirements. These six findings are discussed in this report.

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.

We appreciate the courtesies and assistance extended by the management and staff of the Housing
Authority and the HUD Northern Plains Office of Native American Programs.
Management Memorandum


Should you or your staff have any questions, please contact Ernest Kite, Assistant Regional
Inspector General for Audit, at (303) 672-5452.




2003-DE-1001                             Page ii
Executive Summary
We have completed an audit of the HUD Indian Housing Block Grant Program operations
being carried out by the Sicangu Wicoti Awanyakape Corporation, also known as the
Rosebud Housing Authority, Rosebud, South Dakota. At the beginning of our review,
numerous tribal members, Housing Authority participants, and Housing Authority staff
and officials presented to us information and concerns related to the various aspects of the
administration and operations of the Housing Authority in connection with its Indian
Housing Block Grant Program. To address the numerous concerns, we focused our review
on the Housing Authority’s management controls over its HUD funded Indian Housing
Block Grant Program operations and financial systems and compliance with HUD
program requirements. Basically, we performed an audit of the Housing Authority’s
operations to determine whether they:

·   Had adequate cash management policies to assure availability of funds to meet
    expenditures, safeguarding cash and deposits, and accuracy of reporting and recording
    of financial transactions;

·   Followed admission and occupancy policies and procedures;

·   Effectively used collection policies and procedures to maintain control over Tenant
    Accounts Receivable;

·   Followed procurement policies and procedures in procuring goods and services;

·   Effectively administered the maintenance program;

·   Maintained housing units in good repair, order and condition;

·   Effectively administered the Private Homeowner Rehabilitation/Loan Program; and

·   Effectively managed inventories of materials and supplies.

Generally, the audit covered the period January 1, 1998 through December 31, 2000. Our
review disclosed that management controls were not satisfactorily established to ensure
that the Housing Authority:

·   Had adequate cash management policies to assure availability of funds to meet
    expenditures, safeguarding cash and deposits, and accuracy of reporting and recording
    of financial transactions;

·   Followed occupancy policies and procedures;

·   Effectively used collection policies and procedures to maintain control over tenant
    accounts receivable;

·   Followed procurement policies and procedures in procuring goods and services;


                                           Page iii                           2003-DE-1001
Executive Summary



·    Effectively administered the maintenance program;

·    Maintained housing units in good repair, order, and condition;

·    Effectively administered the Indian Housing Block Grant Program; and

·    Effectively managed inventories of materials and supplies.

From July 9-13, 2001, the HUD Northern Plains Office of Native American Programs
conducted an on-site performance review of HUD funded Indian Housing Block Grants
and United States Housing Act of 1937 programs being implemented by the Housing
Authority. HUD recorded 15 findings and identified 9 other concerns during the course of
their review. HUD concluded the Housing Authority lacked the administrative capacity to
properly administer affordable housing activities effectively and disallowed a number of
costs.



                                    The Housing Authority has numerous policies that identify
    Deficient controls over         procedures to be followed in the collection of payment
    tenant occupancy and            delinquencies, eviction for non-payment of rent and drug
    related activities              related offenses, subleasing, and continued occupancy, etc.
                                    These policies apply equally to all tenants and
                                    homeowners, including Housing Authority employees who
                                    are assigned to a housing unit under the administration and
                                    management of the Housing Authority itself. However, the
                                    Housing Authority either ignores their own policies in these
                                    areas or decides to selectively enforce those requirements.
                                    In addition, the Housing Authority has been lax in its
                                    efforts to collect at least $1,762,594 due from its Low Rent
                                    tenants and $381,321 from its Mutual Help homeowners.
                                    The lack of collection of these receivables can seriously
                                    affect the Housing Authority’s ability to operate due to the
                                    absence of operating funds.

                                    The Housing Authority implemented three supplemental
    Inadequate administration       housing programs during the audit period using Indian
    of supplemental housing         Housing Block Grant Program monies. The three
    programs                        supplemental housing programs were: Used Mobile Home
                                    Program; Pre-Manufactured Modular Units Program; and
                                    Private Homeowner Rehabilitation/Loan Program. In
                                    implementing these programs, the Housing Authority did
                                    not establish adequate administrative procedures to ensure
                                    that HUD requirements were met. More specifically, the
                                    Housing Authority did not ensure that only low income


2003-DE-1001                            Page iv
                                                                 Executive Summary

                        recipients benefited under the programs; that units acquired
                        met safe and health environments; programs’ activities
                        were correctly reflected on the Housing Authority’s
                        accounting records; and recipient purchases or loans are
                        being properly and promptly collected by the Housing
                        Authority. Also, the Housing Authority did not follow it’s
                        own procurement and maintenance policies in
                        implementing the supplemental housing programs.

                        These deficiencies occurred primarily because the Housing
                        Authority lacked adequate management and accounting
                        controls over the implementation of the supplemental
                        housing programs. The programs were carried out by
                        single departments or individuals of the Housing Authority
                        without any apparent management oversight, supervision,
                        and/or monitoring. In some instances the Housing
                        Authority Board of Commissioners authorized individual
                        transactions or activities that were in direct conflict with
                        their previously established policies and procedures.
                        Obviously, proper management and accounting controls are
                        needed if these three supplemental housing programs are to
                        continue in the future.

                        The Housing Authority does not maintain a contract
Inadequate contract     administration system to ensure contractors perform
administration system   according to the terms of their contracts as specified in their
                        own Procurement Policy. We identified procurement
                        deficiencies in the two procurement contracts reviewed.
                        These two contracts were valued at $3.04 million at the
                        time of our review. Specifically, one contract did not
                        receive Indian Health Service inspection reports on sewer
                        and waterline construction, certificates of insurance before
                        commencing work, and consistent progress schedules.
                        There was no record of inspections having been completed
                        on the other contract. In addition, the Housing Authority
                        does not use its own Procurement Policy on
                        vendors/contractors for labor type only contracts and for
                        small dollar amount type contracts that are charged to the
                        Monthly Equity Payments Account. These deficiencies
                        occurred because there has been a significant turnover of
                        Executive Directors, fractionalization between supervisory
                        personnel of the Housing Authority, and management of
                        the Housing Authority not ensuring its staff performs and
                        complies with all applicable provisions of its own
                        Procurement Policy.




                               Page v                                  2003-DE-1001
Executive Summary

                           The Housing Authority is not maintaining adequate
Inadequate controls over   perpetual inventory records in support of its construction
materials inventory        and renovation projects. There are no controls in place to
                           ensure requisitioning activities are properly maintained and
                           materials and supplies are properly safeguarded. The
                           Housing Authority does not have effective inventory
                           control to account for all of its assets. Without an adequate
                           inventory control system for construction materials and
                           supplies, the Housing Authority cannot ensure it safeguards
                           assets purchased with Federal funds by protecting them
                           from theft, loss, waste, damage, and unauthorized use.

                           Contrary to Federal regulations, the Housing Authority has
Improper payment of        used Indian Housing Block Grant Program monies to pay
penalties and fees         for unallowable penalties and fees. From 1996 through
                           2000, the Housing Authority was assessed penalties and
                           interest totaling $78,110 by the Internal Revenue Service
                           for not making proper Federal employment tax deposits and
                           failure to file the Internal Revenue Service Form 941 in a
                           timely manner. In addition, from 1998 through March of
                           2000, the Housing Authority incurred bank overdraft
                           charges totaling $21,900 for having insufficient funds to
                           meet expenditures. This occurred because the Housing
                           Authority did not ensure the Finance Department properly
                           administered its funds.

                           Contrary to HUD requirements, the Housing Authority has
Deficient controls over    not implemented sufficient management controls over its
travel and related costs   travel and related expenses to ensure that its adopted Travel
                           Policy is followed and adhered to. More specifically, each
                           official trip has not always been properly authorized, travel
                           advances have been improperly calculated in some cases,
                           travel vouchers have not always been filed by the traveler
                           after the end of a trip, and documentation supporting travel
                           costs and related calculations were often missing and/or
                           incomplete. As a result, the Housing Authority has limited
                           assurances that its travelers are complying with its Travel
                           Policy and that the reimbursed amounts to the travelers are
                           authorized, accurate, and supported. This situation has
                           occurred primarily by the fact that no one individual or
                           department with the Housing Authority has the
                           responsibility to review and enforce compliance with the
                           Housing Authority’s Travel Policy.

                           In addition, the Housing Authority has paid Board members
                           $75 in per diem for attending each Housing Authority



2003-DE-1001                  Page vi
                                                           Executive Summary

                   Board of Commissioners meeting. The per diem was
                   intended to reimburse the Board member for expenses
                   incurred in connection with the meeting. However, the
                   Housing Authority has also reimbursed the attending Board
                   members for mileage to attend the meetings and to provide
                   meals at each meeting. Since the Housing Authority is
                   actually funding the individual cost of attending the Board
                   meeting, the payment of the $75 per diem fee is an extra
                   and unnecessary expense. During our review, we
                   calculated that the Housing Authority had paid a total of
                   $44,400 in per diem payments for attending Board
                   members. The payment of the $75 per diem fee is also
                   contrary to HUD requirements because the payment is not
                   consistent with the Tribal Council’s policy of not paying
                   Tribal Council members a fee or mileage for attending
                   meetings on the Rosebud Indian Reservation. Therefore,
                   the $44,400 is considered to be an ineligible expense to the
                   Indian Housing Block Grant Program.

                   We recommend HUD require the Housing Authority
Recommendations    establish the necessary management controls over its
                   operations and financial systems to ensure it functions in
                   accordance with HUD requirements and within the Housing
                   Authority’s adopted policies. Specific recommendations
                   are provided with each finding.


                   The findings were discussed with the Housing Authority
Auditee Comments
                   during the course of the audit. On July 8, 2002, the
                   Housing Authority received a copy of the draft audit report
                   for comment. We received the Housing Authority’s initial
                   response on July 26, 2002 and their supplemental response
                   on July 30, 2002.

                   We have included pertinent comments of the Housing
                   Authority’s response in the Findings section of this report.
                   The Housing Authority’s narrative response is provided as
                   Appendix B. Attachments contained in the Housing
                   Authority’s supplemental response were too voluminous to
                   include in the audit report. These attachments were
                   provided to the Northern Plains Office of Native American
                   Programs under separate cover.




                          Page vii                              2003-DE-1001
Executive Summary




                    THIS PAGE LEFT BLANK INTENTIONALLY




2003-DE-1001                   Page viii
Table of Contents
Management Memorandum ...........................................................................................i


Executive Summary ...................................................................................................... iii


Introduction ......................................................................................................................1


Findings
1. Deficient Controls Over Tenant Occupancy and Related Activities...............5
2. Inadequate Administration of Supplemental Housing Programs .................19
3. Inadequate Contract Administration System ....................................................35
4. Inadequate Inventory Control System ................................................................43
5. Improper Payment of Penalties and Fees ...........................................................49
6. Deficient Controls Over Travel and Related Costs ..........................................55


Management Controls ..................................................................................................65


Follow Up On Prior Audits..........................................................................................67


Appendices
      A. Schedule of Ineligible Costs............................................................................69
      B. Auditee Comments ...........................................................................................71
      C. Distribution ........................................................................................................83



                                                                 Page ix                                       2003-DE-1001
Table of Contents

Abbreviations:

HUD          U.S. Department of Housing and Urban Development
NAHASDA      Native American Housing Assistance and Self-Determination Act of 1996
SWA          Sicangu Wicoti Awanyakape Corporation
Board        Housing Authority Board of Commissioners
OMB          Office of Management and Budget
CFR          Code of Federal Regulations




2003-DE-1001                         Page x
Introduction
Congress enacted the Native American Housing Assistance and Self-Determination Act of 1996
(NAHASDA) to provide Federal assistance for Indian Tribes in a manner that recognizes the
right of tribal self-governance. An objective of the NAHASDA is to develop, maintain, and
operate affordable housing in safe and healthy environments on Indian Reservations and other
Indian areas for occupancy by low-income Indian families.

The Sicangu Wicoti Awanyakape Corporation (formerly called the Rosebud Housing Authority)
was established on December 14, 1976 when the Rosebud Sioux Tribal Council adopted
Rosebud Sioux Tribal Ordinance Number 76-02. The Housing Authority is organized and
operated for the purpose of:

·   Remedying unsafe and unsanitary housing conditions that are injurious to the public health,
    safety, and morals;

·   Alleviating the acute shortage of decent, safe, and sanitary dwellings for persons of low
    income;

·   To assist to the best of its abilities and as funds are available persons of all income levels to
    obtain good and decent housing at fair and reasonable cost (added on April 12, 2000 though
    Rosebud Sioux Tribal Resolution Number 98-276); and

·   Providing employment opportunities through the construction, reconstruction, improvement,
    extension, alteration or repair of low-income dwellings.

The Sicangu Wicoti Awanyakape Corporation is also known as the Rosebud Housing Authority
(hereinafter referred to as the Housing Authority). The Housing Authority is managed by a
Board of Commissioners composed of twelve members and two Rosebud Sioux Council
Representatives. The Executive Director is appointed by the Board and is responsible for the
daily operations of the Housing Authority.

The Housing Authority had the following unit mix at the time of our review:

             Low-Rent                                     821 units
             Mutual Help                                  345 units
             Total                                      1,166 units

These units are located in 21 different communities on the Rosebud Indian Reservation. The
NAHASDA authorized the Indian Housing Block Grant Program that replaced Indian housing
assistance programs under the United States Housing Act of 1937. The Housing Authority
received its first Indian Housing Block Grant in 1998. For years 1998 to 2000, HUD authorized
$20,602,588 to the Housing Authority through Indian Housing Block Grants. In 1999, the
Rosebud Sioux Tribe received $800,000 in the form of a HUD Community Development Block
Grant to rehabilitate housing. The Housing Authority is also administering this program. In
addition, there are still some active Traditional Indian Housing Development Programs,



                                               Page 1                                  2003-DE-1001
Introduction

Comprehensive Grant Programs, and Operating Subsidy housing programs initiated under the
United States Housing Act of 1937.

From July 9-13, 2001, the Northern Plains Office of Native American Programs conducted an
on-site performance review of the various HUD funded programs being implemented by the
Housing Authority. HUD’s report identified 15 findings and 9 other concerns. These are
presented in the Follow Up On Prior Audits Section of this report.



                                   At the beginning of our review, numerous tribal members,
 Audit Objectives                  Housing Authority participants and Housing Authority staff
                                   and officials presented to us information and concerns
                                   relating to the various aspects of the administration and
                                   operations of the Housing Authority in connection with its
                                   Indian Housing Block Grant Program. The information and
                                   concerns dealt with possible lack of compliance with
                                   Federal and Housing Authority requirements.

