oversight

The White Mountain Apache Housing Authority Did Not Always Comply With Its Indian Housing Block Grant Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-07-08.

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

OFFICE OF AUDIT
REGION 9
LOS ANGELES, CA




        White Mountain Apache Housing Authority
                    Whiteriver, AZ

                  Indian Housing Block Grant




2014-LA-1004                                   JULY 8, 2014
                                                        Issue Date: July 8, 2014

                                                        Audit Report Number: 2014-LA- 1004




TO:            Carolyn J. O’Neil
               Administrator, Southwest Office of Native American Programs, 9EPI

               //SIGNED//
FROM:          Tanya E. Schulze
               Regional Inspector General for Audit, Los Angeles Region, 9DGA


SUBJECT:       The White Mountain Apache Housing Authority Did Not Always Comply With
               Its Indian Housing Block Grant Requirements


    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of the White Mountain Apache Housing
Authority’s Indian Housing Block Grant funds.

    HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.

    The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.

   If you have any questions or comments about this report, please do not hesitate to call me at
213-534-2471.
                                         July 8, 2014
                                         The White Mountain Apache Housing Authority Did Not
                                         Always Comply With Its Indian Housing Block Grant
                                         Requirements



Highlights
Audit Report 2014-LA-1004


 What We Audited and Why                   What We Found

We audited the White Mountain Apache     The Authority failed to use its IHBG funds in
Housing Authority’s Indian Housing       accordance with HUD requirements. It (1) charged its
Block Grant (IHBG). We conducted         IHBG more than $2.2 million for ineligible charges
the audit primarily due to concerns      and $48,065 for unsupported charges; (2) did not
raised by the U.S. Department of         adequately procure vendors, ensure that it safeguarded
Housing and Urban Development’s          grant assets, and support the categorization of $8.2
(HUD) Southwest Office of Native         million as nonprogram income; and (3) incorrectly
American Programs regarding the          categorized $1million in program income as
Authority’s financial management         nonprogram income. These problems occurred
practices. The objective of the audit    primarily because the Authority’s procedures and
was to determine whether the Authority   financial controls for administering its IHBG were not
used its IHBG funds in accordance with   adequate to ensure that charges complied with HUD’s
HUD requirements.                        requirements and its staff was not sufficiently familiar
                                         with grant requirements.
 What We Recommend
                                          Although it had a waiting list of more than 2,000
                                          families, the Authority housed ineligible tenants whose
We recommend that the Administrator incomes exceeded HUD limits. This condition
of the Southwest Office of Native         occurred because the Authority disregarded its policies
American Programs require the             and HUD regulations. As a result, it charged an
Authority to (1) reimburse its grant $2.3 estimated $84,900 (finding 2) to house eight ineligible
million (findings 1 and 2) for duplicate, families. Additionally, it charged an estimated
ineligible, and unsupported costs; (2)    $11,578 to house two families whose income
support the miscategorization of $8.2     eligibility was not supported.
million in nonprogram funds or
reclassify it to program income; (3)
reclassify $1 million in nonprogram
income funds to program income funds;
and (4) develop and implement policies
and procedures to ensure IHBG
requirements are met. We also
recommend that the Administrator
consider receivership until it has
demonstrated sufficient capacity and
exhibits a strong IHBG control
environment.
                             TABLE OF CONTENTS

Background and Objective                                                     3

Results of Audit
       Finding 1: The Authority Failed To Use Indian Housing Block
                  Grant Funds in Accordance With HUD Requirements           4

       Finding 2: The Authority Inappropriately Housed Ineligible Tenants   13

Scope and Methodology                                                       16

Internal Controls                                                           18

Appendixes
A. Schedule of Questioned Costs and Funds To Be Put to Better Use           20
B. Auditee Comments and OIG’s Evaluation                                    22
C. Criteria                                                                 24




                                             2
                           BACKGROUND AND OBJECTIVE

The White Mountain Apache Housing Authority is the White Mountain Apache Tribe’s tribally
designated housing authority, headquartered in Whiteriver, AZ. The White Mountain Apache
Reservation population endures high unemployment rates, remoteness, and a lack of available
affordable housing. According to the Authority, approximately 2,000 families were on its
waiting list for affordable housing.

The Native American Housing Assistance and Self Determination Act of 1996 (NAHASDA)
reorganized the system of housing assistance provided to Native Americans through the U.S.
Department of Housing and Urban Development (HUD) by eliminating several separate
programs of assistance and replacing them with a block grant program. The Indian Housing
Block Grant (IHBG), a formula-based grant program, is authorized for Indian tribes under
NAHASDA. IHBG funds provide a formula grant for housing and housing-related assistance
directly to eligible tribes or through their tribally designated housing entities. For grant year
2011, HUD awarded the Authority more than $6.8 million in IHBG funds 1 and more than $7.6
million the following year. According to the Authority, it receives the majority of the funds used
for housing projects from HUD.

Due to the Authority’s recent history of late submission of its audited financial statements, HUD
and the Authority agreed to a voluntary compliance agreement 2 whereby HUD began reviewing
all Line of Credit Control System (LOCCS) requests before the disbursement of additional funds.
At the time of our audit, the Authority was required to send detailed supporting documentation
with each payment request to the Southwest Office of Native American Programs.

The tribal council appoints the Authority’s board of commissioners to 4-year terms. Over the
past several years, the Authority has had several changes in administration. The Authority’s
administration repeatedly indicated that it was trying to correct prior administration errors. In
June 2014, the newly elected Tribal Council appointed a new Authority board of commissioners.

The objective of the audit was to determine whether the Authority used its IHBG funds in
accordance with grant requirements.




1
  In 2011, HUD combined the IHBGs for each grantee into one grant for tracking purposes. For 2012 and forward,
all grant years are “55.” Therefore, although the Authority’s IHBG activity covers several grant years, we refer to
all years as “the grant.”
2
  Effective November 2012 and amended in July 2013, the parties also agreed that audit-related submission
deadlines would not be extended.


