Office of Native American Programs,
Washington, DC
Indian Housing Block Grant Program
Office of Audit, Region 9 Audit Report Number: 2018-LA-0002
Los Angeles, CA May 7, 2018
To: Heidi J. Frechette, Deputy Assistant Secretary, Office of Native American
Programs, PN
//SIGNED//
From: Tanya E. Schulze, Regional Inspector General for Audit, 9DGA
Subject: HUD Did Not Have Adequate Controls To Ensure That Grantees Submitted
Accurate Tribal Enrollment Numbers for Program Funding
Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of HUD’s Office of Native American Programs’
Indian Housing Block Grant program.
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 website. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at 213-
534-2471.
Audit Report Number: 2018-LA-0002
Date: May 7, 2018
HUD Did Not Have Adequate Controls To Ensure That Grantees Submitted
Accurate Tribal Enrollment Numbers for Program Funding
Highlights
What We Audited and Why
We audited the U.S. Department of Housing and Urban Development’s (HUD) Office of Native
American Programs’ Indian Housing Block Grant program. We selected the program based on
the results of a previous audit (audit report 2017-LA-1007) and concerns about the accuracy and
completeness of tribal enrollment numbers that HUD used to allocate program funds to eligible
Native American grantees. Our audit objective was to determine whether HUD ensured the
accuracy of tribal enrollment numbers submitted by registered Native American tribes or their
tribally designated housing entities.
What We Found
HUD did not ensure that grantees submitted accurate tribal enrollment numbers to support their
allocated portion of program funding for fiscal years 2015, 2016, and 2017. We attributed this
condition to weaknesses in HUD’s internal control environment, which included the lack of
written policies and procedures and inadequate reporting requirements. As a result, there was an
increased overall risk that more than $1.9 billion in program funding awarded to 377 grantees
may not have been properly allocated. Additionally, the increased risk could result in grantees’
receiving more or fewer program funds than they are entitled to receive to address the housing
needs within the Native American community.
What We Recommend
We recommend that the Deputy Assistant Secretary of the Office of Native American Programs
(1) update the program’s information collection requirements on form HUD-4117 to ensure that
grantees report annually, (2) revise form HUD-4117 to include certification and false claim
statements to hold grantees responsible for the accurate reporting of tribal enrollment numbers,
(3) develop and implement policies and procedures that would assist in the formal challenging of
grantees’ reporting of tribal enrollment numbers, and (4) issue guidance to grantees on
procedures to ensure the accurate reporting of tribal enrollment numbers.
Table of Contents
Background and Objective .................................................................................. 3
Results of Audit .................................................................................................... 5
Finding: HUD Did Not Have Adequate Controls To Ensure That Grantees
Submitted Accurate Tribal Enrollment Numbers for Program Funding ...................5
Scope and Methodology ......................................................................................10
Internal Controls ................................................................................................11
Appendixes ..........................................................................................................12
A. Auditee Comments and OIG’s Evaluation ...........................................................12
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Background and Objective
The U.S. Department of Housing and Urban Development’s (HUD) Office of Native American
Programs administers housing and community development programs, including the Indian
Housing Block Grant program, for the benefit of American Indians and Alaska Native
governments, tribal members, the Department of Hawaiian Home Lands, and Native Hawaiian
and other Native American organizations. HUD’s mission is to increase the supply of safe,
decent, and affordable housing to Native American families; strengthen communities by
improving living conditions and creating economic opportunities for tribes and Indian housing
residents; and ensure fiscal integrity in the operation of the program it administers. For fiscal
years 2015, 2016, and 2017, HUD awarded 377 grantees more than $1.9 billion in program
funding.
The program is a formula grant that provides a range of affordable housing activities on Native
American reservations and areas. The program Formula Service Center (Formula Center)
administers the formula. The Formula Center’s work includes the review and verification of
information used in computing the annual program formula allocations, running and maintaining
the formula in accordance with applicable requirements, and providing information related to the
annual allocations to program grantees.