                                   To address these numerous concerns, we focused our
                                   review on the Housing Authority’s management controls
                                   over its HUD funded Indian Housing Block Grant Program
                                   operations and financial systems and compliance with HUD
                                   program requirements. Therefore, we performed an audit
                                   of the Housing Authority’s operations to determine whether
                                   they:

                                   ·   Had adequate cash management policies to assure
                                       availability of funds to meet expenditures, safeguarding
                                       cash and deposits, and accuracy of reporting and
                                       recording of financial transactions;

                                   ·   Followed occupancy policies and procedures;

                                   ·   Effectively used collection policies and procedures to
                                       maintain control over tenant accounts receivable;

                                   ·   Followed procurement policies and procedures in
                                       procuring goods and services;

                                   ·   Effectively administered the maintenance program;

                                   ·   Maintained housing units in good repair, order and
                                       condition;




2003-DE-1001                           Page 2
                                                                 Introduction


                  · Effectively administered the Indian Housing Block
                    Grant Program; and

                  · Effectively managed inventories of materials and
                    supplies.

                  In conducting the audit, we:

                  · Interviewed various individuals to obtain the details of
                    their concerns;

                  · Interviewed Rosebud Sioux Tribal employees;

                  · Reviewed applicable Federal and Housing Authority
                    policies and procedures to gain an understanding of
                    their requirements;

                  · Interviewed appropriate Housing Authority personnel
                    and officials to obtain an understanding of their
                    operation and management of housing programs;

                  · Visited a number of homes that have been renovated
                    through participation in Housing Authority programs;
                    and

                  · Visited a number of used mobile homes purchased by
                    the Housing Authority for various homeowners.

                  We tested a non-representative sample of Housing
Audit Scope and   Authority documents and other records to obtain an
Methodology       understanding of the Housing Authority’s policies and
                  procedures being implemented in carryout its housing
                  programs. Due to a lack of adequate policies and
                  procedures being implemented by the Housing Authority, a
                  non-representative sample testing of available records
                  combined with Housing Authority staff interviews was
                  performed to identify the nature and possible extent of
                  management control weaknesses.

                  Generally, the audit covered the period January 1, 1998
                  through December 31, 2000. We performed fieldwork
                  from March through October 2001, with subsequent
                  information being obtained from HUD and the Housing
                  Authority through January 2002. Our review in several
                  departments of the Housing Authority was modified
                  because the Northern Plains Office of Native American


                         Page 3                               2003-DE-1001
Introduction

               Programs review completed in July 2001 adequately
               addressed operations related to those departments. The
               completion of our review was interrupted by situations that
               necessitated reassignment of staff.

               We conducted the audit in accordance with generally
               accepted government auditing standards.




2003-DE-1001       Page 4
Finding 1


Deficient Controls Over Tenant Occupancy and
              Related Activities
The Housing Authority has numerous policies that identify the requirements and
procedures to be followed in the collection of payment delinquencies, eviction for non-
payment of rent and drug related offenses, subleasing, and continued occupancy, etc.
These policies apply equally to all tenants and homeowners, including Housing Authority
employees who are assigned to a housing unit under the administration and management of
the Housing Authority itself. However, the Housing Authority has not properly
implemented various policy requirements and procedures. More specifically, the Housing
Authority has not been:

·   Consistently enforcing its Drug Elimination Policy;

·   Consistently enforcing its Sublease Policy;

·   Implementing its Delinquency Policy; and

·   Properly documenting the eligibility of its various Housing Program recipients.

The Housing Authority, in carrying out its various tenant and homeowner policies, has not
established sufficient procedures to ensure that required policies are implemented or has
decided to selectively enforce these requirements. As a result, the Housing Authority
program recipients have not received uniform and consistent benefits. In addition, the
Housing Authority has been lax in its efforts to collect at least $1,762,594 due from Low
Rent tenants and $381,321 from Mutual Help homeowners. The lack of collection of tenant
accounts receivable can seriously affect the Housing Authority’s ability to operate due to
the absence of operating funds. In addition, the Housing Authority is not properly
completing the annual re-certification process and calculating monthly payments.



                                    Section 203 of NAHASDA requires recipients of
 NAHASDA requires the               NAHASDA grants to develop policies governing the
 Housing Authority to               management and maintenance of housing assisted with
 develop policies and               grant amounts provided under the Act. Section 102 of the
 utilize sound management           NAHASDA requires the submission of a 5-YEAR PLAN
 practices                          and a 1-YEAR PLAN to the Secretary. The 1-YEAR Plan
                                    requires evidence of compliance through a certification that
                                    policies are in effect and are available for review by the
                                    Secretary and the public governing eligibility, admission,
                                    and occupancy of families for housing assisted with grant
                                    amounts under this Act. The Housing Authority, in its



                                           Page 5                                2003-DE-1001
Finding 1

                              annual plan submission to HUD, certifies that the
                              eligibility, admission, and occupancy policies are in effect.

                              Rosebud Sioux Tribal Ordinance Number 76-02 declares
  Tribal Ordinance requires   the powers of the Tribal Government shall be vigorously
  enforcement of eviction     utilized to enforce eviction of a tenant or homeowner for
  requirements for non-       nonpayment or other contract violations including action
  payment violations          through the appropriate courts.

                              The Sicangu Wicoti Awanyakape Corporation Charter
  Unsafe and unsanitary       states one of its purposes is to remedy unsafe and
  housing conditions to be    unsanitary housing conditions that are injurious to public
  remedied                    health, safety, and morals.

                              The Housing Authority has adopted various policies
  Housing Authority           relating to the occupancy of its tenants and homeowners.
  Policies                    The Program Management and Occupancy Policy, Master
                              Requirements, establishes occupancy standards for housing
                              units owned, operated or managed by the Housing
                              Authority. The Drug Elimination Policy establishes
                              prohibitions against controlled substances and procedures
                              to be followed when violations occur. The Sublease Policy
                              indicates homes constructed under the Mutual Help
                              Homeownership Program can and should be subleased to
                              be certain of the continued occupancy of these homes. The
                              Delinquency Policy enables the Housing Authority to
                              systematically collect rent and monthly payments due.

                              We performed a review of the management controls over
  Adopted policies are not    the Housing Authority’s implementation of its tenants and
  being fully implemented     homeowners policies. We selected and reviewed two
                              tenant files on individuals who had supposedly violated the
                              controlled substance provisions of the Drug Elimination
                              Policy to determine if the Housing Authority took proper
                              action to terminate their tenancy. Our review showed the
                              Housing Authority is selectively enforcing its Drug
                              Elimination Policy. We reviewed the tenant file on an
                              individual who has continually subleased their Mutual Help
                              home to determine if the Housing Authority is properly
                              administering its Sublease Policy. Our review showed the
                              Housing Authority is not enforcing its Sublease Policy. We
                              selected and reviewed 15 tenant files to determine if the
                              Housing Authority is properly administering its
                              Delinquency Policy. Our review showed the Housing
                              Authority is not enforcing its Delinquency Policy. We
                              reviewed tenant accounts receivable to determine if there



2003-DE-1001                      Page 6
                                                                                 Finding 1

                            are problems. Our review showed the Housing Authority
                            has a serious tenant accounts receivable problem which
                            effects management and its resources. These deficiencies
                            are discussed in the following sections.

                            DRUG ELIMINATION POLICY

                            The Housing Authority developed their Drug Elimination
The Drug Elimination        Policy to establish prohibitions against controlled
Policy of the Housing       substances, to include the possession, use, sale, distribution,
Authority requires          or manufacture of any drug or other illegal substance on or
eviction of tenants for     near any Housing Authority unit or on or near any Housing
violation of the drug       Authority project by any tenant, by a member of the
prohibition provision       tenant’s household, or a guest, or any other person under
                            the tenant’s control. Evidence of a violation of this
                            provision shall be grounds for immediate termination of
                            tenancy regardless of whether criminal charges have been
                            filed or a criminal conviction has been obtained.

                            We selected and reviewed two tenant files on individuals
The Housing Authority is    who had supposedly violated the controlled substance
selectively enforcing its   prohibition provision of the Drug Elimination Policy to
Drug Elimination Policy     determine if the Housing Authority took proper action to
                            terminate their tenancy.

                            The first tenant file reviewed was inactive, as the former
                            individual occupying the Low Rent unit had been
                            previously evicted. This individual had plead guilty to one
                            count of possession of marijuana with intent to distribute
                            between 1996 and 1999. On June 23, 1999, this individual
                            was indicted for conspiracy and possession of marijuana
                            with intent to distribute. On August 9, 1999, the Housing
                            Authority evicted this individual for their possession and
                            distribution of a controlled substance.

                            The second tenant file reviewed was still active. On March
                            27, 2000, the individual occupying this Low Rent unit had
                            plead guilty to possession of marijuana with intent to
                            distribute. A review of this individuals tenant file indicates
                            that at October16, 2001, the Housing Authority had taken
                            no action to terminate the tenancy of this individual for
                            possession and distribution of a controlled substance.

                            Both of these individuals plead guilty to possession of a
                            controlled substance with intent to distribute. One was
                            properly evicted and the other was not. This occurred



                                   Page 7                                  2003-DE-1001
Finding 1

                                because the Housing Authority is not consistently
                                implementing its Drug Elimination Policy. The result is
                                ineligible tenants continue to reside in Housing Authority
                                units.

                                SUBLEASE POLICY

                                The Housing Authority has adopted a Sublease Policy that
  The Sublease Policy of        requires it to:
  the Housing Authority
  identifies procedures to be   ·   Only sublease a Mutual Help home when the
  followed when subleasing          homeowner family has to temporarily move off the
  a Mutual Help home                Rosebud Sioux Reservation and justified reasons
                                    related to employment, education, military service, and
                                    other reasons that have to be justified in writing to the
                                    Housing Board of Commissioners;

                                ·   Ensure the sublease request from the family outlines
                                    the maximum term the homeowner family will be off
                                    the Rosebud Sioux Reservation;

                                ·   Allow year-to-year subleasing with a condition that
                                    both the homeowner and sub-lessee will be evaluated at
                                    the end of each year and approval of the Housing Board
                                    of Commissioners must be given each year for an
                                    extension of the sublease. The homeowner must
                                    submit a request to continue the sublease to the
                                    Housing Authority for each additional year the
                                    homeowner wishes to sublease at least 45 days before
                                    the sublease terminates;

                                ·   Ensure no sublease shall continue beyond four years
                                    without compelling justification;

                                ·   Ensure the sublease request is in writing and state the
                                    reason(s) why the homeowner is requesting to sublease
                                    the home in addition to providing the name of sub
                                    lessee;

                                ·   Ensure the homeowner provides a written statement for
                                    the Housing Authority that he/she is current on all
                                    accounts and payments owing to the Housing
                                    Authority; and

                                ·   Ensure the local Housing Board had no involvement in
                                    determining whether a homeowner may sublet their


2003-DE-1001                        Page 8
                                                                              Finding 1

                                 home. This decision is to be made by the Housing
                                 Authority’s Board of Commissioners and the Housing
                                 Authority’s Executive Director shall carry out the
                                 Housing Board of Commissioners decision
                                 accordingly.

                             We reviewed the tenant file on an individual who has
The Housing Authority is     continually subleased their Mutual Help home to determine
not enforcing its Sublease   if the Housing Authority is properly administering its
Policy                       Sublease Policy. Our review indicates this homeowner has
                             continually subleased her home since December 5, 1997.
                             The Housing Board of Commissioners did not approve the
                             annual sublease agreements for 1997, 1998, and 1999.
                             There were two sublease agreements for 2001. The
                             Housing Board of Commissioners approved one of these
                             sublease agreements and did not approve the other. The
                             Housing Board of Commissioners did not evaluate the
                             homeowner and sub-lessee in 1998 and 1999. The
                             homeowner did not always provide complete information in
                             her request to sublease the home. In addition, this
                             homeowner had a tenant accounts receivable balance from
                             December 1, 1998 through June 1, 2001. The homeowner
                             did not obtain a written statement from the Housing
                             Authority indicating she was current on all accounts and
                             payments owing to the Housing Authority for each sublease
                             entered into since 1998. Despite all of these deviations
                             from the Sublease Policy, this homeowner has been
                             continually able to sublease her home.

                             The Mutual Help program is intended to provide
                             homeownership opportunities to Native American families
                             who will reside in and maintain their homes. The Housing
                             Authority defeats the purpose of the Mutual Help program
                             by approving improper subleases or allowing homeowners
                             to sublease their homes without the approval of the Housing
                             Board of Commissioners. This has occurred because there
                             are inadequate procedures in place to ensure Housing Board
                             of Commissioners policies are followed. The result is
                             ineligible individuals may be allowed to sublease a home.




                             DELINQUENCY POLICY




                                    Page 9                               2003-DE-1001
Finding 1

                              The Housing Authority developed their Delinquency Policy
   The Delinquency Policy     to enable it to systematically collect rent and monthly
   sets outs procedures for   payments due. This policy establishes procedures on how
   tenant non-payments        to handle tenants and homeowners who do not make their
                              monthly payments. The Collection/Eviction Department
                              administers the Delinquency Policy. The Housing
                              Authority’s Delinquency Policy requires the Housing
                              Authority to perform the following:

                              ·   Send a Notice of Delinquency to the participant after
                                  the 10th of the month if the participant has not made the
                                  monthly payment. The participant has until the 15th of
                                  the month to make an appointment with the Housing
                                  Authority staff for counseling and a payment plan will
                                  be drawn up;

                              ·   Send a Final Notice of Delinquency to the participant
                                  by the 15th of the month. If no arrangements for the
                                  payment have been made with the Housing Authority,
                                  the participant will still be able to enter into a payment
                                  plan with the Housing Authority if they come in within
                                  a 10 day period, and;

                              ·   If no action has been taken by the participant, a Notice
                                  to Quit will be issued to the participant by the Housing
                                  Authority giving the participant 3 days to vacate the
                                  unit. If the participant does not vacate the unit, the
                                  Housing Authority will sign a complaint against the
                                  participant in Tribal Court. If the Housing Authority is
                                  forced to take the participant to Tribal Court, the
                                  Housing Authority shall not enter into a payment plan
                                  but will request that the court grant automatic
                                  EVICTION or payment in FULL, plus court costs.

