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. 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. 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. 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. 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. 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.