oversight

The Yakama Nation Housing Authority Did Not Always Properly Spend Its Recovery Act funds

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-04-29.

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

OFFICE OF AUDIT
REGION 10
SEATTLE, WA




                 Yakama Nation Housing Authority
                         Wapato, WA

          Native American Housing Block Grant,
         American Recovery and Reinvestment Act




  2014-SE-1002                                     April 29, 2014
                                                                    Issue Date: April 29, 2014

                                                                    Audit Report Number: 2014-SE-1002


TO:            Ken A. Bowring, Administrator, Office of Native American Programs, 0API

               //signed//
FROM:          Ronald J. Hosking, Regional Inspector General for Audit, 0AGA


SUBJECT:       The Yakama Nation Housing Authority Did Not Always Spend Its Recovery Act
               Funds in Accordance With 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 Yakama Nation Housing Authority’s
Native American Housing Block Grant under the American Recovery and Reinvestment Act of
2009.

    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 8L, 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
(913) 551-5870.




                                                Office of Audit Region 10
                                    909 First Avenue, Suite 126, Seattle, WA 98104
                                       Phone (206) 220-5360, Fax (206) 220-5162
                           Visit the Office of Inspector General Web site at www.hudoig.gov 
 What We Audited and Why                   unnecessary materials, (3) charged the grant for routine
                                           maintenance staff meetings, (4) did not always pay the
                                           prevailing Davis-Bacon wages, and (5) paid employees
We audited the Yakama Nation               for hours not worked.
Housing Authority because it received a
nearly $4.9 million Native American        In addition, it split purchases that would have required
Housing Block Grant under the              it to obtain multiple price quotations and did not
American Recovery and Reinvestment         properly report the project activity descriptions, the
Act of 2009. This was the largest grant    number of homes it planned to repair, the amount of its
of its kind in the State of Washington     vendor payments, and the number of jobs created in
and fourth largest in Region 10 (Alaska,   FederalReporting.gov.
Idaho, Oregon, and Washington). Our
objectives were to determine whether
the Authority properly spent its
Recovery Act funds, correctly obtained
small purchases, and properly reported
Recovery Act information in
FederalReporting.gov.

 What We Recommend

We recommend that the Administrator
of the Office of Native American
Programs require the Authority to
provide support showing that almost
$1.2 million was spent on the projects
or reimburse HUD for transmission to
the U.S. Treasury from non-Federal
funds for expenditures it is unable to
support and provide support showing
that $372,000 worth of materials
purchased was the best value possible
or reimburse HUD for transmission to
the U.S. Treasury from non-Federal
funds.



 What We Found

The Authority did not always properly
spend its Recovery Act funds. It (1)
spent $1.2 million in Recovery Act
funds without being able to show that
the funds were used on the projects, (2)
purchased more than $177,000 worth of
                             TABLE OF CONTENTS


Background and Objectives                                                         3

Results of Audit
        Finding 1: The Authority Did Not Always Properly Spend Its Recovery Act   4
        Funds

        Finding 2: The Authority Split Purchases That Would Have Required It To   11
        Obtain Multiple Price Quotations

        Finding 3: The Authority Did Not Properly Report Its Recovery Act         13
        Information

Scope and Methodology                                                             16

Internal Controls                                                                 18

Appendixes
A.   Schedule of Questioned Costs                                                 20
B.   Auditee Comments and OIG’s Evaluation                                        21
C.   Criteria                                                                     46
D.   Multiple Purchases From Vendors                                              52




                                              2
                     BACKGROUND AND OBJECTIVES

The Yakama Nation, by exercise of the power of self-government, has designated the Yakama
Nation Housing Authority as a tribally designated housing entity under the Native American
Housing Assistance and Self-Determination Act at 25 U.S.C. 4101, et seq. As a tribally
designated housing entity, the Authority owns and manages a variety of low-income housing
developments to provide and promote safe and sanitary housing on a subsidized basis for
qualifying members of the Yakama Nation.

The American Recovery and Reinvestment Act of 2009 included a $510 million appropriation
for the Native American Housing Block Grants, also known as the Indian Housing Block Grant.
Of that amount, $255 million was disbursed based on a formula, and more than $242 million was
allocated competitively. The U.S. Department of Housing and Urban Development (HUD)
awarded almost $4.9 million to the Authority, of which almost $1.9 was formula based and $3
million was competitively granted. The Authority received the largest award in Washington and
the fourth largest in Region 10 (Alaska, Idaho, Oregon, and Washington).

The Authority used its Recovery Act funding to modernize front porches, install gutters, renovate
homes for low-income families, and purchase modular homes used for housing families whose
homes were undergoing renovation. This work was performed on its own housing stock and for
private homeowners.

The Recovery Act required the Authority to obligate its grant funds within 1 year of the date
funds were available. The Authority was also required to expend at least 50 percent of the grant
funds within 2 years and 100 percent within 3 years.

Our objectives were to determine whether the Authority properly spent its Recovery Act funds,
correctly obtained small purchases, and properly reported Recovery Act information in
FederalReporting.gov.




                                                3
                                RESULTS OF AUDIT


Finding 1: The Authority Did Not Always Properly Spend Its Recovery
Act Funds
The Authority did not always properly spend its Recovery Act Native American Housing Block
Grant funds. This condition occurred because the Authority disregarded its control procedures,
lacked review processes, and failed to employ appropriate management techniques and
oversight. As a result, it could deprive its low- and very low-income families of needed benefits
because it might be required to reimburse HUD for transmission to the U.S. Treasury up to $1.2
million. In addition, more homeowners could have benefited from the unnecessary materials
stored in its warehouse.


 The Authority Did Not Always
 Properly Spend Its Grant
 Funds

               The Authority (1) spent $1.2 million in Recovery Act funds without
               demonstrating that the funds were used on the Recovery Act projects, (2)
               purchased more than $177,000 worth of unnecessary materials, (3) charged the
               grant for routine maintenance staff meetings and maintenance operations, (4) did
               not always pay the prevailing Davis-Bacon wages, and (5) paid employees for
               hours not worked.

               In accordance with 24 CFR (Code of Federal Regulations) 85.20(b)(2), grantees
               and subgrantees must maintain records which adequately identify the source and
               application of funds provided for financially-assisted activities. In addition,
               according to 24 CFR 85.20(b)(4), the Authority’s financial information must be
               related to performance or productivity data including the development of unit cost
               information whenever appropriate. However, it recorded materials (purchased
               mostly in bulk), goods and services, permit, environmental review, and
               assessment costs under the general category of construction rather than showing
               how they were used in the activities performed on the project. In addition, labor
               expenditures were recorded as “other task” under a common project work order
               entitled “60 Units Renovation” rather than being related to performance on the
               project.

               The Authority did not maintain adequate records identifying the application of
               more than $1.2 million in grant funds. It spent almost $731,000 on materials and
               supplies that it could not demonstrate were spent on the projects through source
               documents such as purchase orders, requisition slips, invoices, work order system,
               or financial and reporting system.


                                                4
    In addition, the Authority paid its vendors almost $198,000 without obtaining
    proof that it received all the materials ordered. It did not always obtain signed and
    dated receiving reports and match them to the invoices and purchase orders as
    required by its policy. Receiving reports are confirmations that the Authority
    received the materials and goods and that they were acceptable in quantity and
    quality. Comparison of these reports identifies discrepancies between the amount
    ordered and the amount received.

    Further, the Authority recorded more than $289,000 in its financial and reporting
    system on labor costs that were not adequately supported as spent on the projects.
    Of this amount, timesheets showed that the Authority paid for time worked as
    “other” task on the timesheets under “60 Units Rehab” and “60 Units Renovation”
    in its accounting system. There was no documentation to support that the work
    performed was for the projects. Timesheets showed that the Authority paid two
    construction employees a total of more than $53,000, at the regular carpenter rate
    of $31.79 and overtime carpenter rate of $47.69 for these unidentified tasks. In
    contrast to the rest of the construction crew’s timesheets, these timesheets did not
    identify the specific tasks performed or that those tasks applied to the projects.
    The table below shows the two employees’ compensation for the undefined task.

                          Regular Regular Overtime                           Total
             Task         rate per   time   rate per Overtime               amount
Employee   performed       hour      paid    hour      paid                   paid
  A          Other           $31.79 $41,542   $47.69   $1,955                $43,497
   B         Other            31.79   9,251    47.69      453                  9,704
 Total                              $50,793            $2,408                $53,201

    The Authority purchased more than $177,000 in unnecessary materials. As of
    July 19, 2013, almost a year after the date on which it was required to expend 100
    percent of its grant funds, the Authority had more than $82,000, or 15 percent of
    the materials purchased for its formula grant, and more than $95,000, or 40
    percent of the materials purchased for its competitive grant, stored in its
    warehouse. According to 2 CFR Part 225, appendix A, costs charged to Federal
    grants must be reasonable and necessary. In addition, only materials and supplies
    used for the performance of a Federal award may be charged as direct costs. The
    Authority’s policy also states that materials will be procured only for the specific
    job purpose.

    The Authority charged the grant for routine maintenance staff meetings and
    maintenance operations performed by maintenance staff. The Authority charged
    its competitive grant more than $5,000 for staff meetings and maintenance
    operations that were not related to Recovery Act projects. The time was charged
    to the grant in the Authority’s accounting system as “60 Unit Rehab.” According



                                      5
to the timesheets, these charges were for maintenance staff meetings and
maintenance operations.

The construction manager stated that these meetings covered safety issues, so they
applied to all workers. However, these employees did not work on Recovery Act
projects, so their time should not have been charged to Recovery Act grants.
According to the Native American Housing Assistance and Self-Determination
Act, since these hours were related to the Authority’s maintenance program, they
should have been charged to the Authority’s operating account, not to Federal
grants for rehabilitation or new construction.

The Authority did not always pay the prevailing Davis-Bacon wages. The
Authority paid one of its concrete workers $15.50 per hour instead of the
prevailing Davis Bacon wage rate of $29.32. It also paid some of its employees
below the prevailing wage rate for various other tasks. The following table shows
the hourly wage rate differences of the underpayment for the various tasks
performed by the affected employees. For the timesheets reviewed, the Authority
underpaid its employees $176.

                           Davis-                         Wage rate
                           Bacon        Paid wage       difference per
         Task             wage rate        rate              hour
Backhoe operator            $ 39.39        $ 39.27             $    .12
Carpenter (full time)         27.45           27.33                 .12
Concrete work                 29.32           15.50               13.82
Heating, ventilation,         30.28           20.36                9.92
and air conditioning
Roofing                         30.17          28.78               1.39
Plumbing                        20.25          15.91               4.34

The Authority paid employees for hours not worked. The table below shows the
amounts paid to two employees for time not worked (that is, time paid for but not
reflected on the employees’ timesheets).

                 Excess hours
 Employee           paid            Task performed       Rate       Excess pay
   C                 7.75               Roofing         $ 31.34      $242.89
   D                   1               Plumbing           27.33       27.33
  Total                                                              $270.22




                                6
The Authority Did Not
Consistently Adhere to its
Control Procedures

            The Authority did not always adhere to its policy requiring staff to complete an
            issue slip for the materials taken from inventory and to prepare necessary journal
            entries to charge the cost of issuance to the specific unit. Although staff submitted
            the warehouse requisition form, completing the fields identifying the unit and the
            materials taken, staff failed to complete the field for the price of the materials.
            Since the forms lacked price data from the time the materials were purchased,
            many of the materials used for the respective units were not entered into the
            Authority’s accounting system, assigning the materials to specific units.

            In addition, the Authority disregarded its policy requiring a signed and dated
            receiver’s report for vendor payment. The construction staff did not forward the
            required reports to either the accounting staff or warehouse staff so the accounting
            and warehouse staff made a verbal agreement with the vendor, in which the
            vendor would invoice only for items that were delivered to the jobsites or picked
            up by Authority construction staff. The accounting staff believed that this
            procedure canceled the requirement for a separate receiver’s report. Further,
            management told the accounts payable clerk to pay the vendor without obtaining
            the receiving report.

            The Authority also disregarded its policies to procure materials only for specific
            identified units worked on and not allow materials in its inventory to exceed its
            $5,000 threshold. It should have reviewed its inventory stock before approving
            additional purchases to avoid unnecessary or duplicative materials and excess
            inventory nearly a year after the grant activities were completed.

            The Authority lacked review processes. The warehouse requisition forms
            identifying the unit and the materials taken were neither reviewed for accuracy
            and completeness nor approved by an approving authority. In addition, the
            Authority’s management did not review the rates and the hours for which it paid
            its employees to ensure that the correct project rates were selected and the hours
            were entered correctly.

            Management failed to employ appropriate management techniques and oversight.
            The Authority did not have a system in place to demonstrate that all costs were
            spent on the project. It used its own employee labor to conduct the scope of work
            assessments of the eligible units to be renovated, but it did not require its
            employees to identify these assessments on the employees’ timesheets or require
            supervisor review and approval of time charged.




                                              7
             In addition, management did not provide budgetary and expenditure reports
             regarding its projects to the program managers. If the maintenance supervisor had
             received these reports, he would have noticed that maintenance meetings were
             charged to the grant. This matter could have been resolved by reversing the
             charges and charging these costs to the operations account.

HUD Lacked Assurance That
Funds Were Used
Appropriately and The
Authority Could Have Served
More Homes

             The Authority could deprive its low- and very low-income families of needed
             benefits because it might be required to reimburse HUD for transmission to the
             U.S. Treasury up to $1.2 million. It could have applied the funds it spent for
             unnecessary materials, which were being warehoused, on rehabilitating more
             private homes and its own housing stock. It also could not ensure that it received
             all the materials for which it paid and that the materials were received in good
             condition.