                              As part of its Delinquency Policy, the Housing Authority
 The Housing Authority        has established procedures on the type of payment plan a
 has a Payment Plan for       tenant or homeowner must enter into when they do not
 the collection of            make their monthly payments. These procedures are as
 delinquent monthly           follows:
 payments
                              ·   If a participant is delinquent up to $500, a payment plan
                                  must be instituted between the participant and the
                                  Housing Authority;

                              ·   If a participant is delinquent up to $1,000, a payment
                                  plan guaranteeing up to $50 a month will be required;


2003-DE-1001                      Page 10
                                                                                Finding 1



                           ·   If a participant is delinquent in excess of $1,000, a
                               payment plan guaranteeing up to $100 a month will be
                               required; and

                           ·   If the above is not agreed to, immediate action will be
                               taken to remove the participant and the unit will be
                               reassigned to a new applicant.

                           We selected and reviewed 15 tenant files to determine if
The Housing Authority is   participants were (1) delinquent on their monthly payments
not enforcing its          and if so, (2) was the Housing Authority properly
Delinquency Policy         administering its Delinquency Policy. This review covered
                           the period December 1, 1998 through August 1, 2001.

                           Our review showed the following:

                           · Nine participants had a tenant accounts receivable for
                             the entire period under review;

                           · One participant had a tenant accounts receivable in
                             1998;

                           · One participant had a tenant accounts receivable in
                             1998, 1999, and 2001;

                           · One participant had a tenant accounts receivable in 1998
                             and 2001;

                           · One participant had a tenant accounts receivable in 1999
                             and 2001;

                           ·   One participant had a tenant accounts receivable in
                               1999, 2000, and 2001; and

                           ·   One participant did not have a tenant accounts
                               receivable for the entire period under review.

                           The Housing Authority did not take the required action of
                           entering into a payment plan with any of these participants.
                           In addition, the Housing Authority did not issue a Notice of
                           Delinquency, issue a Final Notice of Delinquency, or issue
                           a Notice to Quit on the majority of these participants. This
                           has occurred because there are inadequate procedures in
                           place to ensure Housing Board of Commissioners policies



                                  Page 11                               2003-DE-1001
Finding 1

                        are followed. The result is tenants who should have been
                        evicted continue to reside in Housing Authority units.

                        TENANT ACCOUNTS RECEIVABLE

                        To determine the extent of the tenant accounts receivable
  Increase in Tenant    problem, we looked at the Independent Public Accountant
  Accounts Receivable   Audit Reports from 1998 to 1999. The Independent
                        Auditor had taken a finding in both years on excessive
                        tenant accounts receivable balances. These balances have
                        increased as follows:

                               Date                 Tenant          Homeowner
                         March 31, 1998           $1,147,396         $258,286
                         March 31, 1999           $1,469,259         $328,665
                         December 31, 1999        $1,762,594         $381,321

                        For comparative purposes, the December 31, 1999 tenant
                        accounts receivable balance is based on the Draft
                        Independent Auditor’s Report dated October 20, 2000. The
                        Collection/Eviction Department has started the process of
                        requiring those Low Rent tenants who owe approximately
                        $1,000 or more to enter into a mandatory payment plan
                        with the Housing Authority. The Housing Authority has
                        not started the same process for Low Rent tenants who owe
                        less than $1,000 or for any Mutual Help homeowners
                        regardless of how much they owe.

                        The above chart shows the seriousness of the tenant
                        accounts receivable situation which effects management
                        and its resources. One of the purposes of a Housing
                        Authority is to use available funds to assist persons of all
                        income levels to obtain good and decent housing at a fair
                        and reasonable cost. The Housing Authority defeats this
                        purpose by not enforcing its own Delinquency Policy.

                        Section 1000.128 of the Final Rule for the NAHASDA
NAHASDA and Housing     requires recipients of NAHASDA grants to:
Authority guidance
require adequate        ·   Verify that the family is income eligible based on
documentation of            anticipated annual income. The family is required to
eligibility                 provide documentation to verify this determination.
                            The recipient is required to maintain the documentation
                            on which the determination of eligibility is based.




2003-DE-1001                Page 12
                                                    Finding 1

On June 27, 2001, the Program Management and
Occupancy Policy, Master Requirements, was adopted by
the Board through Resolution Number 01-08. These
Master Requirements establish occupancy standards for
housing units managed by the Housing Authority. These
Master Requirements obligate the Housing Authority to
perform the following:

·   Verify information provided to include earned income
    through employers or other appropriate means at the
    time of admission into a program and upon any re-
    certification.

The 15 tenant files previously reviewed for correct
Delinquency Policy administration were also reviewed to
determine if the Housing Authority was verifying income
and completing the annual re-certification process.

Our review showed the following:

·   It could not be determined how the monthly payments
    were calculated on six participants;

·   Annual re-certifications were not completed on four
    participants; and

·   The monthly payment was not properly calculated
    during an interim re-certification on one participant.

In addition, the Occupancy Department does not always
indicate who reviewed the income verification process. As
a result, HUD has no assurances that the Housing Authority
is only allowing eligible families to continue their
occupancy.

Our office received a large number of concerns related to
the Occupancy Policy of the Housing Authority. Results of
our review support a number of those concerns. We found
that Department Managers either ignored applicable
Housing Board of Commissioners policies or decided to
selectively enforce them. This has occurred because there
are inadequate procedures in place to ensure Housing Board
of Commissioners policies are followed. The result is
tenants who should have been evicted continue to reside in
Housing Authority units. In addition, ineligible tenants



       Page 13                                2003-DE-1001
Finding 1

                   continue to reside in Housing Authority units and ineligible
                   individuals may be allowed to sublease a house.



Auditee Comments   The Housing Authority provided the following comments for
                   each deficiency noted in the finding:

                   •   The Housing Authority states they are reviewing tenants
                       who may have been indicted or convicted of a controlled
                       substance offense. Results of the review will be provided
                       to the Occupancy Department. The Housing Authority
                       states they are reviewing all mutual help subleases and
                       these will be provided to the Housing Board of
                       Commissioners for renewal or action. The Housing
                       Authority states they are sending letters to all tenants
                       reflecting balances owed and the need to enter into
                       Payback Agreements for all delinquent tenants regardless
                       of the amount owed. The Housing Authority states they
                       will use Chapter 8, Resident Eligibility and Service
                       Standards, to the NAHASDA Indian Housing Block
                       Grant Recipient Self-Monitoring Guidebook issued by
                       the Office of Native American Programs as a system of
                       management controls to ensure it properly calculates
                       monthly payments, verifies family income, and
                       completes the annual re-certification process. The
                       Housing Authority has also stated they believe their
                       current policies are adequate to assure compliance with
                       NAHASDA law and are being implemented in a
                       consistent and uniform manner.

                   •   The Housing Authority has stated their internal
                       monitoring process will be completed by August 31,
                       2002. The Housing Authority will submit results of the
                       internal monitoring process and any corrective actions
                       taken to the HUD Northern Plains Office of Native
                       American Programs by September 15, 2002.

                   •   The Housing Authority has indicated they are awaiting a
                       response to their comments provided to the HUD
                       Northern Plains Office of Native American Programs on
                       April 26, 2002 regarding a previous review completed by
                       that office.




2003-DE-1001           Page 14
                                                                         Finding 1




OIG Evaluation of   We agree with the actions taken by the Housing Authority to
Auditee Comments    identify tenants indicted or convicted of a controlled
                    substance offense, the review of all mutual help subleases,
                    sending letters to all tenants reflecting balances owed and the
                    need to enter into Payback Agreements, and using the
                    NAHASDA Indian Housing Block Grant Recipient Self-
                    Monitoring Guidebook to ensure it properly calculates
                    monthly payments, verifies family income, and completes
                    the annual re-certification process. However, the Housing
                    Authority has still not indicated what procedures it will
                    establish and implement to ensure responsible personnel at
                    all levels comply with the Housing Authority’s occupancy
                    and related policies established by the Housing Board of
                    Commissioners.

                    We agree with submitting the results and corrective actions
                    taken by the Housing Authority concerning their internal
                    monitoring process to the HUD Northern Plains Office of
                    Native American Programs. However, the HUD Northern
                    Plains Office of Native American Programs should verify
                    that the internal monitoring process established by the
                    Housing Authority is not a one time process and established
                    procedures ensure responsible personnel at all levels comply
                    with the Housing Authority’s occupancy and related policies
                    established by the Housing Board of Commissioners.

                    We agree with actions taken by the Housing Authority to
                    continue their internal monitoring process to ensure policies
                    are being applied in a uniform and consistent manner while
                    they await approval by the HUD Northern Plains Office of
                    Native American Programs. Our review of the Housing
                    Authority’s April 26, 2002 response to the HUD Northern
                    Plains Office of Native American Programs indicates
                    occupancy and related policies are being reviewed and
                    updated. However, in most cases, there is no indication by
                    the Housing Authority on how they plan to ensure
                    responsible personnel at all levels comply with the
                    occupancy and related policies established by the Housing
                    Board of Commissioners.




                           Page 15                                 2003-DE-1001
Finding 1




Recommendations   We recommend that the HUD Northern Plains Office of
                  Native American Programs:

                  1A. Require the Housing Authority to establish and
                      implement adequate procedures over its tenant
                      occupancy activities to ensure compliance with the
                      Housing Authority’s occupancy and related policies
                      which includes the Program and Management
                      Occupancy Policy, Master Requirements, the Drug
                      Elimination Policy, the Sublease Policy, and the
                      Delinquency Policy. Such procedures should ensure
                      that the Housing Authority’s policies are consistently
                      and uniformly applied. In addition, the procedures
                      would include the following items:

                       ·   Work with appropriate law enforcement agencies
                           to identify any tenants who have been indicted or
                           convicted of a controlled substance offense and
                           take appropriate action as specified in the Housing
                           Authority’s Drug Elimination Policy;

                       · Review all existing subleases for legitimacy and
                         approve or terminate as appropriate;

                       ·   Modify the process for Payback Agreements to
                           include all Low Rent and Mutual Help occupants
                           who have payment delinquencies, not just for Low
                           Rent tenants who owe $1,000 or more, and;

                       ·   Implement a system of management controls
                           including adequate supporting documentation and
                           management oversight, to ensure that it properly
                           calculates monthly payments, verifies family
                           income, and completes the annual re-certification
                           process.

                  1B. Require the Housing Authority to submit details of the
                      established procedures to HUD for their review and
                      concurrence.

                  1C. Conduct a review of the procedures, once they are
                      implemented by the Housing Authority, and ascertain


2003-DE-1001         Page 16
                                            Finding 1

if such procedures are adequate to ensure that the
Housing Authority’s occupancy and related policies
are being properly implemented including being
applied in a uniform and consistent manner.




  Page 17                             2003-DE-1001
Finding 1




               THIS PAGE LEFT BLANK INTENTIONALLY




2003-DE-1001              Page 18
Finding 2


     Inadequate Administration of Supplemental
                 Housing Programs
The Housing Authority implemented three supplemental housing programs during the audit period
using Indian Housing Block Grant Program monies. The three supplemental housing programs were:
Used Mobile Home Program; Pre-Manufactured Modular Housing Units Program; and Private
Homeowner Rehabilitation/Loan Program. In implementing these programs, the Housing Authority
did not establish adequate administrative procedures to ensure that HUD requirements were met. More
specifically, the Housing Authority did not ensure that only low-income recipients benefited under the
programs; that units acquired met safe and health environments; its programs’ activities were correctly
reflected on the Housing Authority’s accounting records, and recipient purchases or loans are being
properly and promptly collected by the Housing Authority. Also, the Housing Authority did not follow
it’s own procurement and maintenance policy in implementing the supplemental housing programs.

These deficiencies occurred primarily because the Housing Authority lacked adequate management
and accounting controls over the implementation of the supplemental housing programs. The programs
were carried out by single departments or individuals of the Housing Authority without any apparent
management oversight, supervision, and/or monitoring. In some instances the Housing Authority
Board of Commissioner authorized individual transactions or activities that were in direct conflict with
the Board’s previously established policies and procedures. Obviously, proper management and
accounting controls are needed if these three supplemental housing programs are to continue in the
future.

At the beginning of our review, a number of concerns were expressed to us by various Tribal
members, Housing Authority residents and Housing Authority officials about various deficiencies
and inconsistencies existing in the three supplemental Housing Authority programs. The majority
of these concerns could have been prevented had the Housing Authority established and
implemented the proper management controls over its supplemental housing programs to ensure
that each of these were carried out in conformity with HUD requirements and were consistently and
uniformly applied.



                                        Under Title II of NAHASDA, grantees in utilizing grant
 Housing Authority must                 monies are limited to assist and promote affordable housing
 meet specific Federal                  activities to develop, maintain, and operate affordable
 requirements in carrying               housing in safe and healthy environments on Indian
 out its Indian Housing                 reservations and in other Indian areas for occupancy by
 Block Grant Programs                   low-income Indian families. Under this same Title,
                                        grantees are to adopt and follow written tenant and
                                        homebuyer selection policies that govern rents and
                                        homebuyer payments charged for dwelling units including
                                        the methods by which such rents and homebuyer payments
                                        are determined. Furthermore, under Title I of NAHASDA,



                                                Page 19                                  2003-DE-1001
Finding 2

                           grantees must certify that they have adopted and are
                           following the required eligibility, admission, and
                           occupancy policies.

                           Part 85 to Title 24 of the Code of Federal Regulations
                           details further requirements for the Housing Authority in
                           carrying out its Indian Housing Block Grant Programs.
                           These requirements relate to the acquisition, procurement,
                           maintenance, and accounting for housing activities and
                           related costs being carried out by the Housing Authority
                           under its Indian Housing Block Grant Programs.

                           The Sicangu Wicoti Awanyakape Corporation Charter
                           states one of its purposes is to remedy unsafe and
                           unsanitary housing conditions that are injurious to public
                           health, safety, and morals.

                           More specifically, the Housing Authority must maintain
                           records that adequately identify the source and application
                           of funds provided for financially assisted activities. These
                           records must contain information pertaining to grant or sub-
                           grant awards and authorizations, obligations, unobligated
                           balances, assets, liabilities, outlays or expenditures, and
                           income. Furthermore, effective control and accountability
                           must be maintained for all grant and sub-grant cash, real
                           and personal property, and other assets. The Housing
                           Authority also must adequately safeguard all such property
                           and must assure that it is used solely for authorized
                           purposes.

                           The Housing Authority has established policies that govern
                           the various aspects of their operations. Such policies relate
                           to procurement, maintenance, tenant and homeowner
                           selection, and occupancy.

                           During the audit period, the Housing Authority established
 Three supplemental        and implemented three supplemental housing programs
 housing programs funded   using Indian Housing Block Grant monies. These three
 with Indian Housing       programs were:
 Block Grant Program
 monies                    ·   Used Mobile Home Program;

                           ·   Pre-Manufactured Modular Housing Units Program;
                               and

                           ·   Private Homeowner Rehabilitation/Loan Program.


