oversight

The Housing Authority of the Sac and Fox Nation of Oklahoma, Shawnee, Oklahoma, Improperly Spent More Than $800,000 in Contracts and Did Not Always Operate in Accordance with HUD Rules and Regulations or Its Own Policies

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-01-20.

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

                                                                 Issue Date
                                                                          January 20, 2010
                                                                 Audit Report Number
                                                                          2010-FW-1002




TO:        Wayne Sims
           Administrator, Southern Plains Office of Native American Programs, 6IPI

           //signed//
FROM:      Gerald R. Kirkland
           Regional Inspector General for Audit, Fort Worth Region, 6AGA

SUBJECT: The Housing Authority of the Sac and Fox Nation of Oklahoma, Shawnee,
         Oklahoma, Improperly Spent More Than $800,000 in Contracts and Did Not
         Always Operate in Accordance with HUD Rules and Regulations or Its Own
         Policies


                                   HIGHLIGHTS

 What We Audited and Why

             We audited the Housing Authority of the Sac and Fox Nation of Oklahoma
             (Authority) due to a U. S. Department of Housing and Urban Development
             (HUD) request. Our objective was to determine whether the Authority expended
             its Indian Housing Block Grant (grant) program funds in accordance with HUD
             rules and regulations.


 What We Found


             While the Authority has improved since HUD’s fiscal year 2006 monitoring
             review, it still needs additional improvement. Because the Authority did not
             always follow HUD requirements or its own policies, it did not

                    Perform the required environmental reviews or independent cost estimates
                    or acquire appropriate bonding documents for procurement contracts.
                    This deficiency resulted in the misspending of more than $800,000 and
                     could lead to additional misspending of more than $250,000 for a contract
                     still in progress;
                     Maintain its low-rent housing inventory in a decent, safe, and sanitary
                     manner or enforce its unit condition policies and procedures for mutual
                     help housing;
                     Follow up on previously failed inspections; and
                     Expend grant funds within the year requested.

           In addition, the Authority did not receive all of its funding back from the Sac and
           Fox Nation of Oklahoma (Nation) after the Nation reestablished the Authority.
           The Authority was working with its accounting firm to determine the amount of
           funding the Nation needs to return to the Authority.


What We Recommend


           We recommend that the Administrator, Southern Plains Office of Native
           American Programs, initiate enforcement actions to require the Authority to

                     Support or reimburse $809,547 and put to better use $269,604 for the
                     contracts without appropriate environmental reviews and for the ineligible
                     hotel expenditure;
                     Correct both the deficiencies identified during our inspections and the
                     inaccurate record keeping of funding requested for specific grant years;
                     Implement policies and procedures to ensure that it maintains units,
                     follows up on inspections, and turns around units within established
                     timeframes; and
                     Continue to work with its accounting firm to determine the correct amount
                     of funding the Nation needs to return to the Authority.

           For each recommendation without a management decision, please respond and
           provide status reports in accordance with HUD Handbook 2000.06, REV-3.
           Please furnish us copies of any correspondence or directives issued because of the
           audit.

Auditee’s Response


           We provided HUD and the Authority our draft report on December 16 and 17,
           2009 respectively. We held an exit conference on January 6, 2010. The
           Authority provided its response on January 14, 2010. While the Authority
           generally agreed with our recommendations; it provided additional information to
           refute one recommendation. The Authority’s response and our evaluation of the
           response are included as Appendix B of this report.


