U. S. Department of Housing and Urban Development Office of Inspector General, Rocky Mountain First Interstate Tower North 633 17th Street, 14th Floor Denver, Colorado 80202-3607 Phone (303) 672-5452 OFFICE OF INSPECTOR GENERAL FOR AUDIT Audit Related Memorandum No. 97-DE-241-1801 October 3, 1996 MEMORANDUM FOR: Vernon Haragara, Administrator, Northern Plains Office of Native American Programs, 8API FROM: W. D. Anderson, District Inspector General for Audit, 8AGA SUBJECT: Operation Safe Home Community Development Block Grant Probe Southern Ute Indian Tribe Ignacio, Colorado We have completed a limited Operation Safe Home fraud review o f Indian Community Development Block Grants received by the Souther n Ute Indian Tribe in Ignacio, C olorado. This review was conducted as part of a national, proactive initiative. Our objectives were t o detect possible fraud and program abuse. SUMMARY In conducting our review we examined the records of HUD's Office of Native American Programs and the Southern Ute Indian Tribe's Economic Development Office and Finance Department. Our review also included int erviews with officials at these organizations and site tours o f four grant project locations. During our limited review we d id not find any fraudulent activities. However, three items concern us which may warrant further Office of Native American Programs attention: 1. The Southern Ute Indian Tribe failed to notify HUD o f significant changes in the scope of work during the Sky Ute Lodge renovation project. 2. The rating of the multi-family housing construction project under the Economic Development category. 3. The Southern Ute Indian Tribe shows a pattern of delay in th e completion of Community Development Block Grant funde d projects. Thus they appear to be getting more grants tha n they have the capacity to manage and execute. BACKGROUND The Southern Ute Indian Tribe is located in Ignacio, Colorado. With the second largest dollar amou nt of open Community Development Block Grant funds in the Rocky Mountain Region, the Southern Ute India n Tribe oversees funds totaling over $2.1 million. Specifically, records were reviewed for the following grants: B-92-SR-08-0001, Sky Ute Lodge renovation: $400,000 economi c development grant originally designated for the addition of rooms to the Sky Ute Lodge in Ignacio. B-93-SR-08-0005, multi-family housing construction: $800,00 0 economic development grant designated for the new constructi on of rental housing units in Ignacio. B-94-SR-08-0003, sewer system upgrade: $800,000 infrastructur e improvement grant designated for repair and partial replacement of sewer lines. B-95-SR-08-0001, high pressure water line construction: $564,000 infrastructure improvement gra nt designated for the construction of a high pressure water line. INTERNAL CONTROLS The internal control review was limited to the controls ove r Com munity Development Block Grant funds at the Southern Ute India n Tribe. We evaluated the organizational, administrative an d disbursing controls through interviews, observation and record s review. The internal control procedures in place at the Sou thern Ute Indian tribe to control the Community Development Block Grant funds provide reasonable safeguarding of the funds. RESULTS OF REVIEW To accomplish our objectives, we reviewed the records for Community Development Block Grants received by the Southern Ute Indian Tribe. Individu al grant files of both the Southern Ute Tribe and HUD wer e 2 examined as well as the Southern Ute Tribe's accounting and gran t records. These records were examined to verify the validity o f expenditures and to verify the eligibility of Community Development Block Grant projects. Specifically, we found that: Grant funds drawn down were properly accounted for an d agreed with Office of Native American Programs drawn dow n amounts. Original receipt documentation supported gran t expenditures. Expenditures were properly authorized and approved fo r payment. Project progression, site tours and planning document s indicate viable projects. Based on our review, we did not identify any fraudulent activities. However, the following three concerns were identified: Significant Change in Project Scope Without Prior HUD Approval A January 6, 1995 tribal lette r to HUD concerning grant B-92-SR- 08-0001, included the cost summary, implementation schedule and project description. The letter indicated that $350,000 of the approved funds would be applied for lodge and restauran t expansion and that $50,000 would