2003-DE-1001                   Page 20
                                                                             Finding 2



                           These programs were not implemented and carried out in
                           accordance with established Federal and Housing Authority
                           regulations and policies. As a result, the Housing Authority
                           has almost no assurances that their supplemental housing
                           programs award housing units to eligible low-income
                           recipients, provide a safe and healthy environment,
                           procurements are in conformance with Federal
                           requirements, are correctly recorded on the Housing
                           Authority’s books of account, and are uniformly applied.
                           This situation has occurred because the Housing Authority
                           has no formal system of management controls over the
                           three supplemental housing programs to ensure compliance
                           with established Federal and Housing Authority regulations
                           and policies.

                           These three programs and related deficiencies are discussed
                           below.

                           USED MOBILE HOME PROGRAM

                           The Housing Authority established the Used Mobile Home
Housing Authority          Program to help alleviate the housing shortage on the
purchased 23 used mobile   Rosebud Indian Reservation. This program was designed
homes with Indian          whereby Indian Housing Block Grant monies were used to
Housing Block Grant        acquire used mobile homes for selected individuals who
Program monies             would reimburse the Housing Authority for the Housing
                           Authority’s costs. Once the costs were reimbursed to the
                           Housing Authority, title to the used mobile home would be
                           transferred to the mutual help homebuyer.

                           During the audit period, the Housing Authority purchased
                           23 used mobile homes, most of which were in poor
                           condition. Four of the 23 used mobile homes are being used
                           as emergency housing. The remaining 19 used mobile
                           homes were assigned to various purchasers. In the
                           acquisition and administration of this program, the Housing
                           Authority has not followed its established procedures or
                           HUD requirements.

                           The following photograph shows one of the used mobile
                           homes purchased by the Housing Authority.




                                   Page 21                              2003-DE-1001
Finding 2




                           The used mobile homes were to be acquired following the
 Housing Authority         procedures set out in the Housing Authority’s Procurement
 acquisition procurement   Policy. Instead, the Housing Authority Board of
 procedures not followed   Commissioners instructed the Housing Authority to acquire
                           11 of the 19 used mobile homes directly from the seller
                           without following the Housing Authority’s policies and
                           procedures. In another case, the Rosebud Sioux Tribal
                           Council passed a resolution requiring the Housing
                           Authority to purchase one of the used mobile homes. As a
                           result of the Housing Authority following the directive
                           from the Rosebud Sioux Tribal Council, it failed to comply
                           with its own Procurement Policy for this acquisition.

                           In acquiring the 23 used mobile homes, the Housing
                           Authority only conducted inspections on 6 of the units
                           before they were purchased. As a result, the Housing
                           Authority acquired most of the used mobile homes sight
                           unseen and had no assurances that these units would meet
                           the provisions under Title II of NAHASDA that acquired
                           units met safe and healthy environments.

                           Under Indian Housing Block Grant Program requirements,
 Acquisitions may not      grant monies are to be used for affordable housing by low-
 have been for required    income Indian families. The Housing Authority files did
 low-income families       not clearly show that families who acquired the used mobile
                           homes are low-income. One instance was identified were a
                           purchasing family did not meet the low-income
                           requirements. Without proper documentation, the Housing
                           Authority is unable to clearly show that the low-income


2003-DE-1001                  Page 22
                                                                               Finding 2


                           requirements of the Indian Housing Block Grant Program
                           are met.

                           For these acquired used mobile homes, the Housing
Maintenance of used
                           Authority has been using its own maintenance staff to
mobile home units being
                           perform various maintenance activities on them.
funded by the Housing
                           Accounting records have not been properly established to
Authority
                           record reimbursement payments from tenants for the labor
                           and material costs associated with repairs to their used
                           mobile homes. Since the used mobile homes have been
                           acquired by the Housing Authority for individual buyers
                           who are to reimburse the Housing Authority for the
                           acquisition, the individual buyers are considered home
                           buyers and therefore are responsible for unit maintenance.
                           As such, the Housing Authority would not be responsible
                           for their maintenance and any maintenance costs incurred
                           by the Housing Authority on behalf of the homebuyer
                           would need to be reimbursed to the Housing Authority.

                           Under the Used Mobile Home Program, the Housing
Deficient recording of     Authority was to fund the acquisition of the used mobile
receivables and payments   homes and the purchasers would reimburse the Housing
for used mobile home       Authority. However, any payments by the purchaser have
purchasers                 not been properly recorded on the Housing Authority’s
                           official accounting records. In addition, delinquencies on
                           required payments by purchasers of the used mobile homes
                           totals $17,766.

                           The administration of the program is not being properly
                           carried out. The Housing Authority did not obtain
                           Certificates of Title on 12 of the used mobile homes.
                           Without Certificates of Title, the Housing Authority will be
                           unable to transfer title with the used mobile homes when
                           the purchasers have fully reimbursed the Housing
                           Authority for the acquisition costs.

                           In a like manner, the Housing Authority has not entered
                           into signed sales contracts with the purchasers of 6 of the
                           used mobile homes. Without signed sales contracts, the
                           Housing Authority is unable to enforce any of the
                           provisions for the purchase of the used mobile homes by
                           the buyers.

                           In one situation, the buyer of a used mobile home has a
                           signed sales contract for a used mobile home that was
                           destroyed prior to occupancy. The buyer was provided a


                                   Page 23                               2003-DE-1001
Finding 2

                            second used mobile home to purchase, but the buyer has not
                            entered into a sales contract with the Housing Authority for
                            the second used mobile home. As a result, the buyer is
                            obligated to complete the purchase for the destroyed used
                            mobile home that is shown below and not for the one the
                            family is currently occupying.




                            During our review, one of the used mobile homes could not
 Deficient administrative   be located and is presumed to be off the Rosebud Indian
 control over the Used      Reservation. All of these deficiencies clearly show the
 Mobile Home Program        Housing Authority has not established proper
                            administrative control over its Used Mobile Home Program
                            and as a result, the Housing Authority has failed to carryout
                            this program in conformance with Federal and Housing
                            Authority regulations and policies. The true impact is that
                            no assurances exist that the used mobile homes met the
                            required safe and healthy environmental provisions
                            stipulated under Title II of NAHASDA. In addition, HUD
                            grant funds have been used to acquire the used mobile
                            homes without reasonable assurances that the acquisition
                            monies will be recovered from the sale of the used mobile
                            homes as originally intended.

                            PRE-MANUFACTURED MODULAR HOUSING
                            UNITS PROGRAM

                            Under the Housing Authority’s Pre-Manufactured Modular
 HUD funds used to buy      Housing Units Program, pre-manufactured modular homes
 16 pre-manufactured        were acquired for designated individuals who would
 modular homes

2003-DE-1001                   Page 24
                                                                             Finding 2


                          reimburse the Housing Authority for the acquisition price and
                          any setup costs. Some of the modular homes were acquired
                          and used as emergency housing. The program was funded
                          using Indian Housing Block Grant Program monies. As
                          such, the Housing Authority would be obligated to comply
                          with Federal requirements as well as with the Housing
                          Authority’s established policies.

                          During the audit period, the Housing Authority purchased 16
                          pre-manufactured modular housing units. Four of the 16
                          modular housing units were designated as emergency
                          housing while another three were purchased for other tribal
                          organizations. Eight of the homes were acquired for
                          individuals. The disposition of the remaining modular
                          housing unit could not be determined.

                          The Pre-Manufactured Modular Housing Units Program was
Modular Housing Units     not carried out by the Housing Authority in conformity with
Program did not comply    HUD requirements or with the policies established by the
with HUD or Housing       Housing Authority. More specifically, the Housing Authority
Authority requirements    did not follow its Procurement Policy in purchasing the
                          modular homes, failed to support that the purchases were for
                          low income families, and has not established proper controls
                          over the collection of reimbursement payments from the
                          modular home buyers.

                          The purchases of the modular homes were made without
Required procurement      following the provisions of the Housing Authority’s
procedures not followed   Procurement Policy. The Housing Authority could not
                          provide any documentation to show that the necessary
                          bidding procedures were followed. In one instance, the
                          Housing Authority Board of Commissioners passed a
                          resolution approving payment for one of the 16 modular
                          housing units without ensuring that the established bidding
                          procedures were met. Accordingly, the Housing Authority is
                          unable to demonstrate that the purchases were at the best
                          available price.

                          The Housing Authority purchased three modular units for
                          various Tribal departments. While the Tribe did reimburse
                          the Housing Authority a total of $145,355 for the three
                          modular homes, the use of Indian Housing Block Grant
                          monies for their procurement was an improper use of HUD
                          program funds.




                                 Page 25                               2003-DE-1001
Finding 2

                           At the time of our site review, the Housing Authority, who
                           had purchased the 16 modular homes, had not made full
                           payment to the modular home supplier. The supplier was still
                           due $45,672 on the sales to the Housing Authority.

                           Lack of records relating to the Modular Housing Units
 Benefits to low-income    Program prevent the Housing Authority from demonstrating
 families not documented   that the home purchases were made and provided to low-
                           income families as required under the HUD provisions.

                           In a similar manner, the Housing Authority has not
 Inadequate Modular        established the proper accounting for the modular home
 Housing Units Program     purchases and the related payments by the individual buyers.
 accounting records        At the time of our review, the Housing Authority’s
                           accounting records did not reflect the actual cost of the
                           individual modular home acquisition and setup costs. From
                           the records that were available, very limited information
                           could be identified about the costs the Housing Authority
                           incurred in setting up the modular homes. Without proper
                           documentation, the Housing Authority is hampered in being
                           able to identify what modular home procurement costs are to
                           be repaid the Housing Authority by the individual
                           homebuyer.

                           In addition, the Housing Authority has not established the
                           accounts receivable due from the homebuyers in the Housing
                           Authority’s official accounting records. Instead informal
                           records were being maintained by the Housing Authority’s
                           Finance Department. With only informal records, no one
                           office or official has been given the responsibility of
                           collecting the amounts due the Housing Authority from the
                           homebuyers. Consequently, no collection efforts have been
                           undertaken.

                           The administration of the Pre-manufactured Modular
 Management controls       Housing Units Program was conducted outside of the
 lacking                   framework of the Housing Authority. Housing Authority
                           personnel in positions of authority were able to, and did,
                           coordinate the modular home purchases and subsequent
                           reassignment to the homebuyer on their own individual
                           action without processing the program through the normal
                           departments of the Housing Authority. These Housing
                           Authority personnel were able to direct the Finance
                           Department to pay the invoices on the purchases despite
                           occasional inquiry concerns being made by the Finance
                           Department.



2003-DE-1001                  Page 26
                                                                                Finding 2


                          PRIVATE HOMEOWNER
                          REHABILITATION/LOAN PROGRAM

                          The Housing Authority initiated the Private Homeowner
Program designed to       Rehabilitation/Loan Program in 1998. This program was
rehabilitate low-income   designed to provide rehabilitation assistance to low-income
family owned properties   families who own their own homes. No official procedures
                          or policies were developed for this program until May 2001.
                          Under the program, applications were received from
                          interested families who owned their own homes. Applicants
                          were to be ranked by points and those with the highest
                          number of points were to be placed on top of the waiting list.
                          Predetermined rehabilitation work was to be made for
                          approved homes and the cost of the rehabilitation work was
                          to be repaid to the Housing Authority by the low-income
                          homeowner.




                          This picture shows a private home that received renovation work
                          on the siding and roof.

                          The administration of the Private Homeowner
Administration of         Rehabilitation/Loan Program was not carried out to ensure
Program did not meet      that HUD requirements were met. More specifically, the
HUD requirements          Housing Authority failed to ensure that only low-income
                          families participated in the program and that the approved
                          recipients were selected on a first come, first serve, basis. In
                          addition, the Housing Authority lacked documentation to
                          identify the exact nature of the rehabilitation work to be


                                  Page 27                                 2003-DE-1001
Finding 2

                         performed and what work was actually performed. Lastly,
                         the Housing Authority did not execute the needed
                         Rehabilitation Loan Repayment Agreement nor established
                         the accounting records to track the monies due from the
                         owners of the rehabilitation properties. As such, the Housing
                         Authority is severely hampered in being able to collect the
                         monies from the homeowner for the rehabilitation work.

                         The Housing Authority had two waiting lists that were
 Improper selection of   established for this program. The first was a list of applicants
 Program recipients      that had been approved by the Housing Board of
                         Commissioners. This official list did not identify the
                         approved applicants in numerical order based upon their date
                         of application. The second was a list that was used by the
                         Program Supervisor. The second list was an unofficial list
                         that identified applicants by Reservation Community but not
                         in a numerical order by application date. In some cases, the
                         applicants listed where individuals who were purchasing
                         homes under the Used Mobile Home Program (discussed
                         above).

                         Of the 14 application files we examined, four applicants
                         were on the official Housing Board of Commissioners
                         waiting list, six applicants were on the unofficial waiting
                         list kept by the Program Supervisor, and four applicants
                         were not on any type of waiting list. The four applicants
                         that were not on any type of waiting list had their private
                         home renovated. The six applicants that were on the
                         unofficial waiting list had their private homes renovated.
                         Only one of the four applicants on the official waiting list
                         has received renovation work. This review clearly shows
                         that the Rehabilitation/Loan Program recipients were not
                         being selected as intended.

                         In addition, the Housing Authority lacked income verification
                         documentation to show that the selected program participants
                         met the low-income requirements. In addition, while the
                         application information furnished by a program recipient was
                         often incomplete, the Housing Authority did not have
                         documentation to show that the minimum required data was
                         received and verified before the applicant was approved for
                         the program. As a result, the Housing Authority is unable to
                         show that the program recipients were actually qualified and
                         eligible to participate in the program.




2003-DE-1001                Page 28
                                                                                Finding 2


                            Inspections were not performed of the private homes prior to
Deficient rehabilitation    the start of renovation work to determine what repairs, if any,
work inspections            were needed. In addition, the Housing Authority did not
                            perform any inspections of the renovated work to determine
                            if the work was performed in an acceptable manner and/or
                            that the required renovation work was actually completed.
                            Without such inspections, the Housing Authority has no
                            assurance that renovation work was needed, properly done, or
                            actually completed.

                            At the time of our review, the Housing Authority had never
Deficient accountability    established any accounts receivable records to identify,
and collection of Program   receive and track loan repayments. For those homeowners
loans                       who had received renovation work, no collection effort had
                            been made by the Housing Authority to collect the loan
                            amounts. Any collection efforts may be further hampered
                            since the Housing Authority has not executed the necessary
                            Rehabilitation Loan Repayment Agreement with all of their
                            renovation recipients.