                                              2
                            TABLE OF CONTENTS

Background and Objective                                                             4

Results of Audit
      Finding 1: The Authority Did Not Properly Procure More Than $800,000 in        5
                 Contracts
      Finding 2: The Authority Did Not Always Properly Maintain Units, Perform       8
                 Follow-up Inspections, or Accurately Report Its Housing Inventory
      Finding 3: The Authority Did Not Always Expend Grant Funding as Requested      13
                 and Misspent $720 for Travel Expenses
      Finding 4: The Nation Did Not Transfer All of the Authority’s Funds Back to    15
                 the Authority

Scope and Methodology                                                                16

Internal Controls                                                                    17

Appendixes
   A. Schedule of Questioned Costs and Funds To Be Put to Better Use                 19
   B. Auditee Comments and OIG’s Evaluation                                          20




                                            3
                        BACKGROUND AND OBJECTIVES

Since November 1965, the Housing Authority of the Sac and Fox Nation of Oklahoma
(Authority) has been the tribally designated housing entity1 for the Sac and Fox Nation of
Oklahoma (Nation). The Nation requested that the U. S. Department of Housing and Urban
Development (HUD) grant the Authority ordinance under Sac and Fox tribal law instead of
Oklahoma State law in 1993. The Assistant Secretary of HUD granted this request. In June
2004, the Nation took over the Authority and its operations as a result of poor management.
However, in September 2007, the Nation reestablished the Authority as the tribally designated
housing entity due to its lack of administrative knowledge as a housing authority. In the fiscal
year ending September 30, 2008, the Authority received more than $1.6 million in Native
American Housing Assistance and Self-Determination Act (NAHASDA) funds with 273 units in
its housing inventory.

Five board members with staggered 4-year terms oversee the Authority. The Authority provides
mutual help programs for low-income individuals to become homeowners; low-rent programs to
help provide decent, safe, and sanitary housing for low-income individuals; renovation for
homeowners that cannot afford to renovate; and model activities that include nonresidential
development projects that support housing activities.

HUD previously reviewed the Nation in February and March 2006 for fiscal years 2001 to 2005.
HUD had 19 findings and 3 concerns, many of which are still open. The major findings included
inadequate internal and financial management control, which resulted in HUD’s questioning
more than $8 million;2 failure to obtain environmental reviews before spending Federal funds on
a housing activity; improper administration of procurement contracts; and noncompliance with
maintenance requirements of the United States Housing Act of 1937 (1937 Act), as amended.

The audit objective was to determine whether the Authority expended its Indian Housing Block
Grant (grant) funds in accordance with HUD’s rules and regulations.




1
    Under Oklahoma State law
2
    The $8 million amount included fiscal years 2002 through 2005.
                                                       4
                                     RESULTS OF AUDIT

Finding 1: The Authority Did Not Properly Procure More Than
           $800,000 in Contracts
The Authority did not consistently follow HUD rules and regulations or its own procurement
policy when entering into construction and rehabilitation contracts. Of the nine contracts
reviewed, the Authority did not appropriately procure three contracts. The noncompliance
included improper environmental reviews, lack of cost estimates, and improper bonding
requirements.3 As a result, the Authority misspent more than $800,000 grant funds and could
additionally misspend more than $250,000 for the contracts.




    The Authority Did Not Follow
    Environmental Review
    Requirements

                 Two of the nine contracts reviewed consisted of new development projects:4 an
                 eight-unit residential complex and a warehouse for the maintenance department.
                 HUD regulations5 required the Authority to follow environmental review
                 requirements before awarding construction and rehabilitation contracts. Although
                 the Authority had performed environmental reviews for other projects, it improperly
                 classified both contracts as categorically excluded from environmental review
                 assessment. The maximum number of residential units allowable on one site under
                 the categorical exclusion is four.6 In addition, HUD regulations require a
                 nonresidential structure, such as a warehouse, to already exist for a categorical
                 exclusion.7 Since the residential complex included eight units and the warehouse
                 did not already exist, the Authority should have performed an environmental
                 assessment of both properties. While the Authority met the statutory requirements
                 for an environmental assessment, it did not meet the regulatory requirements. The
                 Authority needs to meet the regulatory requirements or reimburse its grants.

