related to Grants greater than or equal to $50,000, Aggregate Reporting less than

Source document: related to Grants greater than or equal to $50,000, Aggregate Reporting less than; document type: inspector-general-sigpr-reports.

Full text

Page 2

related to Grants greater than or equal to $50,000, Aggregate Reporting less than
$50,000,7 and Aggregate Payments to Individuals8 did not comply with the CARES
Act and Treasury’s Guidance.

Based on the work performed, Castro questions $80,844,218.619 in expenditures
and determined Navajo Nation’s risk of unallowable use of funds is high. See the
attachment to this transmittal for the definition of a questioned cost.

Castro recommends that Treasury Office of Inspector General (OIG) personnel
follow-up with Navajo Nation management and request that missing
documentation to support expenditures is provided and necessary corrections are
made in the grants portal. Based on Navajo Nation’s responsiveness to Castro’s
requests and management’s ability to provide sufficient documentation, Castro
recommends that we determine the feasibility of performing a focused audit for
Grants greater than or equal to $50,000, Aggregate Reporting less than $50,000,
and Aggregate Payments to Individuals. For Aggregate Payments to Individuals,
Castro recommends a specific focus on Navajo Nation’s non-payroll COVID-19
hardship claims, as well as payroll expenditures for employees substantially
dedicated to COVID-19 recovery efforts.

At the time of fieldwork, Castro noted that the Navajo Nation had not filed its 2021
Single Audit report. Additionally, during its review of the 2020 Single Audit report,
Castro noted that the Navajo Nation did not properly allocate costs for their
Payroll Support Program, which was funded from CRF proceeds. Navajo Nation’s
management opted to evaluate costs on a department level rather than the
employee level. The auditor determined that Navajo Nation charged unallowable
time to the CRF program that resulted in potential questioned costs of up to
$141,187. Castro noted that these potential questioned costs were determined
through the Single Audit process and not through Castro’s desk review. Castro
was not able to determine whether the Navajo Nation corrected these questioned
costs, and therefore, recommends Treasury OIG follow-up on the questioned
costs. We plan to follow up on the findings identified in the 2020 Single Audit, as
well as results of the 2021 and 2022 Single Audits.

7 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in the
grants portal. Transactions less than $50,000 can be reported as an aggregate lump-sum amount
by type (contracts, grants, loans, direct payments, and transfers to other government entities).
8 Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the grants portal to prevent inappropriate disclosure of
personally identifiable information.
9 The $80,844,218.61 questioned costs includes $78,875,557.20 of questioned costs identified
through Castro’s testing and $1,968,661.41 of questioned costs related to issues self-identified by
Navajo Nation personnel.

Page 3

Treasury OIG and Castro personnel met with Navajo Nation management to
discuss the findings and questioned costs. During the meeting, Navajo Nation
management confirmed that they submitted additional documentation to Treasury
OIG to support the separate legal entity status of certain component tribal entities.
The Navajo Nation provided the Employer Identification Numbers (EIN) and
articles of incorporation for the entities. We reviewed the additional
documentation and determined Castro’s finding regarding the status of the legal
entities is resolved. Additionally, Navajo Nation management confirmed that they
provided us additional supporting documentation to address other findings and
questioned costs contained in this report. They told us that they have updated
their reporting to address some of these questioned costs. We have received the
additional documentation and will review this information as part of our follow-up
work.

In connection with our contract with Castro, we reviewed Castro’s desk review
memorandum and related documentation and inquired of its representatives. Our
review, as differentiated from an audit performed in accordance with generally
accepted government auditing standards, was not intended to enable us to
express an opinion on the Navajo Nation’s use of the CRF proceeds. Castro is
responsible for the attached desk review memorandum and the conclusions
expressed therein. Our review found no instances in which Castro did not comply
in all material respects, with Quality Standards for Federal Offices of Inspectors
General.

We appreciate the courtesies and cooperation provided to Castro and our staff
during the desk review. If you have any questions or require further information,
please contact me at (202) 486-1420, or a member of your staff may contact Lisa
DeAngelis, Deputy Assistant Inspector General for Audit, at (202) 487-8371.
cc:
Michelle. A. Dickerman, Deputy Assistant General Counsel,
Department of the Treasury

Victoria Collin, Chief Compliance & Finance Officer, Office of
Recovery Programs, Department of the Treasury

Christopher Sun, Director of Data and Reporting, Office of Recovery
Programs, Department of the Treasury
Sean McCabe, Interim Controller, Navajo Nation Tribal Government
Wayne Ference, Partner, Castro & Company, LLC

Page 4

Attachment

Schedule of Monetary Benefits:

According to the Code of Federal Regulations,10 a questioned cost is a cost that is
questioned because of a finding:

(a) which resulted from a violation or possible violation of a statute,
regulation, or the terms and conditions of a Federal award, including for
funds used to match Federal funds;

(b) where the costs, at the time of the review, are not supported by
adequate documentation; or

(c) where the costs incurred appear unreasonable and do not reflect the
actions a prudent person would take in the circumstances.