                                                         3
                                 RESULTS OF AUDIT


Finding 1: The Authority Failed To Use Indian Housing Block Grant
           Funds in Accordance With HUD Requirements
The Authority failed to use its IHBG funds in accordance with HUD requirements. It (1)
charged its IHBG more than $2.2 million for duplicate, ineligible, and unsupported charges; (2)
did not adequately procure vendors; (3) did not ensure that it safeguarded grant assets; (4) did not
support the categorization of $8.2 million as nonprogram income; and (5) incorrectly categorized
$1 million in restricted program income. These problems occurred primarily because the
Authority’s financial controls and procedures for administering its IHBG were not adequate to
ensure that charges complied with HUD’s requirements and its staff was not sufficiently familiar
with grant requirements. As a result, the Authority placed grant assets at an increased risk for
misappropriation and allowed for a poor control environment, and more than $2.2 million in
misspent funds was not available to maximize the Authority’s IHBG program. Additionally,
program income was not restricted.



 The Authority Charged Its
 IHBG for Duplicate, Ineligible,
 and Unsupported Costs

               The Authority charged its IHBG more than $2.2 million for questionable costs,
               including

               •   Duplicate costs,
               •   Ineligible nonexpense items,
               •   Costs not related to its IHBG,
               •   Inappropriate entertainment costs,
               •   Specifically disallowed costs, and
               •   Costs that it did not adequately support.

               The Authority Charged for Duplicate Costs

               The Authority did not implement sufficient controls to ensure that it requested
               reimbursement for each cost only once. During our audit period, the Authority
               charged the grant more than $1.5 million for duplicate transactions. Although the
               Authority incurred the expenses only once, it charged the grant more than once
               for the costs. Some charges were included on multiple vouchers, and in other
               instances, the Authority included duplicate charges in the same voucher to




                                                 4
                 different grant segments. 3 For example, the grant reimbursed the Authority for a
                 contractor payment of $94,801 on two separate vouchers, a year apart.

                 The table below summarizes the duplicate charges identified.

                                        Costs charged to the grant more than once
                                            (identified on previous vouchers)
                                       Voucher                              Amount
                    079-113566                                  $                                       1,326,379
                    079-115911                                                                            182,223
                                         Total                         $                                1,508,602

                 These duplicate charges were primarily caused because the Authority’s mostly
                 manual draw process did not specify which costs were being reimbursed or
                 whether the Authority included the cost in previous vouchers. Rather, it itemized
                 costs on a perpetual basis for each grant segment, subtracted previous draw totals,
                 and submitted the remaining amount for reimbursement without verifying
                 whether it already received grant reimbursement for the specific costs. The draw
                 excerpt below demonstrates how the Authority determined amounts it drew down
                 from its IHBG.

                                             Grant segment 2009 5 4
                   Total charges allocated to grant segment 2009 5                                $     315,000
                   Less previous draw                                                                   226,001
                   Remaining amount that can be drawn down                                        $       88,999

                 Generally, the information used for draws did not identify the costs related to each
                 voucher, making managerial, audit, or HUD review challenging. After manually
                 eliminating the duplicate transactions among the vouchers, we found three
                 additional transactions reimbursed through the same voucher under a different
                 grant segment. 5 The Authority could not have obtained the grant segment
                 information directly from its accounting system for both segments, indicating
                 manual manipulation of the information.

                 The Authority’s manual draw process was inefficient, allowed for manipulation,
                 and contributed to a high-risk control environment in which errors could easily
                 occur. In one voucher alone, we identified more than 600 items, containing
                 activity from 2010, 2011, and 2012, that the grant reimbursed more than once.




3
  The Authority attached grant costs to segments. The segments related to that year’s Indian housing plan goals.
For example, segment 2009 5 related to crime and prevention charges for the 2009 grant.
4
  Excerpt from LOCCS voucher 079-113566.
5
  Segment 2010 5.


                                                         5
                   The Authority Inappropriately Charged Nonexpense Items

                   The Authority inappropriately charged items to the grant that did not result in a
                   cost to the Authority.

                   •    The Authority inappropriately charged for payroll tax withholding payments
                        and payments from individual tenant savings accounts that did not result in a
                        cost to the Authority. The payroll tax transactions were withheld from wages
                        and submitted to the appropriate authorities and did not result in a cost to the
                        Authority.

                   •    The Authority paid $71 for lodging already paid for by the individual and then
                        requested grant reimbursement for the charge. Therefore, the lodging did not
                        result in a grant cost.

                   •    The Authority recorded $77,581 as receivables that were due from Authority
                        affiliates. Because it recorded the transactions as a receivable, it expected
                        reimbursement from its affiliates. However, it requested reimbursement from
                        the grant as if the transactions were an expense. Charging for these
                        receivables would result in double reimbursement, once by the grant and once
                        by the Authority affiliates.

                   •    The Authority charged the grant $3,122 for a seminar and building materials it
                        did not receive. Because it did not receive the goods and services, the
                        Authority should not have incurred the cost.

                   The Authority’s lack of distinction between costs and noncost items was
                   indicative of the overall lack of financial oversight and staff capacity to
                   administer the grant funds. The nonexpense items totaling $92,693, summarized
                   below, were not eligible 6 grant charges.

                                                      Nonexpense items
                                    Payroll tax withholdings                            $    8,751
                                    Tenant savings account payments                          3,168
                                    Lodging previously paid                                     71
                                    Receivables (due from affiliate)                        77,581
                                    Items not received                                       3,122
                                    Total nonexpense items                              $   92,693

                   The Authority Charged for Items Not Related to Its IHBG

                   The Authority inappropriately used IHBG funds for legal fees of $41,179 that
                   were not program expenses. In some cases, the supporting documentation clearly

6
    See appendix C, 2 CFR (Code of Federal Regulations) Part 225, appendix A C(1)(b).


                                                         6
                 identified the charges as “Non-IHBG.” In other cases, the Authority specifically
                 broke out charges for legal activity related to nonhousing activity. Additionally,
                 the Authority paid costs of $3,910 that were allocable to other grants with IHBG
                 funds. In total, non-IHBG charges of $45,089 were not an allowable cost and
                 were improperly paid from IHBG funds. 7

                 The Authority Charged for Inappropriate Entertainment Costs

                 The Authority charged the grant for unallowable entertainment expenses. Boys
                 and Girls Club field trips accounted for the majority of the expenses. The field
                 trips for members and employees included meals, hotels, event tickets, and related
                 expenses such as parking or travel. The events often required travel to Phoenix
                 and included movies, professional baseball and basketball games, a circus, and a
                 haunted maze. Meals alone for one spring break trip totaled $2,814. The
                 Authority inappropriately charged $26,495 for unallowable entertainment
                 expenses. 8

                 The Authority Charged for Specifically Disallowed Costs

                 The Authority charged the grant $6,587 for several items specifically prohibited
                 by Federal regulations. It used grant funds for prohibited items including goods
                 for the personal use of employees. 9 For example, in October 2012, the Authority
                 purchased grocery store gift certificates for its staff totaling $5,052 and then
                 requested grant reimbursement for the cost.

