Background

Until fiscal year 1998, Indian housing authorities and tribes received most of their funding for low-income housing through programs established under the U.S. Housing Act of 1937 and administered by HUD’s Office of Native American Programs. Through its headquarters and six field offices, and with the help of 217 Indian housing authorities, HUD administered the housing programs that benefited Native American families that live in or near tribal areas. HUD provided funding to construct, maintain, and rehabilitate low-income housing through programs such as Development, Operating Subsidies, and Modernization.
On October 26, 1996, the Native American Housing Assistance and Self-Determination Act was signed into law, separating Indian housing from public housing, administratively and financially. The regulations implementing NAHASDA were developed by a negotiated rulemaking committee. The committee had 58 members, 48 of them from geographically diverse small, medium, and large tribes; the other 10 were HUD employees. After review by the Office of Management and Budget, HUD published the final rule implementing NAHASDA on March 12, 1998; it went into effect on April 13, 1998.
NAHASDA eliminated 9 of HUD’s 14 separate Indian housing programs, replacing them with a single block grant program with one set of funding criteria for HUD to administer and, according to HUD officials, one system for managing and accounting for funds. The new act also allowed tribes to designate themselves, new housing entities, or existing Indian housing authorities as the housing entity to manage existing housing, to plan and implement housing programs, and to administer block grant funding. This change resulted in the number of housing entities more than doubling, from 217 housing authorities to 575 tribally designated housing entities. Under NAHASDA, to receive funding, each housing entity must submit an Indian housing plan to HUD describing 1-year and 5-year housing goals and objectives, housing needs, and financial resources.

	HUD Used Competitive and Noncompetitive Processes to Provide Indian Housing Grant Funding

Prior to NAHASDA, HUD provided funding directly to Indian housing authorities and tribes through 14 programs for which a total of $2.8 billion was appropriated in fiscal years 1993 through 1997. Each program had its own criteria for awarding and allocating funds and its own system for managing and accounting for the funds. For nine of the programs, Indian housing authorities or tribes competed for funding. The Indian housing authorities and tribes submitted project proposals, which HUD then scored and ranked, awarding grants for the highest-ranked projects. For the other five programs, HUD allocated funds to Indian housing authorities or tribes noncompetitively through a formula or on a first-come, first-served basis. Tables I.1 and I.2 in appendix I describe each program and the criteria used to provide funding.
Funding for HUD’s Indian housing programs has remained relatively consistent in recent years, ranging from a low of $491 million in fiscal year 1996 to a high of $593 million in fiscal year 1995, as shown in figure 1. In fiscal year 1997, the last year these programs were funded separately, funding was approximately $562 million, of which almost $322 million, or 57 percent, was awarded through competitive programs. The approximately $240 million (43 percent) remaining was allocated noncompetitively. Figure 2 shows how the fiscal year 1997 funds were distributed.

	The Formula Used to Determine Fiscal Year 1998 NAHASDA Block Grants Did Not Consider Past Housing Authority Performance or Unspent Funding

With the start of the NAHASDA program, HUD applied the act’s allocation formula to determine the amounts of the fiscal year 1998 block grants. The formula considers tribes’ housing needs, but did not include a factor for housing authorities’ past performance. HUD determined that the Department was legally constrained from considering the past management performance of Indian housing authorities. The formula also did not factor in $929 million provided in past years but not yet spent by the Indian housing authorities and tribes. Most of the unspent funding was provided in fiscal years 1993 through 1997 for the Development and Modernization programs, which were intended to assist Indian housing authorities in building new housing and modernizing existing units. The housing entities can continue to use these unspent funds as originally planned or as proposed in their Indian housing plans.