The Formula Center uses tribal enrollment numbers to determine tribal population and then
calculate and formulate the allocation of program funds; therefore, variances in tribal enrollment
numbers can impact grantees’ allocated program funds. Due to the structure of the formula,
changes in tribal enrollment numbers only impact program funding when changes are significant.
The formula relies on Census data to determine the American Indian and Alaska Native
population in a tribe’s formula area. Tribal enrollment data is used to verify the Census
population data, as grantees may not be providing extensive services to non-tribal members who
reside in their formula areas. Under the formula, if the Census population data is more than two
times the tribal enrollment, the population data is capped at twice the tribal enrollment as stated
in HUD regulations at 24 CFR 1000.302 Formula Area (5). The audit universe included 79
grantees that were population capped and awarded more than $270 million in program funding
during fiscal years beginning October 1, 2014, and ending September 30, 2017.
Annually, on June 1 of each year, using form HUD-4117, the Formula Center notifies grantees of
their annual program estimated monetary allocation and the data used to compute the estimated
monetary allocation, including the grantee’s tribal enrollment number. To correct a grantee’s
tribal enrollment number, appendix D of form HUD-4117 specifies that the grantee must submit
a letter stating the tribe’s enrollment data, which is dated and certified by the tribe’s enrollment
officer. Grantees have until August 1 of each year to submit corrections to the data in
consideration for the upcoming fiscal year. The Formula Center makes adjustments to grantees’
data or funding allocations only if grantees submit data changes.
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Before this audit, we completed an audit of the Chukchansi Indian Housing Authority’s program
(audit report 2017-LA-1007). That audit determined that the Authority reported inaccurate tribal
enrollment numbers used to determine its 2015 and 2016 program funding.
Our audit objective was to determine whether HUD’s Office of Native American Programs
ensured the accuracy of tribal enrollment numbers submitted by registered Native American
tribes or their tribally designated housing entities.
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Results of Audit
Finding: HUD Did Not Have Adequate Controls To Ensure That
Grantees Submitted Accurate Tribal Enrollment Numbers for
Program Funding
HUD did not ensure that grantees submitted accurate tribal enrollment numbers to support their
allocated portion of program funding for fiscal years 2015, 2016, and 2017. We attributed this
condition to weaknesses in HUD’s internal control environment, which included the Formula
Center’s lack of written policies and procedures related to its process for challenging tribal
enrollment data and inadequate reporting requirements. As a result, there was an increased risk
that $270,053,924 awarded to 79 population cap grantees may not have been properly allocated.
Additionally, the overall risk could affect how HUD allocates more than $1.9 billion in program
funds among 377 grantees. Specifically, there could be instances of grantees receiving more or
fewer program funds than they are entitled to receive to address the housing needs within the
Native American community.
Sampled Grantees Did Not Always Report Corrections in Tribal Enrollment Numbers
The sampled grantees did not always report changes and corrections to their tribal enrollment
numbers for 2015, 2016, and 2017. Form HUD-4117, appendix D, requires grantees to correct
their tribal enrollment numbers by submitting a letter stating the tribe’s enrollment data, which is
dated and certified by the tribe’s enrollment officer.
Of the 12 sampled program grantees, six grantees did not report changes or corrections related to
their tribal enrollment numbers to HUD for the fiscal years in question. Of these six grantees,
one grantee was nonresponsive to our requests for information about how it reported its tribal
enrollment numbers to HUD. Next, four grantees that included one population capped grantee
did not provide us information to verify the accuracy of the tribal enrollment numbers
maintained by HUD. Specifically, HUD had documentation showing that these grantees had
tribal enrollment numbers in each of the program years, which concerned us because the
enrollment numbers would change from year to year, rather than remaining the same. However,
the grantees did not provide us information to verify the accuracy of the tribal enrollment
numbers maintained by HUD. Lastly, one grantee provided us three documents called “Age”
reports from its enrollment department, which showed changes or corrections to its tribal
enrollment numbers that HUD reported. Within those documents, the grantee had documented
• 3,801 in 2015,
• 3,848 in 2016, and
• 3,884 in 2017.
