oversight

The Muscogee (Creek) Nation, Okmulgee, OK, Did Not Always Comply With HUD Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-07-08.

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

               Muscogee (Creek) Nation,
                   Okmulgee, OK
               Indian Housing Block Grant Program




Office of Audit, Region 6        Audit Report Number: 2016-FW-1003
Fort Worth, TX                                          July 8, 2016
To:            Wayne Sims,
               Administrator, Southern Plains Office of Native American Programs, 6IPI

               //signed//
From:          William W. Nixon,
               Acting Regional Inspector General for Audit, 6AGA
Subject:       The Muscogee (Creek) Nation, Okmulgee, OK, Did Not Always Comply With
               HUD Requirements


Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) results of our review of the Muscogee (Creek) Nation’s Indian Housing Block
Grant funds.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at
817-978-9309.
                    Audit Report Number: 2016-FW-1003
                    Date: July 8, 2016

                    The Muscogee (Creek) Nation, Okmulgee, OK, Did Not Always Comply With
                    HUD Requirements




Highlights

What We Audited and Why
We audited the Muscogee (Creek) Nation’s use of U.S. Department of Housing and Urban
Development (HUD) funds in accordance with the Office of Inspector General’s goal to ensure
the integrity and soundness of HUD’s Public and Indian Housing programs and to follow up on
weaknesses identified in other reviews. The audit objective was to determine whether the Nation
complied with HUD requirements when it housed families and procured contracts under its
Indian Housing Block Grant program.

What We Found
The Nation did not (1) obtain HUD’s approval to lease to a non-low-income family, (2) charge
the non-low-income family the proper amount of rent, (3) require a participant to recertify her
income and family composition, (4) require a manager to remove herself from a conflict of
interest situation, (5) support the fairness and reasonableness of its contracts, (6) have complete
procurement documents, (7) include mandatory clauses in its procurement contracts, (8) collect
sufficient income information for one participant, and (9) maintain supporting documents for two
housing inspections. These conditions occurred because the Nation’s staff did not follow its or
HUD’s requirements. In addition, the Nation’s payments and rents policy did not comply with
Federal regulations. As a result, it could not ensure that it used Indian Housing Block Grant
funds to provide safe, efficient, and affordable housing to its eligible citizens. These deficiencies
resulted in more than $219,000 in questionable expenditures.

What We Recommend
We recommend that the Administrator of the Southern Plains Office of Native American
Programs require the Nation to (1) repay $120,581 to its Indian Housing Block Grant program,
from non-Federal funds, for housing not approved by HUD, (2) support or repay $13,878 in
uncollected rent to its Indian Housing Block Grant program from non-Federal funds, (3) revise
its payments and rents policy to prevent undercharging rent, and (4) support or repay to its Indian
Housing Block Grant program, from non-Federal funds, $85,380 spent on questionable
procurements. Further, we recommend that the Nation improve its controls over recertification
of participants and inspections of homes and revise its contracts and leases.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: The Nation Did Not Always Follow Federal Requirements and Its Own
         Policies ................................................................................................................................ 4

Scope and Methodology .........................................................................................10

Internal Controls ....................................................................................................12

Appendixes ..............................................................................................................13
         A. Schedule of Questioned Costs and Funds To Be Put to Better Use ...................... 13

         B. Auditee Comments and OIG’s Evaluation ............................................................. 14




                                                                       2
Background and Objective
The Muscogee (Creek) Nation is a Federally recognized Indian tribe. Since 1867, the Nation has
continued its constitutional organization of three branches 1 with distinct separation of power. The
executive branch oversees the daily operations of the tribe. The Principal Chief appoints the
Nation’s Secretary of Housing, who governs the Nation’s housing division. The Nation established
its housing division in 1965. Its mission is to provide safe, efficient, and affordable housing to
eligible citizens. It provides housing opportunities through its rental, home ownership, and
emergency home repair programs.

Under the Native American Housing Assistance and Self-Determination Act of 1996,2 the U.S.
Department of Housing and Urban Development (HUD) provides Indian Housing Block Grants for
Indian tribes to develop and operate low-income housing programs. These formula grants assist the
Nation in designing, implementing, and administering its housing programs.

Table 1 shows the Indian Housing Block Grant financial assistance that HUD authorized for the
Nation during the review period.