                            Even though the Housing Authority did establish a policy for
Program implementing        the Private Homeowner Rehabilitation/Loan Program in May
procedures were not         2001, approximately two years after the Program was started,
established and followed    the Housing Authority did not implement any procedures to
                            carryout the program and to ensure that the necessary HUD
                            requirements were being met. No process was implemented
                            to ensure that the program recipients met the low-income
                            requirements, only necessary renovation work was
                            performed, and that actual renovation work was properly and
                            correctly performed. Furthermore, the Housing Authority is
                            not pursuing the collection of the renovation loans.

                            As discussed above for these three supplemental housing
Management controls         programs being implement by the Housing Authority, the
lacking                     Housing Authority has not established the management
                            controls that were necessary for the supplemental programs
                            to be carried out in conformity with HUD requirements and
                            in a uniform and consistent basis. Instead, the Housing
                            Authority has allowed the programs to be implemented in an
                            ineffective, inefficient, and many times unauthorized manner.

                            At the beginning of our review, a number of concerns were
                            expressed to us by various Tribal members, Housing
                            Authority residents and Housing Authority officials about
                            various deficiencies and inconsistencies existing in these
                            three supplemental housing programs. In our opinion, the


                                    Page 29                                2003-DE-1001
Finding 2

                   majority of these concerns could have been prevented had
                   the Housing Authority established and implemented the
                   proper management controls over its supplemental housing
                   programs to ensure that each of them were carried out in
                   conformity with HUD requirements and were consistently
                   and uniformly applied.



Auditee Comments   The Housing Authority provided the following comments for
                   each deficiency noted in the finding:

                   ·   For the Used Mobil Home Program, the Housing
                       Authority has indicated they have discontinued this
                       program. The Housing Authority states they are in the
                       process of determining the condition of each used mobile
                       home, reconciling sales contracts, and trying to obtain
                       Certificates of Title on all used mobile homes The
                       Housing Authority has indicated they have recovered the
                       $95,600 used to purchased the used mobile homes from
                       non-NAHASDA sources and turned their management
                       over to Tribal officials.

                   ·   For its other supplement housing programs, the Housing
                       Authority indicates they will start using qualified
                       Inspectors to ensure future supplemental housing
                       programs meet the safe and healthy environmental
                       provisions stipulated under Title II of NAHASDA. In
                       addition, the Housing Authority indicates they will start
                       using Chapter 9, Fiscal and Financial Management and
                       Chapter 10, Procurement and Contract Administration to
                       the NAHASDA Indian Housing Block Grant Recipient
                       Self-Monitoring Guidebook issued by the Office of
                       Native American Programs as a system of management
                       controls to ensure it properly follows its Procurement
                       Policy. The Housing Authority also plans to develop a
                       Program Statement concerning future housing
                       replacement programs that addresses the purpose,
                       population segment to be service, and eligibility
                       requirements.

                   ·   The Housing Authority indicates the Private Homeowner
                       Rehabilitation/Loan Program is still under development.
                       The Housing Authority states they will use the Policy for
                       the Private Homeowner Rehabilitation/Loan Program
                       adopted by the Housing Board of Commissioners to


2003-DE-1001           Page 30
                                                                       Finding 2


                        identify private homeowners who have received benefits,
                        the amounts involved, develop of a waiting list, and
                        establish an evaluation process for eligible private
                        property homeowner.



OIG Evaluation of   The Housing Authority has indicated they have
Auditee Comments    discontinued the Used Mobile Home Program. As such, our
                    recommendations in the draft report are basically not
                    applicable. However the Housing Authority will need to
                    provide evidence to HUD that the program has been
                    discontinued and that the entire Used Mobile Home Program
                    has been transferred to the Tribe. This will also include
                    evidence that the Tribe has fully reimbursed the Housing
                    Authority for the full amount the Housing Authority has
                    outstanding as receivables under its Used Mobil Home
                    Program and that the amount is properly recorded on the
                    Housing Authority’s books of account. Furthermore, the
                    Housing Authority will need to provide HUD with
                    information showing that the close out of the Used Mobile
                    Home Program has been properly recorded on the Housing
                    Authority’s books of account.

                    However, the Housing Authority still needs to secure
                    repayment of funds previously expended for all the repairs
                    completed on the used mobile homes.

                    For the other supplement housing programs, we agree with
                    the actions taken by the Housing Authority in regards to the
                    future use of qualified Inspectors to ensure future
                    supplemental housing programs meet safe and healthy
                    environmental provisions, the use of Program Statements that
                    address supplemental housing program requirements, and the
                    use of Chapters 9 and 10 of the NAHASDA Indian Housing
                    Block Grant Recipient Self-Monitoring Guidebook to ensure
                    it properly follows its Procurement Policy. However, the
                    Housing Authority has not indicated if the Pre-Manufactured
                    Modular Housing Units Program is to continue. If so, the
                    Housing Board of Commissioners needs to start applying
                    those actions indicated above to this program and establish a
                    record keeping system related to the purchases of the pre-
                    manufactured modular housing units that adequately
                    identifies the source and use of funds. In addition, the
                    Housing Authority needs to initiate actions to collect the
                    $94,928 in funds still owed by the modular homebuyers.


                           Page 31                                2003-DE-1001
Finding 2



                  We agree with the actions taken by the Housing Authority to
                  identify property owners who have received benefits, in what
                  amounts, and the development of waiting lists and evaluation
                  selection procedures. However, the Housing Authority has
                  not indicated how they will collect expended funds from the
                  property owners, how they will account for those funds, and
                  what procedures it will establish and implement to ensure
                  responsible personnel at all levels comply with the Housing
                  Authority’s Private Homeowner Rehabilitation/Loan
                  Program Policy established by the Housing Board of
                  Commissioners.

                  The Housing Authority has not indicated if they will continue
                  to use the Pre-Manufactured Modular Housing Units
                  Program. In addition, the Housing Authority has indicated
                  the Private Homeowner Rehabilitation/Loan Program is still
                  under development. The Housing Authority needs to submit
                  to the HUD Northern Plains Office of Native American
                  Programs the procedures they have identified and any
                  additional procedures subsequently developed over their
                  supplemental housing programs so they can be reviewed to
                  ensure those procedures are adequate and meet HUD
                  requirements.



Recommendations   We recommend that the HUD Northern Plains Office of
                  Native American Programs:

                  2A. Provide the necessary guidance and direction to the
                      Housing Authority in connection with the Used Mobile
                      Home Program to include the following:

                        ·   Obtain evidence that the Housing Authority has
                            discontinued its Used Mobile Home Program and
                            that all functions have been transferred to the Tribe.

                        ·   Obtain evidence that all monies expended by the
                            Housing Authority under its Used Mobile Home
                            Program have been fully funded by the Tribe from
                            non-Federal funds and that the amount has been
                            properly recorded on the Housing Authority’s
                            books of account.




2003-DE-1001         Page 32
                                                       Finding 2


     ·    Require the Housing Authority to secure repayment
          of funds previously expended for all the repairs
          completed on the used mobile homes.

     ·    Obtain and review for adequacy evidence from the
          Housing Authority that the transfer of the Used
          Mobile Home Program has been properly recorded
          on the Housing Authority’s books of account.

2B. Provide the necessary guidance and direction to the
    Housing Authority in connection with the Pre-
    manufactured Modular Housing Units Program to:

     ·    Decide whether the program is to continue and if
          so, require the Housing Board of Commissioners to
          establish the program framework and requirements
          to be implement including compliance with HUD
          requirements such as only benefiting low-income
          recipients, following established procurement
          procedures, implementing proper management and
          accounting controls over property purchases, and
          collection of loan payments;

     ·    Initiate actions to collect the $94,928 in funds still
          owed by the modular home buyers, and;

     ·    Establish a record keeping system related to the
          purchases of the pre-manufactured modular
          housing units that adequately identified the source
          and use of funds.

2C. Provide the necessary guidance and direction to the
    Housing Authority in connection with the Private
    Homeowner Rehabilitation/Loan Program to:

     ·    Establish the appropriate accounting records and
          entries to record the amounts due and payments
          received from the various property owners who
          received renovation work and related loans;

     ·    Initiate rehabilitation loan repayment collection
          efforts;

     ·    Establish procedures to ensure Rehabilitation Loan
          Repayment Agreements are executed for all current
          and future rehabilitation recipients, and;


         Page 33                                 2003-DE-1001
Finding 2



                     ·   Implement income verification procedures to
                         ensure that participants under the Private
                         Homeowner Rehabilitation/Loan Program meet the
                         low-income requirements.

               2D.   Require the Housing Authority to submit to HUD for
                     HUD’s review documentation showing the corrective
                     action for Recommendation Numbers 2B, and 2C
                     above. Once the Housing Authority has established
                     the appropriate procedures over these supplemental
                     housing programs as applicable, HUD should review
                     the revised systems to ensure that the procedures are
                     adequate and that HUD requirements are being met.




2003-DE-1001     Page 34
Finding 3




    Inadequate Contract Administration System
The Housing Authority does not maintain a contract administration system to ensure
contractors perform according to the terms of their contracts as specified in their own
Procurement Policy. We identified procurement deficiencies in the two procurement
contracts reviewed. These two contracts were valued at $3.04 million at the time of our
review. Specifically, one contract did not receive Indian Health Service inspection reports
on sewer and waterline construction, certificates of insurance before commencing work,
and consistent progress schedules. There was no record of inspections having been
completed on the other contract. In addition, the Housing Authority does not use its own
Procurement Policy on vendors/contractors for labor type only contracts and for small
dollar amount type contracts that are charged to the Monthly Equity Payments Account.
These deficiencies occurred because there has been a significant turnover of Executive
Directors, fractionalization between supervisory personnel of the Housing Authority, and
management of the Housing Authority not ensuring its staff performs and complies with all
applicable provisions of its own Procurement Policy.



                                  Federal procurement regulations must meet contracting
 Regulations require the          standards contained in 24 CFR 85.36. To aid in the
 Housing Authority to             procurement process, the Housing Authority adopted its
 meet contracting                 own Procurement Policy.
 standards
                                  Federal procurement regulations require the Housing
                                  Authority to:

                                  ·   Have and use its own procurement procedures that
                                      reflect applicable State and local laws and regulations,
                                      provided the standards also conform to applicable
                                      Federal laws and standards (24 CFR 85.36(b)(1));

                                  ·   Have a contract administration system that ensures that
                                      contractors perform in accordance with the terms,
                                      conditions, and specifications of their contracts or
                                      purchase orders (24 CFR 85.36(b)(2));

                                  ·   Maintain records sufficient to detail the significant
                                      history of procurement. These records must include the
                                      rationale for the method of procurement, selection of
                                      contract type, contractor selection or rejection, and the
                                      basis for the contract price (24 CFR 85.36(b)(9));




                                          Page 35                               2003-DE-1001
Finding 3


                            ·   To use small purchase procedures for those relatively
                                simple and informal procurement methods for securing
                                services, supplies, or other property that do not cost
                                more than $25,000 in the aggregate. If small purchase
                                procedures are used, price or rate quotations shall be
                                obtained from an adequate number of qualified sources
                                (24 CFR 85.36(d)(1));

                            ·   Perform a cost or price analysis in connection with
                                every procurement action including contract
                                modifications. The method and degree of analysis is
                                dependent on the facts surrounding the particular
                                procurement situation, but as a starting point, grantees
                                must make independent cost estimates before receiving
                                bids or proposals (24 CFR 85.36(f)(1)); and

                            ·   Indian Preference shall apply to small purchase
                                procedures; that the Housing Authority shall require a
                                statement from all contractors agreeing to provide
                                Indian Preference in subcontracting, training, and
                                employment; and the Housing Authority must
                                document its efforts in providing Indian Preference. If
                                no quotations are solicited or received from Indian
                                owned economic enterprises, the Housing Authority
                                must also include as part of its documentation a
                                statement explaining the reasons for the lack of Indian
                                participation (24 CFR 905.175(b)(i)(ii)(iii)).

                            The Housing Authority has adopted a Procurement Policy
 The Procurement Policy     that requires it to:
 of the Housing Authority
 requires them to meet      ·   Ensure contracts and modifications are in writing,
 contracting standards          clearly specifying the desired supply, services or
                                construction, and are supported by sufficient
                                documentation regarding the history of the
                                procurement, including as a minimum the method of
                                procurement chosen, the selection of the contract type,
                                the rationale for selecting or rejecting offers, and the
                                basis for the contract price (Chapter 2, Section 2-2(B));

                            ·   Perform an independent cost estimate before
                                solicitation and is appropriately safeguarded for each
                                procurement above the small purchase limitation, and a
                                cost or price analysis is conducted on the responses
                                received for all procurements (Chapter 2, Section 2-
                                2(E); and


2003-DE-1001                    Page 36
                                                                              Finding 3



                          ·   Adhere to the procurement and program requirements
                              of HUD Handbook 7450.1 for Indian Housing
                              Development projects (Chapter 2, Section 2-2(I)).

                          HUD Handbook 7450.01, REV-1 requires the Housing
HUD Handbook 7450.01,     Authority to:
REV-1 requires the
Housing Authority to      · Assure that construction progress is properly
meet contracting            administered and the Housing Authority receives the
standards                   products for which it has contracted (Chapter 8, Section
                            8-1) and

                          · Inspections be made of the construction work at all
                            critical stages of construction work. Ensure that
                            inspections are properly conducted at these times and
                            construction work should be accepted before the
                            contractor proceeds to the next stage (Chapter 8,
                            Section 8-16).

                          The Development Department of the Housing Authority is
                          responsible for the procurement of construction contracts.
                          The Procurement Policy in effect during the time of our
                          review covered the purchase of materials/supplies and
                          professional services. The procedures identified the
                          requirements to be followed.

                          We selected a sample of two construction contracts valued
Two construction          at $3.04 million at the time of our review to determine if the
contracts were reviewed   Housing Authority procured and administered those
                          contracts according to procurement requirements. We
                          compared the documentation provided on each procurement
                          selected for review with the Procurement Policy of the
                          Housing Authority.

                          During the course of our review of the Development
                          Department of the Housing Authority, it was noted on
                          several occasions that the Executive Director did not know
                          the source of funds being used for a project or have any
                          idea what was the remaining fund balance on a particular
                          construction project. In addition, Development Department
                          personnel of the Housing Authority occasionally had
                          difficulty responding to questions or locating documents.