Conclusion

             The Authority did not track $1.2 million of Recovery Act funds adequately to
             ensure funds were spent on the projects. It should have followed the policies and
             procedures it had in place, reviewed documents for accuracy and completeness,
             and employed appropriate management techniques. If the Authority had
             adequately tracked the bulk purchases and other materials and labor, it would not
             have expended more than $177,000 on unnecessary materials and HUD would be
             assured that the materials and labor were used on the project and were used to
             benefit low-income participants.

Recommendations

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

             1A.    Provide support showing that $711,528 of materials, supplies and labor
                    charges were spent on the projects and benefited eligible low-income
                    participants or reimburse HUD for transmission to the U.S. Treasury from
                    non-Federal funds for any expenditures it is unable to demonstrate were
                    used on the projects. (Note: the total amount to be supported is
                    $1,131,381. However, the following amounts appear in other
                    recommendations and were, therefore, removed from this recommendation




                                              8
       to avoid double counting: $111,283 from recommendation 1B, and
       $308,527 from recommendation 2A.)

1B.   Provide support showing that materials costing $197,836 were received
      and in acceptable condition or reimburse HUD for transmission to the U.S.
      Treasury from non-Federal funds for invoices paid without corresponding
      receiving reports ($111,283 of this amount was not shown to have been
      used on the project and will also need to be supported under
      recommendation 1A).

1C.   Review all other Recovery Act Native American Housing Block Grant
      invoices not reviewed as part of this audit and provide the results to HUD
      for review and approval. The Authority should reimburse HUD for
      transmission to the U.S. Treasury for any additional invoices found that
      are not supported by a proper receiving report.

1D.   Use its excess inventory on Native American Housing Assistance and
      Self-Determination Act of 1996 (NAHASDA)-eligible activities within a
      reasonable time or reimburse HUD for transmission to the U.S. Treasury
      $177,133 from non-Federal funds.

1E.    Reimburse the U.S. Treasury from its operating account $5,150 for
       ineligible maintenance staff meetings and maintenance operations charged
       to the grant.

1F.    Review all other payroll charges to the grants not reviewed as part of this
       audit and provide the results to HUD for review and approval. The
       Authority should reimburse the U.S. Treasury from its operating account
       for any additional maintenance staff meetings charged to the grant.

1G.   Provide supporting documentation showing that restitution was made to
      employees who were paid less than the Davis-Bacon wage determination
      rate or compensate the employees $176 for the unsupported wages cited in
      this report.

1H.    Reimburse HUD for transmission to the U.S. Treasury $270 from non-
       Federal funds for hours paid but not worked.

1I.   Review all payments to its employees, who charged time to the grants not
       reviewed as part of this audit, to determine whether additional wage
       restitution is owed and provide the review results to HUD for review and
       approval. If wage restitution is required, the Authority should make
       restitution to the employees affected from non-Federal funds.

1J.    Implement policies already in place to ensure that all costs of labor and
       materials used and charged to the projects were used on the projects.


                                 9
1K.    Implement policies already in place to ensure that the receiver signs and
       dates the receiver’s report confirming that materials have been received
       and are in acceptable condition.

1L.    Implement policies already in place to ensure that the value of materials
       on hand does not exceed $5,000.

1M.    Develop and implement policies to ensure that the unrelated grant
       activities, such as maintenance staff meetings and maintenance operations,
       are charged to its operating fund and not to Federal grants for
       rehabilitation or new construction.

1N.    Develop and implement policies to ensure the Authority pays employees
       at the (Davis-Bacon) rates that are applicable to work performed.

We also recommend that the Administrator of the Northwest Office of Native
American Programs

1O.    Conduct future monitoring to verify that the Authority follows its policies.




                                10
Finding 2: The Authority Split Purchases That Would Have Required It
To Obtain Multiple Price Quotations

The Authority split purchases that would have required it to obtain multiple price quotations.
This condition occurred because the Authority’s policy contradicted itself and incorrectly
permitted it to make multiple purchases from a single source and not obtain a price quotation as
long as each purchase order was less than $5,000. As a result, the Authority could not
demonstrate that it received the best value for more than $372,000 worth of materials purchased.


 The Authority Split Purchases


              The Authority split purchases that would have required it to obtain and document
              price quotes. The Authority made multiple purchases of related items from one
              vendor on 1 day or within 1 business day of less than $5,000 each, which when
              combined, ranged from about $5,100 to almost $39,000 (see appendix D for
              details). HUD’s Office of Public and Indian Housing Notice 2009-14 allowed
              Indian Housing Block Grant recipients to purchase goods and services costing
              less than $5,000 without obtaining and documenting price quotes to reduce the
              burden of complying with the Federal procurement process for goods and services
              of minimal cost. However, the Notice also prohibited recipients from breaking
              down a purchase into multiple purchases to meet the threshold.

              Based on review of the Authority’s 2010-2012 purchase order logs of more than
              $1.1 million, the purchase orders were split on 32 separate occasions with a total
              of 112 single purchases. The table below summarizes the number of occasions on
              which the Authority split its purchases from each vendor on 1 day or within 1
              business day. The specific approval dates for each occasion for each vendor are
              shown in appendix D.

                                               Total          % of       % of total
                Vendor       Occasion(s)     purchases      occasions    purchases
                  A              27          $302,815.83     84.4%         81.4%
                  B               2            14,664.92      6.3%          3.9%
                  C               1            38,956.00      3.1%         10.4%
                  D               1             6,219.59      3.1%          1.7%
                  E               1             9,564.50      3.1%         2.6%
                 Total           32          $372,220.84      100%         100%




                                               11
The Authority’s Procurement
Policy Permitted This
Approach

           The Authority’s procurement policy permitted it to make multiple purchases from
           a single source and not obtain price quotations as long as each purchase order was
           less than $5,000. However, the Authority ignored the part of its policy stating
           that it was not to break down the purchases, under any circumstances, to meet the
           threshold.

The Authority Could Not
Demonstrate That It Received
the Best Value

           Since the Authority split its purchases, it did not always obtain an adequate
           number of price quotations to demonstrate that it received the best value for more
           than $372,000 worth of materials purchased. The Authority could not show that it
           took the most economical approach. It should have combined purchase orders to
           one vendor for related items, which were approved on the same or the next
           business day, to determine whether it should have obtained additional quotes to
           obtain the best possible pricing.

Recommendations

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

           2A.    Provide support showing that it received the best value for $372,221 paid
                  for materials it purchased or reimburse HUD for transmission to the U.S.
                  Treasury from non-Federal funds for any amount that is not supported
                  ($308,527 of this amount was not adequately documented as used on the
                  projects and will also need to be supported under recommendation 1A if
                  the costs are found by HUD to be of best value under this
                  recommendation).

           2B.    Amend its policy to require that it combine its purchases from a single
                  source, within a reasonable timeframe, to determine whether the sum
                  exceeds the $5,000 threshold as this is not currently a part of their policy;
                  if the sum exceeds $5,000, we recommend that the Authority be required
                  to follow its policy to obtain additional price quotations to obtain the best
                  pricing possible for its small purchases.




                                            12
Finding 3: The Authority Did Not Properly Report Its Recovery Act
Information

The Authority did not properly report its project activity descriptions, the number of homes it
planned to repair, the amount of its vendor payments, the total amount of payments to vendors
per award, and the number of jobs created in FederalReporting.gov. This condition occurred
because the Authority lacked review procedures and misunderstood the requirements for
calculating the number of jobs created. As a result, the public did not have access to an accurate
description of project activities, vendor payment information, the total amount of payment to
vendors per award, or the number of jobs created.


 The Authority Did Not Properly
 Report Information in
 FederalReporting.gov

               The Authority did not properly report its project activity descriptions in
               FederalReporting.gov. The project descriptions stated that the Authority provided
               grants as well as zero percent loans to homeowners. However, it renovated the
               homes by providing only grants.

               The Authority overstated the number of homes it planned to repair under the
               competitive grant. It originally planned to repair up to 60 units. However, on
               June 3, 2011, it amended its original application to repair 25 to 30 units, and to
               purchase and install 10 to 15 modular units to be used for relocation of residents
               while their houses were being rehabilitated. Although the Authority revised its
               reporting to reflect the purchase and installation of the modular units, it did not
               reduce the number of units to be rehabilitated as shown in its amended
               application. It also failed to report the correct number of units it repaired and the
               number of modular units it purchased and installed. The Authority rehabilitated
               19 units and purchased and installed 12 modular units under the competitive
               grant.

               The Authority did not properly report the amount and number of payments to its
               vendors. The Authority overstated its payments made to four vendors by more
               than $657,000 and understated the amount paid to another vendor by almost
               $561,000 for a net overstatement of more than $96,000.

                         Expenditures       Expenditures
               Vendor      incurred           reported          Overstated      (Understated)
                 A        $ 410,473          $ 478,726           $ 68,253
                 B            17,792             25,772              7,980
                 C            61,109             81,433             20,324
                 D           390,264            951,163           560,899


                                                13
  E                 760,912                   200,013                                        (560,899)
 Total           $1,640,550                $1,737,107                  $657,456            $ (560,899)

In addition, the Authority overstated the total amount of payments it made to
vendors that were awarded more than $25,000 and to those that were awarded less
than $25,000. These overstatements totaled more than $1.2 million from the
Authority’s formula grant for all vendors and about $1 million from its
competitive grant for vendors that were awarded more than $25,000. The
reported vendor amounts incorrectly included salaries and benefits relating to the
Authority’s in-house force account labor. The tables below show the amounts in
the Authority’s accounting records and the amounts of the total vendor payments
it reported.

                            Total
                                               Total
                          payments
                                             payments                                 Salaries &
     Formula             to vendors                             Total vendor
                                            to vendors                                 related
      grant                greater                               payments
                                             less than                                  costs*
                            than
                                              $25,000
                           $25,000
 QuickBooks               $506,567            $175,741             $682,309           $1,217,522
 Recovery Act
 reporting                 620,017           1,278,914            1,898,931

 Difference               $113,450         $1,103,173            $ 1,216,622
*Grantees were required to report only amounts spent on vendors in FederalReporting.gov.


                            Total
                                               Total
                          payments
                                             payments                                 Salaries &
  Competitive            to vendors                             Total vendor
                                            to vendors                                 related
    grant                  greater                               payments
                                             less than                                  costs*
                            than
                                              $25,000
                           $25,000
 QuickBooks              $1,658,848             $325,248           $1,984,096         $1,015,946
 Recovery Act
 reporting                 1,658,848           1,341,152             3,000,000

 Difference                          $0      $1,015,904            $1,015,904
*Grantees were required to report only amounts spent on vendors in FederalReporting.gov.


The Authority overstated the number of jobs created by reporting the number of
employees it hired for the projects. However, according to Office of Management
and Budget, Memorandum M-09-21, it should have reported its job estimate totals
by dividing the hours worked in the reporting quarter by the hours in a full-time
schedule in that quarter.




                                               14
The Authority Lacked Review
Procedures and Misunderstood
Requirements

           The Authority lacked review procedures. The reporting information was
           compiled and submitted by the same individual and was not reviewed by the
           supervisor to ensure that the information reported was correct. The Authority
           should have had a different individual review the information to ensure that the
           data were accurate before and after submitting the data in FederalReporting.gov.
           In addition, the Authority misunderstood the requirements for calculating the
           number of jobs created.

The Authority’s Reporting
Lacked Transparency

           Because the Authority did not properly report its information in
           FederalReporting.gov, the public did not have access to accurate project activity
           descriptions, vendor payment information, or the number of jobs created.

Recommendation

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

           3A.    Make the necessary changes to the project activity descriptions and all
                  fields relating to final vendor payment figures in FederalReporting.gov.
                  Note that the reporting system allows only the final totals to be changed;
                  the quarterly jobs figures cannot be adjusted.




                                           15
                         SCOPE AND METHODOLOGY

We conducted fieldwork at the Yakama Nation Housing Authority, located at 611 South Camas
Avenue, Wapato, WA, from January 15 through July 19, 2013. The audit covered the lifespan of
the grants from September 2009 through December 2012. To accomplish our objectives, we

      Interviewed Authority and HUD staff;
      Reviewed related laws, regulations, and requirements; a HUD monitoring report; and the
       Authority’s general ledgers, work orders, purchase order log, Indian housing plan, annual
       performance report, Recovery Act reporting submission documentation, single audit
       reports, and policies and procedures;
      Conducted site visits; and
      Sampled expenditures and payroll records.

For the formula grant, we identified nearly $1.9 million in grant expenditures. Of this amount,
more than $638,000 was not attributed to specific units. From this population, we randomly
selected and reviewed 60 invoices classified as materials-other consisting of fuel, materials, and
other costs from various vendors, ranging from $300 to $6,000, totaling more than $178,000, or
28 percent of the population and did not find any discrepancies between the source documents
and what was reported in the Authority’s financial and reporting system.

Of the $1.9 million in expenditures, more than $1.2 million was assigned to specific units,
making this population of less risk. We selected the two units with the highest labor dollars
incurred to review. We reviewed the unit with the second highest labor expenditure of more than
$42,000, or 4 percent of the $1.2 million. We did not review the unit with the highest labor
dollars because the source documents were not provided in a timely manner. For this also, we
did not find any discrepancies between the source documents and what was reported in the
Authority’s financial and reporting system.

For the competitive grant, we identified $3 million in grant expenditures. Of this amount, we
selected and reviewed all expenditures that were classified as “60 Unit Rehab” and “60 Units
Renovation.” This amount was more than $219,000, or 29 percent of the $761,000 in
expenditures not attributed to specific units. We also selected for review the two units with the
most expenditures and the 12 modular homes purchased totaling nearly $1.2 million, or 53
percent of the more than $2.2 million in expenditures assigned to specific units.