       Table 1: Indian Housing Block Grant awards for fiscal years reviewed
                    Year awarded                         Grant amount
                        2013                               $13,736,974
                        2014                                14,927,912
                        2015                                14,989,805
                        Total                               43,654,691

The audit objective was to determine whether the Nation complied with HUD requirements
when it housed families and procured contracts under its Indian Housing Block Grant program.




1
    Executive, judicial, and legislative
2
    Regulations at 25 U.S.C. (United States Code) Section 4101 et seq.



                                                         3
Results of Audit

Finding: The Nation Did Not Always Follow Federal Requirements
and Its Own Policies
The Muscogee (Creek) Nation did not (1) obtain HUD’s approval to lease to a non-low-income
family, (2) charge the non-low-income family the proper amount of rent, (3) require a participant
to recertify her income and family composition, (4) require a manager to remove herself from a
conflict of interest situation, (5) support that its contracts were fair and reasonable, (6) have
complete procurement documents, (7) include mandatory clauses in its procurement contracts,
(8) collect sufficient income information for one participant, and (9) maintain supporting
documents for two housing inspections. These conditions occurred because the Nation’s staff
members did not follow its or HUD’s requirements. In addition, the Nation’s payments and rents
policy did not comply with Federal regulations. As a result, it could not ensure that it used
Indian Housing Block Grant funds to provide safe, efficient, and affordable housing to its
eligible citizens. These deficiencies resulted in more than $219,000 in questionable
expenditures. 3

The Nation Did Not Get HUD’s Approval To Lease to a Non-Low-Income Family

The Nation entered into a lease with option to purchase agreement with a family whose income
exceeded the median income without HUD approval. 4 This noncompliant action occurred because
the Nation waived its requirements. As a result, it incurred $120,581 in ineligible expenditures.

The Nation’s lease with option to purchase program allowed low-income participants to purchase
their own homes. The Nation could use grant funds to provide housing assistance to families with
income that exceeded the median income with HUD approval. 5

In April 2010, the Nation spent $150,8356 to purchase and repair a home for a low-income
participant under a lease purchase agreement.7 In February 2014, the Nation waived its
requirements and let the participant transfer the home to his nephew, whose annual income of
$86,357 exceeded the median income ($51,520) for a family of two. Since it did not obtain HUD’s
approval for this transfer, the $120,581 Indian Housing Block Grant funds spent on the property
were ineligible.




3
    $120,581 housing not approved by HUD, $13,878 uncollected rent, and $85,380 questionable procurements
4
    Regulations at 24 CFR 1000.110(c) required HUD approval for this agreement.
5
    Regulations at 24 CFR 1000.110(c)
6
    Consisting of $120,581 Indian Housing Block grant funds and $30,254 program income
7
    The Nation amortized the $150,835 loan amount for 25 years with a $1,007 monthly payment.



                                                      4
The Nation Did Not Charge the Proper Amount of Rent to a Non-Low-Income Family

The Nation did not require a non-low-income family to pay market rent under a lease purchase
agreement. Under Federal regulations, the Nation needed to use a specific formula to calculate rent,
not to exceed market rent.8 Instead, it charged the family its maximum rent of only $350 each
month for 20 months.9 This occurred because the Nation’s payments and rents policy did not
comply with Federal requirements, 10 which resulted in collecting $13,87811 less in rent than was due
from the family. Additionally, it could save $7,88012 during the next year by complying with the
Federal rent requirements for non-low-income families.

The Nation Did Not Take Corrective Action When a Participant Did Not Recertify as Required

The Nation did not take corrective action when a participant did not recertify during 2014 and
2015 as required by its policy. 13 As a result, the participant did not provide required employment
and family composition information when her employment changed. In addition, the Nation did
not know whether the participant was living in the home. Immediately after the violations
occurred, the Nation failed to prepare a required corrective action plan. This condition occurred
because the Nation’s housing management department did not have procedures for following up
on participants that did not recertify. Further, the lease agreement did not state that the
participant must use the home as a principal residence. As a result, the Nation did not know
whether it had accurate income and family composition to calculate and collect the proper
amount of rent. If the Nation continued to disregard its recertification requirements for this
participant, she would only pay $6,000 for this $56,700 home according to her 5-year agreement.