                 An additional contract for rehabilitation contained an environmental review with the
                 wrong address. The environmental review on file contained a note stating that the
                 address originally written had changed to the address of the property the Authority
                 was rehabilitating. However, the Authority’s housing inventory included both
                 addresses. Further, the Authority provided another environmental review that also


3
     As of December 7, 2009, one contract was ongoing.
4
     Exceeding $100,000
5
     24 CFR (Code of Federal Regulations) 1000.20(b)(2) and 24 CFR Part 58
6
     24 CFR 58.35(a)
7
     Ibid
                                                      5
                  did not include the correct address. The Authority needs to produce an
                  environmental review with the correct address for this contract.

                  The two new development contracts totaled more than $1 million. However, one of
                  the contracts was still in progress. The rehabilitation contract was for more than
                  $5,000. Since the Authority did not perform the appropriate environmental reviews,
                  it misspent more than $800,000 and may misspend an additional $250,000 for the
                  contract still in progress.

     The Authority Awarded New
     Development Contracts with a
     High Risk to HUD

                  In addition to the HUD-required environmental reviews, HUD regulations8 required
                  the Authority to perform a cost estimate before receiving bids or proposals. The
                  Authority did not estimate the costs or have a method for estimating costs for the
                  eight-unit residential complex or warehouse contracts. Although the Authority
                  considered HUD’s total development cost9 list, it did not perform cost estimates for
                  the eight-unit residential complex before accepting bids. Further, the Authority
                  effectively sole sourced the contract without HUD approval.10 It also failed to
                  perform an independent cost estimate for its new warehouse. Without the
                  independent cost estimates, the Authority could not compare the bids it received to
                  determine cost reasonableness.

                  Further, the Authority did not follow the necessary bonding requirements on the
                  eight-unit residential complex contract. HUD regulations11 required the Authority to
                  obtain certain bonding documents. The Authority accepted a letter of credit;
                  however, it did not include the necessary language to guarantee payment. Although
                  the contractor completed the job, this noncompliance left the Authority unprotected
                  and should not occur again.

     The Authority Did Not Follow
     Two Administrative
     Requirements
                  The Authority did not always follow procurement administrative requirements.
                  Specifically, HUD regulations required the Authority to determine the eligibility
                  of the contractor12 and whether the contractor complied with the Davis-Bacon
                  Act.13

8
      24 CFR 1000.26(a)(11) and 24 CFR 85.36(f)
9
      According to 24 CFR 100.158, total development cost establishes the maximum amount of funds from all
      sources that the Authority may use to develop affordable housing.
10
      24 CFR 1000.52(b)(3)
11
      24 CFR 1000.26(a)(11) and 24 CFR 85.36(h)
12
      24 CFR 1000.44 and 2 CFR 2424
13
      24 CFR 85.36 (i)(5)
                                                        6
                  For instance, the Authority generally used the General Services Administration’s
                  excluded parties’ list system to determine contractor eligibility for its contracts.14
                  However, the Authority awarded three contracts before determining contractor
                  eligibility. Also, a self-employed contractor did not submit timesheets in
                  accordance with the Davis-Bacon Act for four separate contracts. The
                  Authority’s noncompliance with these procurement administrative requirements
                  did not adversely impact the completion of the contracts.


     Conclusion


                  The Authority did not always follow the environmental regulations to ensure that
                  projects did not affect the surrounding environment in a negative manner. As a
                  result, it misspent more than $800,000 and could misspend an additional $269,604
                  for the in-progress contract. Additionally, the Authority did not perform cost
                  estimates on two construction contracts to determine cost reasonableness. Finally,
                  it did not ensure that it consistently followed all administrative requirements in
                  each stage of the procurement process. Without the appropriate environmental
                  reviews, cost estimates, and bonding requirements, the Authority potentially put
                  itself at unnecessary risk.

     Recommendations

                  We recommend that the Administrator, Southern Plains Office of Native American
                  Programs, initiate enforcement actions to require the Authority to

                  1A. Reimburse its 2007 grant $5,555 for the environmental review with the wrong
                      address.

                  1B. Support or reimburse its 2004 and 2006 grants $803,272 from nonfederal
                      funds for inappropriate environmental reviews.