We also reviewed the Authority’s 2009, 2010, 2011, and 2012 purchase order logs of more than
$1.1 million and selected and reviewed all of the more than $415,000 in purchase orders to one
vendor that were issued on 1 day or a few days apart, when each of those purchase orders was for
less than $5,000.

The Authority used QuickBooks. We did not test the reliability of the Authority’s computer-
processed data as QuickBooks is a small accounting software system that is widely accepted by
the accounting industry and we verified hardcopy documents to QuickBooks and found no


                                                16
exceptions. Also our testing confirmed the Authority’s accounting staff statement that if
QuickBooks did not show the information, then the information was not available from the
hardcopy source documents to be recorded in QuickBooks. Our testing of the source documents
noted above proved this to be true. Thus we relied on QuickBooks to support our audit
conclusions.

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




                                               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:

                     Policies and procedures implemented to reasonably ensure that funds were
                      spent on goods, materials, and labor for specific units that the Authority
                      worked on.
                     Policies and procedures implemented to reasonably ensure that reliable data
                      were obtained, monitored, and reported to adequately support procurement
                      and contracting activities.
                     Policies and procedures to ensure that payments made to vendors and
                      procurement activities complied with applicable laws and regulations.

               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.

 Significant Deficiencies

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



                                                 18
   The Authority did not have controls in place to ensure that it followed its policies
    to
       o Maintain records identifying the application of funds (finding 1).
       o Obtain, sign, and date receiving reports for purchased materials (finding
          1).
       o Purchase materials for a specific job purpose and keep extra materials of
          no more than $5,000, provided that the material could be used on other
          federally funded projects in the near future (finding 1).

   The Authority lacked procedures to ensure that
       o Maintenance staff meeting time was charged to its operating fund and
          not to the Recovery Act projects (finding 1).
       o It paid employees the prevailing Davis-Bacon wage for the tasks they
          performed (finding 1).
       o Staff obtained additional price quotations to obtain the best pricing
          possible for the Authority’s small purchases (finding 2).
       o Filing of required information was complete and accurate (finding 3).




                                  19
                                            APPENDIXES

Appendix A

                      SCHEDULE OF QUESTIONED COSTS

             Recommendation                 Ineligible 1/      Unsupported        Unreasonable or
                 number                                                 2/         unnecessary 3/

                     1A                                            $711,528
                     1B                                            197,836a
                     1D                                                                   $177,133
                     1E                           $5,150
                     1G                                                   176
                     1H                              270
                     2A                                            372,221b

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/      Unreasonable or unnecessary costs are those costs not generally recognized as ordinary,
        prudent, relevant, or necessary within established practices. Unreasonable costs exceed
        the costs that would be incurred by a prudent person in conducting a competitive
        business.




a
  Of the $197,836, documentation of $111,283 did not demonstrate the items purchased were used on the projects.
Therefore, these costs will also need to be supported under recommendation 1A.
b
  Of the $372,221, documentation of $308,527 did not demonstrate the items purchased were used on the projects.
If these funds are found by HUD to be the best value, they will also need to be supported under recommendation 1A.


                                                       20
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation                              Auditee Comments




                                                          January 6, 2014

              Ronald J. Hosking
              Regional Inspector General for Audit
              U.S. Department of Housing and Urban Development
              Office of Inspector General
              Office of Audit Region 10
              909 First Avenue, Suite 126
              Seattle, WA 98104

              RE:      Yakama Nation Housing Authority Comments to HUD-OIG Draft Audit Report

              Dear Mr. Hosking:

                       The Yakama Nation Housing Authority (the “Authority”) submits these written comments to
              the U.S. Department of Housing and Urban Development (“HUD”) Office of Inspector General’s
              (“OIG”) Draft Audit Report on its audit of the Authority’s 2009 federal stimulus grants under the Native
              American Housing and Self-Determination Act of 1996 (“NAHASDA”) and the American Recovery and
              Reinvestment Act of 2009 (“ARRA”).

                        We appreciated the opportunity to meet with the HUD-OIG auditors and the Grants
              Management Division Director of the Northwest Regional Office of Native American Programs
              (“ONAP”) for an exit conference on December 23, 2013, in Wapato, Washington. The Authority
              consults regularly with ONAP Grants Management staff to ensure that the Authority is following HUD
              guidelines and policy in administering its grants under NAHASDA. These comments restate and
              supplement the verbal comments we shared at the exit conference.

                                  COMMENTS TO BACKGROUND AND OBJECTIVES (P. 3)

                         The Authority is the Tribally designated housing entity of the Confederated Tribes and Bands
              of the Yakama Nation, which is the largest Indian Tribe in the Pacific Northwest. The Yakama Nation is
              comprised of descendents of 14 tribes and bands that were federally recognized under the Yakama Treaty
              of 1855. The 1.3 million acre Yakama Reservation is located in south central Washington, along the
              eastern slopes of the Cascade Mountain Range.

              According to the 2012 American Community Survey, the poverty rate nationally for American Indians is
              29%, twice the average for all Americans. About 40% of on-reservation housing in this country is
              considered inadequate, compared to 6% of all housing nationwide (2003, National American Indian
              Housing Council). There are approximately 10,000 enrolled members of the Yakama Nation, of which
              about 60% reside on the Yakama Reservation. On this Reservation, 24% of Indian households live below
              the poverty line, and 34% are unemployed. Over 40% of the




                                                      21
            Letter to Ronald J. Hosking
            January 6, 2014
            Page 2 of 17

            households have income of less than $25,000. The Authority houses 2,884 persons in units under
            management, or nearly half of the Yakama Nation’s members who live on the Reservation.

                      There is a great need for housing on the Yakama Reservation and the funding that was
            made available in 2009 through the ARRA appropriations for the Indian Housing Block Grant
            (“IHBG”) program was put to good use. The IHBG program is authorized under the Native
            American Housing and Self-Determination Act of 1996, as amended (“NAHASDA”). The
            Authority received two IHBG grants from the ARRA appropriations: a formula grant of
            $1,899,831, and a competitive grant of $3,000,000. The formula grant was based on the Authority’s
            Fiscal Year (“FY”) 2008 IHBG allocation and was spent to replace defective steel steps on 77
            housing units with poured in place concrete steps and railings, and to improve the indoor air quality
            and weatherization of 54 housing units. The competitive grant was awarded based on a competitive
            grant proposal the Authority submitted to HUD, and was spent on the extensive repair and
            rehabilitation of 19 privately owned homes and the purchase and set up of 12 modular units, which
            were used to relocate families during the rehabilitation efforts and have since housed many Indian
            families as rental units.

Comment 1            The report recognizes that the Yakama Nation exercises powers of self-government, but
            leaves out that Tribal self-determination is a guiding principle of NAHASDA. The NAHASDA
            statute and regulations were terms of the Grant Agreements, as stated on the Funding
            Approval/Agreement Forms HUD-52734-B that the Authority signed to receive the grants.
            NAHASDA states that federal assistance

                     shall be provided in a manner that recognizes the right of Indian self-
                     determination and tribal self-governance by making such assistance available
                     directly to the Indian tribes or tribally designated entities under authorities
                     similar to those accorded Indian tribes in Public Law 93-638 (25 U.S.C. 450 et
                     seq.).

            In Public Law 93-638, Congress declares its commitment to

                     the establishment of a meaningful Indian self-determination policy which will
                     permit an orderly transition from the Federal domination of programs for, and
                     services to, Indians to effective and meaningful participation by the Indian
                     people in the planning, conduct, and administration of those programs and
                     services.

                       In recognition of self-determination, NAHASDA allows a Tribal grantee to self-determine
            the specific uses of IHBG funds as long as those funds are used to “carry out affordable housing
            activities,” as defined in NAHASDA and in the grantee’s Indian Housing Plan (“IHP”).
            NAHASDA, Section 102. A Tribe may adopt its own Tribal prevailing wage ordinances in lieu of
            Davis Bacon wages, NAHASDA 104(b)(3). Procurements of less than $5,000 are exempt from
            “any otherwise applicable competitive procurement rule or procedure.” NAHASDA, Section
            203(g). In these ways and others, NAHASDA recognizes Tribal self-determination in how IHBG
            grants are administered.

              The auditors conducted fieldwork on site at the Authority’s offices for 7 months (p. 16), and were
            still requesting documents from the Authority in December 2013. In the exit conference the
            auditors affirmed that they had not found any spending under either of the grants that was not for
            the benefit of eligible households. The funds were spent on affordable housing activities under




                                                   22
            Letter to Ronald J. Hosking
            January 6, 2014
            Page 3 of 17

            NAHASDA. Only two of the questioned costs were determined to be “ineligible costs” under the
            grants: $5,150 paid to workers who attended safety meetings and $270 paid to workers for hours
            they did not list on their timesheets. The other questioned costs in the report are based primarily on
            the auditors’ interpretations of regulations and the Authority’s own policies (interpretations with
            which the Authority disagrees, as discussed in these comments), and on opinions about reasonable
            wages or the amount of materials stored in inventory.

                                                COMMENTS TO RESULTS OF AUDIT

            RESPONSE TO FINDING NO. 1: THE AUTHORITY DID NOT ALWAYS PROPERLY
            SPEND ITS RECOVERY ACT FUNDS. (PP. 4-10)

Comment 2            In the first paragraph on page 4, the report states that the Authority disregarded its control
            procedures, lacked review processes and failed to employ appropriate management techniques and
            oversight and that “As a result, it completed only 19 of 60 planned units with its competitive grant.”
            We believe this is an unfair characterization of the Authority’s performance and we will respond to
            each of the statements in turn. The conclusion that as a result, only a third of the planned units
            were completed is directly contradicted by the facts and should be removed from the report.

                       At the exit conference, the auditors seemed not to have reviewed the Amended Grant
            Application, although they referred to it later in the meeting. The Amended Grant Application was
            approved by HUD and contemplated between 20 to 30 repaired units and 10 to15 modular units.
            The completion of 19 repaired units was only one short of that estimate. The grant application was
            amended so that some of the funds could be used to purchase modular units to be used to relocate
            the families whose homes were being repaired under the grants. The Authority had originally
            intended to utilize FEMA mobile units for relocation purposes, but a disastrous fire destroyed 20
            homes on the Yakama Reservation and all of the awarded FEMA mobile units were redirected to
            the fire victims.

                     Also on page 4, the report states that “more homeowners could have benefited from the
            unreasonable pay for labor and unnecessary materials stored in [the YNHA] warehouse.” The
Comment 3   inference is that this was a large amount, but less than $7,000 in wages has been identified as
            “unreasonable” in the view of the auditors, and that would not have covered even one additional
            unit. The stored materials are primarily metal roofing that will be used to benefit eligible families.
            This conclusion is misleading and should also be removed from the report.

            A.            Comments to “The Authority Did Not Always Properly Spend Its Grant Funds.” (p.
            4)

                          1.         Comment to “Recovery Act funds were not always assigned to eligible units.”
                          (p. 4).

Comment 4             The report states that the auditors identified $1.3 million in costs that were not assigned to
            specific units and are, therefore, treated as unsupported costs.1 The Authority will need to review
            this number, but the auditors’ reliance on 24 C.F.R. Section 85.20(b)(2) as requiring the Authority
            to assign all of its expenditures to specific units is misplaced.
            ________________________
            1
                Unsupported costs include those that “might involve a legal interpretation.” (p.20)




                                                              23
            Letter to Ronald J. Hosking
            January 6, 2014
            Page 4 of 17

                      The financial recordkeeping requirements for IHBG projects are found in 24 C.F.R.
Comment 4   Section 1000.26, which states that recipients “shall comply with the requirements and standards of
Comment 5   OMB Circular No. A-87, ‘Principles for Determining Costs Applicable to Grants and Contracts
            with State, Local and Federally Recognized Indian Tribal Governments,’” and with particular
            sections of 24 C.F.R. Part 85.

                     Section 85.20(b)(2) states:

                     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.

                      The auditors interpret “records which adequately identify the source and application of
            funds” to mean that the Authority must maintain records per unit that would enable the auditors to
            visit each home and count the boards and nails in the unit against those that were purchased for that
            unit. We disagree that the plain language of Section 85.20(b)(2) or NAHASDA mandates that level
            of specificity.

                      OMB Circular No. A-87, Item 26.a. of Attachment B, “Materials and Supply Costs”
            states: “Costs incurred for materials, supplies, and fabricated parts necessary to carry out a Federal
            award are allowable.” OMB Circular A-87 does not require that the recipient identify each item of
            material that goes into a particular unit. The Inspector General has not found any noncompliance
            with OMB Circular A-87. OMB Circular A-133 applies to audits of IHBGs, including formula and
Comment 5   competitive grants from ARRA funds, and does not state that expenditures for affordable housing
            must be allocated to specific, individual units.

                     Each of the grants was a source of funds for an affordable housing project, as described in
            the amended IHP (for the formula grant) and in the Amended Grant Application (for the
            competitive grant). The Authority complied with acceptable accounting practices by maintaining
            records which showed that the funds under each grant were applied to pay for materials, labor, and
            related costs incurred to carry out the award. The Authority also maintained records which
            demonstrated that the beneficiaries were eligible for the program, inventory records for materials
            purchased and stored in the warehouse, and payroll records for the work.

                      The auditors said at the exit conference that if some of the expenditures were allocated to
            specific units then all of the expenditures should have been allocated this way. Some procurements
            were structured to apply purchases to specific units; however, absent a published standard that
            requires a per unit allocation of costs, the Authority disagrees with treating expenditures as
            unsupported because they are not allocated to specific units.