The Nation Allowed a Manager To Remain in a Conflict of Interest Situation Resulting in an
Improper Lease Agreement

A former manager in the housing management department did not disclose or recuse herself from
managing her brother’s lease agreement with the Nation despite HUD regulations. 14 The former
manager notarized and approved documents contained in the participant’s file while representing
the Nation. In fact, she allowed her sister-in-law to violate the agreement without any
consequences. After the sister-in-law notified the department that she and one son moved out of
the home, 15 the department did not remove her from the lease purchase agreement. Further, the
former manager, who was a housing counselor at the time, did not require her brother, the other
leaseholder, to include the sister-in-law’s income in the family income. Contrary to Federal


8
     Regulations at 24 CFR 1000.110(d)(1)
9
     The Nation’s policy set the maximum monthly rent for this three-bedroom home at $350.
10
     Regulations at 24 CFR 1000.110(d)(1) required a specific calculation for the minimum monthly rent.
11
     This market rent was less than the rent calculated at 30 percent of adjusted monthly income.
12
     Twelve times the difference between the $1,006.70 monthly loan payment and the $350 monthly rent collected
13
     Tribal Resolution 14-103, Program Eligibility, Admissions, and Occupancy Policy, required participants to
     recertify annually and whenever employment or family composition changed.
14
     Regulations at 24 CFR 1000.30 required the Nation to disclose publically the nature of the assistance involving
     the former manager and to notify HUD.
15
     The former manager notarized the written notification.



                                                          5
regulations, 16 the Nation did not notify HUD of the situation. Because the former manager
managed her brother’s agreement with the Nation, she retained benefits for her family, including
herself. The lease agreement listed her as the guardian of her nephew who was the successor
under the agreement upon the participants’ death, incapacity, or divorce.

The Nation Did Not Support That Its Contracts Were Fair and Reasonable

The Nation did not support that four of its contracts were fair and reasonable as required. 17 The
contracts were between 33 and 79 percent greater than the Nation’s independent cost estimates.
This condition occurred because the Nation did not have procedures to document that it justified
contracts that significantly exceeded its independent cost estimates. Therefore, the Nation spent
$47,225 for unsupported construction costs.
Table 2 shows the contracts that significantly exceeded the independent cost estimates with no
sufficient price analyses in the files.

Table 2: Contracts exceeding independent cost estimates

                                                                      Amount               Percentage
                                                                      contract             contract
         Contract             Contract            Estimated           exceeded             exceeded
         number               amount              amount              estimate             estimate
         2014-013             $ 37,050            $ 27,800            $ 9,250              33%
         2014-023             101,000               76,200              24,800             33%
         2015-022               16,100              11,825               4,275             36%
         2015-027               20,200              11,300               8,900             79%
         Total                                                          47,225


When the Nation received proposals that were significantly greater than its independent cost
estimates, it should have performed additional price analyses or included information in the
contract files to explain the differences between the contract prices and the estimated costs.
For one contract, the Nation estimated a construction cost of $76,200 and appropriately used
small purchase procedures for procuring the contract. The contract files showed four proposals.
The Nation accepted the lowest proposal of $101,000, which increased to $109,100 because of
unforeseen repairs. However, the Nation did not perform a full price analysis as required by 24
CFR 85.36. 18 As a result, the documents in the contract file did not show why the contract,
which was the lowest proposal, exceeded the Nation’s $76,200 cost estimate by 33 percent.
Three other contracts were between 33 and 79 percent greater than the Nation’s estimates as
well. Since the Nation did not determine why the excessive differences existed between the
rewarded contracts and its estimates, it may have incurred $47,225 in unreasonable expenditures.


16
     Regulations at 24 CFR 1000.30
17
     Regulations at 24 CFR 85.36(f)(1) required the Nation to support that its contract prices were reasonable.
18
     HUD guidelines and Federal Acquisition Regulations offered various techniques of price analyses.



                                                           6
The Nation’s Procurement Files Were Incomplete

The Nation’s procurement files were not all complete and it had to search its records to provide
required documents. For example, files did not include selection of procurement method,
independent cost estimates, and information related to the bidding process. The Nation located
these missing documents outside the procurement files; however, it could not locate required
price quotations 19 for a $38,155 contract. 20 HUD required complete and accurate records to
support that the Nation appropriately spent Federal funds. It also required the Nation to manage
its contracts so that it had essential documents to support its procurements 21 for at least 3 years. 22
However, the Nation did not maintain the integrity of its contract files because it lacked a
comprehensive system to ensure contract file completeness and proper ordering of file contents.
The Nation’s Procurement Contracts Omitted Most Mandatory Clauses