Questioned costs are to be recorded in the Department of the Treasury’s
(Treasury) Joint Audit Management Enterprise System (JAMES).11 The amount
will also be included in the Office of Inspector General (OIG) Semiannual Report to
Congress. It is Treasury management's responsibility to report to Congress on the
status of the agreed to recommendations with monetary benefits in accordance
with 5 USC Section 405(b) of the Inspector General Act of 1978.

Recommendations                                                Questioned Costs

Recommendation No. 1

$19,059.45

Recommendation No. 2

$78,800,543.11
Recommendation No. 3

$49,000.00
Recommendation No. 4

$6,954.64
Other Matter

$1,968,661.41

The questioned cost represents amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review, $80,844,218.61
are the Navajo Nation Tribal Government’s total expenditures reported in the
grant-reporting portal that are deemed ineligible and that lacked supporting
documentation, and errors self-identified by Navajo Nation management not
tested by Castro.

10 2 CFR § 200.84 – Questioned Cost.
11 JAMES is Treasury’s audit recommendation tracking system.

Desk Review of the Navajo Nation Tribal Government
1

1635 King Street
Alexandria, VA 22314
Phone: 703.229.4440
Fax: 703.859.7603
www.castroco.com

August 8, 2023

OIG-CA-23-041

MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT

FROM:
Wayne Ference

Partner, Castro & Company, LLC

SUBJECT:
Desk Review of the Navajo Nation Tribal Government

On June 15, 2022, we initiated a desk review of the Navajo Nation Tribal
Government’s (Navajo Nation) use of the Coronavirus Relief Fund (CRF)
authorized under Title VI of the Social Security Act, as amended by Title V,
Division A of the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act).1 The objective of our desk review was to evaluate Navajo Nation’s
documentation supporting its uses of CRF proceeds as reported in the
GrantSolutions2 portal and to assess the risk of unallowable use of funds. The
scope of our desk review was limited to obligation and expenditure data for the
period of March 1, 2020 through June 30, 2022 as reported in Cycles 13 through 94
in the GrantSolutions portal.

As part of our desk review, we performed the following:
1) reviewed Navajo Nation’s quarterly Financial Progress Reports (FPRs)
submitted in the GrantSolutions portal through June 30, 2022;5

1 P.L. 116-136 (March 27, 2020).
2 GrantSolutions, a grant and program management Federal shared service provider under the
U.S. Department of Health and Human Services, developed a customized and user-friendly
reporting solution to capture the use of CRF payments from recipients.
3 Calendar quarter ending June 30, 2020.
4 Calendar quarter ending June 30, 2022.
5 The scope of our desk review included the period March 1, 2020 to March 31, 2022 (Cycles 1 to 8);
however, Navajo Nation personnel did not submit a Cycle 8 GrantSolutions portal submission.
Therefore, we extended the scope of our review to Cycle 9.

Desk Review of the Navajo Nation Tribal Government
2

2) reviewed the U.S. Department of the Treasury’s (Treasury) Coronavirus
Relief Fund Guidance as published in the Federal Register on
January 15, 2021;6
3) reviewed Treasury Office of Inspector General’s (OIG) Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and
Recordkeeping;7
4) reviewed Treasury OIG’s monitoring checklists8 of Navajo Nation’s
quarterly FPR submissions for reporting deficiencies;
5) reviewed other audit reports issued, such as Single Audit reports, and
those issued by the Government Accountability Office and other applicable
Federal agency OIGs for internal control or other deficiencies that may
pose risk or impact Navajo Nation’s uses of CRF proceeds;
6) reviewed Treasury OIG Office of Investigations (OI), the Council of the
Inspectors General on Integrity and Efficiency Pandemic Response
Accountability Committee (PRAC),9 and Treasury OIG Office of Counsel
input on issues that may pose risk or impact Navajo Nation’s uses of CRF
proceeds;
7) interviewed key personnel responsible for preparing and certifying Navajo
Nation’s GrantSolutions portal quarterly FPR submissions, as well as
officials responsible for obligating and expending CRF proceeds;
8) made a non-statistical selection of Contracts, Grants, Direct Payments,
Aggregate Reporting,10 and Aggregate Payments to Individuals11 data
identified through GrantSolutions reporting; and