            Further, the standard method in construction for accounting for performance of work on a project is
Comment 6   a percentage of completion. The construction industry does not account to a particular board or
            nail. Had YNHA contracted the work on these projects, the contractor would not have the




                                                    24
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 5 of 17

             type of records the auditors are requiring. It is not reasonable to treat the Authority differently
             simply because the Authority utilized its own Tribal workforce.2

                        2.         Comment to “The Authority paid its vendors almost $196,000 without obtaining
                                   proof that it received all the materials ordered.” (p. 4)

                       We have not yet been able to determine the basis for the $196,000. While the auditors
             have said that the documents they reviewed are in the Authority’s conference room, the auditors
             pulled apart the documents and putting them back together will take time, according to accounting
Comment 7    staff. We understand that the auditors did not consider other types of documentation as being
             acceptable to verify deliveries. The Authority’s policy does not prescribe the format of a receiver’s
Comment 8    report or prohibit other methods, and the delivery of materials may be verified by a packing slip or
             invoice that is signed by an employee of the Authority.

                        3.         Comment to “The Authority purchased more than $177,000 in unnecessary
                                   materials. (p. 5)

                       The majority of the materials remaining in the warehouse as of July 29, 2013 (the date
             specified in the report), were metal roofing materials. These materials were purchased in bulk to
Comment 9    obtain the best price, but due to the fire on the Reservation and the need to reprogram some of the
             competitive grant to purchase modulars for relocation, the Authority had roofing materials that it
             did not use for the home repairs. The Authority would generally return unused materials, but metal
             roofing materials cannot be returned and it would have been wasteful to dispose of the materials.
             The Authority disagrees that the materials were unnecessary. There is a regular need for roof
             repairs, and the materials will be used for affordable housing consistent with the purposes of the
             grants.

                        4.         Comment to “The Authority charged the grant for routine maintenance staff
                                   meetings and maintenance operations performed by maintenance staff.” (p. 5)

Comment 10             The report claims that the Authority paid $5,150 in wages to maintenance workers who
             attended safety meetings but did not work directly on the ARRA projects. The Authority disagrees
             that time spent in safety meetings needed to be assigned to specific units. The Authority will need
             time to review the documentation to be able to prepare a more complete response.

                        5.         Comment to “The Authority did not always pay the prevailing Davis Bacon
                                   wages.” (p. 5-7)

             The report asserts that the Authority underpaid employees a combined total of $186 below the
Comment 11   prevailing Davis Bacon wages by paying incorrect wage rates. The report does not explain how
             this was calculated, but after the exit conference the auditors provided copies of spreadsheets that
             gave the names of the employees, the pay periods, hourly wages paid for work, etc. The auditors
             also provided copies of the wage rates from March 2010 which they said they used to compute the


             _______________________________
             2
              The auditors’ lack of experience with Tribal projects was evident. At their first meeting with the Authority, which
             included the Chairman of the Authority, one of the auditors asked jokingly if those present were going to do a “rain
             dance.” The auditors said later that this was their first IHBG audit.




                                                            25
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 6 of 17

             discrepancies, and said they had not independently determined the rates that applied to the projects.
             The Authority will need more time to review the documentation in order to prepare a complete
             response.

                      6.        Comment to “the Authority paid employees for hours not worked.” (p. 6)

                       The report also asserts that the Authority paid two employees a combined total of $270.22
             for hours not worked. The Authority has had time to review its records for one of the employees,
             who the auditor found was overpaid for 8 hours or a total of $254.88. The records show that this
Comment 12   employee did work those hours, but on a different ARRA unit. Due to a miscoding in the
             accounting department, the hours worked on the other unit were mistakenly assigned in the payroll
             records to the unit the auditors reviewed. The employee worked the hours that he was paid. The
             Authority will need more time to identify and review the remaining $15.34.

                      7.        Comment to “The Authority sometimes paid unreasonable hourly rates.” (p. 6)

             The report states that the Authority paid nearly $7,000 in unreasonable hourly rates to its
             construction staff, by paying several construction employees more than the applicable Davis Bacon
             rate. In the opinion of the auditors, that the amount of the wages above the Davis Bacon rate was
             not a “reasonable and necessary” cost. The Davis Bacon Act prescribes minimum wages, not
             maximum wages. HUD Program Guidance 2009-07 (ONAP) states,

                      Section 1606 of the Recovery Act requires all laborers and mechanics employed
                      by contractors and subcontractors on projects funded directly by or assisted in
                      whole or in part by and through the Recovery Act to be paid wages at not less
                      than…(Davis Bacon wages).

                       The Authority will need more time to review the information the auditors provided after
             the exit conference, but we believe some of the differences may be traced to the wage determination
             the auditors used. If the Authority paid more than it was required to pay under Davis Bacon, that is
             not a violation of the law, as the auditors have tacitly acknowledged by not identifying these
Comment 13   amounts as ineligible costs. If the standard is whether the costs were “ordinary, prudent, relevant or
             necessary” (p. 20), then we believe this should be considered in the context of NAHASDA and
             Tribal self-determination. If Indian Tribes may adopt Tribal prevailing wages in lieu of Davis
             Bacon wages, NAHASDA, Section 104(b)(3), then paying more than Davis Bacon in some
             instances should not be treated as per se unreasonable. While Yakama has not yet adopted a Tribal
             prevailing wage ordinance, whether or not a cost is “reasonable and necessary” depends upon the
             circumstances of the payment.
             The report also includes a paragraph about two employees who were paid $31.79 per hour for
             “undefined tasks” while another employee performed purchasing functions for $20.65 per hour.
Comment 14   This was discussed at the exit conference and the auditors said they did not know what work the
             higher paid employees performed. The employees performed administrative duties that included
             purchasing but also other functions, such as scope of work assessments, and their compensation
             reflected the value of their construction knowledge and background. The inference that those
             employees were




                                                     26
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 7 of 17

             overpaid for their work is without support. We note that this was not included in the schedule of
             questioned costs and request that the paragraph and accompanying table be removed.

             B.            Comments to “The Authority Failed to Employ Appropriate Management
                           Techniques.” (pp. 7-8)

                           1.          Comment to “The Authority disregarded its control procedures.” (p. 7)
Comment 15
                       The report states that the “Authority disregarded its policy requiring materials and goods
             to be charged to specific units,” and that “Its policy required staff…to prepare necessary journal
             entries to charge the cost of issuance to the specific unit.” (p. 7). On Appendix C, the report quotes
             the YNHA Procurement Policy and Procedures, V.A.1(e), which states:

                           Issuing materials - Charging the cost of materials and supplies to the
                           appropriate project for which the materials and supplies are being used is a
                           primary goal of the inventory system. An issue slip will be filled and transmitted
                           weekly to the Accountant. The Accountant will charge the cost of issuance to
                           the appropriate programs and prepare the necessary journal entries to record the
                           transaction.

                      The statement that this policy requires materials to be “charged to specific units” is false.
             The policy requires materials to be charged to “projects” and “programs.” Each of the ARRA
             grants was a project or program under this policy, and the cost of purchased materials and supplies
             was charged to the appropriate grant.

                      The report further states that the Authority disregarded its policy requiring a signed and
             dated receiver’s report for vendor payments. On Appendix C, the report quotes the YNHA
             Procurement Policy and Procedures, III.C, which states:
Comment 8                  Receiver’s responsibilities3 - Upon receipt of the goods, the receiver shall
                           prepare the Receiver's Report. The report should be signed and dated. Upon
                           preparation, the receiver should forward the original receiver’s report and the
                           signed copy of the vendor's delivery receipt (if available) to the accounting
                           office.

             There are other methodologies for verifying receipt of purchased materials and supplies, and while
             receiver’s reports are preferred, by using the words “should” we believe the policy does not
             preclude other methods of verification for accounting purposes. The delivery of materials may be
             verified by reference to a packing slip or invoice that is signed by an employee of the Authority
             who receives the goods. If the auditors discounted these type of records as not meeting the
             requirements of the policy, that was an overly narrow interpretation.

                      Finally, the report states that the Authority disregarded its policies to procure materials
Comment 15   only for specific identified units, and to not allow materials to exceed $5,000 in value. On
             Appendix C, the report quotes the following clause from page 62 of the YNHA Procurement Policy
             and Procedures:

             ___________________________
             3
                 The report states “Receiver’s Report,” but the actual language in this paragraph is “Receiver’s Responsibilities.”




                                                               27
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 8 of 17

                      Inventory of Materials: The YNHA shall only procure materials for the
Comment 15            specific job purpose. Any extra materials shall be 1. Returned to the supplier
                      for credit, 2. Sold as surplus using the procedures included in this section, 3.
                      Inventoried at a central location, keeping the material safe and secure, provided
                      that the material can be used on other federally funded projects in the near future
                      (the value of this material shall not exceed $5,000), or 4. Scrap the material.

             The statement that this policy requires materials to be procured for “only for specific identified
             units” is false. The policy refers to “job purpose,” and the purpose of the ARRA projects was to
Comment 9    rehabilitate homes. Most of the materials in the warehouse at the end of the project were for metal
             roofing, which cannot be returned to the supplier for credit. It would be wasteful to sell that
             material as surplus or scrap it. The material has been properly inventoried at the warehouse, which
             is a central, safe and secure location, for use on affordable housing, consistent with the purpose of
             the grants.

                       2.       Comment to “The Authority lacked review processes.” (p. 7).

                       The report states that the time spent by the Authority’s employees to conduct the scope of
             work assessments was not allocated to specific units on their timesheets and reviewed and approved
Comment 4    by the supervisor. We are not aware of any requirement that scope of work assessments be
Comment 5    allocated to specific units. The report also states that management did not provide budgetary and
             expenditure reports to the program managers, and that if the maintenance supervisor had received
             these reports he would have corrected the charges to the grant for safety meetings. The Executive
             Director of the Authority held regular, weekly meetings with its managers, which the Chief
Comment 16   Financial Officer and the Maintenance Manager attended. The ARRA projects were discussed at
             those meetings. Management provided a reasonable opportunity to its managers to ask questions
             and discuss concerns. If an error was made, it was not due to lack of available information or
             processes.

                      The report also claims cryptically that management specifically instructed payroll to pay
             two employees $31.79 regardless of the work performed, without identifying the manager, the
Comment 13   payroll employee or the two employees. We assume this refers to the same employees who were
             discussed on pages 6-7 of the report, and for the same reasons as stated therein, this reference
             should also be removed from the report.

             A.       Comments to “The Authority Could Have Served More Homes, and HUD Lacked
                      Assurance that Funds Were Used Property.” (p. 8)

                      We incorporate our earlier comments.

             B.       Comments to Conclusion (p. 8)

                      We incorporate our earlier comments.

             C.       Comments to the Recommendations (pp. 8-10)




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             Letter to Ronald J. Hosking
             January 6, 2014
             Page 9 of 17

                       Recommendation 1A: Provide support showing that $709,367 (or $1,313,621) was spent
             on eligible units or reimburse the U.S. Treasury from non-Federal funds for expenditures it is
             unable to assign to a specific eligible unit.

                      Specific per unit accounting was not required by any applicable law, regulation or
Comment 4    standard at the time the funds were spent. The Inspector General has identified no areas of
             noncompliance with OMB Circulars A-87 or A-133. The Authority complied with acceptable
             accounting practices by maintaining records showing that the funds under each grant were applied
             to purchase materials and pay for labor for the affordable housing purposes that were identified in
             the grants. The Authority also maintained occupancy records which demonstrated that the
             beneficiaries were eligible for the program, inventory records for materials purchased and stored in
             the warehouse, and payroll records for work performed.

                      It would be a waste of resources for the Authority to have to create specific per unit
Comment 17   records for every cost and expenditure of funds under both of the grants. If there needs to be a per
             unit record for accounting purposes, then the bulk purchases and other amounts may be assigned
             based on a reasonable formula. We do not feel that there is a lawful basis to require the Authority
             to reimburse the U.S. Treasury for these amounts. The amounts were expended for affordable
             housing and by taking that amount out of the Authority’s budget, HUD would be hurting families
             who depend on the Authority for housing.

                      Recommendation 1B. Provide support showing that materials costing $195,793 were
Comment 8    received and in acceptable condition or reimburse U.S. Treasury.

                       The Authority does not agree that its policy requires the accounting department to have a
             corresponding receiver’s report for every purchase of materials before paying an invoice. Other
             types of verification than just receiver’s reports should be acceptable. The auditors have not
             identified any instance in which the accounting department paid for materials that were not
             delivered or in acceptable condition. The Authority should not be required to reimburse the grants
             just because there is not a receiver’s report.

                      Recommendation 1C.            Review all other Recovery Act NAHBG invoices not
             reviewed as a part of this audit and provide the results to HUD for review and approval. Reimburse
             HUD for any invoices not supported by a proper receiving report.

                       If the Authority can verify the purchases that were reviewed with other available
             documentation (Recommendation 1B), then it should not be necessary to review every other
             invoice. If other invoices must be reviewed, then other types of verification than just receiver’s
             reports should be accepted. Again, the Authority should not be required to reimburse the grants just
             because there is not a receiver’s report.

                       Recommendation 1D.         Use its excess inventory on NAHASDA eligible activities
             within a reasonable time or reimburse U.S. Treasury $177,133 from non-Federal funds.

Comment 18   The Authority will use the materials still in its inventory for affordable housing activities under
             NAHASDA. We do not understand the statement that this amount must be supported under




                                                     29
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 10 of 17

             Recommendation 1A, when the materials have not yet been deployed. If the intent is to require the
             Authority to assign the materials to specific units in its accounting system, then please see our
             earlier comments.

                       Recommendation 1E.          Reimburse the U.S. Treasury from non-Federal funds $5,150
             for ineligible maintenance staff meetings and maintenance operations charged to the grant.

                      As already stated, the Authority will need time to review the documentation to prepare a
             more complete response on whether these were ineligible costs under the Recovery Act projects,
             including whether the employees worked on those projects. The Authority does not agree,
Comment 19   however, that if there is a reimbursement, it should be from non-Federal funds. The workers were
             employed on affordable housing projects under NAHASDA and time spent attending safety
             meetings benefits the program.