The Nation’s procurement contracts omitted most contract clauses required by Federal
regulations 23 and the Nation’s procurement policy. 24 This condition occurred because the
Nation’s contract management procedures did not include steps to ensure that its contracts
included required clauses that would protect the rights of the Nation and ensure compliance with
Federal laws. Although omission of these clauses did not result in noticeable adverse effects,
failure to include these items violated requirements and could negatively affect the Nation.
One Housing Management Department File Did Not Contain Sufficient Income Information

A housing counselor disregarded Federal requirements 25 and the Nation’s own policy 26 by not
requiring a participant 27 to complete an unemployment statement before entering into a lease.
The participant’s file contained a checklist which showed that the counselor had requested a
notarized unemployment statement before occupancy. However, the participant did not sign an
unemployment statement. This condition occurred because the Nation did not have procedures
in place to conduct and document income verifications. Since the manager did not follow up on
requested documents, the Nation could not support that the housing management department had
procedures to ensure that it received all required documents and that its staff used all its
resources to correctly calculate the rent.




19
     Regulations at 24 CFR 85.36(d)(1)
20
     Contract 2015-003
21
     Regulations at 24 CFR 1000.502 required the Nation to ensure that it complied with applicable Federal
     regulations.
22
     Regulations at 24 CFR 1000.552
23
     Section 3 of the HUD Act of 1968 and 24 CFR 85.36(i) list provisions that the Nation must include in its
     contracts to protect the Nation’s rights and to ensure compliance with Federal laws.
24
     Tribal Resolution 06-128, Section 14C
25
     Regulations at 24 CFR 1000.128 required the Nation to verify income.
26
     Tribal Resolution 14-103, Part One, Section III.C required the Nation to keep complete and accurate
     verification records.
27
     Participant account number N-100-1011-01



                                                          7
The Housing Management Department Could Not Support That It Conducted Required Housing
Inspections

The Nation could not support that it conducted required move-in inspections for two of seven
leases reviewed. 28 The Nation said that the participants signed the inspection reports but could
not provide the inspection records. This condition occurred because the Nation did not have
controls in place to conduct and document move-in inspections for every lease with option to
purchase home. Because of these errors, the Nation could not support that it used Indian
Housing Block Grant funds to provide two homes that were decent, safe, and sanitary. 29 The
Nation stated that it has since implemented a new process for its housing management counselors
to keep files open until completed at move-in.

Conclusion
The Nation did not obtain HUD approval for leasing a home to a non-low-income family and
then charged the family improper rents. It also allowed two families to violate their agreements
without taking action. Additionally, its housing manager worked directly with relatives to retain
a lease agreement and inappropriately lower their rents. Further, the Nation did not always
procure contracts as required and did not include required clauses in its contracts. In addition,
one counselor did not require a participant to complete an unemployment statement and the
housing management department did not keep inspection documents in two of seven
participants’ files. These conditions occurred because the Nation’s staff members did not follow
its or HUD’s requirements. In addition, the Nation’s payments and rents policy did not comply
with Federal regulations. Because of these conditions, the Nation had more than $219,000 in
questionable expenditures.
Recommendations
We recommend that the Administrator of the Southern Plains Office of Native American
Programs require the Nation to

         1A.      Repay its Indian Housing Block Grant program, from non-Federal funds,
                  $120,581 spent on the home leased to a non-low-income family. 30
         1B.      Support or repay its Indian Housing Block Grant program, from non-Federal
                  funds, $13,878 in rents not collected.
         1C.      Revise its payments and rents policy regarding minimum rental payments to
                  comply with 24 CFR 1000, which would save at least $7,880 during the next year.




28
     Participant account numbers LP-048-4344-02 and N-103-1038-01
29
     Regulations at 24 CFR 1000 required the Nation to provide housing that was decent, safe, and sanitary.
30
     Participant account number N-091-9147-01