		NAHASDA Funding Is Based on Two Components—Maintaining Existing Housing and Need for Affordable Housing

The NAHASDA block grant formula consists of two components: (1) the costs of operating and modernizing existing housing units and (2) the need for providing affordable housing. A housing entity’s total block grant amount is the sum of the amounts determined under each of these two components—or the amount an Indian housing authority received in fiscal year 1996 for modernization and operating subsidy.
To determine funding for the first component—operating and modernizing—HUD calculates the number of existing housing units an entity has and the operating costs of providing that housing. HUD then calculates the modernization costs of keeping these units in good working order. These two cost figures are combined as the entity’s funding amount under the first component of the NAHASDA formula. To calculate funding of the second component of the NAHASDA formula—need for affordable housing—HUD uses various factors. These factors reflect each housing entity’s Native American population, income levels, local housing costs and housing conditions, and the extent of housing shortages. Hence, it is through the calculation of this component that tribal housing needs are considered in the distribution of NAHASDA funding.
In allocating funds in the first year of the NAHASDA program, HUD recognized that the data used to calculate block grants may need to be improved. HUD has hired a contractor to review alternative data sources to use when applying the NAHASDA formula. In addition, NAHASDA regulations require that HUD, with the consultation and involvement of the tribes, review the formula and, if necessary, revise the formula within 5 years. Appendix II provides a more detailed description of the current formula.

		Past Housing Authority Management Performance Was Not a Factor in Calculating Fiscal Year 1998 Block Grants, but Performance Under NAHASDA May Be a Factor in the Future

HUD interpreted NAHASDA as legally constraining the Department from considering Indian housing authorities’ past management performance as a factor in determining the eligibility of housing entities for fiscal year 1998 NAHASDA block grants. Indian housing authorities’ past performance came under the requirements and regulations for programs created under the U.S. Housing Act of 1937, requirements and regulations that are no longer in effect since NAHASDA eliminated most of these programs. According to HUD’s Office of General Counsel, there is no provision under NAHASDA allowing HUD, when awarding block grant funding under the act, to consider Indian housing authorities’ failure to comply with requirements and regulations that are no longer in effect. Consequently, the housing entities were given the opportunity to demonstrate good management and performance under NAHASDA. However, HUD does have the authority and has, in several instances, placed conditions, such as additional monitoring and oversight, on the use of grant funds by a housing entity that has a history of poor performance in administering federal grant programs. For example, for a tribe with problems administering its Indian Community Development Block Grant and HOME programs, HUD plans to more closely monitor expenditures of NAHASDA block grant funds and to require that the tribe submit quarterly program and financial reports.
In future fiscal years, regulations permit HUD, when dispensing new grants, to consider how well housing entities have managed past NAHASDA grants. NAHASDA regulations allow HUD to sanction poorly managed housing entities by (1) reducing or eliminating future grant funding or (2) replacing the housing entity managing the program. Such actions may be taken if HUD determines, through activities such as reviewing reports provided by tribes or making site visits, that housing entities are substantially noncompliant with NAHASDA regulations. HUD plans to closely monitor housing entities that are having performance problems and to provide them with technical assistance to help them comply with NAHASDA requirements. To monitor and assist these entities, HUD is using Internet e-mail to facilitate the submission and review of Indian housing plans and to respond to housing entities’ questions about the program.
Providing additional monitoring and technical assistance may pose a challenge for HUD, given the Department’s decreasing resources. HUD’s Inspector General has stated that effectively overseeing housing entities while simultaneously implementing the NAHASDA program may prove difficult with current HUD staffing because the number of housing entities served by HUD under NAHASDA will more than double.
Until the first year of NAHASDA is completed, HUD will not know what the impact this increase in the number of housing entities served will have on its workload. The Deputy Assistant Secretary, Office of Native American Programs, estimated that 221 staff years will be needed to fully implement Indian housing programs. Meanwhile, several changes are planned to accommodate the future workload with the present staffing level of 178 employees. The planned changes include addressing the length and frequency of site visits, modifying some work processes, and using technology to improve efficiency. The Deputy Assistant Secretary added that because of the resource limitations, the office may have to reduce the number of site visits to tribal housing entities during fiscal year 1999. HUD plans to visit only 20 percent of the housing entities, instead of 33 percent as originally planned.
Under NAHASDA regulations, the tribes also have a responsibility to monitor the performance and compliance of their housing entities. For example, tribes are required to ensure that their entities prepare periodic progress reports, including annual compliance assessments and performance and audit reports.