                       Recommendation 1F.          Review all other payroll charges to the grants not reviewed,
             provide results to HUD for review and approval, and reimburse the U.S. Treasury from non-Federal
             funds for any other maintenance staff meetings charged to the grant.

                       See above. A review of all other payroll charges would be overbroad; if a review is
Comment 20   required, the scope should be on meetings the maintenance staff were paid to attend during the
             relevant period. If it is determined they were paid incorrectly from the Recovery Act grants, then
             the cost was related to a federal program and should not be paid from non-Federal funds.

                      Recommendation 1G.        Provide supporting documentation showing restitution was
             made to employees paid less than Davis-Bacon wages or compensate them $186 from non-Federal
             funds.

                      The Authority has not yet had the opportunity to review the documentation relied upon by
             the auditors to determine that some employees were paid less than the wages to which they were
Comment 21   legally entitled, but if this occurred and the amount is supported by the documentation, then the
             Authority will properly compensate the employees $186. The Authority does not necessarily agree,
             however, that the compensation should come from non-Federal funds, if the employees were
             working on affordable housing under NAHASDA.

                      Recommendation 1H.          Reimburse U.S. Treasury $270 from non-Federal funds for
             hours paid and not worked.

                       The Authority can document that one of the employees, who was paid $254.88, did work
Comment 12   on the project, as discussed above. If upon review, the documentation shows that $15.34 was paid
             for time not worked, the Authority will repay that amount.

                      Recommendation 1I.          Reimburse the U.S. Treasury $6,617 for the unreasonable
             wages cited in this report.

Comment 13            This recommendation is understood to correspond to the earlier reference to “nearly
             $7,000.” We note that this is identified as an unreasonable cost, and not an ineligible or
             unsupported cost. No




                                                   30
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 11 of 17

             law was violated. We disagree with having to reimburse the grant solely on the basis that there
             were instances in which the Authority paid more than the minimum required by Davis Bacon.

                     Recommendation 1J.         Review all payments to employees who charged time to the
             grants not reviewed4 to determine whether additional wage restitution is owed or additional
             unreasonable wages were paid. If owed, make restitution from non-federal funds, and if
             unreasonable wages were paid, reimburse the U.S. Treasury from non-federal funds.
Comment 22
                     We do not agree that the de minimus amount of wage restitution that has been identified
             warrants a complete and exhaustive review of all payroll records for all employees over the life of
             the two grants. The auditors identified only $186 in underpayments. We also do not agree that an
             exhaustive records review to identify “unreasonable wages” is warranted, for reasons already stated.

                      Recommendation 1K.                   Implement policies already in place to ensure that all costs are
Comment 23   charged to corresponding units.

                        We incorporate our earlier comments.

                      Recommendation 1L. Implement policies already in place to ensure that the receiver
             signs and dates the receiver's report confirming that materials have been received and are in
             acceptable condition.

                        We incorporate our earlier comments.

                      Recommendation1M.                    Implement policies to ensure that value of materials on hand
             does not exceed $5,000.
Comment 24
                      We incorporate our earlier comments. The Authority owns and operates its own
             warehouse, which can accommodate more than $5,000 of materials safely and securely. If this is
             against policy, then the Authority may consider amending its policy.

                        Recommendation 1N.           Develop and implement policies to ensure that unrelated
             activities are not charged to grants for rehabilitation or new construction.

                        The Authority will review its policies and consider any necessary amendments.

                     Recommendation 1O.           Develop and implement policies to ensure that YNHA pays at
             Davis Bacon rates or uses appropriate personnel.

                        The Authority will review its policies and consider any necessary amendments.

                      Recommendation 1P.                   ONAP should conduct future monitoring to ensure that the
             Authority follows its policies.




             __________________________
             4
               At the exit conference, the auditors clarified that this means to review the payments that were not reviewed in this
             audit, not the grants not reviewed in this audit.




                                                             31
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 12 of 17

                      The report has not established that the Authority failed to follow its policies. Any
Comment 15   additional monitoring must be in accordance with NAHASDA.

             II.        FINDING 2: THE AUTHORITY SPLIT PURCHASES TO AVOID THE $5,000
                        THRESHOLD THAT WOULD REQUIRE IT TO OBTAIN MULTIPLE PRICE
                        QUOTATIONS. (PP. 11-12)
Comment 25
             The report states that the Authority’s policy “contradicted itself and incorrectly permitted it to make
             multiple purchases from a single source and not obtain a price quotation as long as each purchase
             order was less than $5,000,” resulting in the Authority not being able to “demonstrate that it
             received the best value for more than $372,000 worth of materials purchased.”

                        Section 203(g) of NAHASDA authorizes micro-purchases utilizing IHBG grants and
             states:

                        DE MINIMUS EXEMPTION FOR PROCUREMENT OF GOODS AND
                        SERVICES. Notwithstanding any other provision of law, a recipient shall not be
                        required to act In accordance with any otherwise applicable competitive
                        procurement rule or procedure with respect to the procurement, using a grant
                        provided under this Act, of goods and services the value of which is less than
                        $5,000.

             The report does not mention this statute in Appendix C. Nor does it identify any other provision of
             law that the Authority violated when purchasing materials valued at under $5,000.

                     Appendix C lists 24 C.F.R. Section 85.36(d)1, which pertains to small purchase procedures.
Comment 26   Under the plain language of Section 203(g) of NAHASDA, purchases of less than $5,000 are
             covered by a “de minimus exemption” from otherwise applicable competitive procurement rules.
             The only reference we found in 24 C.F.R. Section 85.36 to dividing purchases appears at 24 C.F.R
             85.36(e)2.iii, which refers to "Dividing total requirements, when economically feasible, into smaller
             tasks or quantities to permit maximum participation by small and minority business, and women's
             business enterprises." We have not found a law or regulation that required the Authority to
             aggregate its purchases.

             A.        Comments to “The Authority Split Purchases.” (p. 11).

                     The report claims that the Authority split purchases to avoid having to obtain and document
             price quotations. On Appendix D, the report identifies 112 separate purchases from 5 different
Comment 27   vendors and says those purchases should have been combined into 32 purchases based on the dates
             the purchase orders were approved. Even if combined, all of these purchases would have been
             small purchases and the majority would still be under $10,000, even in the aggregate. Under the
             Authority’s policy, small purchases required three quotations by phone or other informal procedure.
             YNHA Procurement Policies and Procedures, par. V.E.




                                                     32
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 13 of 17

                     Bid splitting by definition is dividing purchases for the purpose of avoiding competition.
Comment 28   Appendix C to the report includes a reference to HUD Notice PIH-2009-14 (TDHEs),5 which
             states:

                       The Procurement or Contracting Officer should be aware of the prohibition
                       against breaking down requirements of a purchase for the purpose of bid
                       splitting to avoid the requirements that apply to larger purchases.

             The notice does not identify an applicable law or regulation for the “prohibition,” but the focus is
             on dividing purchases for the purpose of avoiding competition. The auditors do not consider
             whether there were reasons that the Authority made smaller purchases, but just assume that it was
             to avoid having to obtain three price quotations by phone.

                       The Authority is not able to respond as to each of the procurements without more
Comment 29   information, but there were many different reasons that the Authority would make smaller
             purchases other than to avoid a phone procurement. Purchase orders were prepared and submitted
             throughout the week, so the fact that they were signed on the same day does not point to bid
             splitting. We note that there is no finding in the report that the prices were not reasonable. The
             Authority is situated in a rural area, so there were a limited number of vendors from which the
             Authority could obtain its materials, and based on its experience with the vendors, the Authority
             could determine the costs to be reasonable. HUD Notice PIH-2009-14 (TDHEs) states:

                       Under a Micro Purchase, the Procurement or Contracting Officer determines
                       reasonableness based on prior purchases of a similar nature or other source of
                       information. When the purchase order is signed, it signifies that the cost has
                       been determined to be reasonable.

Comment 30   Both the Authority and its vendors had limited space to store bulk purchases. It was also not
             always possible to predict the materials that would be required for a repair, because unexpected
             conditions were regularly encountered that required more extensive work than was originally
             anticipated. The Authority made some smaller purchases to help track some of the costs by unit. In
             short, there are many other reasons for making smaller purchases, other than to avoid competition.

             B.        Comments to “The Authority’s Procurement Policy Permitted this Approach.” (p.
             12)

                     The basis for the statement that the Authority’s policy “contradicted itself” is unclear.
             The Authority’s policy on micro-purchases is identical in all relevant respects to the sample policy
             HUD recommended for TDHEs in HUD Notice PIH-2009-14 (TDHEs).6

                       HUD’s sample policy:
Comment 25
             For purchases of less than $5,000, also known as Micro Purchases, only one price quote is required,
             provided the quote is considered reasonable. Quotes may be


             __________________________
             5
              A HUD notice is not adopted under the federal rulemaking process and does not have the force of law.
             6
              The Authority’s Procurement Policies and Procedures handbook was originally adopted in 2001 and was modeled on
             the HUD Handbook 7460.8 REV 1, “Procurement Handbook for Public and Indian Housing Authorities” (1/93).




                                                         33
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 14 of 17
                       obtained orally (either in person or by telephone), by catalog, fax, or email. If the
                       purchase is made for reasons other than price, the file must clearly describe the
                       reason for the purchase. Under no circumstances will a purchase be broken down
                       into more than one action in order to meet the Micro Purchase threshold. The
                       Micro Purchase must be documented by an authorized purchase order or
                       contract.

                      The Authority’s policy:

                      For small purchases of less than $5,000, (except for contracts of $2,000 or more
Comment 31            involving labor), only one price quote is required, provided the quote is
                      considered reasonable. Quotes may be obtained orally (either in person or by
                      telephone), by catalog, fax, or email. If the purchase is made for reasons other
                      than price, the file must clearly describe the reason for the purchase. Under no
                      circumstances will a purchase be broken down into more than one action in
                      order to meet the Micro Purchase threshold. The Micro Purchase must be
                      documented by an authorized purchase order or contract.

Comment 32            The report states that the Authority “ignored the part of its policy stating that it was not to
             break down the purchases, under any circumstances, to meet the threshold.” This assumes that each
             of the purchases identified by the auditors was a single purchase, which was then broken down for
             the purpose of avoiding competition. The policy does not prohibit breaking down purchase orders
             for other reasons, and there is no requirement that smaller purchases be aggregated into larger
             purchases.

             B.       Comments to “The Authority Could Not Demonstrate That It Received the Best
Comment 33            Value.” (p. 12).
                      The report states that the Authority was not able to demonstrate “best value” because it
             did not obtain more than one price quotation for purchases under $5,000. Purchases under $5,000
             do not require documentation of “best value.” As stated in HUD Notice PIH-2009-14 (TDHEs),
             “When the purchase order is signed, it signifies that the cost has been determined to be reasonable.”
             See also NAHASDA, Section 203(g).

                       The report states that the Authority “should have combined purchase orders to one vendor
Comment 26   for related items…to determine whether it should have obtained additional quotes to obtain the best
             possible pricing.” (p. 12) The report does not state any law or rule that requires an IHBG grantee
             to aggregate its purchases and we are not aware of one that would apply here.

             C.       Comments to the Recommendations (p. 12)

                       Recommendation 2.A. Provide support showing that the Authority received the best
             value for $372,221 worth of materials it purchased or reimburse the U.S. Treasury from nonfederal
             funds for any amount that is not supported.




                                                      34
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 15 of 17

                       The auditors explained that the exit conference that the amount they would recommend to
Comment 34   be reimbursed was not the entire $372,221, but the difference between the “best value” cost and the
             actual cost. This should be clarified in the recommendations.

                      The report does not state how the “best value” is to be determined. It would not be
             appropriate to require the Authority to aggregate the 112 purchases into 32 purchases (as the report
             does in Appendix D) and then evaluate whether there could have been a cost savings, because the
Comment 35   Authority was not required to aggregate its purchases. If there is evidence that any of the purchases
             was intentionally split, there still may have been other reasons for dividing the purchase other than
             to avoid competitive procurement, in which case bid splitting cannot be established. We do not
             believe there is a legal basis for requiring the Authority to document “best value” for a micro-
             purchase or reimburse the grant.

                       Recommendation 2.B.          Amend the Authority’s policy to require that purchases from
             a single source, within a reasonable timeframe, be combined to determine whether they exceed the
             $5,000 threshold, and if so, obtain additional price quotations.

Comment 26            The report does not identify any legal basis for requiring the Authority to amend its
             policy. Sometimes aggregating purchases may make sense, but there may be good reasons for not
             aggregating purchases, as recognized in 24 C.F.R. Section 85.36(e)2.iii, and as already discussed.

             III.     FINDING 3: THE AUTHORITY DID NOT PROPERLY REPORT ITS
                      RECOVERY ACT INFORMATION (PP. 13-15)

                       The Authority acknowledges that some errors occurred in its reporting utilizing the
Comment 36   FederalReporting.gov system. The project descriptions stated that the Authority would offer zero
             percent loans and grants, which was accurate when written. The initial plan was to use zero percent
             loans, secured by mortgages, for some of the homes and that the loans would “convert” to grants
             over a 10-year period. When the Bureau of Indian Affairs was unable to approve trust land
             mortgages in a timely manner, the Authority decided not to use loans.

                       The report also states that the Authority overstated its payments made to four vendors.
             The ARRA guidance for recording payments to vendors was not very clear and the Authority
             reported certain vendor payments in a cumulative fashion, and reported the number of employees it
Comment 37   hired rather than the FTEs of the jobs that were funded. The Authority’s reporting methodology did
             not cause any general ledger duplication of payments. Given the lack of clear guidance, having the
             reporting information reviewed by the supervisor may not have made much difference. We
             understand these were common reporting errors among ARRA grantees. Any lack of transparency
             was certainly not purposeful.