6 Coronavirus Relief Fund Guidance as published in the Federal Register (January 15, 2021)
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf.
7 Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked
Questions Related to Reporting and Recordkeeping OIG-20-028R; March 2, 2021.
8 The checklists are used by Treasury OIG personnel to monitor the progress of prime recipient
reporting in the GrantSolutions portal. GrantSolutions quarterly submission reviews are designed
to identify material omissions and significant errors, and where necessary, include procedures for
notifying prime recipients of misreported data for timely correction. Treasury OIG follows the CRF
Prime Recipient Quarterly GrantSolutions Submissions Monitoring and Review Procedures Guide,
OIG-CA-20-029R to monitor the prime recipients quarterly.
9 Section 15010 of P.L. 116-136 established the Pandemic Response Accountability Committee
within the Council of the Inspectors General on Integrity and Efficiency to promote transparency
and conduct and support oversight of covered funds (see Footnote 18 for a definition of covered
funds) and the coronavirus response to (1) prevent and detect fraud, waste, abuse, and
mismanagement; and (2) mitigate major risks that cut across program and agency boundaries.
10 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in
the GrantSolutions portal. Transactions less than $50,000 can be reported as an aggregate lump-
sum amount by type (contracts, grants, loans, direct payments, and transfers to other government
entities).
11 Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the GrantSolutions portal to prevent inappropriate
disclosure of personally identifiable information.

Desk Review of the Navajo Nation Tribal Government
3

9) evaluated documentation and records used to support Navajo Nation’s
quarterly FPRs.

Based on our review of Navajo Nation’s documentation supporting the uses of its
CRF proceeds as reported in the GrantSolutions portal, we determined that
Navajo Nation’s Contracts greater than or equal to $50,000 and Direct Payments
greater than or equal to $50,000 complied with the CARES Act and Treasury’s
Guidance. However, we determined that the expenditures related to Grants
greater than or equal to $50,000, Aggregate Reporting less than $50,000, and
Aggregate Payments to Individuals did not comply with the CARES Act and
Treasury’s Guidance.

Based on the work performed, we identified total questioned costs of
$80,844,218.61, to include $78,875,557.20 of questioned costs identified through
our testing and $1,968,661.41 of questioned costs related to issues self-identified
by Navajo Nation personnel (see further discussion in the Other Matter section of
this report). We determined Navajo Nation’s risk of unallowable use of funds is
high.

Castro recommends Treasury OIG personnel follow-up with Navajo Nation
management and request that missing documentation to support expenditures is
provided and necessary corrections are made in the GrantSolutions portal. Based
on Navajo Nation’s responsiveness to Treasury OIG’s requests and its ability to
provide sufficient documentation, we recommend Treasury OIG personnel
determine the feasibility of performing a focused audit for Grants greater than or
equal to $50,000, Aggregate Reporting less than $50,000, and Aggregate
Payments to Individuals. For Aggregate Payments to Individuals, we recommend
a specific focus on Navajo Nation’s non-payroll COVID-19 hardship claims, as well
as payroll expenditures for employees substantially dedicated to COVID-19
recovery efforts.

Non-Statistical Transaction Selection Methodology
Treasury issued a CRF payment to the Navajo Nation of $714,189,631.45. As of
Cycle 9,12 Navajo Nation’s cumulative obligations and expenditures were
$714,188,904.63 and $714,055,219.78, respectively. Navajo Nation’s cumulative
obligations and expenditures by payment type, as reported in GrantSolutions
through Cycle 9,12 are summarized below.

12 Calendar quarter ending June 30, 2022.

Desk Review of the Navajo Nation Tribal Government
5

Background

The CARES Act appropriated $150 billion to establish the CRF. Under the CRF,
Treasury made payments for specified uses to States and certain local
governments; the District of Columbia and U.S. Territories, including the
Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American
Samoa, and the Commonwealth of the Northern Mariana Islands; and Tribal
governments. Treasury issued a CRF payment to the Navajo Nation for
$714,189,631.45.

The CARES Act stipulates that a recipient may only use the funds to cover costs
that—
(1) are necessary expenditures incurred due to the public health emergency
with respect to the coronavirus disease 2019 (COVID-19);
(2) were not accounted for in the budget most recently approved as of
March 27, 2020; and
(3) were incurred between March 1, 2020 and December 31, 2022.16

Section 15011 of the CARES Act requires each covered recipient17 to submit to
Treasury and the PRAC, no later than 10 days after the end of each calendar
quarter, a report that contains (1) the total amount of large covered funds18,19
received from Treasury; (2) the amount of large covered funds received that were
expended or obligated for each project or activity; (3) a detailed list of all projects
or activities for which large covered funds were expended or obligated; and (4)
detailed information on any level of sub-contracts or sub-grants awarded by the
covered recipient or its sub-recipients.