		Unspent Indian Housing Funding Was Not a Factor in Calculating Fiscal Year 1998 NAHASDA Block Grants

The unspent $929 million in Indian housing funding was not a factor in calculating the fiscal year 1998 block grants because, according to HUD officials, the unspent funding addresses needs that continue to exist. This funding, awarded in previous years, remains available for housing entities to complete ongoing work or for eligible NAHASDA activities. NAHASDA regulations require housing entities to use unspent funding for housing planned under earlier housing programs if contracts have already been signed. However, if such contracts have not been signed, NAHASDA regulations allow the entities to integrate the funding into their overall NAHASDA housing plan. Housing entities report these unspent funds and the plans for their use as part of the Indian housing plans they submit for HUD’s approval.
Officials from HUD’s Office of the Chief Financial Officer told us that some funds, particularly the Development and Modernization funds, have remained unspent because of the construction difficulties some projects on Indian lands have encountered. These difficulties include legal disputes and the remoteness of the Indian lands, which makes access difficult for the builders and other individuals, businesses, and suppliers needed to construct housing.
Most of the unspent funding, almost $903 million of it, was provided in fiscal years 1993 through 1997 and was for the Development and Modernization programs. The unspent funding provided in fiscal years 1993 through 1997 is shown by program in figure 3. Over this same 5-year period, HUD provided a total of $2.8 billion for Indian housing programs; thus, about 30 percent of this funding remains unspent. In appendix III, table III.1 shows the unspent Indian housing funding by program over an 18-year period. Table III.2 shows the unspent Indian housing funding over the same period for 15 Indian housing authorities and tribes that have unspent funding of more than $10 million each.
Other ($35.9)
Operating Subsidies ($12.0) Section 8 Rental Assistance ($10.0) Drug Elimination ($8.6) Economic Development and Support  Services ($3.4) Emergency Shelter Grants ($1.0) HOPE I ($0.7) Youth Sports ($0.2)
HOME Investment  Partnership ($38.9)
Development  ($511.3)
Modernization ($316.5)

	HUD Has Allocated NAHASDA Block Grants for Fiscal Year 1998 and Requested 1999 Funding

As of September 30, 1998, HUD had allocated most of the fiscal year 1998 NAHASDA block grants and had requested funds from the Congress for fiscal year 1999 block grants. To receive grants from the $590 million available for the NAHASDA program in fiscal year 1998, each of the 575 housing entities had to submit an Indian housing plan by July 1, 1998. HUD had received plans representing over 97 percent of the entities by the deadline. As of September 30, 1998, HUD had approved 327 plans representing approximately $548 million and was in the process of reviewing 40 additional plans representing $39 million—for a total of 367 plans and $587 million in fiscal year 1998 block grants. Appendix IV shows the fiscal year 1998 block grant amount for each housing entity.
For the fiscal year 1999 program, HUD requested $600 million from the Congress. As of September 30, 1998, however, HUD had not calculated the final fiscal year 1999 block grant allocations because it had not yet received its appropriation. Fiscal year 1999 Indian housing plans are due by July 1, 1999, for HUD’s review and approval.

	Conclusions

Passage and implementation of NAHASDA presents HUD and the Native American tribes with both opportunities and challenges. NAHASDA allows HUD to manage and monitor most housing assistance to tribes through a single program. At the same time, NAHASDA more than doubled the number of grantees that must be assisted and monitored—during a period of declining resources at the Department. As for the tribes, they gained the freedom to set their own priorities and to determine how to best meet their housing needs with the resources available. Yet the tribes will ultimately be responsible for making sure that grant funds are spent efficiently and appropriately. It is too soon to determine how well HUD and the tribes will meet the challenges presented by NAHASDA.

	Agency Comments

We provided the Department of Housing and Urban Development with a draft of this report for review and comment. HUD generally agreed with the report but commented that we should recognize that the Department merely administers the NAHASDA formula. The formula was a product of the negotiated rulemaking process, and the Department did not determine or control the elements of the formula. We have expanded the discussion in our report to reflect this concern.
HUD also suggested that we include information on standard spend-out rates for the Development and Modernization programs in our discussion of unspent program funding to allow for a more comprehensive understanding of the issue. We believe that our discussion of the unspent program funding addresses this concern. We point out that most of the unspent funding was appropriated over a recent 5-year period—fiscal years 1993 through 1997. Furthermore, we describe the difficulties of building on Indian lands and point out that Development and Modernization funds can remain unspent because of these difficulties. Consequently, we did not make the suggested change to the report.
Additionally, HUD provided a number of suggested technical and clarification comments that we have incorporated as appropriate.