                 The Authority Did Not Adequately Support Charges

                 The Authority did not support charges of $44,403 with adequate documentation.
                 A majority of the charges were for seminars such as “How to Recruit, Interview
                 & Hire People” and “Making Change Work.” However, the Authority’s
                 documentation did not support the number of people attended, whether those who
                 attended were Authority-assisted housing stock residents, the purpose of the
                 seminar and its relation to the program, or whether the cost was reasonable. The
                 Authority also failed to maintain adequate support such as receipts, invoices, etc.,
                 for other unsupported charges, including travel and miscellaneous items, to ensure
                 cost eligibility.

                 The Authority also did not ensure that travel costs complied with its policies. Its
                 policies required that the Authority use its vehicles for travel when available. 10
                 However, on several occasions, the Authority allowed employees to use private
                 vehicles for travel and obtain mileage reimbursement without documenting a

7
  See appendix C, 2 CFR Part 225, appendix A C(1)(b).
8
  See appendix C, 2 CFR Part 225, appendix B 14.
9
  See Appendix C, 2 CFR Part 225, appendix B 20.
10
   See appendix C, Authority Policies and Procedures, 2000 version, section 15 2C; Authority Policies and
Procedures, 2009 version, section 15 2C; and Authority Policies and Procedures, 2012 version, Travel Policy G2.


                                                        7
                 valid policy exception. It did not support $3,662 in out of policy mileage
                 charges. 11

     The Authority Inadequately
     Procured Vendors

                 The Authority did not consistently follow HUD’s procurement regulations. 12 For
                 example, although it was not eligible for noncompetitive procurement, the
                 Authority did not competitively procure its health insurance broker, as required.
                 Additionally, the Authority did not perform a cost or price analysis for the
                 insurance. Thus, HUD had no assurance that the insurance cost was reasonable.
                 Further, the Authority could not provide documentation showing the history of the
                 procurement.

                 Because of the Authority’s disregard for procurement requirements, it
                 inappropriately charged $569,037 to the grant 13 for vendors not procured in
                 compliance with HUD regulations. The table below summarizes the deficiencies
                 identified.

                                                Procurement deficiencies
                                                 Lacked full                  Incorrect
                                                              No cost or
                    Type of        Insufficient   and open                   method of
                                            14                   price                    Amount
                    vendor          records      competition                procurement
                                                     15       analysis 16       17

                 Accountant                                   X    X            X         $     1,962
                 Automobiles                                                    X             111,788
                 Information
                                        X                     X    X            X              29,982
                  technology
                   Insurance            X                     X    X            X             321,802
                     Legal              X                     X    X            X              30,425
                    Propane             X                     X    X            X              73,078
                                                      Total                               $ 569,037

                 Further, contrary to HUD procurement regulations, 18 the Authority’s Boys and
                 Girls Club inappropriately sought and received contributions totaling $1,200 from
                 the Authority’s vendors. Additionally, Authority vendors repaired the Club’s
                 computer room and helped paint the interior of the Club’s building at no cost.


11
   See appendix C, 24 CFR Part 225, appendix A C(1)(e).
12
   See appendix C, 24 CFR 85.36.
13
   See appendix C, 2 CFR Part 225, appendix A C(1)(d).
14
   See appendix C, 24 CFR 85.36(b)(9).
15
   See appendix C, 24 CFR 85.36(c)(1).
16
   See appendix C, 24 CFR 85.36(d)(4)(ii) and (f)(1).
17
   See appendix C, 24 CFR 85.36(d).
18
   See appendix C, 24 CFR 85.36(b)(3)(iv).


                                                          8
                The Authority’s employees operated the Boys and Girls Club. Therefore,
                regulations prohibit solicitation of anything of monetary value from vendors.

     Authority Assets Were Not
     Always Safeguarded

                The Authority’s internal controls did not sufficiently safeguard grant assets and
                did not ensure that grant assets were used only for their intended purposes, as the
                grant requires. 19 The Authority assigned various departments one or more of its
                62 vehicles to use at will without requiring mileage logs or other forms of
                monitoring. Following our questioning regarding mileage logs, the Authority
                purchased several mileage logs. However, it did not ensure consistent application
                and use of mileage logs. Because the majority of the Authority’s funding came
                from IHBGs, it was likely that grant funds paid for the vehicles, although the
                Authority could not be sure. The lack of monitoring increased the risk of
                inappropriate vehicle use. Further, several vehicles’ titles were held in a name
                that included the word “Tribe” or “Tb.” However, “Tribe” is not part of the
                Authority’s legal name, and the wording of the titles allowed for misinterpretation
                or manipulation to indicate that the vehicles may have been the property of the
                tribe. The tribe had financial difficulty in recent years, including the inability to
                pay its suppliers. The status of the vehicle titles subjected the vehicles to
                misappropriation by the tribe.

     The Authority Did Not Support
     the Categorization of
     Nonprogram Income

                The Authority also did not support categorizing proceeds of pre-NAHASDA
                housing unit sales as nonprogram income. Although HUD requires that a system
                be in place to identify the source and application of grant funds, 20 the Authority
                lacked the ability to determine whether conveyed units received IHBG funding.
                The system used to identify per-unit funding described by Authority officials was
                not adequate to ensure that it tracked all IHBG activity. Additionally, we
                identified two instances in which the Authority performed extensive rehabilitation
                in 2011 on Mutual Help (pre-NAHASDA) units, 21 but the Authority did not
                identify the source of funding. Because the majority of the Authority’s funding
                was from IHBG and the tenants did not pay for the rehabilitation, the Authority
                likely used IHBG funds on the pre-NAHASDA units.