                                 Page 37                                2003-DE-1001
Finding 3

                 Various documentation deficiencies were noted during our
 Documentation   review:
 deficiencies
                 ·   One contract did not receive Indian Health Service
                     inspection reports on sewer and waterline construction
                     and consistent progress schedules as required by HUD
                     Handbook 7450.01, REV-1. There were 13 other
                     subcontractors for this construction project.
                     Certificates of insurance could not be found on seven of
                     these subcontractors. These documents are necessary
                     to keep the Housing Authority updated on the progress
                     of construction, alert them to any problems, and
                     provide security for any potential loss that might occur;

                 ·   One contract had no record of inspections having been
                     completed. HUD Handbook 7450.01, REV-1 requires
                     the Housing Authority to ensure inspections of the
                     construction work are completed at all critical stages of
                     the construction work. In addition, the Housing
                     Authority utilized the Force Account Method to save
                     on labor costs for this construction project. However,
                     almost 42 percent of the costs associated with this
                     construction project were for labor. The end result is
                     the Housing Authority has spent more money to move
                     and setup those housing units than they are worth; and

                 ·   During an examination of various archived vendor files
                     in the Finance Department of the Housing Authority,
                     we notice one contractor had previously performed
                     work for the Housing Authority. This work included
                     snow removal, painting, installing storm doors and
                     windows, replacing title in bathrooms, and removing
                     and replacing carpeting. However, there was no
                     documentation on this contractor in the Development
                     Department of the Housing Authority to detail the
                     history of the procurement as required by 24 CFR
                     85.36(b)(9) and their own Procurement Policy. This
                     contractor was not an Enrolled Tribal Member nor was
                     his firm entitled to Indian Preference. There was no
                     documentation in the Development Department of the
                     Housing Authority to indicate the reasons for lack of
                     Indian participation.




2003-DE-1001         Page 38
                                                                              Finding 3


                           According to the Development Department of the Housing
 Required cost estimates   Authority, they do not create procurement files on
 are not performed and     vendors/contractors for labor type only contracts or for
 procurements without      small contracts (less than $2,000) that are charged to the
 evidence of competition   Monthly Equity Payments Account. They also elect to
 are being completed       bypass the procurement process specified in their own
                           Procurement Policy for these types of contracts. This
                           means the Housing Authority does not perform the required
                           cost or price analysis or provide evidence of competition
                           for these types of contracts as required by 24 CFR
                           85.36(f)(1) and their own Procurement Policy. Without
                           records, it is not possible to determine the rationale behind
                           the method of procurement, ensure the contractor provides
                           those services contractor for, selection procedures are
                           properly followed, cost data is analyzed, and if Indian
                           Preference requirements are being met.

                           As a result of not having a contract administration system,
                           the Housing Authority cannot ensure contractors perform
                           according to the terms of their contracts. In addition, the
                           Housing Authority does not always use their Procurement
                           Policy when completing procurement activities. These
                           deficiencies could have been prevented had the Housing
                           Authority established a contract administration system and
                           implemented proper management controls over its
                           procurement activities to ensure they are carried out in
                           conformity with HUD requirements and the Housing
                           Authority’s Procurement Policy.



Auditee Comments           The Housing Authority provided the following comments for
                           each deficiency noted in the finding:

                           ·   The Housing Authority believes they already have
                               adequate contract administration and procurement
                               procedures in place. However, to ensure compliance in
                               the areas of contract administration, procurement, and
                               inspection the Housing Authority has indicated they will
                               use seven different Chapters from the NAHASDA Indian
                               Housing Block Grant Recipient Self-Monitoring
                               Guidebook issued by the Office of Native American
                               Programs. These Chapters include the Organizational
                               Contract Environment; Fiscal and Financial
                               Management; Procurement and Contract Administration;
                               Labor Standards and Contract Administration; Tribes


                                  Page 39                                2003-DE-1001
Finding 3

                        Assuming Environmental Review Responsibilities;
                        Financial Assessment; and Physical Assessment
                        Checklist. The Housing Authority has indicated they will
                        use the Chapters bi-annually as part of their self-
                        monitoring process.

                    ·   The Housing Authority has stated they will maintain
                        documents related to the self-monitoring process over the
                        contract administration area and these documents will be
                        available to HUD for their review.



OIG Evaluation of   We agree the Housing Authority has an adequate
Auditee Comments    Procurement Policy. As noted in the finding, the Housing
                    Authority did not have an adequate contract administration
                    system in place to ensure its procurement activities were
                    carried out in conformity with HUD’s regulations and their
                    own Procurement Policy. In addition, the Housing Authority
                    has not indicated what procedures it will establish and
                    implement to ensure responsible personnel at all levels
                    comply with the self-monitoring process related to contract
                    administration activities.

                    The HUD Northern Plains Office of Native American
                    Programs should review the self-monitoring process related
                    to contract administration activities as specified by the
                    Housing Authority to ensure they are being performed
                    adequately and the Housing Authority is complying with
                    Federal contracting requirements.



Recommendations     We recommend that the HUD Northern Plains Office of
                    Native American Programs:

                    3A. Require the Housing Authority to establish and
                        implement a contract administration system to ensure
                        its procurement activities are carried out in conformity
                        with HUD’s regulations and the Housing Authority’s
                        Procurement Policy. This system should include:

                         ·   Appropriate monitoring and inspections are
                             performed of contractor performance to ensure
                             the terms of the contract are met;




2003-DE-1001            Page 40
                                                   Finding 3


     ·    Sufficient historical detail on each type of
          procurement activity to allow for identification of
          the method of procurement, selection of contract
          type, contractor selection or rejection, and basis
          for the contract price; and

     ·    Steps to ensure compliance with the procurement
          requirements detailed in the Housing Authority’s
          Procurement Policy.

3B. Review the Housing Authority’s Contract
    Administration System, when it has been implemented
    under Recommendation Number 3A above, to ensure
    that adequate controls are in place over the Housing
    Authority’s contracting activities and the Housing
    Authority is complying with Federal contracting
    requirements.




         Page 41                              2003-DE-1001
Finding 3




               THIS PAGE LEFT BLANK INTENTIONALLY




2003-DE-1001               Page 42
Finding 4


            Inadequate Inventory Control System
The Housing Authority is not maintaining adequate perpetual inventory records in support
of its construction and renovation projects. There are no controls in place to ensure
requisitioning activities are properly maintained and materials and supplies are properly
safeguarded. The Housing Authority does not have effective inventory control to account
for all of its assets. Without an adequate inventory control system for construction
materials and supplies, the Housing Authority cannot ensure it safeguards assets purchased
with Federal funds by protecting them from theft, loss, waste, damage, and unauthorized
use.



                                  HUD regulations (24 CFR 85.20(b)(3)) states that effective
 Regulations and guidance         control and accountability must be maintained for all grant
 require the Housing              and sub-grant cash, real and personal property, and other
 Authority to account for         assets. Grantees and sub-grantees must adequately
 and safeguard assets             safeguard all such property and must assure that it is used
                                  solely for authorized purposes.

                                  OMB Circular A-87, Section A (2)(a)(1) states
                                  Governmental units are responsible for the efficient and
                                  effective administration of Federal awards through the
                                  application of sound management practices.

                                  The Housing Authority developed their Procurement Policy
 The Procurement Policy           to assure that supplies, services, and construction activities
 of the Housing Authority         are procured efficiently, effectively, and at the most
 requires them to account         favorable prices available. Under the Housing Authority’s
 for and safeguard assets         Procurement Policy, the Executive Director or his/her
                                  designee is to ensure that procedures for inventory control,
                                  storage and protection of goods and supplies, and issuance
                                  of, or other disposition of, supplies and equipment are
                                  established in accordance with HUD Handbook 7460.1,
                                  Chapter 5. This reference requires the Housing Authority
                                  to adopt and comply with policies for procurement and
                                  administration of supplies, materials, services, and
                                  equipment in connection with the operation of Housing
                                  Authority developments to include inventory control,
                                  storage and protection of goods and supplies, and the
                                  issuance and disposition of supplies and equipment.

                                  The Housing Authority has not established and
 Inventory controls are           implemented an adequate inventory control system over its
 lacking                          purchases of materials and supplies. Inventory records are
                                  not maintained. Without inventory records, the Housing


                                          Page 43                                2003-DE-1001
Finding 4

               Authority is unable to identify what goods have been
               purchased, what materials are on hand and in storage, and
               what inventory items have been used. Furthermore, the
               Housing Authority has a large quantity of materials and
               supplies on hand but these are not properly stored and
               safeguarded. As a result, the Housing Authority has limited
               assurances that the materials and supplies it purchases are
               needed and used for official Housing Authority activities.

               At the time of our review, the Housing Authority
               Procurement Department was responsible for the
               procurement of materials and supplies. All purchased
               materials and supplies are delivered to the two Housing
               Authority warehouses that are located next to each other.
               These include both inside and outside storage areas.

               The following photographs show inside storage.




2003-DE-1001      Page 44
                                                   Finding 4

These photographs show that materials being stored in a
haphazard arrangement. No shelves are provided to help
facilitate the storage of the materials. In addition, the
storage facilities were not locked and otherwise secured.

The following photographs show the Housing Authority’s
outside storage areas.




These photographs clearly show that materials stored
outside are exposed to the elements and some lumber
products are rotting. Vehicle entry gates are left open and a
number of personnel entry doors to the storage warehouses
are also left open.

The following photograph shows the poor condition of the
security fence. This photograph indicates the security fence


       Page 45                                2003-DE-1001
Finding 4

               surrounding the outside storage area is not sufficient to
               prevent theft of Housing Authority materials and supplies.




               We reviewed the operations of the Procurement Department
               of the Housing Authority. Procurement personnel were not
               aware of the procedures for inventory control, storage, and
               protection of goods and supplies, and the issuance of, or
               other disposition of materials and supplies established in
               HUD Handbook 7460.1, Chapter 5. The Housing Authority
               has no written procedures on how to conduct physical
               inventories. In addition, the Housing Authority has no
               controls in place to ensure requisitioning activities are
               properly maintained and materials and supplies are properly
               safeguarded.

               We reviewed the procurement of materials and supplies by
               the Procurement Department of the Housing Authority.
               Only three partial physical inventories in the sheet rock,
               plumbing, and electrical material areas have been
               completed. Since a complete physical inventory has never
               been completed, the Housing Authority is not able to take
               trial balances of their inventory records at regular intervals
               and reconcile the results to the general ledger control
               account. The Housing Authority has not even made quality
               control spot counts on the three partial physical inventories
               they have completed. Reorder levels have not been
               established for any individual material item or individual
               supply item.



2003-DE-1001      Page 46
                                                                        Finding 4

                    As a result of its inadequate inventory control system, the
                    Housing Authority cannot ensure it safeguards assets
                    purchased with Federal funds by protecting them from
                    theft, loss, waste, damage, or unauthorized use. The current
                    system does not provide sufficient information for
                    management to make informed material acquisition
                    decisions. The Housing Authority has no way of knowing
                    if they are ordering materials and supplies beyond what is
                    actually necessary to perform their normal day to day
                    operations. The Housing Authority does not even know the
                    exact amount of materials and supplies they do have on
                    hand.



Auditee Comments    The Housing Authority provided the following comments for
                    each deficiency noted in the finding:

                    ·   The Housing Authority indicates they have hired a
                        Warehouse Supervisor and Inventory Management
                        Specialist. In addition, the storage warehouses have been
                        mapped, materials are now stored in designated areas, a
                        security fence is in place, the warehouse has been
                        designated a secure area, and materials are now being
                        stored out of the weather. The Housing Authority also
                        indicates they will procure a computer inventory system
                        to perform inventory control, track disbursements, and
                        complete reconciliations. The Housing Authority is in
                        the process of completing a physical inventory of all
                        materials and supplies and developing written procedures
                        for conducting physical inventories.

                    ·   The Housing Authority has indicated they are awaiting a
                        response to their comments provided to the HUD
                        Northern Plains Office of Native American Programs on
                        April 26, 2002 regarding a previous review completed by
                        that office.



OIG Evaluation of   The actions being taken and planned by the Housing
Auditee Comments    Authority should help correct the deficiencies noted in the
                    finding.

                    The HUD Northern Plains Office of Native American
                    Programs should review the actions taken by the Housing



                            Page 47                                2003-DE-1001
Finding 4

                  Authority to ensure those procedures they are now using
                  ensure proper controls are being exercised over their material
                  purchases and inventory.



Recommendations   We recommend that the HUD Northern Plains Office of
                  Native American Programs provide the necessary guidance
                  and direction to the Housing Authority to:

                  4A. Establish and implement adequate control procedures
                      over its material purchases and inventory. These
                      procedures would include the following:

                      ·   Develop written procedures on how to conduct
                          physical inventories;

                      ·   Complete a physical inventory of all materials and
                          supplies;

                      ·   Improve security measures for the outside storage
                          area to include building a secure fence;

                      ·   Develop an improved materials shelving system for
                          the storage warehouses;

                      ·   Establish reorder levels for materials and supplies
                          so only those items necessary for day-to-day
                          operations are available; and

                      ·   Maintain adequate perpetual inventory records in
                          support of its materials and supplies and that these
                          records are reconciled to the applicable general
                          ledger control account.

                  4B. Review the procedures established and implemented
                      by the Housing Authority under Recommendation
                      Number 4A above to ensure proper controls and
                      procedures are being exercised over the Housing
                      Authority’s material purchases and inventory and are
                      in conformance with HUD requirements.




2003-DE-1001         Page 48
Finding 5


    Improper Payment of Penalties and Fees
Contrary to Federal regulations, the Housing Authority has used Indian Housing
Block Grant monies to pay for unallowable penalties and fees. From 1996 through
2000, the Housing Authority was assessed penalties and interest totaling $78,110 by
the Internal Revenue Service for not making proper Federal employment tax
deposits and failure to file the Internal Revenue Service Form 941 in a timely
manner. In addition, from 1998 through March of 2000, the Housing Authority
incurred bank overdraft charges totaling $21,900 for having insufficient funds to
meet expenditures. This occurred because the Housing Authority did not ensure the
Finance Department properly administered its funds.



                                  HUD regulations (24 CFR 1000.26(a) and 24 CFR
 Regulations and guidance         85.22(b)) states recipients shall comply with the
 establish principles for         requirements and standards of OMB Circular A-87,
 determining allowable            “Principles for Determining Costs Applicable to
 costs                            Grants and Contracts with State, Local and
                                  Federally recognized Indian Tribal Governments.”

                                  OMB Circular A-87 establishes principles for
                                  determining allowable costs by State, Local and
                                  Federally recognized Indian Tribal Governments.
                                  Attachment B(20) states fines, penalties, damages,
                                  and other settlements resulting from violations (or
                                  alleged violations) of, or failure of the governmental
                                  unit to comply with Federal, State, Local, or Indian
                                  Tribal laws and regulations are unallowable except
                                  when incurred as the result of compliance with
                                  specific provisions of the Federal award.
                                  Attachment B(26) states costs incurred for interest
                                  on borrowed capital or the use of a government
                                  unit’s own funds, however represented, are
                                  unallowable.