                  1C. Not use HUD funds to pay the remaining $269,604 on the contract still in
                      progress without an environmental review. If the Authority paid any of the
                      remaining amount with federal funding, it should support or repay the funds to
                      its grant.

                  1D. Obtain HUD approval of contracts of more than $100,000 before awarding
                      contracts for fiscal year 2010 to ensure that the Authority follows the
                      necessary contract procurement rules and regulations.



14
      24 CFR 1000.44 and 2 CFR 2424
                                                     7
Finding 2: The Authority Did Not Always Properly Maintain Units,
           Perform Follow-up Inspections, or Accurately Report Its
           Housing Inventory
All 20 Authority units inspected did not meet its standards for decent, safe, and sanitary
conditions. Further, the Authority did not always follow up on deficiencies that it noted during
inspections, and it did not turn around vacant units in accordance with its own policy. Also, the
Authority did not accurately report the number of 1937 Act units to HUD. This noncompliance
occurred because the Authority did not follow or enforce its policies and HUD requirements.
Without maintaining units and following up on previously failed inspections, tenants lived in
units that were not decent, safe, or sanitary. The Authority also may not have maximized its
occupancy and rent potential by not turning around its units in accordance with its policy.
Finally, the Authority may have received more funds than authorized for its 1937 Act units.


     The Authority Did Not
     Maintain Its Low-Rent Housing
     Stock in Accordance With Its
     Policies and Procedures


                   The Authority did not maintain its 1937 Act low-rent units in accordance with its
                   own policies and procedures. Of the 20 units inspected in September 2009, seven
                   were 1937 Act low-rent units. The Authority was responsible for the overall
                   maintenance of the units, while the tenant was responsible for the daily upkeep.15
                   Tenants occupied four of the seven units, while three were vacant.

                   The four occupied units contained a variety of fail items that included but were
                   not limited to smoke detectors not working properly or needing batteries, a
                   dresser blocking access to a window, and a cut screen to allow for a phone cable
                   through the window instead of the wall. In addition, the four occupied units
                   received Authority inspections in June 2009. Three of the four failed the
                   Authority’s inspections. The Authority performed follow-up inspections;
                   however, the responsible party did not remedy all of the noted fail items. The
                   Authority did not follow up to determine whether the responsible party corrected
                   the remaining fail items. As a result, tenants continued to live in conditions that
                   were not decent, safe, or sanitary.




15
      Authority low-rent regulations, section III (A)
                                                        8
Picture 1: Occupied unit – screen cut and a phone              Picture 2: Occupied unit – egress blocked
           cord inserted through the screen

                  The three vacant units also had fail items including mold, cut cable wires, and
                  ongoing work in the kitchen. The Authority’s force account crew used one vacant
                  unit that was in disrepair for temporary storage of materials. None of the units
                  was ready for tenants to move in. In addition to the fail items, the three vacant
                  units’ latest inspections were between 3 and 5½ years from the date of the
                  September 2009 inspections. The Authority’s policy required it to turn around
                  units in 3 weeks.16 The Authority may not have maximized its occupancy and
                  rent potential by not turning around its units in accordance with its own policy.




Picture 3: Vacant unit – mold in walls                         Picture 4: Vacant unit – used as a storage facility
                                                                          and in disrepair




16
     Authority procedures for renovation of vacated units, section B
                                                          9
     The Authority Did Not Enforce
     Its Unit Condition Policy for Its
     Mutual Help Housing

                  The remaining 13 occupied units inspected were either 1937 Act or NAHASDA
                  mutual help units. The Authority was responsible for inspecting the units to
                  ensure that they were decent, safe, and sanitary. However, as mutual help units
                  are a lease-to-purchase option,17 the responsibility for maintenance and daily
                  upkeep resided with the resident.

                  All 13 mutual help units had deficiencies of varying degrees. The deficiencies
                  included but were not limited to mold on walls, ceilings, and floors; smoke
                  detectors either missing or that did not have working batteries in them; insect
                  infestation; damaged or missing cable, electrical outlet, and light switch covers;
                  natural gas utility turned off; and inoperable stoves. These living conditions did
                  not provide tenants a decent, safe, or sanitary environment in which to live.