                The Authority did not support that the conveyed units did not receive IHBG
                funding or that it had an adequate system in place to identify the funding, as


19
   See appendix C, 24 CFR 85.20(b)(3).
20
   See appendix C, 24 CFR 85.20(b)(2).
21
   Tenant account NM-039-0014-01 (conveyed) and NM-037-0055-04


                                                  9
                  required. 22 Therefore, it did not support its recording of proceeds of pre-
                  NAHASDA unit sales totaling more than $8.2 million as nonprogram income.

                  Additionally, the Authority inappropriately classified $64,935 in proceeds of sale
                  on NAHASDA units, at least partially funded by IHBG, as 100 percent
                  nonprogram income. Because the IHBG funded a portion of the units, HUD
                  requires the Authority to record a proportional amount as program income. 23

                  The Authority also inappropriately classified excess developer fees as
                  nonprogram income. Grant rules 24 allow the Authority to record developer fees
                  approved by the State as nonprogram income. However, the Authority
                  inappropriately classified more than $1 million of excess developer fees as
                  nonprogram income that exceeded the State approved amounts.

     Conclusion

                  The Authority failed to use its IHBG funds in accordance with HUD
                  requirements. These problems occurred primarily because the Authority’s
                  financial controls and procedures for administering its IHBG were not adequate to
                  ensure that charges complied with HUD’s requirements and its staff was not
                  sufficiently familiar with grant requirements. Without proper managerial review
                  of financial activity, grant funds were at risk. Based on the above, it was apparent
                  the Authority did not have sufficient capacity, adequately trained staff, and
                  controls to administer its IHBG funds. As a result, it placed grant assets at an
                  increased risk for misappropriation and allowed for a poor control environment,
                  and more than $2.2 million in misspent and unsupported funds was not available
                  to maximize the IHBG program. Additionally, program income was not
                  restricted.

     Recommendations

                  We recommend that the Administrator of the Southwest Office of Native American
                  Programs require the Authority to

                  1A.    Reimburse its IHBG from non-Federal funds or reduce undisbursed grant
                         funds by $1,508,602 for ineligible duplicate charges.

                  1B.    Develop and maintain a process for grant reimbursement that readily
                         identifies the specific charges represented by the total requested and ensures
                         that charges are reimbursed only once.



22
   See appendix C, Public and Indian Housing Notice 2002-12.
23
   See appendix C, 24 CFR 1000.62(a) (before December 3, 2012, and December 3, 2012, changes).
24
   See appendix C, NAHASDA section 104(a)(4).


                                                     10
1C.   Reimburse its IHBG from non-Federal funds or reduce undisbursed grant
      funds by $92,693 for nonexpense grant charges.

1D.   Reimburse its IHBG from non-Federal funds or reduce undisbursed grant
      funds by $45,089 for nonallocable non-IHBG grant charges.

1E.   Reimburse its IHBG from non-Federal funds or reduce undisbursed grant
      funds by $26,495 for unallowable entertainment.

1F.   Reimburse its IHBG from non-Federal funds or reduce undisbursed grant
      funds by $6,587 for unallowable charges that did not meet Federal cost
      principles.

1G.   Provide support or reimburse its IHBG from non-Federal funds $44,403 for
      inadequately documented charges.

1H.   Provide support or reimburse its IHBG from non-Federal funds $3,662 for
      out of policy mileage reimbursements.

1I.   Reimburse its IHBG from non-Federal funds or reduce undisbursed grant
      funds by $569,037 for improperly procured charges.

1J.   Ensure that all Authority-owned automobiles have titles with the Authority’s
      legal name. When the title is deficient, the Authority should change the
      automobile titles to the grantee’s legal name and implement policies and
      procedures to ensure that future automobiles purchased are registered and
      titled in the grantee’s legal name.

1K.   Support that IHBG funds were not used for the units conveyed or reclassify
      $8,280,221 ($8,215,286 + $64,935) in proceeds of sale funds, when an
      IHBG supplement cannot be determined, from nonprogram income funds to
      program income funds subject to HUD restrictions.

1L.   Implement policies and procedures that would allow the grantee to identify
      IHBG subsidies for each of its projects by unit at any time.

1M.   Reclassify $1,065,780 in excess developer fees from nonprogram income
      funds to program income funds subject to HUD restrictions.

1N.   Train its employees regarding the grantee’s policies and procedures, train its
      managerial and financial staff on HUD rules and regulations, and ensure that
      employees have sufficient access to HUD’s rules and regulations.

1O.   Develop and implement policies and procedures to ensure that its staff
      members have sufficient minimal education or experience relevant to their
      position to adequately manage the Authority’s IHBG financial operations.



                                11
       1P.    Develop and implement policies and procedures to ensure adequate
              managerial and board review of IHBG financial operations.

       1Q.    Develop and implement policies and procedures to ensure periodic IHBG
              compliance evaluations.

       1R.    Continue submitting the LOCCS Payment Voucher, form HUD-50080-
              IHBG, with supporting documentation, and obtain the Southwest Office of
              Native American Programs’ approval before requesting funds from LOCCS
              until the Authority implements the recommendations in this audit report and
              the Authority has demonstrated that it has sufficient capacity and financial
              controls in place.

In addition, we recommend that the Administrator of the Southwest Office of Native
American Programs

       1S.    Consider placing the Authority under receivership until it has demonstrated
              sufficient capacity and exhibits a strong IHBG control environment.




                                       12
Finding 2: The Authority Inappropriately Housed Ineligible Tenants
Although the Authority had a waiting list of more than 2,000 families, it housed ineligible tenants
whose incomes exceeded HUD limits. In some instances, this condition occurred at the request of
tribal leadership. The deficiencies occurred because the Authority disregarded its policies and HUD
regulations. As a result, it charged an estimated $84,900 for ineligible housing assistance to
inappropriately house eight ineligible families. Additionally, it charged an estimated $11,578 to
house two families whose income eligibility was not supported.