                                  Furthermore, 24 CFR 1000.26(b)(1)(ii) specifically
                                  states that fines and penalties are unallowable costs
                                  to the Indian Housing Block Grant program.

                                  One of the functions of the Finance Department is
 The Finance Department           to ensure the Housing Authority is in compliance
 is responsible for Federal       with the fiscal accountability requirements of
 tax requirements and             Federal, State, Local, and Indian Tribal
 reporting excess funds           Governments. In this regard, the Payroll Manager
 and shortages                    is responsible for Federal tax requirements and


                                  Page 49                               2003-DE-1001
Finding 5

                              maintaining checkbooks and balances. The Payroll
                              Manager is required to report any excess funds or
                              shortages to the Finance Officer.

                              FEDERAL TAX PENALTIES AND INTEREST

                              We reviewed documents issued to the Housing
 IRS penalties and interest
                              Authority by the Internal Revenue Service to
 of $78,110 was assessed
                              determine if the Housing Authority was assessed
 against the Housing
                              penalties and interest related to its Federal tax
 Authority
                              requirements. The period reviewed was 1996
                              through 2000.

                              Our review showed the Housing Authority was
                              assessed $78,110 in penalties and interest for not
                              making proper Federal employment tax deposits
                              and failing to file the Internal Revenue Service
                              Form 941 in a timely manner. Penalties and interest
                              are not allowable costs under HUD regulations and
                              OMB Circular A-87.

                              BANK OVERDRAFT CHARGES

                              We reviewed bank documents issued to the Housing
 Bank overdraft charges of    Authority to determine if the Housing Authority
 $21,900 was assessed         was assessed overdraft charges for having
 against the Housing          insufficient funds to meet expenditures. The period
 Authority                    reviewed was 1998 through 2000.

                              Our review showed the Housing Authority was
                              assessed $21,900 in bank overdraft charges for not
                              having sufficient funds to meet expenditures. Bank
                              overdraft charges are not allowable costs under
                              HUD regulations and OMB Circular A-87.

                              Our office received concerns related to the payment
                              of penalties and interest to the Internal Revenue
                              Service and the assessment of bank overdraft
                              charges for having insufficient funds to meet
                              expenditures. Results of our review support those
                              concerns. The assessment of payroll penalties and
                              interest and bank overcharges occurred because the
                              Housing Authority did not ensure the Finance
                              Department properly administered its funds.
                              Procedures were not in place to pay the Internal
                              Revenue Service the withheld payroll tax deduction
                              and to file the required forms in a timely manner.


2003-DE-1001                     Page 50
                                                                Finding 5

                   The Housing Authority encountered funding
                   shortfalls due primarily to the fact that Indian
                   Housing Block Grant Program monies were not
                   timely drawn down from HUD. This same situation
                   necessitated the Bank advancing funds to the
                   Housing Authority to cover the checks issued by the
                   Housing Authority. Better management of its
                   funding and HUD grant draw downs is needed by
                   the Housing Authority to prevent the future
                   assessment of penalties and interest and bank
                   overdraft charges that are unallowable under the
                   Indian Housing Block Grant Program.



Auditee Comments   The Housing Authority provided the following
                   comments for each deficiency noted in the finding:

                   ·   The Housing Authority has stated they have hired
                       a Chief Financial Officer and a Payroll Manager
                       that are knowledgeable about Federal
                       employment tax requirements and are responsible
                       for ensuring appropriate balances are maintained
                       and checked daily for all checking and savings
                       accounts. In addition, the Housing Authority has
                       indicated they are developing a Corporation
                       Financial Management Procedures Handbook to
                       ensure improved financial management.

                   ·   The Housing Authority has indicated they agree
                       that Internal Revenue Service interest, penalties,
                       and bank overdraft charges are ineligible costs.
                       The Housing Authority has identified three
                       different methods to recover these funds from
                       non-Federal sources and has made an inquiry as
                       to the possibility of a repayment plan.

                   ·   The Housing Authority has stated they will
                       provide the HUD Northern Plains Office of
                       Native American Programs with verification of
                       repayment of the interest, penalties, and bank
                       overdraft charges from non-Federal sources as
                       they occur.

                   ·   The Housing Authority has stated they will work
                       with the HUD Northern Plains Office of Native


                   Page 51                                2003-DE-1001
Finding 5

                       American Programs to ensure management
                       controls are in place and comply with HUD
                       guidelines.



OIG Evaluation of   We agree with the actions being taken and
Auditee Comments    planned by the Housing Authority to ensure Federal
                    tax requirements are met and appropriate balances are
                    maintained and checked daily for all checking and
                    savings accounts. However, the HUD Northern
                    Plains Office of Native American Programs should
                    review the Corporation Financial Management
                    Procedures Handbook being developed by the
                    Housing Authority to ensure procedures identified
                    require compliance on the part of responsible
                    personnel at all levels.

                    We are not directing the Housing Authority to select a
                    particular method to recover these funds from non-
                    Federal sources. The Housing Authority needs to
                    work with the HUD Northern Plains Office of Native
                    American Programs about the possibility of a
                    repayment plan.

                    The action planned by the Housing Authority should
                    correct this deficiency provided the HUD Northern
                    Plains Office of Native American Programs
                    determines that management controls specified in the
                    Corporation Financial Management Procedures
                    Handbook are adequate and in conformance with
                    HUD requirements.



Recommendations     We recommend that the HUD Northern Plains
                    Office of Native American Programs provide the
                    necessary guidance and direction to the Housing
                    Authority to:

                    5A. Implement a system of management controls to
                         ensure the Finance Department makes proper
                         Federal employment tax deposits, files
                         required Federal tax documents in a timely
                         manner, and maintains sufficient funds to meet
                         expenditures.



2003-DE-1001           Page 52
                                         Finding 5

5B. Recover from non-Federal sources the $78,110
    in penalties and interest and the $21,900 in
    bank overdraft charges and use the recovered
    monies for eligible HUD program costs.

We also recommend that the HUD Northern Plains
Office of Native American Programs:

5C. Obtain evidence from the Housing Authority
    that the $78,110 in penalties and interest and
    the $21,900 in bank overdraft charges has been
    recovered and used for eligible HUD program
    costs.

5D. Review the system of management controls
    implemented by the Housing Authority under
    Recommendation Number 5A to ensure they
    function properly and are in conformance with
    HUD requirements.




Page 53                             2003-DE-1001
Finding 5




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2003-DE-1001                 Page 54
Finding 6


     Deficient Controls Over Travel and Related
                        Costs
The Housing Authority has adopted the Rosebud Sioux Tribal Travel Policy as its Travel Policy.
However, contrary to HUD requirements, the Housing Authority has not implemented sufficient
management controls over its travel and related expenses to ensure that its adopted Travel Policy is
followed and adhered to. More specifically, each official trip has not always been properly authorized,
travel advances have been improperly calculated in some cases, travel vouchers have not always been
filed by the traveler after the end of a trip, and documentation supporting travel costs and related
calculations were often missing and/or incomplete. As a result, the Housing Authority has limited
assurance that its travelers are complying with its Travel Policy and that the reimbursed amounts to the
travelers are authorized, accurate, and supported. This situation has occurred primarily by the fact that
no one individual or department within the Housing Authority has the responsibility to enforce
compliance with the Housing Authority’s Travel Policy.

In addition, the Housing Authority has paid Board members $75 in per diem payments for
attending each Housing Authority Board of Commissioners meeting. The per diem was intended to
reimburse the Board member for expenses incurred in connection with the meeting. However, the
Housing Authority has also reimbursed the attending members for mileage to attend the meetings
and to provide meals at each meeting. Since the Housing Authority is actually funding the
individual cost of attending the Board meeting, the payment of $75 per diem is an extra and
unnecessary expense. During our review, we calculated that the Housing Authority had paid a
combined total of $44,400 in per diem payments for attending Board members. The $75 per diem
payment is also contrary to HUD requirements because the payment is not consistent with the
Tribal Council’s policy of not paying Tribal Council members a fee or mileage for attending
meetings on the Rosebud Indian Reservation. Therefore, the $44,400 is considered to be an
ineligible expense to the Indian Housing Block Grant Program.



                                         The Housing Authority is to follow the financial
  Adequate internal                      management standards set out in Section 85.20 of Title 24 of
  controls, accounting                   the Code of Federal Regulations. This section provides that
  records, and                           the Housing Authority must maintain effective control and
  documentation must be                  accountability for all grant cash, real and personal property
  established for travel and             and other assets and adequately safeguard such assets and
  related costs                          assure that they are used solely for authorized purposes.

                                         Section 85.20 also requires the Housing Authority to
                                         maintain accounting records that adequately identify the
                                         source and application of funds provided. These records
                                         must contain information pertaining to grant awards and
                                         authorizations, obligations, unobligated balances, assets,
                                         liabilities, outlays or expenditures and income. Furthermore,



                                                 Page 55                                  2003-DE-1001
Finding 6

                              the accounting records must be supported by such source
                              documentation as cancelled checks, paid bills, payrolls, time
                              and attendance records, contract award documents, etc. In
                              addition, the provisions of OMB Circular A-87 must be
                              followed in connection with the eligibility of costs.

                              On February 20, 1998, the Housing Authority adopted the
 Housing Authority Travel     Rosebud Sioux Tribal Travel Policy as the official Travel
 Policy establishes travel    Policy for the Housing Authority. This policy set out various
 requirements and             reimbursement rates for certain types of travel and delineated
 procedures                   requirements for incurring official travel and being
                              reimbursed for official travel costs. Travelers are to be paid
                              for lodging and a set amount for Meals and Incidental
                              Expense based on a rate for each quarter of the day the
                              traveler is in travel status.

                              Our review identified that the Housing Authority has been
 Travel Policy not            incurring official travel and related travel costs contrary to
 followed with duplicate      the provisions of its official Travel Policy. These deviations
 compensation for travel to   have occurred in two areas: First, the Housing Authority has
 Board meetings               not been authorizing official travel and reimbursing its
                              travelers in accordance with its Travel Policy. Second, the
                              Housing Authority has provided duplicate compensation to
                              Housing Authority Board of Commissioner members for
                              attending Board meetings. These two areas are discussed
                              below:

                              DEFICIENT ADMINISTRATION OF TRAVEL
                              AUTHORIZATIONS, ADVANCES, AND COSTS

                              Under the Housing Authority’s Travel Policy, travelers on
 Housing Authority            official Housing Authority business must have advanced
 processing of travel         travel approval. In addition, the traveler may obtain an
 authorization, advances,     advance of travel funds that are based on the estimated travel
 and costs                    costs. Once a trip is completed, the traveler is to submit a
                              travel voucher detailing the travel costs incurred and
                              refunding any excess advance received or obtaining funding
                              of any unpaid travel costs.

                              We identified and tested the internal controls the Housing
 Required Travel Policy       Authority has implemented over its travel and related costs.
 provisions not being met     Our review showed that the Housing Authority has failed to
 and/or documented            established adequate controls. As a result, the Housing
                              Authority has very limited assurance that its travelers are
                              incurring travel costs in conformity the adopted official
                              Travel Policy.



2003-DE-1001                     Page 56
                                                                                Finding 6



                             Travel documentation for three Housing Authority
                             employees on official Authority travel were reviewed and
                             the following deficiencies were noted:

                             ·   Housing Authority employees are traveling without an
                                 approved travel authorization;

                             ·   Travel vouchers are not always submitted upon
                                 completion of the travel;

                             ·   Housing Authority employees do not always submit
                                 receipts to support costs claimed on the travel voucher;

                             ·   Insufficient information was provided on the travel
                                 advance form and/or the actual travel voucher form to
                                 support and properly calculate the Meals & Incidental
                                 Expense amount paid; and

                             ·   Insufficient documentation was maintained to show
                                 that any excess travel advances were properly and
                                 promptly paid to the Housing Authority.

                             These deficiencies occurred primarily from the fact that the
Deficient procedures to      Housing Authority does not have adequate management
control and monitor travel   controls in place to ensure that official Housing Authority
and related costs            travel is properly authorized, travel advances are properly
                             and accurately calculated, and the traveler submits the
                             required travel voucher after the completion of the travel.
                             No one individual or department had the responsibility to
                             ensure that travel policies and procedures were being
                             followed. Without adequate management controls, the
                             Housing Authority has very limited assurance that travel
                             was actually performed, or that the traveler was properly
                             funded for their individual trips.

                             The method by which travel advances and subsequent
Deficient accounting for     travel vouchers are recorded makes it difficult to identify
travel advances and          when travel is planned, what travel has been performed,
vouchers                     and the final accounting status of travel that has been
                             completed. This is due to the fact that travel advances are
                             recorded as an expense. In addition, any additional
                             amounts paid to the traveler after a completed trip, is also
                             charged as an expense. Under this process, the Housing
                             Authority can only identify what travel advances have
                             been paid and any subsequent travel voucher costs have


                                    Page 57                               2003-DE-1001
Finding 6

                             been paid to an individual traveler is by performing a
                             detailed review of the various expense records. Any errors
                             or omissions are not readily identifiable.

                             Controls could be improved if the Housing Authority were
                             to record all travel advances as a receivable from the
                             traveler. When a designated trip is completed and the final
                             travel voucher for the trip is submitted, the accounts
                             receivable for the traveler could be properly reduced. Any
                             amounts shown in the travel accounts receivable accounts
                             would be those advances that have been made by which
                             travel vouchers have not been submitted by the travelers.
                             This process would allow Housing Authority management
                             to quickly identify those travelers who have outstanding
                             advances that need to be liquidated.

                             DUPLICATE COMPENSATION FOR ATTENDING
                             BOARD MEETINGS

                             The Housing Authority Board of Commissioners passed
 Board members receive a     Resolution 98-17 on August 20, 1998 that indicated Board
 $75 per diem payment for    members would receive a per diem payment of $75 to attend
 expenses while attending    each Board meeting. The $75 payment was to be
 Board meetings              compensation for expenses, including travel, incurred in the
                             discharge of their duties.

                             Since the adoption of this resolution, the Housing Authority
                             has been paying Board members who attend Board meetings
                             the $75 per diem payment. However, the Housing Authority
                             has been reimbursing each attending Board member mileage
                             for attending the meetings. Also, the Housing Authority has
                             funded the meals that have been provided at the Board
                             meetings. Since the Housing Authority has paid Board
                             members for the actual cost of attending meetings that
                             include mileage and meals, the payment of the $75 per diem
                             that was designated for reimbursement for expenses, results
                             in a duplicate compensation for meeting expenses.

