We audited the U.S. Department of Housing and Urban Development Office of Native American Program’s (ONAP) rules regarding calculation of program income under the Native American Housing and Self-Determination Act of 1996 (NAHASDA). Our objectives were to determine whether ONAP’s guidance on calculating program income for the NAHASDA-assisted 1937 Act housing projects was consistent with the generally accepted accounting principles. We also wanted to determine whether the effects of implementing this guidance were consistent with the purpose and goals of NAHASDA. 

Our audit found that policies established by ONAP allowed tribal housing to redirect and abuse rent revenue from NAHASDA-assisted Low Rent program units developed under the 1937 Act. The condition occurred because HUD’s program income regulations are ambiguous and ONAP’s corresponding program income is not consistent with generally accepted accounting principles. Further, ONAP allowed tribal authorities to claim these funds as unrestricted income retroactively to 1998 and use the funds to cover expenditures that are not permitted under NAHASDA. 

We recommended that HUD’s Deputy Assistant Secretary, Office of Native American Programs, (1) take immediate action to suspend the redirecting of revenue from NAHASDA-assisted 1937 Act units unless all cost for operation, maintenance, rehabilitation, and capital improvement have been reimbursed by offsetting expenses again revenue of those units in a method consistent with self-sufficiency and (2) rescind Public and Indian Housing Notice 2000-18 and associated guidance, such as Program Guidance Memorandums 2001-3T and 2002-12, until appropriate guidance can be designed that supports the purpose and goals of NAHASDA.