Picture 5: Occupied unit – mold on walls and ceiling            Picture 6: Occupied unit – missing smoke detector




17
     Authority mutual help regulations, sections II (D) and (F) and Section III (H)
                                                          10
Picture 7: Occupied unit – missing outlet cover         Picture 8: Occupied unit – moldy floors

                 Of the 13 mutual help units, nine failed the Authority’s most recent inspection.
                 The Authority did not perform follow-up inspections on eight of the nine failed
                 units to ensure that the deficiencies had been corrected. For example, the
                 inspector noted on the inspection report for one of the eight units that the
                 “Bathroom still has mold on walls,” implying that this was not the first time the
                 deficiency had been noticed. The inspection report for one unit that had a follow-
                 up inspection noted that the resident did not correct all of the fail items.
                 However, no additional follow-up inspection was found. The Authority should
                 follow up on its inspections to ensure that fail items have been corrected and that
                 it provides decent, safe, and sanitary housing.

      The Authority Did Not
      Accurately Report Its 1937 Act
      Housing Inventory to HUD


                 The Authority did not accurately report its 1937 Act housing inventory. HUD
                 required the Authority to verify the number of 1937 Act low-rent and mutual help
                 units it had to determine the amount of funding it would receive for those units.
                 The Authority’s housing inventory list did not match the number of units it
                 reported to HUD. The Authority reported 39 more units to HUD than it had on its
                 inventory list. It either did not maintain an accurate inventory list or did not
                 verify the number of units reported to HUD. As a result, the Authority may have
                 received and continue to receive more funding than authorized for its 1937 Act
                 units.

      Conclusion

                 The Authority did not comply with its policy on maintaining units in decent, safe,
                 and sanitary condition. In addition, it did not always follow up on previously failed

                                                   11
                   inspections. When the Authority did follow up on previously failed inspections, the
                   responsible party did not always repair the noted fail items. The Authority also had
                   vacant units that it did not turn around in accordance with its policy. Further, it did
                   not accurately report the number of 1937 Act units in its inventory. As a result,
                   tenants lived in units that were not decent, safe, and sanitary. In addition, the
                   Authority may not have maximized it occupancy and rent potential by not turning its
                   units around. Finally, it may have received and continue to receive more funding
                   than authorized for its 1937 Act units.


     Recommendations


                   We recommend that the Administrator, Southern Plains Office of Native American
                   Programs, initiate enforcement actions to require the Authority to

                   2A. Correct the deficiencies identified during our property inspections.18

                   2B. Comply with its policy for maintaining unit conditions, following up on
                       inspections to include ensuring that deficiencies are corrected, and turning
                       around units within established timeframes.

                   2C. Maintain an accurate inventory list and report the appropriate number of
                       1937 Act units to HUD as required.




18
      We have provided the Authority with a listing of the deficiencies.
                                                          12
Finding 3: The Authority Did Not Always Expend Grant Funding as
           Requested and Misspent $720 for Travel Expenses
The Authority requested grant funding for specific grant years; however, it did not always use
the appropriate grant year to pay its expenditures. In addition, it misspent $720 for an
employee’s travel expenses. The Authority was not aware of either condition. As a result, it
may not be able to reconcile and close out its grants in an effective and efficient manner.



     The Authority Did Not Expend
     Its Grant Funding as Requested


                    Before spending grant funds, HUD required the Authority to request grant funds
                    through a voucher. The Authority provided HUD with a list of expenditures by
                    grant. In three of five vouchers reviewed, the Authority requested grant funding
                    from HUD out of a specific year grant. However, it recorded the expenditures in
                    its records for a different grant year than requested. The Authority was not aware
                    that the funds used for the expenditures did not reconcile with the requested
                    funds. As a result, it may not be able to close out its open grants in an effective
                    and efficient manner.