	Scope and Methodology

To determine how HUD awarded and allocated funding to Indian housing authorities and tribes before NAHASDA’s enactment, we reviewed regulations governing HUD’s grant award programs. In addition, we reviewed the applicable HUD handbooks and guidebooks and interviewed officials from HUD’s headquarters Office of Native American Programs in Washington, D.C., and Denver, Colorado, who were familiar with the programs’ funding. To determine the aggregate funding amounts for Indian housing programs in fiscal years 1993 through 1997, we obtained data from HUD’s annual reports.
To determine what factors HUD used to allocate Indian housing block grant funding to housing entities under NAHASDA, we reviewed NAHASDA, the final rule developed under the act, notices, and plans for implementing NAHASDA. We also analyzed the NAHASDA block grant allocation formula. We discussed the NAHASDA block grant allocation process and formula with officials of HUD’s Office of Native American Programs who were responsible for NAHASDA’s implementation. In addition, we interviewed members of the NAHASDA Negotiated Rulemaking Committee who participated in drafting the final rule and the block grant allocation formula. To determine the amount, type, and “age” of unspent Indian housing program funds, we analyzed data obtained for us by HUD from its Program Accounting System. We did not systematically verify the accuracy of HUD’s data or conduct a reliability assessment of HUD’s databases as part of this assignment.
To determine the status of Indian housing block grant funding for fiscal year 1998, we reviewed HUD’s reports on housing entities’ status in meeting NAHASDA funding requirements and the associated funding amounts. We also interviewed officials of HUD’s Office of Native American Programs who were responsible for calculating and allocating the fiscal year 1998 block grants.
We performed our work from June 1998 through November 1998 in accordance with generally accepted government auditing standards.
We are sending copies of this report to the Secretary of HUD and the Director, Office of Management and Budget. We will make copies available to others on request. Please call me at (202) 512-7631 if you or your staff have any questions. Major contributors to this report are listed in appendix V.

Grant Award Criteria and Fiscal Year 1997 Funding for Competitive and Noncompetitive Indian Housing Programs