                       Recommendation 3A. Make the necessary changes to reports on FederalReporting.gov.
                       The Authority agrees with the recommendation to make the necessary changes to the
             project descriptions and fields relating to final vendor payment figures in FederalReporting.gov. If
             it were possible, the Authority would also change the jobs information, but unfortunately those
             numbers cannot be adjusted.




                                                    35
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 16 0f 17


                  COMMENTS TO INTERNAL CONTROLS: SIGNIFICANT DEFICIENCIES (P. 18)

             Our comments to the deficiencies and lack of procedures identified in the report are as follows:

Comment 4    A.       Comment to “The Authority did not have controls in place to ensure that it followed
                      its policies to…”
Comment 15
                       1.        Maintain records identifying the source and application of funds. We believe the
             records identified the source and application of funds in compliance with the applicable regulations
             and circulars. We do not believe HUD should find a significant deficiency solely on the basis that
             not all costs were identified to a specific unit.

Comment 8              2.       Obtain, sign and date receiving reports for purchased materials. We believe
             there are other ways to document and verify the receipt of purchased materials. The Authority’s
             policy does not proscribe the use of other methods, and we do not believe there is a basis for a
             determination of a significant deficiency on the basis that not all purchases have receiving reports.

Comment 9             3.         Purchase materials for a specific job purpose and keep extra materials of no
             more than $5,000. We believe purchases are made for a job purpose even when they are not
             assigned to a specific identified unit, and under certain circumstances it may be more economical
             for the Authority to store more than $5,000 of materials in its warehouse.

             B.       Comment to “The Authority lacked procedures to ensure that...”

                       1.       Maintenance staff meeting time was charged to its operating fund and not to the
Comment 16   grants. If this occurred, then it was an isolated mistake. Managers knew that only the labor costs
             associated with the two projects should be charged to the grant. The Executive Director also held
             weekly managers’ meetings to provide an opportunity for the managers to exchange relevant
             information around a conference table.

                      2.        It paid employees the prevailing Davis-Bacon wage for the tasks they performed.
Comment 22   The report identifies only $186 in underpayments. The Authority will evaluate the circumstances
             and determine whether it needs to revise its procedures, but given the total amount of wages paid on
             these two projects we do not agree that $186 represents a significant deficiency.

                      3.      Staff obtained additional price quotations to obtain the best pricing possible for
Comment 26   small purchases. We do not agree that it was a significant deficiency not to have procedures in
             place to aggregate micro purchases, when there was no regulation or circular that required
             aggregation.

                      4.       Filing of information was complete and accurate. We agree that there were
Comment 36   some errors in reporting, but we do not agree that the reason was a lack of internal procedures.
Comment 37   HUD provided limited guidance in how to report the vendor payments and the job FTEs and many
             grantees were confused.




                                                  36
             Letter to Ronald J. Hosking
             January 6, 2014
             Page 17 of 17

                           COMMENTS TO SCHEDULE OF QUESTIONED COSTS (P. 20)

Comment 38   The schedule of questioned costs shows that only .3% of the questioned costs are considered to be
             “ineligible costs,” meaning the auditors believe those costs are not allowable by law. Those are the
             costs of safety meetings and hours not worked. The bulk of the questioned costs, 87.1% are
             identified as “unsupported costs.” The report explains that

                      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.

             That includes the costs not assigned to specific identified units, those paid without receiver’s
             reports, split purchases, and de minimus underpayments under Davis Bacon. The remaining 12.6%
             are identified as “unreasonable costs” and include the stored materials and payments above Davis
             Bacon.

                       We have responded to each of the costs in our comments. With 99.7% in costs identified
             as either “unsupported” or “unreasonable,” we anticipate there will be the opportunity to work with
             the HUD ONAP officials to address the issues we have raised in these comments and others as they
             arise. We have had a positive working relationship with the Regional HUD ONAP staff and we
             anticipate being able to work through these findings. Our comments are, of course, preliminary,
             because we either do not have the source information or we have not had the time yet to analyze it.
             We have been advised that in order to obtain a copy of the auditors’ working papers, we will need
             to submit a Freedom of Information Act (“FOIA”) request after the report is published.

                      We appreciate the opportunity to provide these comments.      If there are any questions, I
             may be reached at (509) 877-6171.
                                                                   Sincerely,

                                                                     William Picotte, Executive Director
                                                                     Yakama Nation Housing Authority




                                                    37
                 OIG Evaluation of Auditee Comments

Comment 1   The Authority stated that the report recognizes that the Yakama Nation
            exercises powers of self-government, but leaves out that Tribal self-
            determination is a guiding principle of NAHASDA. We agree that Tribal
            self-determination is a guiding principle within the constraints of
            NAHASDA.

Comment 2   The Authority believed our statement “As a result, it completed only 19 of
            60 planned units with its competitive grant” was an unfair characterization
            of the auditee’s performance, contradicted the facts, and should be
            removed from the report. We relied on the Authority’s original
            application, its final Recovery Act report submission as of September
            2012, and its 2011 annual performance plan in which it stated that it
            planned to repair up to 60 homes, and purchase up to 15 modular homes.
            Although the Authority provided a copy of the signed approval for the
            purchase of the 12 modular homes, there was not a signed amended
            application reducing the number of units to be repaired and the HUD
            approval did not mention the decrease in the number of planned units for
            rehabilitation. However, as a result of HUD's assertion that the reduction
            in the number of units to be rehabilitated was approved, we changed our
            effect to state that the Authority could not demonstrate that it spent $1.2
            million of grant funds on eligible housing activities.

Comment 3   The Authority believed our conclusion that “more homeowners could have
            benefited from the unreasonable pay for labor and unnecessary materials
            stored in [the YNHA] warehouse” is misleading and should be removed
            from the report because less than $7,000 in wages that was identified as
            “unreasonable” would not have covered even one additional unit. As a
            result of the auditee’s response and our discussions with HUD, we
            removed the unreasonable wages from the report. However, we also
            identified $177,000 in unnecessary materials that remained in inventory
            and could have been used to benefit eligible families.

Comment 4   Part 1000.28 of the Native American Housing And Self-Determination
            Act (NAHASDA) requires the Authority, as a self-governance Indian
            tribe, to have administrative requirements, standards and systems that
            meet or exceed the comparable requirements of 24 CFR 1000.26. This
            requires the Authority to meet requirements in 24 CFR 85.20, which
            requires grantees to maintain financial records that are accurate, current,
            and complete and that adequately identify the source and application of
            funds provided for assisted activities. It also requires financial
            information to be related to performance or productivity data, including
            the development of unit cost information whenever appropriate. The


                                     38
            Authority could not demonstrate that bulk materials purchased and labor
            paid with Recovery Act grant funds were used in the performance of the
            work and to benefit eligible units and recipients.

            In addition, Federal Regulations at 24 CFR 1000.156, as clarified by HUD
            Notice PIH 2010-47, maintains that the Authority, “…is responsible for
            ensuring that the amount of funds from all sources used to construct each
            unit does not exceed the TDC [total development cost] limits…” and that
            units that improperly exceed total development cost limits without
            appropriate HUD approval will not be considered to be “…affordable
            housing…” All Indian Housing Block Grant funds expended on such
            units will be disallowed. Consequently, it needs to know the amount of
            block grant funds that went into each unit to demonstrate that total
            development cost limits were not exceeded.

            Further, Section 205 (a)(2) of the NAHASDA requires each dwelling unit
            to remain affordable according to binding commitments for the remaining
            useful life of the property. The useful life restrictions in the binding
            commitments, according to HUD program guidance No. 2007-07, provide
            that the NAHASDA funds invested in a property be refunded, either in
            full, or as a prorated amount in the event of a default. Consequently, the
            Authority needs to know the amount of block grant funds that went into a
            specific unit to determine the amount to be refunded in the event of
            default.

            We modified the finding to include additional information and the
            additional criteria are now included in appendix C. In addition, we
            requested further documentation on the Authority’s calculation of total
            development costs and the useful life of the units it assisted with these
            grants, but it did not provide the support.

Comment 5   The Authority stated that we have not found any noncompliance with
            OMB Circular A-87, and that OMB Circular A-133 applies to audits of
            Indian Housing Block Grants and does not state that expenditures for
            affordable housing must be allocated to specific, individual units. It also
            stated that it complied with acceptable accounting practices by
            maintaining records which showed that the funds under each grant were
            applied to pay for materials, labor, and related costs incurred to carry out
            the award. Cost principles in 2 CFR 225 (OMB Circular A-87) state that,
            “only materials and supplies actually used for the performance of a
            Federal award may be charged as direct costs.” We did not dispute that
            the Authority complied with acceptable accounting practices. However,
            although the Authority stated that it maintained these records and applied
            the costs to the grants, the Authority could not demonstrate that it used the
            materials purchased and the labor charged on the eligible projects. This
            criterion was added to appendix A. Also, see Comment 4.


                                     39
Comment 6     Whether the construction industry accounts for its performance of work on
              a project using the percentage of completion method is irrelevant.
              According to 2 CFR 225 Appendix B, Selected Items of Cost, number 26,
              “…only materials and supplies actually used for the performance of a
              Federal award may be charged as a direct cost.” The Authority must show
              the materials were used in the performance of the award.

Comment 7     The Authority claimed that it had not had time to determine the basis for
              the $196,000 as it would take time to put together the documents that were
              pulled apart and reviewed by the auditor. The Authority’s documentation
              (purchase orders, invoices, checks, and timesheets) was contained in boxes
              it provided to the auditors. However, because the Authority’s filing
              system within these boxes was a challenge to work with, it was agreed that
              Authority staff would pull the documentation from those boxes and
              provide it to the auditors. Upon completion of the fieldwork, the auditors
              presented the documentation back to the Authority in the condition in
              which it had been received.

Comment 8     We did not take exception to documentation of delivery receipts as long as
              there was evidence that the Authority received the materials and goods in
              the correct quantity and quality. For example, a purchase order that was
              stamped, signed, and dated was considered acceptable. We found that use
              of only a vendor’s invoice was unacceptable to document receipt of the
              correct quantity and quality of materials since no one compared the
              vendor’s invoice to what was received.

Comment 9     Note the date specified in the report is July 19, 2013, not July 29, as stated
              in the response. The Authority purchased $38,366 of additional inventory
              after it stopped charging labor to the formula grant projects at the end of
              June 2011. Also, the Authority claimed that it purchased roofing materials
              in bulk to obtain the best price, but needed to reprogram some of the grant
              funds due to a fire so did not use all of these roofing materials. However,
              review of its accounting system showed the Authority purchased $21,360
              of roofing materials on March 16, 2011, and $22,800 on August 25, 2011.
              These purchases were made after the February 14, 2011 fire and after it
              knew that it was not going to repair as many homes as shown in its grant
              application. In addition, the second of these purchases was made after the
              Authority received approval of its amended grant application.

Comment 10 The Authority disagrees that time spent in safety meetings needed to be
           assigned to specific units. We rephrased the audit report to delete the
           wording, “…and was not allocated to particular units” in this instance
           because it detracted from the issue that these costs should not have been
           charged to the grant.



                                        40
Comment 11 The Authority stated that the report did not explain how we calculated the
           underpayment of the prevailing Davis Bacon wages, and that during the
           exit we stated that we used the March 2010 wage rates. We used the wage
           rates adopted by the Authority at the beginning of the grant period to test
           and recalculate the labor costs. We also corrected this amount to be $176
           as pointed out during the exit conference.

Comment 12 The timesheet in question showed 10.25 hours worked on the days in
           question, but 18 hours were entered into the system. When asked about
           the discrepancy, the Authority was not able to provide documentation to
           support this difference. If the Authority is now able to produce the
           documentation, it should work with HUD to resolve the recommendation.

Comment 13 The Authority stated that paying more than it was required to pay under
           Davis Bacon was not a violation of the law. We considered the
           Authority’s comment and removed this from the report because the Davis
           Bacon Act addresses the minimum wage rate, not the ceiling rate.

Comment 14 One employee told us he worked on administrative tasks such as typing up
           purchase orders and scope of work assessments as well as coordinating
           purchases for the supervisors by calling or faxing for bids, whichever
           means was called for in the particular circumstance. The other employee
           was no longer with the Authority at the time of our payroll review and was
           unavailable to be interviewed. However, although one employee
           described some activities he performed, the Authority did not provide
           documentation of the “other” work that was performed. The Authority
           needs to provide documentation to HUD for resolution.

              These costs were included in the unsupported costs in Recommendation
              1A and in the Schedule of Questioned costs.

Comment 15 The Authority’s policy requires that costs be charged to the “appropriate
           project” or “appropriate programs.” However, the Authority’s policy also
           states that an issue slip (requisition form) will be filled and transmitted
           weekly to the accountant. This slip includes detailed information for
           charging the costs to specific units such as the address of the unit, the
           workorder number, and the materials unit cost. This form was not always
           complete.

Comment 16 Although the Executive Director of the Authority held regular, weekly
           meetings with its managers and discussed the Recovery Act projects, the
           maintenance program manager said that no budgetary and expenditure
           reports were provided to the program managers for review to identify
           whether maintenance labor was incorrectly charged to Recovery Act
           grants and he was not aware that maintenance costs were charged to the
           grants.


                                      41
Comment 17 The Authority claimed that it would be a waste of resources for it to have
           to create specific per unit records for every cost and expenditure of funds
           under both of the grants. The Authority had already created and assigned
           accounting codes to each individual unit that it worked on in its
           accounting software as it had for the $3.5 million to which the audit did
           not take exception. It needed to do this to determine the remaining useful
           life of the property it assisted to comply with the criteria cited in comment
           4.