None of these numbers matched the 3,388 listed on the grantee’s form HUD-4117 formula
response forms for those program years and resulted in differences ranging from 413 to 496
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tribal members. Although the differences were not significant, the grantees’ failure to report
changes to HUD raised concerns that tribal enrollment numbers for these six sampled grantees
were inaccurate.
The remaining six grantees, which included two population capped grantee, reported accurate
tribal enrollment numbers to HUD and provided the respective supporting documentation.
Neither HUD or the Formula Center Routinely Challenged Grantees to Verify Tribal
Enrollment Numbers
HUD or the Formula Center did not challenge grantees’ submitted tribal enrollment numbers to
ensure accurate reporting. During discussions, HUD stated that it did not challenge tribal
enrollment numbers. In addition, HUD did not have documentation to support challenges related
to the accuracy of submitted tribal enrollment numbers. However, HUD clarified that it is
responsible was for overseeing the Formula Center’s work as stated in the executed agreement.
As part of the agreement and HUD regulations 24 CFR 1000.336, the Formula Center is
responsible for challenging the formula data submitted by the grantees. However, the executed
agreement did not include language that required the Formula Center to challenge the grantees’
submitted tribal enrollment numbers for accuracy.
The Formula Center Lacked Written Policies and Procedures for Challenging Tribal
Enrollment Numbers
HUD did not have written policies and procedures establishing minimum requirements for the
Formula Center’s oversight of tribal enrollment numbers for accuracy. HUD Handbook 1840.1,
REV-3, section 1-2, requires that HUD establish and maintain a cost-effective system of
management controls to provide reasonable assurance that programs and activities are effectively
and efficiently managed and to protect against fraud, waste, abuse, and mismanagement.
Further, HUD Handbook 1840.1, REV-3, section 1-3(A), states that management controls are
policies and procedures adopted by managers to ensure that program objectives are efficiently
and effectively accomplished within planned timeframes, within budgetary limitations, and with
the intended quality and quantity of output. Instead, HUD used the following as part of its
review for the accuracy of tribal enrollment numbers:
• 24 CFR (Code of Federal Regulations) 1000.302;
• form HUD-4117, formula response form;
• form HUD–4119, Challenging U.S. Decennial Census Data: Guidelines for the Indian
Housing Block Grant Formula; and
• Indian Housing Block Grant, Formula Customer Service Center, Policies and Procedures
Handbook.
HUD regulations at 24 CFR 1000.302 provide definitions that apply to the program formula.
The Formula Center used form HUD-4117 to notify grantees of their upcoming program year
funding and to require grantees to correct their tribal enrollment numbers, if needed, by
submitting a letter stating the tribe’s enrollment data, which is dated and certified by the tribe’s
enrollment officer. Form HUD-4119 provides information and instructions to the program
grantees on how to challenge census numbers used in their program funding allocation. The
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handbook summarizes the policies and procedures used by the Formula Center for maintaining
the program formula data, calculating the allocations, and distributing formula and funding
information semiannually to all grantees and HUD field offices. However, this document does
not include policies and procedures related to the process for challenging tribal enrollment
numbers, which would help ensure accuracy. As a result, HUD lacked written policies and
procedures related to challenging the grantees’ submitted tribal enrollment numbers. Without
written policies and procedures, there was a lack of assurance that grantees submitted accurate
tribal enrollment numbers for use in determining annual allocated program funding.
Reporting Requirements for Tribal Enrollment Numbers Were Inadequate
HUD did not have adequate requirements to ensure that grantees reported accurate tribal
enrollment numbers. Form HUD-4117 states that grantees are responsible for reporting changes
and corrections related to their tribal enrollment numbers. The form further states that grantees
should use this form to report changes and corrections to their tribal enrollment numbers.
The form goes on to state that grantees should follow the instructions in appendix D of the form
to correct their tribal enrollment numbers.
Appendix D allows the grantees to submit a letter with the correct tribal enrollment number for
the program year in question if they wish to do so.
However, the form does not include language requiring grantees to submit the form and report
tribal enrollment numbers annually, regardless of whether there was a change. Doing so would
provide better assurance of accurate reporting to HUD.