                                                          8
         1D.     Require the participant who did not recertify 31 to enter into a corrective action
                 plan to provide income and occupancy information for 2014 through 2016 and
                 verify whether she owes the Nation for unreported income or reduced family
                 composition. If she refuses to enter into or comply with the plan, terminate the
                 lease agreement according to the agreement’s requirements.
         1E.     Provide support that it has improved its controls over recertification of
                 participants.
         1F.     Revise its lease with option to purchase agreements to include a requirement for
                 participants to use the property as a principal residence during the contract term.
         1G.     Provide support that it has relinquished the sister-in-law's 32 rights as a potential
                 homebuyer, if she no longer lives there, or retroactively included her and the
                 eldest son’s income in the family income when calculating the monthly rental
                 payments and amounts owed.
         1H.     Support or repay $47,225, 33 from non-Federal funds, to its Indian Housing Block
                 Grant program for contracts that exceeded the Nation’s independent cost
                 estimates.
         1I.     Provide support that it has instituted procedures to document that contracts with
                 winning proposals are reasonable when they are significantly more than the
                 independent cost estimates.
         1J.     Support or repay $38,155, 34 from non-Federal funds, to its Indian Housing Block
                 Grant program for a contract file that did not have price quotations to support full
                 and open competition.
         1K.     Provide support that it has controls in place to ensure contract files are complete
                 including developing procedures for personnel to complete a contents document
                 for every contract file to note inclusion of the required documents for a more
                 efficient contract file system with supervisory approval.
         1L.     Amend its procurement contracts to include all required clauses on a prospective
                 basis.
         1M.     Provide support that it has controls in place to conduct and document income
                 verifications.
         1N.     Provide support that it has controls in place to ensure that members of its staff
                 conduct and document move-in inspections for every lease with option to
                 purchase home.


31
     Participant account number LP-057-5060-02
32
     Participant account number N-083-8321-01
33
     Contracts 2014-013, 2014-023, 2015-022, and 2015-027
34
     Contract 2015-003



                                                      9
Scope and Methodology
We conducted the audit at the Nation’s office at 2951 N. Wood Drive, Okmulgee, OK, and our
offices in Fort Worth, TX, and Oklahoma City, OK, from October 2015 to February 2016. The
review scope was from October 1, 2013, to September 30, 2015.

To achieve our objective, we
• Reviewed relevant laws, regulations, and other HUD requirements,
• Reviewed the Nation’s procurement and eligibility, admissions, and occupancy policies,
• Reviewed the independent public accountant audit report for the Nation’s fiscal year ended
   September 30, 2014,
• Reviewed HUD’s fiscal year 2013 monitoring review report of the Nation,
• Interviewed responsible HUD and Nation officials, and
• Reviewed and tested available electronic financial data and determined that it was sufficient
   for selecting samples.

We also selected and reviewed samples whose findings we did not plan to project to the
unproved universe as follows.

We selected and reviewed a nonstatistical sample of 9 of 385 (2 percent) files for housing
participants that either may be related to officials or employees or had identity of interest
concerns, which we considered high risk. The Nation had specific concerns about two
participants and gave us information on another two participants that were related to the housing
management department manager. The remaining five were possibly related to the Nation’s
officials and staff members.

Using the Nation’s contract logs, we selected and reviewed a nonstatistical sample of 34 of 70
(49 percent) contracts that totaled $1,178,615 of $2,102,416 (56 percent). The selection included
all contracts more than $50,000 and contracts whose change orders were more than 10 percent of
the original contracts. Additionally, we selected groups of contracts with the same contractors
and similar locations that could be split bids. We reviewed 20 contracts to determine compliance
with requirements. We reviewed the remaining 14 contracts for evidence of split bids.

We selected and reviewed a nonstatistical sample of 7 of 68 (10 percent) single-family homes
leased by the Nation. Using the Nation’s lists of housing participants, we included only those
participants whose move-in dates fell within the audit scope. We did not evaluate the reliability
of the Nation’s housing lists because we used them for sample selection only. We obtained a
random sample for the selected participants because we were determining what types of errors
existed and did not plan to project findings to the universe. We reviewed the selected sample for
compliance with the Nation’s eligibility, admissions, and occupancy policies.




                                                10
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               11
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 objective:

•   Policies and procedures in place intended to ensure that the Nation properly administered its
    HUD-funded procurement and housing programs in compliance with HUD requirements.
•   Policies and procedures in place intended to ensure that the Nation’s resource use was
    consistent with laws and regulation.
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.
We evaluated internal controls related to the audit objective in accordance with generally
accepted government auditing standards. Our evaluation of internal controls was not designed to
provide assurance regarding the effectiveness of the internal control structure as a whole.
Accordingly, we do not express an opinion on the effectiveness of the Nation’s internal control.