Comment 18 As stated in comment 4, “only materials and supplies actually used for the
           performance of a Federal award may be charged as direct costs.”
           Inventory held in the Authority’s warehouse has not been used for the
           performance of a Federal award. Further, the grants were completed about
           1 ½ years ago and all materials purchased should have been used on the
           projects at that time.

Comment 19 The Authority does not agree that if there is a reimbursement to be made
           for the maintenance staff meetings and maintenance operations, it should
           be from non-Federal funds. We rephrased the recommendation to state
           that the reimbursement should be made from the Authority’s operating
           account rather than from non-Federal funds.

Comment 20 The Authority stated a review of all other payroll charges would be
           overload; if a review is required, the scope should be on meetings the
           maintenance staff were paid to attend during the relevant period.
           Reviewing all payroll charged to the Recovery Act projects should
           identify any ineligible costs charged to the grants in addition to
           maintenance meetings. Also see comment 19.

Comment 21 We have rephrased the recommendation to delete the requirement that the
           restitution come from non-Federal funds because the Authority should
           have compensated the employees from its operating account.

Comment 22 We reviewed labor charges to two units rehabilitated with competitive
           grant funds. Of the 20 pay periods reviewed, the Authority made errors
           for multiple employees in 14 pay periods or 70 percent of the time. This
           was a pervasive problem on these units for this grant. Therefore, the
           Authority should be required to review all payments charged to the grants
           to determine whether additional wage restitution is owed.

Comment 23 After review of the auditee and HUD's comments, we removed this
           recommendation from the report because we are emphasizing that the
           costs should be attributed to the project.




                                       42
Comment 24 The Authority stated that it owns and operates its own warehouse, which
           can accommodate more than $5,000 of materials safely and securely. If
           this is against policy, then it may consider amending its policy. We
           quoted the policy and made the recommendation based on the policy that
           was in effect during the scope of the audit.

Comment 25 The Authority’s policy adopted the provisions of the HUD Office of
           Public and Indian Housing Notice 2009-14. Its policy states, “under no
           circumstances will a purchase be broken down into more than one action
           in order to meet the Micro Purchase threshold.” This is contradicted by
           the statement in the Authority’s policy, which states, “Single purchases for
           the purpose of this policy and procedure shall be considered to mean the
           total cost of one or more similar items to be obtained at any one time from
           a single source and listed on a single purchase order.” Consequently, by
           creating multiple purchase orders under $5,000 each, the Authority was
           able to circumvent the requirement for obtaining 3 price quotations.

Comment 26 Regulations at 24 CFR 85.36(b)(4) state, “Grantee…will provide for a
           review of proposed procurements to avoid purchase of unnecessary or
           duplicative items. Consideration should be given to consolidating or
           breaking out procurements to obtain a more economical purchase.” This
           criterion has been added to appendix C.

Comment 27 We agree that the purchases listed in appendix D if combined would still
           be under $10,000 even in aggregate. However, since they would be over
           $5,000, the Authority would have been required by its policy to obtain
           three quotations, documented in writing or by fax for each.

Comment 28 We identified specific evidence of splitting purchases. On June 1, 2010,
           the Authority obtained an estimate for storage containers from one vendor;
           one type of container at $3,995 and another type of container at $3,495
           with a $125 delivery fee. The Authority purchased two containers totaling
           $8,240 on two separate purchase orders on the same day; P10-7171 was
           for $4,120 and P10-7172 was for $4,120. The Authority did not obtain
           additional price quotes to obtain the best possible pricing. There was no
           documentation why the purchase was made on two separate purchase
           orders other than “…no bid required…”

              On July 12, 2010, the Authority obtained an estimate of $5,153.40 from
              one vendor for various construction supplies. The estimate shows a hand-
              drawn line and total about half way down, indicating the Authority split
              this estimate into two separate purchase orders, P10 7376 for $1,197.90,
              and P10 7377 for $3,955.70. These were separately invoiced on August 3,
              2010. This indicated that the split of the purchase was intentional.




                                      43
Comment 29 The Authority stated that it was not able to respond as to each of the
           procurement issues without more information. It also stated that there
           were many reasons it would make smaller purchases other than to avoid a
           phone procurement, and that purchase orders were prepared and submitted
           throughout the week. However, we noted that the purchase orders
           questioned were not only signed on the same day, but the purchase order
           dates were the same day or within one day. The Authority is correct that
           the audit did not find that the costs were unreasonable. We also did not
           find that the costs were reasonable and so we recommend that the
           Authority provide documentation supporting that it received the best value
           for the materials it purchased or reimburse HUD for the transmission to
           the U.S. Treasury from non-Federal funds for any amount that is not
           supported.

Comment 30 The Authority stated that it and its vendors had limited space to store bulk
           purchases, and that it was also not always possible to predict the materials
           that would be required for a repair. It also said it made some smaller
           purchases to help track some of the costs by unit and bought smaller
           purchases for many reasons, other than to avoid competition. We
           considered space as a reason the Authority made multiple purchases on the
           same day, but noted that the Authority purchased a total of 6 40-foot and 2
           20-foot standard container storage units in August, and September 2010,
           to store Recovery Act project materials. In addition, it made many
           purchases of less than $5,000 that if combined, would not have taken
           additional storage space since the purchases were made on the same day or
           within one day. Further, the Authority said that it, “…made some smaller
           purchases to help track some of the costs by unit,” but it did not identify
           the unit on these purchase orders. Finally, the Authority stated that it
           owns and operates its own warehouse, which can accommodate more than
           $5,000 of materials safely and securely (see comment 24).

Comment 31 The issue is not what the requirements are for purchases of less than
           $5,000, but that the Authority broke down purchases so that they would be
           less than $5,000. At this point, the Authority would be responsible for
           following its policy as stated in comments 24 and 25.

Comment 32 The Authority stated that the report assumed that the purchases were
           broken down for the purpose of avoiding competition and its policy does
           not prohibit breaking down purchase orders for other reasons. However,
           the Authority’s policy states that “under no circumstances will a purchase
           be broken down into more than one action in order to meet the Micro
           Purchase threshold.” The policy does not allow breaking down purchase
           orders for any reason. See comments 27 and 28.
Comment 33 These purchases were under $5,000 as a result of splitting them into
           multiple single purchases or not combining them. These purchases were


                                      44
              from the same vendor, on the same day, and in many cases in sequential
              order. It would have been prudent to create one purchase order and obtain
              quotes from multiple vendors to determine which would provide the best
              value.
Comment 34 The Authority stated that the difference between the $372,221 materials
           and the best value be clarified in the recommendations. We clarified in
           the exit conference that the recommended reimbursement would be the
           difference between the $372,221 paid for materials the Authority
           purchased and the documentation it is able to provide showing that it
           received the best value.
Comment 35 It is the Authority’s responsibility to work with HUD to determine how to
           document that it received the best value for the grant funds spent. See
           comments 27, 32, and 33.
Comment 36 The final submission of the Recovery Act reporting was for the quarter
           ending September 30, 2012. There were many previous filings, beginning
           in October 2009, during which the Authority could have updated its data
           to reflect accurate information.
Comment 37 The Authority was unable to provide documentation for determining how
           it arrived at the data it reported. The chief financial officer obtained the
           data verbally from a temporary project coordinator over the phone.
           Although guidance was not clear at the beginning, clarification was made
           throughout the grant period. In addition, if there had been documentation
           for review, it is possible that at least some of the mistakes would have
           been caught.
Comment 38 The Authority commented on the questioned costs stating that .3% was
           determined to be ineligible, 87.1% unsupported, and 12.6% unreasonable
           or unnecessary. Although only a small portion of the questioned costs
           were ineligible, the unsupported costs require supporting documentation to
           be eligible. Without that documentation, the costs are ineligible and need
           to be returned to HUD for transmission to the U.S. Treasury.




                                       45
Appendix C

                                         CRITERIA
Native American Housing Assistance and Self-Determination Act of 1996 Section 203 Program
Requirements (b) Maintenance and Efficient Operation
SEC. 203. (b) Maintenance and Efficient Operation – each recipient who owns or operates (or is
responsible for funding any entity that owns or operates) housing developed or operated pursuant
to a contract between the [HUD] Secretary and an Indian housing authority pursuant to the
United States Housing Act of 1937 shall, using amounts of any grants received under this Act,
reserve and use for operating assistance under section 202(1) such amounts as may be necessary
to provide for the continued maintenance and efficient operation of such housing.

Native American Housing Assistance and Self-Determination Act of 1996 Section 205 (a)(2) Low
Income Requirement and Income Targeting
(a) IN GENERAL.—Housing shall qualify as affordable housing for purposes of this Act only
if—(2) except for housing assisted under section 202 of the United States Housing Act of 1937
(as in effect before the date of the effectiveness of this Act), each dwelling unit in the housing
will remain affordable, according to binding commitments satisfactory to the Secretary, for the
remaining useful life of the property (as determined by the Secretary) without regard to the term
of the mortgage or to transfer of ownership, or for such other period that the Secretary
determines is the longest feasible period of time consistent with sound economics and the
purposes of this Act, except upon a foreclosure by a lender (or upon other transfer in lieu of
foreclosure) if such action—


2 CFR 225 (OMB Circular A-87) Appendix B 26 to Part 225 (26) c. Selected Items of Costs
(26) Materials and Supplies Costs
c. Only materials and supplies actually used for the performance of a Federal award may be
charged as direct costs.

24 CFR 85.20(b) Standards for Financial Management Systems
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
       must adequately safeguard all such property and must assure that it is used solely for
       authorized purposes.


                                                46
        (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.

24 CFR 85.36(b)(4) Procurement Standards
Grantee and subgrantee procedures will provide for a review of proposed procurements to avoid
purchase of unnecessary or duplicative items. Consideration should be given to consolidating or
breaking out procurements to obtain a more economical purchase. Where appropriate, an
analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to
determine the most economical approach.

24 CFR 85.36(d)1
If small purchase procedures are used, price quotations shall be obtained from an adequate
number of qualified sources. Small purchase procedures are those relatively simple and informal
procurement methods for securing services, supplies, or other property that do not cost more than
$100,000.

24 CFR 1000.26 What are the administrative requirements under NAHASDA?
(a) Except as addressed in §1000.28, recipients shall comply with the requirements and standards of OMB
Circular No. A–87, “Principles for Determining Costs Applicable to Grants and Contracts with State,
Local and Federally recognized Indian Tribal Governments,” and with the following sections of 24 CFR
part 85 “Uniform Administrative Requirements for Grants and Cooperative Agreements to State and
Local Governments.” For purposes of this part, “grantee” as defined in 24 CFR part 85 has the same
meaning as “recipient.”

24 CFR 1000.28 May a self-governance Indian tribe be exempted from the applicability of §1000.26?
Yes. A self-governance Indian tribe shall certify that its administrative requirements, standards and
systems meet or exceed the comparable requirements of §1000.26. For purposes of this section, a self-
governance Indian tribe is an Indian tribe that participates in tribal self-governance as authorized under
Public Law 93–638, as amended (25 U.S.C. 450 et seq. ).

24 CFR.1000.156 Is affordable housing developed, acquired, or assisted under the IHBG program subject
to limitations on cost or design standards?
Yes. Affordable housing must be of moderate design. For these purposes, moderate design is defined as
housing that is of a size and with amenities consistent with unassisted housing offered for sale in the
Indian tribe's general geographic area to buyers who are at or below the area median income. The local
determination of moderate design applies to all housing assisted under an affordable housing activity,
including development activities ( e.g., acquisition, new construction, reconstruction, moderate or
substantial rehabilitation of affordable housing and homebuyer assistance) and model activities.
Acquisition includes assistance to a family to buy housing. Units with the same number of bedrooms must
be comparable with respect to size, cost and amenities.

United States Office of Management and Budget Memorandum M-09-21 Section 2 – Basic
Principles and Requirements of Recovery Act Recipient Reporting



                                                     47
2.1 What recipient reporting is required in Section 1512 of the Recovery Act? Section 1512 of
the Recovery Act requires reports on the use of Recovery Act funding by recipients no later than
the 10th day after the end of each calendar quarter (beginning the quarter ending September 30,
2009) and for the Federal agency providing those funds to make the reports publicly available no
later than the 30th day after the end of that quarter. Aimed at providing transparency into the use
of these funds, the recipient reports are required to include the following detailed information:
     Total amount of funds received; and of that, the amount spent on projects and activities;
     A list of those projects and activities funded by name to include:
            o Description
            o Completion status
            o Estimates on jobs created or retained;
     Details on sub-awards and other payments.

Report United States Office of Management and Budget Memorandum M-09-21 Section 4 –
Data Quality Requirements

4.1 What is the scope of required data quality reviews?
Data quality (i.e., accuracy, completeness and timely reporting of information) reviews required by
this Guidance are intended to emphasize the avoidance of two key data problems -- material
omissions and significant reporting errors.

Significant reporting errors are defined as those instances where required data is not reported
accurately and such erroneous reporting results in significant risk that the public will be misled or
confused by the recipient report in question.

4.2 Who is responsible for the quality of data submitted under Section 1512 of the Recovery Act?
Data quality is an important responsibility of key stakeholders identified in the Recovery Act. Prime
recipients, as owners of the data submitted, have the principal responsibility for the quality of the
information submitted.

       Prime Recipient
            o Owns recipient data and sub-recipient data
            o Initiates appropriate data collection and reporting procedures to ensure that Section
               1512 reporting requirements are met in a timely and effective manner
            o Implements internal control measures as appropriate to ensure accurate and complete
               information
            o Performs data quality reviews for material omissions and/or significant reporting
               errors, making appropriate and timely corrections to prime recipient data and working
               with the designated sub-recipient to address any data quality issues



United States Office of Management and Budget Memorandum M-09-21 Section 5 – Reporting
on Jobs Creation Estimates by Recipients
5.2 What information are recipients covered by Section 1512 required to report? Recipients will
be required to report an aggregate number for the cumulative jobs created or retained for the
quarter in a separate numeric field.