be used for courtyard/poo l renova tion. The Southern Ute Tribe subsequently renovated th e conference facilities and expa nded the casino located at the Sky Ute Lod ge. This work was completed with Tribal funds. I n Septe mber, 1995 the courtyard/pool area was renovated fo r $467,040.34. Of this amount, $397,401.39 were HUD Communit y Development Block Grant funds. The Southern Ute Tribe's failure to provide HUD with revised cost summaries, implementation schedules and project description s caused HUD to be misinformed about the use of approved funds . This misinformation decreases HUD's oversight of the program and increases the potential for program abuse. The Northern Plains Office of Native American Programs needs to stress to the Southern Ute Tri be that prior HUD approval must be obtain ed for revisions which significantly change the scope , timing or objective of an approved project. 3 New Housing Construction Rated Under Economic Development For pr oject B-93-SR-08-0005, the Southern Ute Tribe planned t o buil d a multi-family rental housing project. The Tribe' s applic ation to HUD identified this project under the Communit y Development Block Grant program criteria as an Economi c Development activity. However, in our opinion, this projec t would have been better classified under the New Housin g Construction criteria. How a project is classified as a Bloc k Grant activity could impact upon the ranking of the application and possibly upon the selectio n of grant recipients. This would be par ticularly true when there are more applications receive d than Federal funds available. We sug gest that the Northern Plains Office of Native America n Programs take sufficient steps to ensure that future projec t app lications are properly classified under the Block Gran t eligibility criteria. Delay in Completion of Projects The Southern Ute Indian Tribe has encountered delays i n comple ting its projects which have caused it to exceed it s projected timetables and the generally accepted two year period for grant completion. During our review it was apparent tha t the Southern Ute Tribe was getting more grants than it had th e capac ity to manage and execute in a timely manner. There ar e generally good reasons for the delays and proper approval fo r the extensions were granted by the Office of Native America n Programs. The Sky Ute Lodge renovation was completed in October 199 5 approximately 21 months behind original schedule. The multi-family housing const ruction project was originally schedule d to be completed in June, 1995. As of July, 199 6 site preparation had just started. The sewer system upgrade project was expected to be complete d in April , 1996. As of July, 1996 construction had not ye t started. At the t ime site work was completed in July 1996, the hig h pressure water line project was not yet behind schedule but was placed on hold because the tribe's Economic Development Office was too busy with other projects to work on the water line project. We believe that the capacity o f the Southern Ute Tribe to manage 4 grant projects should be taken into consideration in futur e applications until the tribe can demonstrate the capacity t o manage additional projects. These concerns are not being controlled under the Department' s Automated Audit Management Sys tem. Please provide us with copies of any correspondence relating to this memorandum. We appreciate the courtesies extended by the Northern Plains Office of Native American Programs an d the Southern Ute Indian Tribe during our review. Should you have any questions, please contact Ernes t Kite, Assistant District Inspector General for Audit, at (303) 672- 5452. DISTRIBUTION Secretary's Representative, 8AS Administrator, Northern Plains Office of Native American Programs, 8API (5) Director, OFC, Field Accounting Division, 8AF Director, Office of Administration, 8AA Assistant to the Deputy Secretary for Field Management, SDF (Room 7106) Chief Financial Officer, F (Room 10164) (2) Deputy Chief Financial Officer for Finance, FF (Room 10166) (2) Louis S. Carmisciano, Regional Comptroller, 77 West Jackson Blvd., Chicago, Illinois 60604-3507 Assistant Director in Charge, US GAO, 820 1st Street, NE, Union Plaza, Building 2,Suite 150, Washington, DC 20002 Attn: Mr. Cliff Fowler (2) 5 6
Southern Ute Indian Tribe, Ignacio, CO
Published by the Department of Housing and Urban Development, Office of Inspector General on 1996-10-03.
Below is a raw (and likely hideous) rendition of the original report. (PDF)