     Ineligible Travel Expense


                    Of the 59 expenditures reviewed, one was ineligible. An employee19 requested a
                    travel advance for a training course: $720 for hotel and $270 for per diem.
                    However, the Authority issued a separate check to the hotel for $620. The hotel
                    required a $100 deposit for the first night, which was included in the overall stay,
                    not in addition to it. The employee requested the cost of the hotel plus the
                    deposit. The employee was not entitled to the $720 travel advance for the hotel.20
                    The Authority was unaware that it had paid the hotel cost and advanced funds to
                    the employee for the same expenditure. As a result, the Authority was not able to
                    use the grant funds for eligible purposes.




19
       The employee pled guilty to embezzlement in tribal court. However, the court documents did not include this
       expenditure. The employee no longer works for the Authority.
20
       24 CFR 1000.26 and Office of Management and Budget (OMB) Circular A-87 (C)(1)
                                                          13
Recommendations

        We recommend that the Administrator, Southern Plains Office of Native American
        Programs, initiate enforcement actions to require the Authority to

        3A. Implement policies and procedures to ensure that the Authority accounts for
            its funds as requested.

        3B. Correct the accounting for the incorrect recording of funds identified during
            our review to ensure the Authority charges the expenditures to the
            appropriate grant.

        3C. Reimburse its 2008 grant $720 from nonfederal funds.




                                        14
Finding 4: The Nation Did Not Transfer All of the Authority’s Funds
           Back to the Authority
In 2007, the Nation transferred operations of the Authority back to the Authority. However, the
Authority did not know whether it had received all of its funding back from the Nation. As a
result, it did not know how much the Nation should return and was unable to budget and expend
those funds for eligible purposes.



 The Nation Did Not Return
 Funds to the Authority


              When the Nation transferred operations back to the Authority, it did not return the
              Authority’s funds. On June 16, 2004, the Nation created a resolution to designate
              itself as the tribally designated housing entity to receive and expend HUD
              funding. As a result of this resolution, the Nation and its business committee put
              the Authority under its direction. This action occurred because the Authority had
              received negative feedback on its financial statement audits before 2004. On
              September 28, 2007, the Nation reestablished the Authority as a separate entity
              and removed it from under the direction of the Nation and its business committee
              due to the Nation’s lack of administrative knowledge as a housing authority.

              When the Nation was the tribally designated housing entity, it had access to all of
              the Authority’s funds. During this time, the Nation did not maintain Authority
              funds separately from other funding. Therefore, when the Nation reestablished
              the Authority, it was unable to determine the amount of funding, including any
              HUD funding, it needed to return to the Authority.

              As of October 22, 2009, the Authority was working with an accounting firm to
              determine the amount of funding the Nation needs to return.

  Recommendation

              We recommend that the Administrator, Southern Plains Office of Native American
              Programs, initiate enforcement actions to require the Authority to

              4A. Continue working with its accounting firm to ensure that it receives all of its
                  HUD funding from the Nation.




                                               15
                             SCOPE AND METHODOLOGY

Our audit period covered November 2007 through July 2009. To accomplish the audit objective,
we

         Reviewed relevant Federal regulations and Authority policies and procedures;
         Reviewed Indian housing plans and Authority procurement and financial records;
         Interviewed HUD and Authority staff; and
         Viewed 20 low-rent, mutual help, and NAHASDA mutual help homes.

We reviewed 9 of 30 contracts executed during the review period. We selected two contracts
based on dollar amount and six contracts based on the number of contracts to one specific
contractor. The Authority provided us one contract that had a name similar to that of a selected
contractor. We reviewed this contract as well.

We representatively selected 20 of 273 Authority units to inspect.21 The Authority originally
sent us a housing inventory list with only 263 units. We selected our sample from this list.
However, we received an updated list with 273 units. The increase in units did not negatively
impact our conclusions based on our original sample.