                                                   48
The estimate of the number of jobs required by the Recovery Act should be expressed as “full-
time equivalents” (FTE), which is calculated as total hours worked in jobs created or retained
divided by the number of hours in a full-time schedule, as defined by the recipient (see Section
5.3 for more information). The FTE estimates must be reported cumulatively each calendar
quarter.

Housing and Urban Development Office of Native American Program Guidance No. 2007-07
Record of Use Restrictions: The Record of Use Restrictions is a form that can be used by
recipients to record both NAHASDA and other useful life/use restrictions. Restrictions can vary
both in how they are imposed and their length. Since recipients may have properties that are
subject to other use restrictions, this model reporting form is designed to be the registry of all of
the various use restrictions that are placed on recipient properties.

Binding Commitments: There are a number of different ways to place both NAHASDA and
other use restrictions on assisted properties. The four attached sample Useful Life/Use
Restriction Agreements can be used for this purpose. Whichever form is used, it must be
properly recorded with the appropriate land records offices. Additional use restrictions may be
imposed on such properties as long as they do not contradict the NAHASDA useful life
restrictions.

2.2 Recovery of Amounts Contributed by the Tribe. The Tribe has contributed through loan(s) or grant(s)
the sum of __________________ ($__________) to the Owner or Property and shall be entitled to
recover this amount in its entirety for any violation of the Land Restriction agreement during the Term of
the Land Restriction.

4.0 USEFUL LIFE.
4.1 Term of Land Restriction Should Meet HUD Requirements. NAHASDA requires that the Secretary of
the U.S. Department of Housing and Urban Development determine that the Property is minimally
restricted for a period of time acceptable to its Secretary, 25 U.S.C. § 4135(a)(2). In section 1.4 of this
Land Restriction agreement, a Term has been set for this Land Restriction and that Term should not be
less than what is acceptable to the Secretary of HUD based on the nature and the amount of IHBG funds
to this Property. The Tribe should ensure that a Land Restriction has been obtained for a Term that meets
HUD’s standards.

Housing and Urban Development Office of Native American Program Guidance No. 2009-07
In the formula program and competitive program, the provisions of Section 104(b) of the Native
American Housing Assistance and Self-Determination Act (NAHASDA), and 24 CFR
1000.16(b) govern the use of Recovery Act IHBG/NAHBG [Native American Housing Block
Grant] formula and competitive funds. In accordance with Section 104(b)(1) of NAHASDA,
Davis-Bacon applies to projects assisted with IHBG/NAHBG funds.

Housing and Urban Development Office of Public and Indian Housing Notice 2009-14
This Notice allows the Authority to adopt and implement the Micro Purchase Procurement
clause in its procurement policy for purchases of goods and services with a value of less than
$5,000. The intent of Micro Purchasing is to reduce the burden of complying with the federal
procurement process for goods and services of minimal cost. It also prohibits the Authority


                                                    49
breaking down requirements of a purchase for the purpose of bid splitting to avoid the
requirements that apply to larger purchases.

Housing and Urban Development Office of Native American Program Guidance No. 2010-47
The tribe/TDHE is responsible for ensuring that the amount of funds from all sources used to
construct each unit does not exceed the TDC limits. The tribe/TDHE must maintain records
showing that housing was developed in accordance with these limits and other applicable
NAHASDA requirements. Units that improperly exceed TDC limits without appropriate HUD
approval will not be deemed to be “affordable housing” and all IHBG funds expended on such
units will be disallowed.

Yakama Nation Housing Authority Financial Administration Policy
Accounting Records: The Authority must maintain records that adequately identify the source
and application of funds provided under IHBG [Indian Housing Block Grant].

Yakama Nation Housing Authority Financial Administration Policy
Inventory of Materials – the Authority shall only procure materials for a specific job or
purpose.…any extra materials shall be 1. returned to the supplier for credit, 2. sold as surplus 3.
inventoried at a central location, keeping the material safe and secure, provided that the material
can be used on other federally funded projects in the near future (the value of this material shall
not exceed $5,000), or 4. scrap the material.

Yakama Nation Housing Authority Property Accountability Policy
Part V, Section A.1(e), Issuing materials – charging the cost of materials and supplies to the
appropriate project for which the materials and supplies are being used is a primary goal of the
inventory system. An issue slip will be filled and transmitted to the Accountant. The
Accountant will charge the cost of issuance to the appropriate programs and prepare the
necessary journal entries to record the transaction.

Yakama Nation Housing Authority Procurement and Contract Administration Procedures
Part III, Section C, The Receiver’s Report – upon receipt of the goods, the receiver shall prepare
the Receiver's Report. The report should be signed and dated. Upon preparation, the receiver
should forward the original receiver’s report and the signed copy of the vendor’s delivery receipt
(if available) to the accounting office.

Yakama Nation Housing Authority Procurement and Contract Administration Procedures
Part V, Section F, Procurement of Less than $5,000 states that for small purchases of less than
$5,000, (except for contracts of $2,000 or more involving labor), only one price quote is
required, provided the quote is considered reasonable. Quotes may be obtained orally (either in
person or by telephone), by catalog, fax, or email. If the purchase is made for reasons other than
price, the file must clearly describe the reason for the purchase. Under no circumstances will a
purchase be broken down into more than one action in order to meet the Micro Purchase
threshold. The Micro Purchase must be documented by an authorized purchase order or contract.

Yakama Nation Housing Authority Procurement and Contract Administration Procedures



                                                50
Part IV, Section D.1. Definition of Single Purchases – single purchases for the purpose of this
policy and procedure shall be considered to mean the total cost of one or more similar items to be
obtained at any one time from a single source and listed on a single purchase order.




                                               51
Appendix D

        MULTIPLE PURCHASES FROM VENDORS


        Vendor A
        approval    Purchase
          date        order       Amount                   Items
                    P10-7376    $ 1,196.62    Trim molding
                    P10-7377       3,955.30   Sheetrock & plywood
         7/26/10
                    P10-7378       1,826.89   Drywall materials
                    Total (3)   $ 6,978.81
                    P10-7502    $ 4,528.49    Plumbing materials
         8/23/10    P10-7505       4,522.04   Painting materials
                    Total (2)   $ 9,050.53
                    P10-7619    $    489.90   Door locks
                    P10-7620         197.91   Drop cloths
         9/14/10                   4,577.90   Plumbing materials
                    P10-7621
                    Total (3)   $ 5,265.71
                    P11-7914    $ 3,175.36    Paint
                    P11-7915         313.80   Sheetrock
         11/22/10
                    P11-7919       1,611.63   Security fencing
                    Total (3)   $ 5,100.79
                    P11-8149    $ 4,377.85    Stock materials
                    P11-8153       3,284.73   Stock materials
         02/01/11
                    P11-8154       3,162.13   Stock materials
                    Total (3)   $ 10,824.71
                    P11-8190    $ 4,998.75    Stock materials
         02/11/11   P11-8198       1,782.00   Stock materials
                    Total (2)   $ 6,780.75
                    P11-8289    $ 2,692.80    Insulation
                    P11-8290       4,259.84   Paint sealer
         03/16/11
                    P11-8291       4,912.28   Paint & doors
                    Total (3)   $ 11,864.92
                    P11-8376    $ 3,622.21    Steps project materials
                    P11-8380       4,328.40   Doors & misc.
                    P11-8390       2,257.95   Stock materials
                    P11-8400       1,923.77   Stock materials
         04/12/11   P11-8401       3,344.33   Stock materials
                    P11-8402       3,445.33   Stock materials
                    P11-8408       4,347.27   Stock materials for windows
                    P11-8410         730.00   Stock materials and windows
                    Total (8)   $ 23,999.26



                                    52
Vendor A
approval   Purchase
  date       order       Amount                    Items
           P11-8442     $ 2,376.52    Windows, vents, doors & shelves
           P11-8445        2,623.32   Nails & screws
04/25/11
           P11-8446        2,638.62   Nails & screws
           Total (3)    $ 7,638.46
           P11-8454     $ 4,986.25    Doors
           P11-8458        1,081.20   Panels
04/28/11
           P11-8460        4,904.30   Windows
           Total (3)    $ 10,971.75
           P11-8472     $ 2,129.38    Stock materials
           P11-8473        2,373.30   Stock materials & sheet rock
           P11-8474        2,165.48   Caulk, toilet supplies & plywood
05/02/11   P11-8475        4,553.95   Stock materials, plywood
           P11-8476        4,073.89   Stock materials, caulk & tile
           P11-8477        3,213.48   Stock materials & insulation
           Total (6)    $ 18,509.46
           P11-8505     $ 2,682.57    Stock materials, toilets, closets
05/06/11   P11-8506        3,738.13   Stock materials, elbows & sinks
           Total (2)    $ 6,420.70
           P11-8565     $ 4,980.00    Stock materials & windows
           P11-8566        4,283.05   Stock materials & laminate
05/24/11   P11-8567        2,796.03   Stock materials, windows & trims
           P11-8568        3,253.00   Stock materials & windows
           Total (4)    $ 15,312.08
           P11-8595     $ 4,707.94    Materials
           P11-8601        2,629.80   Plywood
           P11-8603          439.05   Hammer tacker staples
06/06/11   P11-8604        2,961.28   Materials
           P11-8605        1,651.45   Materials for formula projects
           Total (5)    $ 12,389.52
           P11-8659     $ 4,860.69    Materials for formula projects
06/29/11   P11-8662        4,090.16
            Total (2)   $ 8,950.85
           P11-8691     $ 3,867.83    Windows, sheetrock & paint
           P11-8692        4,708.68   Plywood & trim
           P11-8694          877.23   Materials for formula projects
07/06/11
           P11-8696        2,695.06   Materials for formula projects
           Total (4)    $ 12,148.80

           P11-8795     $   4,792.91 Stock materials for formula
           P11-8796         4,756.51 projects
07/29/11   Total (2)    $   9,549.42



                             53
Vendor A
approval   Purchase
  date       order       Amount                    Items
           P11-8843    $  4,782.14   Plumbing materials
           P11-8844       4,735.20   Insulation
08/09/11
           P11-8845       2,333.99   Stock materials
           Total (3)   $ 11,851.33
           P11-8908    $ 4,914.00    Foundation materials
           P11-8909       4,953.00   Foundation materials
08/19/11   P11-8910       3,561.89   Foundation materials
           P11-8911       4,470.12   Foundation materials
           Total (4)   $ 17,899.01
           P11-8956    $ 3,860.66    Stock materials, plumbing &
           P11-8957       1,796.10   bathroom fixtures
09/07/11
           P11-8958       2,439.04
           Total (3)   $ 8,095.80
           P11-8991    $ 4,797.25    Restock materials & insulation
           P11-8992         395.18   Restock materials & insulation
09/01/11   P11-8993       1,286.04   Restock materials & insulation
           P11-8994       4,375.00   Restock materials & insulation
           Total (4)   $ 10,853.47
           P11-9005    $    276.83   Materials
           P11-9007       2,128.26   Restock
09/20/11
           P11-9011       4,803.99   Vinyl windows
           Total (3)   $ 7,209.08
05/18/12   P12-9776    $ 4,080.87    Materials
           P11-9777       4,143.65
           Total (2)   $ 8,224.52
           P12-9826    $ 3,229.25    Materials
           P12-9827       4,060.50
           P12-9828       3,488.43
06/04/12   P12-9829         872.25
           P12-9830       4,867.95
           P12-9831       2,301.98
           Total (6)   $ 18,820.36
           P12-9843    $ 4,366.43    Materials & restock materials
           P12-9844       2,193.31
           P12-9845       4,414.47
06/05/12   P12-9847       1,893.77
06/06/12   P12-9849       2,718.87
           P12-9850       1,770.76
           Total (6)   $ 17,357.61
           P12-9928    $ 4,452.90    Plumbing materials
07/05/12   P12-9929       3,573.16
           Total (2)   $ 8,026.06



                           54
Vendor A
approval   Purchase
  date       order       Amount                   Items
           P12-9965     $  4,900.74 Materials
           P12-9966        3,698.35
07/20/12
           P12-9967        4,122.99
           Total (3)    $ 12,722.08
           Total (94)   $302,815.84


Vendor B
approval   Purchase
  date       order       Amount                   Items
02/11/11   P11-8184     $ 4,097.91 Steel & electrical
02/10/11   P11-8185        2,597.40 Electrical
           Total (2)    $ 6,695.31
           P12-9902     $    657.85 Electrical materials
           P12-9903        2,608.48
06/26/12
           P12-9904        4,703.28
           Total (3)    $ 7,969.61
           Total (5)    $ 14,664.92


Vendor C
approval   Purchase
  date       order       Amount                 Items
           P11-8919     $ 4,990.00 Cabinets & granite counter tops
           P11-8920        4,990.00
           P11-8921        4,924.00
           P11-8922        4,818.00
08/26/11   P11-8923        4,568.00
           P11-8924        4,924.00
           P11-8926        4,924.00
           P11-8927        4,818.00
           Total (9)    $ 38,956.00


Vendor D
approval   Purchase
  date       order       Amount                  Items
           P11-8949     $ 2,992.17 Stock materials, plumbing &
09/02/11   P11-8950       3,227.42 bathroom fixtures
           Total (2)    $ 6,219.59




                            55
Vendor E
approval   Purchase
  date       order      Amount                   Items
           P11-9013     $ 4,620.50 Stock materials
09/20/11   P11-9014       4,944.50 Stock materials
           Total (2)   $ 9,564.50




                            56