     The Authority Inappropriately
     Provided Assisted Housing to
     Ineligible Families

                At the request of tribal leadership, the Authority housed a tribal councilperson as
                a benefit of the position. Tribal leadership requested that a councilperson obtain
                housing in an Authority-assisted unit during the elected term. However, the
                councilperson’s family income exceeded HUD income eligibility limits. 25 In
                another instance, also at the request of tribal leadership, a tribal employee
                received housing in an Authority-assisted unit. The tribal employee was heavily
                involved in tribal economic development. However, the tribal employee’s family
                did not meet income restriction requirements 26 and owned a home in another city.
                Both families paid rent during their occupancy. Contrary to HUD requirements, 27
                the Authority did not maintain support to show that either family’s presence on
                the reservation was essential to the community or that the families’ housing needs
                could have been satisfied without assistance.

                In addition to the two families above, the Authority inappropriately provided
                assisted housing to six ineligible families. The ineligible families’ income
                exceeded the allowable limits at the time of their lease. Two other tenant files
                reviewed did not contain income details to determine the families’ eligibility.
                HUD rules regarding when a non-low-income Indian family may participate in
                the program state that a family that is purchasing housing under a lease purchase
                agreement and is low income at the time of lease signing is eligible without
                further conditions. 28 Therefore, a family that was not low income at lease signing
                was not eligible to receive assisted housing, including conveyance of the property.
                The Authority housed several ineligible families in home ownership units. Those
                families expected to own the property at some future date. However, the property
                conveyance would not be eligible because of the families’ ineligibility during
                lease signing.

25
   See appendix C, 24 CFR 1000.104 (before December 3, 2012).
26
   See appendix C, 24 CFR 1000.104 (before December 3, 2012).
27
   See appendix C, 24 CFR 1000.106(b) and 24 CFR 1000.110(c) (before December 3, 2012).
28
   See appendix C, 24 CFR 1000.110(a) (before December 3, 2012, and December 3, 2012, changes).


                                                     13
                  For the two tribal-related families, six families whose income exceeded allowable
                  limits, and the two families whose income eligibility was not supported, the
                  Authority could not determine the IHBG funds used to provide the housing.
                  Therefore, we were unable to determine the amount of ineligible IHBG funds it
                  received. Instead, we identified the amount paid for rent as the ineligible or
                  unsupported cost, accordingly. However, HUD should determine the actual
                  IHBG subsidies received. We estimate that the Authority charged its IHBG
                  $84,900 for the eight ineligible families and $11,578 to house the two families
                  whose income eligibility was not supported. Additionally, when the Authority
                  provided housing for the ineligible tenants, those units were unavailable to house
                  eligible families on the waiting list.

     Conclusion

                  The Authority disregarded its policies and HUD rules when it allowed families
                  whose incomes exceeded the qualifying limits to obtain assisted housing. The
                  deficiencies occurred because the Authority disregarded its policies and HUD
                  regulations. Additionally, the Authority did not have controls in place such as
                  scheduled periodic review of its assisted housing stock tenant list to ensure that it
                  complied with its policies. It charged an estimated $84,900 29 to its IHBG to
                  house ineligible families and an additional $11,578 30 to house families whose
                  income eligibility it could not support.

     Recommendations

                  We recommend that the Administrator of the Southwest Office of Native American
                  Programs require the Authority to

                  2A.    Reimburse its IHBG $84,900 from non-Federal funds for the subsidies used
                         to house ineligible tenants. HUD should determine the actual IHBG
                         subsidies received for the affected properties and adjust the ineligible
                         amount accordingly.

                  2B.    Support the income eligibility for the two families identified in the report in
                         accordance with program and HUD regulations or reimburse its IHBG
                         $11,578 from non-Federal funds for the subsidies used to house the tenants.
                         HUD should determine the actual IHBG subsidy received for the affected
                         properties and adjust the unsupported or ineligible amount accordingly.

                  2C.    Terminate the participation of all ineligible tenants to allow for eligible
                         participants on the waiting list to obtain housing and ensure that the

29
   HUD should determine the actual IHBG funds used to house the families and adjust the ineligible amount
accordingly.
30
   HUD should determine the actual IHBG funds used to house the families and adjust the unsupported amount
accordingly.


                                                      14
      Authority does not convey properties to the eight tenants identified as
      ineligible.

2D.   Develop and implement policies and procedures to ensure periodic review of
      tenant eligibility and compliance with HUD requirements.




                               15
                             SCOPE AND METHODOLOGY

We conducted the audit primarily due to concerns raised by HUD’s Southwest Office of Native
American Programs regarding the Authority’s financial management practices. We conducted
our onsite audit work from September 2013 to April 2014 at the Authority’s offices in
Whiteriver, AZ, and our office in Phoenix, AZ. The audit covered the period July 2011 through
June 2013.

During our audit period, the Authority drew down more than $12.5 million of its IHBG funds
through 12 LOCCS draws. We reviewed a sample 31 of 7 of the 12 draws totaling more than
$10.7 million, evaluating the draws for grant eligibility. We selected the sample draws based on
the total amount requested and the date of the request as it related to the change in the
Authority’s administration.

We also selected a sample of 16 tenant files from a universe of 1,773 assisted properties to
review for family income eligibility. Sample selection criteria included tenant list indicators of
(1) essential to the community status, (2) nonqualified status, and (3) high incomes relative to
other tenants. Additionally, we selected the sample for review partially based on tenants that
were employees, tribal councilmembers, and board members.

To accomplish our objective, we

     •   Reviewed relevant HUD regulations and guidance;

     •   Reviewed the Authority’s policies and procedures, available board minutes, Indian
         housing plans, and IHBG agreements;

     •   Analyzed the Authority’s financial records;

     •   Interviewed Authority and HUD staff;

     •   Reviewed procurement documentation for material vendors relative to the sampled draws
         described above;

     •   Reviewed various files provided onsite, including vendor, tenant, project, bank, credit
         card, development, maintenance, and asset files; and

     •   Reviewed the Authority’s vehicle inventory.

