Federal officials are freezing close to $5 million in existing grant money and will withhold $2 million more in future funding that initially...

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Federal officials are freezing close to $5 million in existing grant money and will withhold $2 million more in future funding that initially was secured by the Tulalip Tribes for low-income housing construction.

The U.S. Department of Housing and Urban Development (HUD) announced sanctions yesterday against the Tulalips over “serious outstanding performance issues” connected to problems with the tribes’ recently dismantled housing-authority program.

Tribal officials said yesterday they’ll appeal the decision before an administrative judge, adding that they’ve now put in place corrective measures. They have 30 days to file an appeal.

In August, HUD officials warned tribal members of pending sanctions after a standard financial review unveiled serious flaws in accounting and auditing measures used by the tribes’ housing authority when spending money from HUD’s Indian Housing Block Grant Program.

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Between 2002 and 2004, the Tulalips failed to account for how they spent federal dollars that were to be used for maintaining existing HUD housing and for constructing new low-income homes, HUD officials said yesterday. The auditing issue is one of five violations that remain under investigation.

“Since there are serious, outstanding performance issues remaining, the assistant secretary [for public and Indian housing] decided to take this action,” said HUD spokeswoman Pam Negri. “It’s critical that they still have not filed satisfactory audits for 2002, 2003 and 2004.”

Tribal leaders, who met periodically with HUD officials to reach a voluntary compliance agreement, say they’re working to reconstruct financial records needed for such audits. They say at least $6 million was spent by the housing authority during a six-year period.

Following HUD’s notice of impending sanctions last fall, the Tulalips disbanded the autonomous Tulalip Tribes’ Housing Authority, instead bringing the department under tribal administration oversight.

Tulalip lawyer Michael Taylor said the tribes have placed a self-imposed deadline of May 31, 2006, to complete the auditing procedure.

Still, HUD will withhold the Tulalips’ 2005 grant award worth more than $2 million and suspend access to remaining federal grant awards from 1999 to 2004 worth nearly $5 million. Of that $5 million, HUD is seeking to permanently take back $3 million for grants between 1999 and 2002.

Further sanctions and fines could be imposed if acceptable audits aren’t produced by the May 31, 2006, deadline or if illegal spending is documented, Negri said.

For years, the Tulalip Housing Authority has been plagued by financial problems and scandals. The latest came in October, when Dale Michael Jones, who served as chairman of the Tulalip Tribal Housing Board of Commissioners from 1993 to 2002, pleaded guilty to embezzling more than $23,000 between 1999 and 2002.

In 1996, it was revealed that two Tulalip tribal officials had used HUD money to build themselves a 5,300-square-foot house. That incident resulted in tougher regulations to prevent abuse of federal money.

But tribal leaders said part of the blame for the financial mismanagement belongs to HUD.

“The Tulalip Tribes feel there was shared responsibility and oversight of the Tulalip Housing Authority by the Tulalip board of directors and Housing and Urban Development,” said John McCoy, general manager of the tribe’s Quil Ceda Village development, following a tribal-board consultation. “Today, we feel we have the proper mechanisms in place that address all the issues in [HUD’s] letter.”

Taylor said the Tulalips and HUD were close to reaching an agreement over corrective actions until federal officials asked the tribes to waive their appeal rights in this matter.

“We couldn’t do that because we don’t know what else will happen,” Taylor said. “That [request] was the deal breaker.”

Tribal chairman Stan Jones Sr. said the ones who are hurt most by the sanctions are the tribal members most in need of housing.

“We’ve put up a lot of houses, and a lot of people have benefited from those houses,” he said. “This will really hurt us.”

The tribes have approximately 3,600 members on a reservation near Marysville. The Tulalip Tribes Housing Authority has been awarded $12 million since 1998, when HUD’s Indian Housing Block Grant Program began.

Christopher Schwarzen: 425-783-0577 or cschwarzen@seattletimes.com

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