Fiscal year 1997 funding (dollars in millions)
For scoring and ranking proposals — Bureau of Indian Affairs housing needs assessment  — Percentage of the area’s total need — Estimated number of units to be funded — Weighted average cost of developing housing within each area — Indian housing authority established under state law or a HUD-approved tribal ordinance — Indian housing authority had the capacity to administer the program as demonstrated by compliance with HUD standards for housing development, modernization, and operations — Indian housing authority met performance eligibility thresholds to apply for housing development funding: environmental review, fiscal closeout, final site approval and control, utility supplier’s firm commitment, and preconstruction certification — Relative unmet need for housing — Relative Indian housing authority occupancy rate compared with the occupancy rates of other eligible Indian housing authorities — Time since last Development grant was approved compared with that for other eligible Indian housing authorities — Current Indian housing authority development “pipeline” activity already in progress — For fiscal year 1997, HUD applied additional factors for scoring and ranking that included clear Indian housing authority demonstration of preplanning housing project activities, site selection that results in cost savings, and innovative approaches to development or financing that reduce housing delivery time or increase the number of units — $1 million base amount for each field office — Additional amount calculated by a formula that considered the latest Census data for the eligible Native American population residing in each area and the extent of poverty and housing overcrowding — Reasonableness of project’s cost  — Project’s appropriateness for intended use — Project can be achieved within 2 years — Tribe’s administrative, managerial, and technical capacity — Tribe’s past grants administration — Tribe’s actions to impede development of housing for low- and moderate-income individuals — Outstanding block grant obligations to HUD — Need for project and its design — Project planning — Leveraging of block grant funding (continued)
Fiscal year 1997 funding (dollars in millions)
Comprehensive Improvement Assistance Program for modernization(Nonemergency)
Degree to which — project addressed the housing needs of the tribe and maximized benefits to low-income families — tribe had taken the financial, administrative, and legal actions necessary to undertake the proposed project and had the administrative staff to carry out the project — tribe would use other sources of funding, such as state grants, private mortgage insurance, private contributions, and other federal grants, to leverage funding for the project — Plan for evaluating activities — Plan for establishing a relationship with local law enforcement entities — Coordination with empowerment zone and welfare reform efforts — Description of use of community facilities and bringing back community focus to housing authority properties — Assurance that Indian housing authority has a broad range of tools for making and maintaining a safe community — Indian housing authority’s administrative capacity and relevant experience — Problem’s extent — Support of residents, local government, and community in implementing activities — Soundness of proposed plan — Extent of coordination and participation with other organizations in community planning (continued)
Fiscal year 1997 funding (dollars in millions)
For scoring and ranking proposals — Formula calculating emergency shelter needs for tribes within each field office area — Form, timeliness, and completeness of application — Tribe’s eligibility as determined by Department of Treasury Office of Revenue Sharing — Eligibility of persons to be served for program assistance — Tribe’s building compliance with disability requirements — Tribe’s capacity to carry out the proposed activities successfully and within a reasonable time — Tribe’s service to the homeless population that is most difficult to reach and serve — Existence of an unmet need for the proposed project — Appropriateness of proposed activities to meet the needs of the served population — Extent of coordination with other community programs — 51 percent or more of the residents included in the proposed project are affected by welfare reform — Proposed activities must take place in a community facility that is easily accessible for applicants — Community resources must be firmly committed to the project — Indian housing authority’s compliance with current programs — Troubled housing authority must use a contract administrator — Indian housing authority’s administrative capacity and relevant experience — Extent of problem and need for project — Soundness of program approach and methodology — Indian housing authority’s ability to leverage project resources — Extent of coordination with community to identify and address problems — Funding provided to field offices to assist Indian housing authorities in providing funds for eligible families — Families, not Indian housing authorities or tribes, must be eligible for assistance — Funding provided to field offices to assist Indian housing authorities in providing funds for eligible families (continued)
Fiscal year 1997 funding (dollars in millions)
For scoring and ranking proposals — Funding awarded directly to organizations by HUD’s Office of Public and Indian Housing — 51 percent or more of the residents included in the proposed project are affected by welfare reform — Signed agreement between the applicant and the housing authority describing each of their roles and responsibilities  — Proposed activities must take place in a community facility that is easily accessible for applicants — Must use the services of a contract administrator or mediator — Must be a registered nonprofit organization — Compliance with current programs and no unresolved audit findings — Contract administrator must not be in default — Letters of support from project participants — Certification of resident organization board elections — Resident organization’s administrative capacity to carry out the project and its relevant experience — Need for the project and extent of the problem — Soundness of program approach and methodology — Resident organization’s ability to leverage project resources — Extent that project reflects a coordinated community-based process identifying and addressing the problem — HUD ONAP awarded a small portion of the funding using a lottery system Fiscal year 1997 funding (dollars in millions)
Comprehensive Improvement Assistance Program for modernization(Emergency)
For allocating funding to Indian housing authorities or tribes — Funding allocated directly to field offices by HUD’s Office of Public and Indian Housing — HUD approval of Indian housing authority’s comprehensive plan identifying all physical condition and management improvements of existing housing and action plan for achieving them — Coordination with local officials in developing comprehensive plan — Indian housing authority board resolution approving comprehensive plan — Additional assurances or information required from HUD monitoring, audit findings, civil rights compliance findings, or corrective action orders — Formula calculating housing modernization needs of Indian housing authorities — Funding allocated directly to field offices by HUD’s Office of Public and Indian Housing — Indian housing authorities must meet HUD financial management and occupant income requirements — Performance Funding System formula for calculating what a well-managed Indian housing authority would need to operate its housing programs — Compliance with Fair Housing, Civil Rights, and environmental statutes — Housing projects have to be fully available for occupancy — All eligible applications funded subject to the availability of funds — HUD does not allocate funding for loan guarantees to field offices — Tribe must have developed eviction and foreclosure procedures — HUD guarantees loans made by private lenders to applicants that meet loan qualifications (continued)
Fiscal year 1997 funding (dollars in millions)

Formula Used to Allocate NAHASDA Block Grant Funding

Using the block grant formula established under the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA), the Department of Housing and Urban Development (HUD) allocates funds to Indian housing entities for (1) the costs of operating and modernizing existing housing units and (2) the need for providing affordable housing activities. In calculating grant amounts for operating and modernizing existing housing, HUD, as specified in the formula, considers inflation since 1996 in the cost of providing these services, the number of housing units an entity operates, and the entity’s cost of providing these services compared with the average cost for all entities. In calculating grant amounts for the need to provide affordable housing activities, HUD considers seven weighted factors specified in the formula indicating the need for housing activities and the cost of obtaining the activities. Additionally, once the block grants are calculated, HUD ensures that the funding amounts meet certain minimum levels.