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

31
  The results from the sample selections and review apply only to the items selected and are not intended to be
projected to the universe or population.


                                                        16
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               17
                              INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

   •   Effectiveness and efficiency of operations,
   •   Reliability of financial reporting, and
   •   Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls 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:

                  •   Controls to ensure that IHBG reimbursements adequately detail specific
                      transactions for reimbursement.
                  •   Controls to ensure that grant reimbursements comply with HUD
                      requirements.
                  •   Controls to ensure that grant assets are adequately safeguarded.
                  •   Controls to ensure that Authority employees are adequately trained and have
                      the capacity to administer the grant’s activities.

               We assessed the relevant controls identified above.

               A deficiency in internal control exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
               impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on a
               timely basis.




                                                 18
Significant Deficiencies

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

                •   The Authority lacked adequate financial and administrative controls to
                    ensure that grant expenditures complied with grant requirements and it
                    adequately safeguarded grant assets (see finding 1).

                •   The Authority did not have adequate controls in place to ensure that its staff
                    was adequately qualified and trained regarding HUD rules and regulations or
                    had the capacity to administer grant activities properly (see finding 1).

                •   The Authority did not have adequate controls in place to ensure that only
                    eligible families were assisted with grant funds (see finding 2).




                                              19
                                    APPENDIXES

Appendix A

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

        Recommendation                               Unsupported     Funds to be put
                                Ineligible 1/
            number                                       2/          to better use 3/
                     1A             $1,508,602
                     1C                 92,693
                     1D                 45,089
                     1E                 26,495
                     1F                  6,587
                     1G                                  $44,403
                     1H                                    3,662
                      1I                569,037
                     1K                                 8,280,221
                    1M                                                    $1,065,780
                     2A                  84,900
                     2B                                    11,578
                   Total            $2,333,403         $8,339,864         $1,065,780


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. In this instance, the ineligible costs totaling $2,333,403 were for
     expenditures charged to the Authority’s IHBG that were for duplicate charges, inadequate
     procurement, items that did not result in a cost, items that were not related to its IHBG
     activity, inappropriate entertainment costs, items that were specifically disallowed, items
     that were not adequately documented, and items that did not comply with its policies.

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. In this instance, the unsupported cost is the
     $8,339,864 for miscellaneous, mileage, rent charges, and categorization of proceeds of
     sale as nonprogram income that the Authority did not adequately support.

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,



                                                20
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, implementation of recommendation 1J to
reclassify nonprogram funds to IHBG program funds will result in $1,065,780 that is
subject to HUD restrictions and can be put to better use.




                                        21
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation      Auditee Comments




Comment 1




                        OIG Evaluation of Auditee Comments


                                       22
Comment 1   The Authority stated they disagreed with the audit findings. However, it did not
            provide any additional details or supporting documents. During the exit
            conference, the Authority did not specifically dispute the audit findings, but
            explained that it had begun correcting deficiencies identified in the audit report
            such as correcting the vehicle titles and evicting ineligible tenants. However, the
            Authority did not provide additional supporting documentation and we, therefore,
            did not verify the corrections. We confirmed with the Authority that its reference
            to a “final response” refers to the audit resolution process and not additional
            comments to this audit report.




                                             23
Appendix C

                                       CRITERIA

 Authority Policies and Procedures (2000 Version)
   Section 15, Travel Policies and Procedures
    2.C Methods of Travel
       Methods of travel such as common carrier, WMAHA [Authority] vehicles, rental or
       privately owned and operated vehicles will be at the discretion of the Executive
       Director. Private vehicle usage will be utilized only if a WMAHA vehicle is not
       available. In each case, the most cost effective method to the White Mountain Apache
       Housing Authority will be selected.

 Authority Policies and Procedures (2009 Version)
  Section 3 Eligibility,
   1C. Income limitations
      1. Maximum income – The applicant must qualify as a low-income family, defined as a
      family whose income does not exceed 80% of the medium income for the area or the
      United States, whichever is greater.
      6. Exception to Maximum Income limits (See 24 CFR [Code of Federal Regulations]
      Part 100.106, 108, and 110) – The White Mountain Apache Housing Authority may
      waive the maximum income limit requirement under the following circumstances:
         a. The applicant demonstrates to the satisfaction of the White Mountain Apache
         Housing Authority that their housing need cannot be met without assistance.
         b. The income waiver is consistent with HUD requirements.
         c. The White Mountain Apache Housing Authority may waive the income limits for a
         model program, subject to HUD approval.

  Section 15 Travel Policies and Procedures
    2C Methods of Travel
        Methods of travel will be at the discretion of the Executive Director. Private vehicle
        usage will be utilized only if a WMAHA vehicle is not available. The most cost
        effective method of travel will be selected.

 Authority Policies and Procedures (2012 Version)
  Travel Policy
     III G. Automobile Expenses and Use of WMAHA Vehicles
         2. In conducting official business, employees and Commissioners shall use WMAHA
         vehicles whenever reasonably practicable. Personal vehicles may only be used when
         use of WMAHA vehicles is not reasonably practicable and prior written consent of the
         Executive Director is obtained.

 2 CFR Part 225, Cost Principles for State, Local, and Indian Tribal Governments (Office
 of Management and Budget (OMB) Circular A-87)
   Appendix A C. Basic Guidelines


                                               24
   1. Factors affecting allowability of costs. To be allowable under Federal awards, costs
   must meet the following general criteria:
      a. Be necessary and reasonable for proper and efficient performance and administration
      of Federal awards.
      b. Be allocable to Federal awards under the provisions of 2 CFR part 225.
      c. Be authorized or not prohibited under State or local laws or regulations.
      d. Conform to any limitations or exclusions set forth in these principles, Federal laws,
      terms and conditions of the Federal award, or other governing regulations as to types or
      amounts of cost items.
      e. Be consistent with policies, regulations, and procedures that apply uniformly to both
      Federal awards and other activities of the governmental unit.
      h. Not be included as a cost or used to meet cost sharing or matching requirements of
      any other Federal award in either the current or a prior period, except as specifically
      provided by Federal law or regulation.
      i. Be the net of all applicable credits.
      j. Be adequately documented.
   2. Reasonable costs. A cost is reasonable if, in its nature and amount, it does not exceed
   that which would be incurred by a prudent person under the circumstances prevailing at the
   time the decision was made to incur the cost.