In addition, the Failure to Report section of the form (shown below) does not state what
administrative or enforcement actions HUD can take if grantees fail to report accurate tribal
7
enrollment numbers. This section addresses only grantees’ failure to report information other
than accurate tribal enrollment numbers.
Inclusion of language to prevent false statements and claims regarding the submission of tribal
enrollment numbers would assist HUD in holding grantees responsible for ensuring the accuracy
of this information. Without language that holds grantees accountable for submitting accurate
tribal enrollment numbers, grantees could defraud the agency or abuse the program and HUD
could have no recourse to hold the grantees accountable and lacks assurance that grantees are
providing accurate data, which affects the proper allocation of program funds.
Grantee Received Excess Program Funds Due to Inaccurate Reporting
As previously mentioned, we conducted an audit of the Chukchansi Indian Housing Authority to
determine whether the Authority accurately reported and supported its tribal enrollment numbers
as required by HUD. We determined that the Authority reported inaccurate tribal enrollment
numbers used to determine its 2015 and 2016 program funding. Based on the numbers submitted
to HUD, it received $248,222 in excess program funds (audit report 2017-LA-1007). We
recommended that HUD recapture the $248,222 in excess program funds for reallocation among
other program grantees to meet program objectives. HUD was working with the Authority to
correct the issues identified in the report.
Conclusion
HUD did not ensure that grantees submitted accurate tribal enrollment numbers to support their
allocated portion of program funding for fiscal years 2015, 2016, and 2017. We attributed this
condition to weaknesses in HUD’s internal control environment, which included the lack of
written policies and procedures on oversight of tribal enrollment numbers for accuracy and
inadequate reporting requirements to ensure the accurate submission of tribal enrollment
numbers. As a result, there was an increased risk that the $270,053,924 awarded to 79
population cap grantees may not have been properly allocated. Additionally, there is an overall
risk that more than $1.9 billion in program funding may not have been properly allocated among
its 377 grantees. Specifically, the lack of written policies and procedures on oversight of tribal
enrollment numbers for accuracy and inadequate reporting requirements could result in
overstating or understating tribal enrollment numbers that affect the annual allocation of program
8
funds among the grantees. Additionally, the increased risk could result in grantees receiving
more or fewer program funds than they are entitled to receive to address the housing needs
within the Native American community.
Recommendations
We recommend that the Deputy Assistant Secretary of the Office of Native American Programs
1A. Update the program’s information reporting requirements on form HUD-4117 to
ensure that grantees report tribal enrollment numbers annually regardless of
whether there are changes or corrections.
1B. Revise form HUD-4117 to include certification and false claim statements that
hold grantees responsible for reporting accurate tribal enrollment numbers to
HUD annually.
1C. Develop and implement policies and procedures to assist in formal challenging of
grantees’ reporting tribal enrollment numbers in accordance with applicable
requirements.
1D. Issue guidance to grantees on procedures to ensure accurate reporting of tribal
enrollment numbers.
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Scope and Methodology
We performed our audit work from our office in Los Angeles, CA, between October 2017 and
January 2018. Our audit covered the period October 1, 2014, through September 30, 2017.
To accomplish our objective, we
• Reviewed applicable laws and regulations, including Federal regulations and HUD
handbooks and forms.
• Reviewed HUD’s program policies and procedures related to tribal enrollment numbers
submitted by program grantees.
• Conducted interviews with relevant HUD officials and Formula Center management and
staff.
• Reviewed the tribal enrollment numbers submitted by a sample of program grantees.
The universe consisted of 377 grantees, which included 570 tribes that were awarded more than
$1.9 billion in program funding during fiscal years beginning October 1, 2014, and ending
September 30, 2017. This universe included 79 grantees that were population capped and
awardee more than $270 million in program funding. We nonstatistically selected a random
sample of 12 grantees that included 3 population capped grantees. The sample grantees received
more than $142.8 million in program funding for the period under review. The program funding
awarded to these 12 sampled program grantees represented 7 percent ($142,845,705 divided by
$1,947,107,988) of the total program funding to all grantees for fiscal years 2015 through 2017.
This sampling method did not allow us to make a projection to the universe, but it was sufficient
to meet the audit objective.