	How Funding for Operating and Modernizing Housing Is Calculated

HUD calculates an entity’s grant amount for operating and modernizing existing housing using fiscal year 1996 national average funding per housing unit and increasing it to reflect cost increases. After this inflation adjustment, HUD adjusts the national average amount to reflect geographic differences in the cost of operating and modernizing housing for each Indian housing entity. HUD then multiplies each entity’s cost per unit by the number of housing units the entity operates to arrive at its grant amount. Figure II.1 illustrates the formula for calculating funding for operating and modernizing existing housing.

	Sample Funding Calculation for Operating and Modernizing Existing Housing

Housing entities operate a variety of units that are classified into three major types: (1) low-income rental units built under the U.S. Housing Act of 1937, (2) units operated under the Section 8 Rental Assistance program, and (3) Turnkey III and Mutual Help homeownership units. For the NAHASDA block grants, HUD separately calculates grant amounts that reflect the operating and modernizing needs of each of these types of housing units. An entity’s funding reflects these needs and is the sum of two calculations.
Table II.1 shows a hypothetical sample calculation of an entity’s funding for operating housing. In calculating funding for operating housing, HUD uses the 1996 national average funding for each of the three types of housing. In our hypothetical sample calculation, we assume that the inflation cost adjustment is 5.3 percent and that the entity’s geographic cost factor is 14 percent above the national average. We also assume that the entity is responsible for operating 150 low-income housing units, 50 Section 8 housing units, and 20 Turnkey III and Mutual Help units. We use the fiscal year 1996 national average funding amount for each type of housing unit in our hypothetical calculation.
The national average funding amount for low-income units in fiscal year 1996 was $2,440 per unit. We increase this amount by 5.3 percent for inflation and by 14 percent for operating costs above the national average, and consider that the entity operates 150 low-income units. Given these assumptions, our hypothetical housing entity would receive a grant amount of $439,354 for low-income units. Similar calculations for Section 8 units and for Turnkey III and Mutual Help units yield grant amounts of $217,576 and $12,676, respectively. Adding these three figures together yields a total operating housing grant amount of $669,606.
In calculating funding for modernizing housing, HUD bases the average 1996 funding amount on the number of low-income and Turnkey III and Mutual Help units. Section 8 units are excluded in this calculation. The national average funding amount for modernizing housing units in fiscal year 1996 was $1,974 per unit. The block grant uses the same inflation adjustment factor for both operating and modernizing housing. Consequently, we assume a 5.3-percent inflation adjustment for this calculation. Under the block grant, the geographic cost factor for modernizing housing differs from that used for operating housing. In our sample calculation, we assume that the entity’s geographic cost factor is 2 percent below the national average. The resulting grant calculation for modernizing housing is shown in table II.2.
We increase the fiscal year 1996 modernizing funding amount by 5.3 percent for inflation, reduce it by 2 percent for below average costs, and consider the 170 housing units the entity operates (150 low-income units and 20 Turnkey III and Mutual Help units). These calculations result in a modernizing grant amount of $346,298. Adding this amount to the $669,606 the entity receives for operating housing results in a total grant of $1,015,904 for operating and modernizing housing.

	Data Sources HUD Used in Calculating Operating and Modernizing Funding

For fiscal year 1998, HUD derived the number of housing units and areas served from reports submitted by Indian housing authorities or tribes. The numbers reported were confirmed by the Department. HUD adjusted costs for inflation using the housing cost component of the Consumer Price Index, published annually by the Bureau of Labor Statistics. HUD adjusted for geographic differences in the cost of operating housing (for example, the costs of maintenance and tenant services) using the larger of the entity’s historical Allowable Expense Levels for calculating operating subsidies under the Public Housing Program (prior to October 1, 1997) or the private sector housing Fair Market Rents, data collected and published annually by HUD. Fair Market Rents represent the rental cost of private sector housing units and reflect geographic differences in rental housing supply and demand in local U.S. housing markets.
HUD based the geographic cost factor used to calculate funding for modernizing housing on the cost of building a standard housing unit of moderate design in various geographic locations. Given moderate housing design specifications, HUD calculates the labor, materials, and other costs required to construct such a unit in various locations. These amounts are based on cost surveys conducted by private firms. Thus, the geographic cost factor reflects labor, materials, and other costs in the housing construction industry.