Appendix B
 14. Entertainment.
   Costs of entertainment, including amusement, diversion, and social activities and any costs
   directly associated with such costs (such as tickets to shows or sports events, meals,
   lodging, rentals, transportation, and gratuities) are unallowable.
 20 Goods or services for personal use.
   Costs of goods or services for personal use of the governmental unit’s employees are
   unallowable regardless of whether the cost is reported as taxable income to the employees.

24 CFR Part 85, Administrative Requirements for Grants and Cooperative Agreements
to State, Local, and Federally Recognized Indian Tribal Governments

§ 85.20 Standards for financial management systems.
 (b) The financial management systems of other grantees and subgrantees must meet the
 following standards:
    (1) Financial reporting. Accurate, current, and complete disclosure of the financial results
    of financially assisted activities must be made in accordance with the financial reporting
    requirements of the grant or subgrant.
    (2) Accounting records. Grantees and subgrantees must maintain records which
    adequately identify the source and application of funds provided for financially-assisted
    activities. These records must contain information pertaining to grant or subgrant awards
    and authorizations, obligations, unobligated balances, assets, liabilities, outlays or
    expenditures, and income.
    (3) Internal control. Effective control and accountability must be maintained for all grant
    and subgrant cash, real and personal property, and other assets. Grantees and subgrantees




                                             25
  must adequately safeguard all such property and must assure that it is used solely for
  authorized purposes.
  (4) Budget control. Actual expenditures or outlays must be compared with budgeted
  amounts for each grant or subgrant. Financial information must be related to performance
  or productivity data, including the development of unit cost information whenever
  appropriate or specifically required in the grant or subgrant agreement. If unit cost data
  are required, estimates based on available documentation will be accepted whenever
  possible.
  (5) Allowable cost. Applicable OMB cost principles, agency program regulations, and
  the terms of grant and subgrant agreements will be followed in determining the
  reasonableness, allowability, and allocability of costs.
  (6) Source documentation. Accounting records must be supported by such source
  documentation as cancelled checks, paid bills, payrolls, time and attendance records,
  contract and subgrant award documents, etc.

§ 85.36 Procurement.
 (b) Procurement standards.
    (1) Grantees and subgrantees will use their own procurement procedures which reflect
    applicable State and local laws and regulations provided that the procurements conform
    to applicable Federal Law and the standards identified in this section.
    (3) Grantees and subgrantees will maintain a written code of standards of conduct
    governing the performance of their employees engaged in the award and administration
    of contracts. No employee, officer or agent of the grantee or subgrantee shall
    participate in selection, or in the award or administration of a contract supported by
    Federal funds if a conflict of interest, real or apparent, would be involved. Such a
    conflict would arise when:
       (i) The employee, officer or agent,
       (ii) Any member of his immediate family,
       (iii) His or her partner, or
       (iv) An organization which employs, or is about to employ, any of the above, has a
       financial or other interest in the firm selected for award. The grantee’s or
       subgrantee’s officers, employees or agents will neither solicit nor accept gratuities,
       favors or anything of monetary value from contractors, potential contractors, or
       parties to subagreements. Grantee and subgrantees may set minimum rules where
       the financial interest is not substantial or the gift is an unsolicited item of nominal
       intrinsic value. To the extent permitted by State or local law or regulations, such
       standards or conduct will provide for penalties, sanctions, or other disciplinary
       actions for violations of such standards by the grantee’s and subgrantee’s officers,
       employees, or agents, or by contractors or their agents. The awarding agency may in
       regulation provide additional prohibitions relative to real, apparent, or potential
       conflicts of interest.
    (9) Grantees and subgrantees will maintain records sufficient to detail the significant
    history of a procurement. These records will include, but are not necessarily limited to
    the following: rationale for the method of procurement, selection of contract type,
    contractor selection or rejection, and the basis for the contract price.
 (c) Competition.



                                           26
    (1) All procurement transactions will be conducted in a manner providing full and open
    competition consistent with the standards of §85.36.
(d) Methods of procurement to be followed.
    (1) Procurement by small purchase procedures. Small purchase procedures are those
    relatively simple and informal procurement methods for securing services, supplies, or
    other property that do not cost more than the simplified acquisition threshold fixed at 41
    U.S.C. 403(11) (currently set at $100,000). If small purchase procedures are used, price
    or rate quotations shall be obtained from an adequate number of qualified sources.
    (2) Procurement by sealed bids (formal advertising). Bids are publicly solicited and a
    firm-fixed price contract (lump sum or unit price) is awarded to the responsible bidder
    whose bid, conforming with all the material terms and conditions of the invitation for
    bids, is the lowest in price. The sealed bid method is the preferred method for procuring
    construction, if the conditions in § 85.36(d)(2)(i) apply….
    (3) Procurement by competitive proposals. The technique of competitive proposals is
    normally conducted with more than one source submitting an offer, and either a fixed-
    price or cost reimbursement type contract is awarded. It is generally used when
    conditions are not appropriate for the use of sealed bids...
    (4) Procurement by noncompetitive proposals is procurement through solicitation of a
    proposal from only one source, or after solicitation of a number of sources, competition
    is determined inadequate.
        (i) Procurement by noncompetitive proposals may be used only when the award of a
        contract is infeasible under small purchase procedures, sealed bids or competitive
        proposals and one of the following circumstances applies:
            (A) The item is available only from a single source;
            (B) The public exigency or emergency for the requirement will not permit a delay
            resulting from competitive solicitation;
            (C) The awarding agency authorizes noncompetitive proposals; or
            (D) After solicitation of a number of sources, competition is determined
            inadequate.
        (ii) Cost analysis, i.e., verifying the proposed cost data, the projections of the data,
        and the evaluation of the specific elements of costs and profits, is required.
(f) Contract cost and price.
    (1) Grantees and subgrantees must 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 estimates before receiving bids or
    proposals. A cost analysis must be performed when the offeror is required to submit the
    elements of his estimated cost, e.g., under professional, consulting, and architectural
    engineering services contracts. A cost analysis will be necessary when adequate price
    competition is lacking, and for sole source procurements, including contract
    modifications or change orders, unless price reasonableness can be established on the
    basis of a catalog or market price of a commercial product sold in substantial quantities
    to the general public or based on prices set by law or regulation. A price analysis will
    be used in all other instances to determine the reasonableness of the proposed contract
    price.