                             For the period from August 20, 1998 through August 13,
 Duplicate compensation      2001, the Housing Authority Board held a total of 102
 totaling $44,400 paid for   meetings. For these meetings, the number of Board
 Board members expenses      members present totaled 592. These Board members
 while attending Board       received the $75 per diem for each of the meetings for a
 meetings                    combined total expense of $44,400. Since the Housing
                             Authority paid these Board members mileage as well as
                             provided meals for the meetings, the attending Board



2003-DE-1001                    Page 58
                                                                              Finding 6

                            members did not have any additional meeting expenses to
                            pay. As a result, the $75 per diem payment was a duplicate
                            and unnecessary payment for meeting expenses since the
                            attending Board members were already being compensated
                            for mileage and meals. Therefore, the $44,400 is considered
                            to be an ineligible Indian Housing Block Grant Program
                            cost.

                            The Housing Authority has had up to two Board members
Tribal Council members      who are Tribal Council members and are representatives of
on Housing Authority        the Tribal Council to the Housing Authority Board. These
Board not paid for          Tribal Council members did not receive the $75 per diem
meeting expenses            payment for each Board meeting they attended nor did these
                            Tribal Council members receive reimbursement for their
                            mileage while attending the Board meetings.

                            This practice of non-compensation for meeting related costs
                            for Tribal Council members on the Housing Board is in
                            harmony with Tribal policy and directives. On June 23,
                            2000, the Rosebud Sioux Tribe issued a Tribal Council
                            Directive that states Tribal employees are not to be paid
                            meeting stipends or mileage for participating in Tribal
                            Council appointed committees and commissions. Similarly,
                            Tribal Council members do not receive mileage, meals, or a
                            stipend for attending meetings on the Rosebud Indian
                            Reservation.

                            The $75 per diem payment to Board members for attending
The $75 per diem            Board meetings when actual expenses are funded separately
payment is not consistent   by the Housing Authority could be considered a $75 stipend
with HUD and local          or fee being paid to the Board members. The payment of
government requirements     such a stipend is contrary to HUD regulations and guidance
                            and not consistent with Tribal government policy and
                            practice.

                            HUD requirements under NAHASDA Guidance 98-13
                            reinforced the provisions in OMB Circular A-87 and stated
                            that stipends for Board members to attend monthly meetings
                            is considered an allowable cost but it:

                            ·   Must be a necessary and reasonable for the proper and
                                efficient performance and administration of a Federal
                                award;

                            ·   Must be authorized or not prohibited under Tribal law;
                                and


                                  Page 59                               2003-DE-1001
Finding 6



                           ·   Must be consistent with policies, regulations, and
                               procedures that apply uniformly to both Federal awards
                               and other activities of the governmental units.

                           The Housing Authority Board payment of the $75 per diem
                           as a stipend or fee is not authorized under Tribal policy and
                           practice and is not consistent with the policies and
                           procedures being followed by the Tribal government.
                           Accordingly the payment of the $75 to Board members is an
                           unallowable cost to the Indian Housing Block Grant
                           Program. Accordingly, the total $44,400 paid during our
                           review period for per diem to Housing Board members
                           attending Board meetings needs to be repaid to the Indian
                           Housing Block Grant Program from non-Federal sources.

                           These deficiencies as discussed in the previous two
 Management controls and
                           sections are a result of the Housing Authority not
 procedures lacking
                           establishing adequate management controls and procedures
                           to implement their adopted Travel Policy and to ensure that
                           such travel and related costs are incurred in compliance
                           with HUD and Housing Authority requirements. As a
                           result, the Housing Authority is incurring travel costs and
                           payments that are unauthorized, ineligible, and/or
                           improperly documented.



Auditee Comments           The Housing Authority provided the following comments for
                           each deficiency noted in the finding:

                           ·   The Housing Authority believes they already have
                               adequate management controls over its travel and related
                               costs and an adequate Travel Policy is maintained. The
                               Housing Authority states their Travel Policy required all
                               travel to have proper written authorization, travel reports
                               are required and reconciled in a timely manner, and
                               travel is treated as an advance and maintained as a
                               receivable until reconciled.

                           ·   The Housing Authority is awaiting a determination by
                               the HUD Northern Plains Office of Native American
                               Programs regarding the practice of providing Board
                               members a $75 per diem payment for each meeting they
                               attend. The Housing Authority believes the per diem
                               cost is justified because it a common practice of other


2003-DE-1001                   Page 60
                                                                           Finding 6

                        Tribal Designated Housing Entities. The Housing
                        Authority has stated they have reduced the per diem
                        payment to $70 and are no longer paying mileage costs.

                    ·   The Housing Authority state they will discuss the
                        $44,400 as an ineligible cost and provide official
                        notification as to the results of their discussions to the
                        HUD Northern Plains Office of Native American
                        Programs.

                    ·   The Housing Authority has indicated they are awaiting a
                        response to their comments provided to the HUD
                        Northern Plains Office of Native American Programs on
                        April 26, 2002 regarding a previous review completed by
                        that office. The Housing Authority also indicates they
                        are open to any technical assistance HUD can provide in
                        establishing other appropriate controls to ensure
                        compliance with their Travel Policy.



OIG Evaluation of   We agree the Housing Authority has an adequate Travel
Auditee Comments    Policy. However, the Housing Authority has not
                    implemented any process to be performed by Housing
                    Authority officials and/or staff to ensure that the Authority’s
                    adopted Travel Policy is being followed. No one has the
                    assigned responsibility that travel advances are properly
                    authorized, documented and conform with the Travel Policy
                    provisions before a travel advance is made; that travel
                    vouchers are prepared and submitted by each traveler at the
                    completion of each trip; and that the travel costs actually
                    paid is properly documented, supported and complies with
                    the Travel Policy. This indicates a lack of adequate
                    management controls over its travel and related costs to
                    ensure compliance with HUD requirements and with the
                    Housing Authority’s adopted Travel Policy

                    We have reviewed the Housing Authority’s response on this
                    subject submitted to the HUD Northern Plains Office of
                    Native American Programs. However, the payment of the
                    $75 per diem, or a reduced amount of $70, as a stipend or fee
                    is not authorized under Tribal policy and the practice is not
                    consistent with the policies and procedures being followed
                    by the Tribal government. Therefore, it does not meet the
                    allowable cost provisions of OMB Circular A-87 or



                           Page 61                                  2003-DE-1001
Finding 6

                  NAHASDA Guidance 98-13 and is considered an ineligible
                  cost.

                  The Housing Authority has not indicated how they will
                  reimburse the Indian Housing Block Grant Program from
                  non-Federal sources for the duplicate compensation paid to
                  Board members for attending Board meetings. The Housing
                  Authority’s official notification to HUD about their
                  discussions on the subject needs to indicate how it will
                  accomplish this reimbursement.

                  The HUD Northern Plains Office of Native American
                  Programs should assist the Housing Authority in establishing
                  and implementing appropriate controls over their travel and
                  related costs to ensure they are adequate and that HUD
                  requirements and the Housing Authority’s Travel Policy are
                  being met.



Recommendations   We recommend that the HUD Northern Plains Office of
                  Native American Programs:

                  6A. Require the Housing Authority to establish and
                      implement adequate management controls over its
                      travel and related costs to ensure compliance with
                      HUD requirements and with the Housing Authority’s
                      adopted Travel Policy. Such controls would:

                        ·   Enforce the requirement that all travel have
                            properly written prior authorization;

                        ·   Ensure travel vouchers are promptly submitted
                            after each trip and are properly supported and
                            calculated in accordance with the Housing
                            Authority’s Travel Policy, and;

                        ·   Record travel advances as a receivable on the
                            Housing Authority’s books of account;

                  6B. Have the Housing Authority stop the practice of
                      providing Board members a $75, or a reduced amount
                      of $70, per diem payment for each meeting they attend.

                  6C. Require the Housing Authority to reimburse the
                      Indian Housing Block Grant Program from non-


2003-DE-1001         Page 62
                                               Finding 6

     Federal sources the duplicate compensation of
     $44,400 paid to the Board members for attending
     Board meetings.

6D. Once the Housing Authority has established and
    implemented the appropriate controls and procedures
    set out in Recommendation Number 6A above, HUD
    should review the implemented system to ensure that
    the controls and procedures are adequate and that
    HUD requirements and the Housing Authority’s
    Travel Policy are being met.




      Page 63                            2003-DE-1001
Finding 6




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2003-DE-1001              Page 64
Management Controls
In planning and performing our audit, we obtained an understanding of the management
controls that were relevant to our audit. Management is responsible for establishing
effective management controls. Management controls, in the broadest sense, include plan
of organization, methods, and procedures adopted by management to ensure that its goals
are met. Management controls include the processes for planning, organizing, directing,
and controlling program operations. They include the systems for measuring, reporting,
and monitoring program performance.



                                  We determined that the following controls were relevant to
 Relevant Management              our objectives and each was assessed during our review:
 Controls
                                  ·   Accounting system;

                                  ·   Procurement system;

                                  ·   Inventory system;

                                  ·   Maintenance system;

                                  ·   Occupancy system; and

                                  ·   The Housing Authority’s supplemental housing
                                      programs.

                                  The following procedures were used to evaluate
                                  management controls:

                                  ·   Interviews with Housing Authority officials and
                                      employees;

                                  ·   Interviews with Rosebud Sioux Tribal employees;

                                  ·   Interviews with Housing Authority residents;

                                  ·   Tours of the Housing Authority’s supplemental housing
                                      programs; and

                                  ·   Review of Housing Authority management systems and
                                      related records.



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Management Controls

                          Our review indicates the Housing Authority lacks the
 Significant Weaknesses   management controls necessary to ensure that the Housing
                          Authority:

                          ·   Complied with policies related to drug elimination,
                              subleasing, delinquency, and eligibility (Finding 1);

                          ·   Complied with policies related to procurement,
                              maintenance, and administration of its supplemental
                              housing programs (Finding 2);

                          ·   Maintained proper administration over its procurement
                              and contracting of goods and services (Finding 3);

                          ·   Maintained adequate administration and safeguards
                              over its materials and supplies inventory (Finding 4);

                          ·   Prevented the assessment of penalties, interest, and
                              bank overdraft charges (Finding 5); and

                          ·   Complied with established Travel Policy requirements
                              ensuring that Housing Authority travel is authorized,
                              accurate, supported, and eligible (Finding 6).




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Follow Up On Prior Audits
The Office of Inspector General has not completed any type of audit work related to the Housing
Authority since at least 1990. However, the HUD Northern Plains Office of Native American
Programs has conducted a monitoring review of the Housing Authority. During the week of July
9, 2001, HUD conducted an on site performance review of HUD funded Indian Housing Block
Grant and United States Housing Act of 1937 programs being implemented by the Housing
Authority. HUD’s Final Monitoring Report was issued on April 26, 2002 and contained 11
findings with related recommended corrective action and target dates. These 11 findings are:

1. Tribal Council failed to monitor, perform oversight and accountability of the Sicangu Wicoti
   Awanyakape (SWA) Corporation Housing Board in violation of 24 CFR 1000.502;

2. Required operating policies not in place as required by Section 203 of NAHASDA;

3. SWA is not conducting re-certifications as required by 24 CFR 1000.128 and NAHASDA
   102(c)(5);

4. SWA is not complying with tenant and homebuyer selection policies in accordance with
   Section 207 of NAHASDA;

5. Non-low income family received same benefits as low-income families which was not in
   accordance with 24 CFR 1000.110(e);

6. 1937 Housing Act housing stock is not being maintained as required by Section 203(a)(2)(b)
   of NAHASDA;

7. SWA has failed to adequately safeguard, maintain records for and dispose of equipment
   purchased with HUD funds as evidenced by poor or non-existent property records, incomplete
   physical inventory records, and possible loss or theft, in violation of 24 CFR 85.20 and 24
   CFR 85.32;

8. SWA is in non-compliance with Section 105 of NAHASDA and 24 CFR Part 58 by
   obligating/expending funds in connection with the rehabilitation of non-1937 Act units and
   with the new construction of 4 units of modular housing prior to performing an environment
   review;

9. SWA failed to follow the procurement requirements of 24 CFR 85.36 and its own
   Procurement Policy for contracts and purchases;

10. SWA Board held excessive Board meetings, in violation of By-Laws of Rosebud Housing
    Authority, Article III;




                                             Page 67                              2003-DE-1001
Follow Up On Prior Audits

11. SWA is not in compliance with the Single Audit Act required by 24 CFR 1000.544 and
    NAHASDA.




2003-DE-1001                          Page 68
Appendix A


Schedule of Ineligible Costs
     Recommendation                 Description                  Ineligible Costs 1/
          5B                  Penalties and Interest                 $78,110.80
          5B                 Bank Overdraft Charges                  $21,900.00
          6C               Duplicate Per Diem Payments               $44,400.00

1/     Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
       that the auditor believes are not allowable by law, contract or Federal, State or local
       policies or regulations.




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Appendix B

Auditee Comments




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            Appendix B




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            Appendix B




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Appendix B


                      SUPPLEMENTAL AUDITEE COMMENTS
  (The Supplemental Auditee Comments contained numerous attachments that were too
    voluminous to include in the audit report. These attachments were provided to the
       Northern Plains Office of Native American Programs under separate cover.)




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            Appendix B




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Appendix C

Distribution Outside of HUD
Sharon Pinkerton, Senior Advisor, Subcommittee on Criminal Justice, Drug Policy &
    Human Resources, B373 Rayburn House Office Bldg., Washington, DC 20515
Stanley Czerwinski, Director, Housing and Telecommunications Issues, U.S. 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 Bldg., Washington, DC 20503
Linda Halliday (52P), Department of Veterans Affairs, Office of Inspector General, 810
    Vermont Ave., NW, Washington, DC 20420
William Withrow (52KC), Department of Veterans Affairs, OIG Audit Operations
    Division, 1100 Main, Rm 1330, Kansas City, Missouri 64105-2112
The Honorable Joseph Lieberman, Chairman, Committee on Government Affairs, 706
    Hart Senate Office Bldg., United States Senate, Washington, DC 20510
The Honorable Fred Thompson, Ranking Member, Committee on Governmental Affairs,
    340 Dirksen Senate Office Bldg., United States Senate, Washington, DC 20510
The Honorable Dan Burton, Chairman, Committee on Government Reform, 2185
        Rayburn Bldg., House of Representatives, Washington, DC 20515
The Honorable Henry A. Waxman, Ranking Member, Committee on Government
        Reform, 2204 Rayburn Bldg., House of Representatives, Washington, DC 20515
Andy Cochran, House Committee on Financial Services, 2129 Rayburn H.O.B.,
        Washington, DC 20515
Clinton C. Jones, Senior Counsel, Committee on Financial Services, U.S. House of
        Representatives, B303 Rayburn H.O.B., Washington, DC 20515




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