Of the Authority’s 171 vouchers, we selected 5 to review.22 In addition to reviewing the five
vouchers, we reviewed the expenditures within the five vouchers. The vouchers contained 49
expenditures. We selected an additional 10 expenditures using the same statistical software
package from the Authority’s 781 total expenditures.

We performed fieldwork at the Authority’s office in Shawnee, OK, from July through December
2009.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




21
     We used the RAT STATS 2007, Version 2, statistical software package. This was not a statistical sample, and
     we did not project our results.
22
     Ibid
                                                       16
                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following controls are achieved:

       Program operations,
       Relevance and reliability of information,
       Compliance with applicable laws and regulations, and
       Safeguarding of assets and resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.



 Relevant Internal Controls
              We determined that the following internal controls were relevant to our audit
              objectives:

                  Program operations – Policies and procedures that management has
                  implemented to reasonably ensure that procurement contracts, maintenance of
                  units, and fund eligibility meet their objectives.
                  Compliance with laws and regulations – Policies and procedures that
                  management has implemented to reasonably ensure that resource use is in
                  compliance with applicable laws and regulations.
                  Validity and reliability of data – Policies and procedures that management has
                  implemented to reasonably ensure that it obtains, maintains, and fairly discloses
                  valid and reliable data in reports.

              We assessed the relevant controls identified above.

              A significant weakness exists if management controls do not provide reasonable
              assurance that the process for planning, organizing, directing, and controlling
              program operations will meet the organization’s objectives.

 Significant Weaknesses


              Based on our review, we believe that the following items are significant weaknesses:




                                                17
The Authority did not implement adequate policies and procedures in the
procurement process, specifically, environmental reviews, independent cost
estimates, bonding requirements, and adequate competition;
The Authority did not maintain or enforce its policies and procedures concerning
unit conditions;
The Authority did not implement adequate policies and procedures to properly
record expenditures from the same grant year as requested from Southern Plains
Office of Native American Programs, resulting in unreliable data on individual
grant amounts available; and
The Authority’s housing inventory record was not reliable; it did not match the
annual report sent to the National Office of Native American Programs.




                             18
                                           APPENDIXES

Appendix A

                SCHEDULE OF QUESTIONED COSTS
               AND FUNDS TO BE PUT TO BETTER USE



        Recommendation                   Ineligible 1/       Unsupported 2/          Funds to be put
               number                                                                to better use 3/
                 1A                            $5,555
                 1B                                                  $803,272
                 1C                                                                          $269,604
                 3C                                720

               Totals                          $6,275                $803,272                $269,604




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.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program or activity when
     we cannot determine eligibility at the time of the audit. Unsupported costs require a decision by HUD
     program officials. This decision, in addition to obtaining supporting documentation, might involve a legal
     interpretation or clarification of departmental policies and procedures.

3/   Recommendations that funds be put to better use are estimates of amounts that could be used more
     efficiently if an Office of Inspector General (OIG) recommendation is implemented. These amounts
     include reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures noted in preaward
     reviews, and any other savings that are specifically identified. In this instance, it represents the remaining
     balance, as of December 7, 2009, on a contract the Authority executed without a required environmental
     review.



                                                      19
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2


Comment 2




                         20
Comment 2


Comment 3




            21
                         OIG Evaluation of Auditee Comments

Comment 1   We reviewed the files the Authority provided. While the Authority met the
            statutory requirements for its environmental reviews, it did not complete an
            environmental assessment checklist. Therefore, the Authority did not meet the
            regulatory requirements. The Authority will either need to complete the
            environmental assessment checklist or repay the funds spent on those contracts.
            We modified our report and recommendations accordingly.

Comment 2   We commend the Authority for making the necessary changes to ensure it
            appropriately procures any future contracts. The Authority should incorporate
            these changes in its written policies.

Comment 3   The Authority provided written comments separate from the official written
            comments concerning the housing unit conditions. The Authority stated it has
            reorganized its staff and is developing new policies to ensure appropriate unit
            maintenance and follow-up inspections.




                                            22