                                           27
24 CFR Part 1000, Native American Housing Activities
 Before December 3, 2012

§ 1000.62 What is considered program income and what restrictions are there on its use?
(a) Program income is defined as any income that is realized from the disbursement of grant
amounts. Program income does not include any amounts generated from the operation of
1937 Act units unless the units are assisted with grant amounts and the income is attributable
to such assistance. Program income includes income from fees for services performed from
the use of real or rental of real or personal property acquired with grant funds, from the sale of
commodities or items developed, acquired, etc. with grant funds, and from payments of
principal and interest earned on grant funds prior to disbursement.

§ 1000.104 What families are eligible for affordable housing activities?
   The following families are eligible for affordable housing activities:
     (a) Low income Indian families on a reservation or Indian area.
     (b) A non-low-income family may receive housing assistance in accordance with§
     1000.110….
      (c) A non-Indian family may receive housing assistance on a reservation or Indian area
      if the non-Indian family’s housing needs cannot be reasonably met without such
      assistance and the recipient determines that the presence of that family on the
      reservation or Indian area is essential to the well-being of Indian families, except that
      non-Indian families residing in housing assisted under the 1937 Act do not have to meet
      these requirements for continued occupancy.

§ 1000.106 What families receiving assistance under title II of NAHASDA require HUD
approval?
(b) Assistance under section 201(b)(3) of NAHASDA for non-Indian families does not
require HUD approval but only requires that the recipient determine that the presence of that
family on the reservation or Indian area is essential to the well-being of Indian families and
the non-Indian family’s housing needs cannot be reasonably met without such assistance.

§ 1000.110 Under what conditions may non low-income Indian families participate in the
program?
   (a) A family who is purchasing housing under a lease purchase agreement and who was
   low income at the time the lease was signed is eligible without further conditions.
   (b) A recipient may provide the following types of assistance to non low-income Indian
   families under the conditions specified in paragraphs (c), (d) and (e) of this section:
       (1) Homeownership activities under section 202(2) of NAHASDA, which may include
       assistance in conjunction with loan guarantees under the Section 184 program (see 24
       CFR part 1005);
    (c) A recipient must determine and document that there is a need for housing for each
   family which cannot reasonably be met without such assistance.

24 CFR Part 1000, Native American Housing Activities
 December 3, 2012 Changes




                                              28
§ 1000.62 What is considered program income?
(a) Program income is defined as any income that is realized from the disbursement of grant
    amounts. Program income does not include any amounts generated from the operation of
    1937 Act units unless the units are assisted with grant amounts and the income is
    attributable to such assistance. Program income includes income from fees for services
    performed from the use of real or rental of real or personal property acquired with grant
    funds, from the sale of commodities or items developed, acquired, etc. with grant funds,
    and from payments of principal and interest earned on grant funds prior to disbursement.

§1000.64 What are the permissible uses of program income?
  Program income may be used for any housing or housing related activity and is not subject
  to other federal requirements.

§ 1000.104 What families are eligible for affordable housing activities?
   The following families are eligible for affordable housing activities:
     (a) Low income Indian families on a reservation or Indian area.
     (b) A non-low-income family may receive housing assistance in accordance with§
     1000.110.
     (c) A family may receive housing assistance on a reservation or Indian area if the
     family’s housing needs cannot be reasonably met without such assistance and the
     recipient determines that the presence of that family on the reservation or Indian area is
     essential to the well-being of Indian families.

§ 1000.106 What families receiving assistance under title II of NAHASDA require HUD
approval?
   (b) Assistance for essential families under section 20l(b)(3) of NAHASDA does not
   require HUD approval but only requires that the recipient determine that the presence of
   that family on the reservation or Indian area is essential to the well-being of Indian families
   and that the family’s housing needs cannot be reasonably met without such assistance.

§ 1000.110 Under what conditions may non low-income Indian families participate in the
program?
   (a) A family who is purchasing housing under a lease purchase agreement and who was
   low income at the time the lease was signed is eligible without further conditions.
   (b) A recipient may provide the following types of assistance to non low-income Indian
   families under the conditions specified in paragraphs (c), (d) and (e) of this section:
       (1) Homeownership activities under section 202(2) of NAHASDA, which may include
       assistance in conjunction with loan guarantees under the Section 184 program (see 24
       CFR part 1005);
    (c) A recipient must determine and document that there is a need for housing for each
   family which cannot reasonably be met without such assistance.
   (f) The requirements set forth in paragraph (e) of this section do not apply to non low-
   income Indian families which the recipient has determined to be essential to the well-being
   of the Indian families residing in the housing area.




                                              29
Public and Indian Housing Notice 2002-12
 In the absence of an accounting system to allocate income attributable to the 1937 Act and the
 IHBG Program, all income (net costs paid for by income and subject to $25,000 exclusion)
 would be program income and must be used for NAHASDA eligible affordable housing in
 accordance with section 202 of NAHASDA.

NAHASDA, Section 104(a)(4)
 EXCLUSION FROM PROGRAM INCOME OF REGULAR DEVELOPER’S FEES FOR
 LOW-INCOME HOUSING TAX CREDIT PROJECTS - Notwithstanding any other
 provision of this Act, any income derived from a regular and customary developer’s fee for
 any project that receives a low-income housing tax credit under section 42 of the Internal
 Revenue Code of 1986, and that is initially funded using a grant provided under this Act, shall
 not be considered to be program income if the developer’s fee is approved by the State
 housing credit agency.




                                             30