We evaluated the reliability of computer-processed data to identify potential weaknesses related
to our audit objective. We relied in part on computer-processed data provided by HUD in the
form of Microsoft Excel funding logs primarily for determining the audit universe and selecting
a sample of grantees for testing. We performed a minimal level of testing and found the data to
be sufficiently reliable to meet the audit objective and for the intended use of the data.
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(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.
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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:
• Effectiveness and efficiency of operations – Implementation of policies and procedures to
reasonably ensure that program objectives are met.
• Reliability of financial information – Implementation of policies and procedures to
reasonably ensure that relevant and accurate information is obtained to adequately support
the allocation of program funds.
• Compliance with applicable laws and regulations – Implementation of policies and
procedures to ensure that management’s controls and the allocation of program funds comply
with applicable HUD rules and requirements.
We assessed the relevant control 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 Deficiency
Based on our review, we believe that the following item is a significant deficiency:
• HUD did not have adequate monitoring and reporting controls in place to ensure that
grantees submitted accurate tribal enrollment numbers (finding).
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Appendixes
Appendix A
Auditee Comments and OIG’s Evaluation
Auditee Comments
Ref to OIG
Evaluation
Comment 1
Comment 2
Comment 3
Comment 4
12
Comment 5
Comment 6
Comment 7
13
OIG Evaluation of Auditee Comments
Comment 1 We appreciate HUD for considering recommendations to ensure that grantees
submit accurate tribal enrollment numbers for program funding. We look forward
to the continued cooperation during the audit resolution process. We will take
into consideration HUD’s points.
Comment 2 We agree with HUD’s comments and revised the report to reference the Formula
Center as the entity responsible for operating the program.
Comment 3 We agree with HUD that it has been its policy to obtain accurate information on
tribal enrollment. However, as noted in the audit report, HUD or the Formula
Center did not challenge grantees’ submitted numbers to ensure accurate
reporting.
Comment 4 We considered HUD’s comment regarding the inclusion of a “more robust
discussion” on the limited impact that incorrect tribal enrollment numbers have on
the program funding. We agree that the 91 grantees with population caps would
be directly affected by incorrect tribal enrollment data. However, the funding
provided to any of these grantees would indirectly affect the overall program
funding available for the remaining program grantees who were not population
capped. On April 16, 2018, HUD emailed us documentation regarding the 91
grantees with population caps. Based on our review, we identified 79 of the 91
population capped grantees that were awarded $270,053,924 during fiscal years
beginning October 1, 2014, and ending September 30, 2017. The remaining 12
grantees were not in our audit universe and period of review. As a result, we
revised the report to identify an increased risk of more than $270 million awarded
to the 79 population capped grantees that may not have been properly allocated.
In addition, the overall risk affected how HUD allocated more than $1.9 billion in
program funds among all grantees.
Comment 5 We acknowledge the nature in how HUD determines the allocation of program
funding among grantees. However, we disagree that the recommendations should
only apply to population capped grantees. The recommendations ensure that all
grantees are accountable for ensuring the accuracy of tribal enrollment numbers
submitted to HUD as part of determining funding allocations. Further, these
recommendations are respectful of tribal sovereignty and the grantees’ self-
governance, while safeguarding federal funds.
Comment 6 We acknowledge HUD’s concerns about the sensitive nature of monitoring
grantees. In addition, we understand the restrictions to monitoring these grantees
as stated at HUD regulations 24 CFR Part 1000, Subpart F. As a result, we
revised the audit report to use the term “challenge” instead of “monitoring”
grantees’ submittal of tribal enrollment numbers for accuracy.
14
Comment 7 We acknowledge HUD’s commitment to obtaining accurate information on tribal
enrollment. We appreciate HUD’s openness to considering recommendations that
will ensure program funds are allocated among its grantees using accurate
information. These recommendations will safeguard federal funds, while
preserving the grantees’ tribal sovereignty and self-governance.
15
HUD Did Not Have Adequate Controls To Ensure That Grantees Submitted Accurate Tribal Enrollment Numbers for Program Funding
Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-05-07.
Below is a raw (and likely hideous) rendition of the original report. (PDF)