	How Funding for Need for Additional Housing Is Calculated

Once funding for operating and modernizing housing is determined for each entity, HUD totals the funding amounts and deducts the amounts from available appropriations. This calculation results in the amount of funding available to all housing entities to address the need to provide affordable housing activities. The formula for the need for housing activities allocates available funding among entities based on their proportionate share of seven weighted factors and the cost of building a standard housing unit of moderate design in various geographic locations. The geographic cost adjustment factor is the same as or similar to that used in the formula to calculate funding for modernizing housing. Figure II.2 shows the formula for calculating funding for the need for housing activities.

	Sample Calculation for Need for Housing Activities

The formula for calculating funding for the need to provide affordable housing activities uses various weighted need factors. The factors capture the portions of the national population that fall into seven categories and are American Indians or Alaska Natives living in areas where a tribe has jurisdiction or has provided substantial housing services. These categories include the Native American population, low-income households, households with housing cost exceeding half their income, low-income households in need of housing, and households living in overcrowded conditions or without kitchen or plumbing facilities. Table II.3 shows each factor and its associated weight. HUD multiplies each housing entity’s share of each factor by the factor’s assigned weight and adds the total for all factors to produce the entity’s weighted share for the seven need factors.
Population (American Indians and Alaska Natives)
The third column of table II.3 shows the weight for each of the seven need factors. For example, in our sample calculation, we assume that a housing entity’s jurisdiction covers, or that the entity has provided, substantial housing services to one-half of 1 percent of the total American Indian and Alaska Native population (see factor 1 in the table). This factor receives a weight of 11 percent in the formula. Multiplying the entity’s share of the American Indian and Alaska Native population by the factor’s weight produces the entity’s weighted share for the factor. To produce the entity’s weighted share of the seven factors, we make similar computations for each factor and add the entity’s weighted shares together.
HUD uses the formula shown in figure II.3 to calculate an entity’s funding for the need to provide affordable housing activities. To illustrate, we assume that $100 million of the program’s total appropriation remains after the operating and modernizing grants have been allocated. We use the weighted share of the seven need factors as calculated in table II.3, 0.00622. We also assume that the entity’s geographic cost factor is 2 percent below the national average. Multiplying these amounts results in a grant calculation of $609,560 for need for housing activities.
Funding for    Need for    Housing    Activities After calculating funding for operating and modernizing housing and for the need for housing activities, HUD combines the amounts into a single block grant. The total grant amount of our hypothetical sample calculation is $1,267,736.

	Data Sources Used in Calculating Funding for the Need for Housing Activities

For fiscal year 1998, HUD used the same geographic cost factor to calculate funding for the need to provide affordable housing activities as it did for modernizing existing housing. HUD obtained data for each of the seven need factors from the 1990 U.S. Census, which HUD updated to reflect current conditions. Housing entities can challenge the Census data by conducting their own surveys subject to HUD guidelines and by submitting the data to HUD for use in calculating grant amounts for need for housing activities.

	NAHASDA Regulations Provide Minimum Funding Guarantees

The NAHASDA regulations establish two kinds of minimum funding levels for housing entities. Consequently, when HUD calculates funding amounts that are below the legislated minimums, housing entities are given additional funds. The first minimum funding level guarantees every entity an allocation that at least equals its fiscal year 1996 funding for operating and modernizing housing. The second minimum funding level guarantees every housing entity an allocation of at least $50,000 for funding the need for affordable housing activities. In subsequent years, HUD will reduce the second minimum funding guarantee to $25,000, and in fiscal year 2002, it will be eliminated.