                                                  12
Appendixes

Appendix A


          Schedule of Questioned Costs and Funds To Be Put to Better Use
        Recommendation                                    Funds to be put
                           Ineligible 1/ Unsupported 2/    to better use 3/
            number
                1A            $120,581
                1B                                 $13,878
                1C                                                    $7,880
                1H                                  47,225
                1J                                  38,155

              Totals           120,581             99,258              7,880



1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.
2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.
3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include costs not incurred by implementing recommended
     improvements. In this instance, the Nation will realize cost savings of $7,880 in the next
     12 months by requiring a participant to pay the correct rent amount.




                                              13
Appendix B
             Auditee Comments and OIG’s Evaluation




              Auditee Comments




                               14
Ref to OIG   Auditee Comments
Evaluation




Comment 1



Comment 2


Comment 1



Comment 3


Comment 1
Comment 4
Comment 5

Comment 6



Comment 7




                            15
Ref to OIG   Auditee Comments
Evaluation




Comment 7




Comment 8




Comment 9

Comment 10




                            16
Ref to OIG   Auditee Comments
Evaluation




Comment 11



Comment 1




                            17
                         OIG Evaluation of Auditee Comments


Comment 1   We appreciate that the Nation has agreed to improve its policies and procedures,
            including training its staff. The Nation will need to provide supporting
            documentation to HUD that it implemented the policies and procedures to close
            the recommendation.
Comment 2   The Nation believes it should repay only a prorated amount of the purchase and
            repair costs for the home since an eligible participant lived in the home before the
            ineligible participant. While the Nation’s position may be reasonable, HUD will
            need to decide whether proration of the $120,581 that the Nation spent on the
            home is acceptable to address the deficiency.
Comment 3   The Nation believes that since it will repay the cost (prorated) of the home that it
            no longer is responsible for the uncollected rent. We maintain our position that
            the Nation should repay these funds. The Nation used program funds to purchase
            and repair the home, which was subject to 24 CFR 1000.110, and should have
            collected the rents in accordance with the requirements.
Comment 4   The Nation responded that the participant recently recertified. However, it did not
            provide sufficient documents to support the recent recertification. Further, it did
            not provide the necessary documents to address whether the participant entered
            into a corrective action plan to provide income and occupancy information for
            2014 and 2015. In addition, it did not provide information on whether the
            participant owed the Nation for unreported income or reduced family
            composition. The Nation will need to provide supporting documentation to HUD
            to close the recommendation.
Comment 5   We appreciate that the Nation has agreed to update its lease with option to
            purchase agreement. The Nation will need to implement its updated lease
            agreement and submit supporting documentation to HUD to close the
            recommendation.
Comment 6   While we appreciate the Nation’s actions to implement procedures, it did not
            address the recommendation that it provide support that it has relinquished the
            participant’s rights as a potential homebuyer, if she no longer lives there, or
            retroactively included her and the eldest son’s income in the family income when
            calculating the monthly rental payments and amounts owed. The Nation will
            need to provide supporting documentation to HUD to close the recommendation.




                                              18
                           OIG Evaluation of Auditee Comments


Comment 7     The Nation believed that the bids justified the price and that it performed an
              independent cost estimate. We maintain our position.
              The purpose of independent cost estimates is to determine whether the
              contractors’ bids are reasonable. When bids are significantly greater (30 percent
              or more in this instance) than the independent cost estimates, the bids do not
              appear reasonable or assumptions used for the independent cost estimates seem
              incorrect. As a result, the Nation should have analyzed the differences and
              included their analyses in the contract files rather than assumed that the bids were
              fair and reasonable because they were comparable to each other. These actions
              ignore the independent cost estimate that the Nation performed. As discussed in
              the report, the Nation did not have support to explain the significant differences
              between its independent cost estimates and the awarded contracts.
Comment 8     The Nation needs to provide supporting documentation to HUD that it performed
              full and open competition for this contract to close the recommendation.
Comment 9     We appreciate that the Nation has agreed to improve its policies and procedures.
              However, the provided attachment did not include a space for supervisory
              approval. The Nation will need to provide support to HUD that it has
              implemented the policies and procedures to close the recommendation.
Comment 10 We appreciate that the Nation has agreed to implement a contract attachment to
           include the required clauses. While most required clauses were added to the
           contract attachment example provided, the attachment did not include the
           retention clause required by 24 CFR 85.36(i)(11). The Nation needs to provide
           supporting documentation to HUD to close this recommendation.
Comment 11 We appreciate that the Nation has agreed to correct the deficiency and improve its
           policies and procedures. The Nation will need to provide supporting
           documentation to HUD to close the recommendation.




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