oversight

The Fort Belknap Indian Community in Harlem, MT, Had Weaknesses That Could Significantly Affect Its Capacity To Administer Its Recovery Act Funding

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-04-23.

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

Telephone: (303) 672-5452        http://www.hud.gov/offices/oig/                         Fax: (303) 672-5006



                                                          U.S. Department of Housing and Urban Development
                                                          Office of Inspector General
                                                          Region VIII Office of Audit
                                                          UMB Plaza - 24th floor
                                                          1670 Broadway
                                                          Denver, CO 80202-4801



                                                                               MEMORANDUM NO:
                                                                               2010-DE-1801

April 23, 2010

MEMORANDUM FOR:               Randall Akers, Administrator, Northern Plains Office of Native
                              American Programs, 8API

                 //signed//
FROM:            Ronald J. Hosking, Regional Inspector General for Audit, Denver, 8AGA

SUBJECT:         The Fort Belknap Indian Community in Harlem, MT, Had Weaknesses That
                 Could Significantly Affect Its Capacity To Administer Its Recovery Act Funding

                                         INTRODUCTION

In accordance with our goal to review funds provided under the American Recovery and
Reinvestment Act of 2009 (Recovery Act), we conducted a capacity review of the Fort Belknap
Indian Community’s (Fort Belknap) operations. Our objective was to determine whether there
was evidence indicating that Fort Belknap lacked the capacity to adequately administer Recovery
Act funding.

                                 METHODOLOGY AND SCOPE

Our review was based on information reviewed and conclusions made about Fort Belknap’s
controls and compliance with U.S. Department of Housing and Urban Development (HUD)
regulations during our review of Fort Belknap’s Indian Housing Block Grant (block grant) program.
We issued our report on the block grant program to Fort Belknap on March 7, 2010. In addition, we
obtained an understanding of Recovery Act legislation and program guidance, reviewed Fort
Belknap’s Recovery Act grant, and interviewed HUD staff.

We used the Internal Control – Integrated Framework, generally referred to as the Committee of
Sponsoring Organizations report, as a framework to evaluate Fort Belknap’s capacity to
administer its Recovery Act funding. The report was published in September 1992 and was a
joint project of five organizations which formed the Committee of Sponsoring Organizations of
the Treadway Commission. The report describes the five interrelated components of internal
control: control environment, risk assessment, control activities, information and
communication, and monitoring.
 Telephone: (303) 672-5452     http://www.hud.gov/oig/oigindex.html          Fax: (303) 672-5006

                                           BACKGROUND

Under the Recovery Act, HUD allocated more than $1 million in funding to Fort Belknap. Fort
Belknap administers its HUD funding through its Housing Department.

Fort Belknap received more than $7.1 million in block grant funding for fiscal years 2006 to 2008.
The chart below shows the allocations per fiscal year.

                             Fiscal year                    Total

                                2006                          $2,159,860 
                                2007                          $2,463,851 
                                2008                          $2,504,204 
                                                              $7,127,915 

HUD’s Northern Plains Office of Native American Programs conducted an on-site monitoring
review of Fort Belknap’s block grant program in June 2007. It identified findings related to late
submission of audited financial statements, and the monthly equity payments account balances
could not be verified. We identified similar deficiencies during our audit.


                                     RESULTS OF REVIEW

We found weaknesses in Fort Belknap’s administration of its block grant program that could
significantly affect its capacity to administer its Recovery Act funding. Based on our review of Fort
Belknap’s block grant program, Fort Belknap

       Completed renovation work in violation of its Indian housing plans,
       Completed purchases in violation of cost principles for Federal awards,
       Did not submit its audited financial statements when required,
       Did not pursue collection of its past-due tenant accounts receivable, and
       Did not maintain equity accounts on its home buyers.

Fort Belknap used block grant funds for renovation work on homes that were not in its 2006, 2007,
and 2008 block grant plans. It spent more than $182,000 for renovation work on 23 mutual help,
conveyed mutual help, and other non-HUD homes that were not listed in the block grant plans that
it submitted to HUD.

Fort Belknap used block grant funds for unallowable expenses. The expenses were not necessary
and reasonable for proper and efficient performance and administration of its block grant as
stipulated in Office of Management and Budget (OMB) Circular A-87. As a result, participants in
the mutual help and low-rent programs lost the benefit of at least $31,000 in program funding.

Fort Belknap did not submit its Housing Department’s 2006, 2007, and 2008 audited financial
statements within 9 months after the end of each audit period as required by OMB Circular A-133.
It submitted the 2006 financial statements more than 2 years late, the 2007 statements more than a


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 Telephone: (303) 672-5452     http://www.hud.gov/oig/oigindex.html          Fax: (303) 672-5006

year late, and the 2008 statements more than 5 months late. The independent auditor was unable to
express an opinion for all three years due to the lack of adequate accounting records.

Fort Belknap did not pursue collection of its past-due tenant accounts receivable because it did not
have written policies and procedures for collecting them. The outstanding tenant accounts
receivable balance exceeded $1 million as of September 30, 2008.

Fort Belknap did not maintain monthly equity payment accounts on its mutual help program home
buyers as required by HUD. In addition, it inappropriately withdrew $300,000 in restricted home-
buyer funds to meet the Housing Department’s daily operating expenses.

                                      AUDITEE RESPONSE

We provided Fort Belknap the draft memorandum on March 19, 2010, and requested its
comments by March 26, 2010. On April 2, 2010 we had not received comments from Fort
Belknap, so we sent a letter to Fort Belknap stating if we did not receive a response by April 7,
2010, we would issue the memorandum in final. In an email dated April 7, 2010, Fort Belknap
informed our office that it chose not to provide written comments to the memorandum.
However, in its email, Fort Belknap stated it fully understands HUD OIG’s concern over the
financial capacity of its Housing Department and it shares those concerns. Fort Belknap also
stated it is taking proactive steps to strengthen its capacity.

                                      RECOMMENDATION

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

1A. Increase monitoring and oversight of Fort Belknap’s administration and disbursement of
    Recovery Act funds, to include increased on-site monitoring if deemed necessary, to ensure
    compliance with program rules and regulations.




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