Unspent Indian Housing Funding, 1980-97

Indian housing authority/tribe and programs Navajo Housing Authority, Arizona Choctaw Nation Housing Authority, Oklahoma Association of Village Council Presidents Housing Authority, Alaska Cherokee Nation Housing Authority, Oklahoma Tagiugmiullu Nunamiullu Housing Authority, Alaska Tohono O’odham Housing Authority, Arizona (continued)
Indian housing authority/tribe and programs Standing Rock Housing Authority, South Dakota Northern Circle Housing Authority, California Bering Straits Regional Housing Authority, Alaska Navajo Nation of Arizona, New Mexico and Utah Yurok Housing Authority, California Karuk Tribe Housing Authority, California 0 (continued)

HUD’s Fiscal Year 1998 Indian Housing Block Grant Amounts Calculated for 575 Housing Entities

Alaska Office of Native American Programs (Anchorage, Alaska) (continued)
Operating and modernizing existing housing (continued)
Operating and modernizing existing housing (continued)
Operating and modernizing existing housing (continued)
Operating and modernizing existing housing (continued)
Operating and modernizing existing housing (continued)
Operating and modernizing existing housing Eastern/Woodlands Office of Native American Programs (Chicago, Illinois) (continued)
Operating and modernizing existing housing (continued)
Northern Plains Office of Native American Programs (Denver, Colorado) (continued)
Operating and modernizing existing housing Southern Plains Office of Native American Programs (Oklahoma City, Oklahoma) (continued)
Operating and modernizing existing housing (continued)
Southwest Office of Native American Programs (Phoenix, Arizona) (continued)
Operating and modernizing existing housing (continued)
Operating and modernizing existing housing (continued)
Operating and modernizing existing housing (continued)
Northwest Office of Native American Programs (Seattle, Washington) (continued)

Major Contributors to This Report

Carol Anderson-Guthrie Robert J. Dinkelmeyer Luis Escalante, Jr. Jerry C. Fastrup Michael L. Mgebroff The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent.
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Summary:
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Housing and Urban Development's (HUD) implementation of the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA), focusing on: (1) how HUD allocated funding to Indian housing authorities and tribes before NAHASDA's enactment, and how much was appropriated for Indian programs in fiscal years (FY) 1993 through 1997; (2) identifying the factors HUD used to allocate Indian housing block grant funding to tribes and tribally designated housing entities under NAHASDA, and whether HUD considered current tribal housing needs, past tribal housing management performance, and the magnitude of unspent housing grant funding for incomplete housing projects; (3) the amount, type, and age of unspent funding for incomplete housing projects; and (4) the status of HUD's Indian housing block grant funding for fiscal years 1998 and 1999.

What GAO Found

GAO noted that: (1) before NAHASDA became effective, HUD distributed funding to Indian housing authorities and tribes through 14 different programs, each having its own criteria for awarding and allocating grant funding; (2) for nine of these programs, funding was awarded competitively, requiring the Indian housing authorities or tribes to submit project proposals, which HUD then scored and ranked; (3) for the other five programs, HUD allocated funding to Indian housing authorities or tribes noncompetively, using formulas or distributing the funds on a first-come, first-serve basis; (4) over fiscal years 1993 through 1997, HUD provided a total of $2.8 billion to Indian housing authorities and tribes through these 14 programs; (5) after NAHASDA went into effect for FY 1998, eliminating 9 of the 14 separate Indian housing programs and replacing them with a single block grant program, HUD used the act's noncompetitive allocation formula to determine the grant amounts for the 575 Indian housing entities; (6) the formula has two components: (a) the costs of operating and modernizing existing housing units; and (b) the need for providing affordable housing activities; (7) the allocation formula does not include a factor for past management performance; (8) HUD's rationale was that there is no authority under the new act for it to consider the authorities' failure to comply with requirements and regulations that are no longer in effect; (9) relying on other guidance, HUD has placed conditions on the use of NAHASDA grant funds if a housing entity has a history of problems with administering other federal grant programs; (10) in subsequent years, HUD can consider performance under NAHASDA when dispensing new grants; (11) the block grant formula also did not consider the approximately $929 million in total unspent Indian housing program funding awarded in previous years because the funding addresses needs that continue to exist; (12) most of the unspent funds were provided in fiscal years 1993 through 1997 through two programs--Development and Modernization; (13) entities must report their planned use of those funds to HUD as part of their Indian housing plans; (14) for FY 1998, $590 million was appropriated for the Indian housing block grants awarded under the new act; (15) as of July 1, 1998, over 97 percent of the housing entities had submitted the required Indian housing plans to HUD describing their planned use of block grant funds and HUD approved 327 of those plans; and (16) for FY 1999, HUD requested $600 million for the program.