The CARES Act assigned Treasury OIG the responsibility for compliance
monitoring and oversight of the receipt, disbursement, and use of CRF proceeds.
Treasury OIG also has authority to recoup funds in the event that it is determined

16 P.L. 116-260 (December 27, 2020). The period of performance end date of the CRF was extended
through December 31, 2021 by the Consolidated Appropriations Act, 2021. The period of
performance end date for tribal entities was further extended to December 31, 2022 by the State,
Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act,
Division LL of the Consolidated Appropriations Act, 2023, P.L. 117-328, December 29, 2022, 136
Stat. 4459.
17 Section 15011 of P.L. 116-136 defines a covered recipient as any entity that receives large
covered funds and includes any State, the District of Columbia, and any territory or possession of
the United States.
18 Section 15010 of P.L. 116-136 defines covered funds as any funds, including loans, that are made
available in any form to any non-Federal entity, not including an individual, under Public Laws 116-
123, 127, and 136, as well as any other law which primarily makes appropriations for Coronavirus
response and related activities.
19 Section 15011 of P.L. 116-136 defines large covered funds as covered funds that amount to more
than $150,000.

Desk Review of the Navajo Nation Tribal Government
6

a recipient failed to comply with requirements of subsection 601(d) of the Social
Security Act, as amended, (42 U.S.C. 801(d)).

Desk Review Results

Financial Progress Reports

During our review of Navajo Nation’s quarterly FPR submissions through
June 30, 2022, we determined that management completed FPRs for Cycles 120
through 721 and Cycle 9;22 however, Navajo Nation had a late submission for Cycle
223 and no submission for Cycle 8.24 As such, we determined that the Navajo
Nation did not comply with the reporting timeline as required under Treasury
OIG’s Guidance OIG-CA-20-021, Coronavirus Relief Fund Reporting and Record
Retention Requirements.

Review of Single Audit Reports

Castro determined that one of the 2020 Single Audit findings related directly to
CRF and contributed to our overall risk determination for the Navajo Nation. We
have summarized the auditor-identified finding below.

Finding 2020-009: The Navajo Nation did not properly allocate costs for their
Payroll Support Program, which was funded from CRF proceeds. Management
opted to evaluate costs on a department level rather than the employee level. The
auditor determined that Navajo Nation charged unallowable time to the CRF
program that resulted in potential questioned costs of up to $141,187. Castro
noted that these potential questioned costs were determined through the Single
Audit process and not through Castro’s desk review. Castro was not able to
determine whether the Navajo Nation corrected these questioned costs, and
therefore, recommends Treasury OIG follow-up on the questioned costs.

Additionally, Navajo Nation personnel did not provide the 2021 Single Audit
report as it was still in process during our planning procedures. Castro
recommends that Treasury OIG follow-up to obtain the status of this Single Audit.

20 Calendar quarter ending June 30, 2020.
21 Calendar quarter ending December 31, 2021.
22 Calendar quarter ending June 30, 2022.
23 Calendar quarter ending September 30, 2020.
24 Calendar quarter ending March 31, 2022.

Desk Review of the Navajo Nation Tribal Government
7

Summary of Testing Results

Other than Grants greater than or equal to $50,000, Aggregate Reporting less than
$50,000, and Aggregate Payments to Individuals, transactions selected for detailed
review were supported by documentation and were allowable expenditures in
accordance with the CARES Act and Treasury’s guidance. We found that Contracts
greater than or equal to $50,000 and Direct Payments greater than or equal to
$50,000 were necessary expenditures due to the COVID-19 public health
emergency, were not accounted for in the budget most recently approved as of
March 27, 2020, and were incurred during the covered period. The transactions
selected for testing were not selected statistically, and therefore results cannot be
extrapolated to the total universe of transactions.

The following table includes the total cumulative expenditure population amount
and the cumulative expenditure amount tested. Additionally, this table includes a
summary of Castro’s testing results over expenditure transaction balances. Within
the table below, we have included a summary of unsupported and ineligible
expenditures identified as questioned costs. These expenditures do not comply
with the CARES Act and Treasury’s Guidance. Additionally, in the far-right
column, we have identified the expenditures that Castro tested without exceptions
noted. See Desk Review Results section below this table for a detailed discussion
of questioned costs and other issues identified throughout the course of our desk
review.

Desk Review of the Navajo Nation Tribal Government
9

provide information needed to complete our testing, but the Navajo Nation did
not respond with sufficient support prior to the end of fieldwork in December
2022.

For 2 of the 26 sub-selections, Castro received partial expenditure documentation.
We noted the following exceptions totaling $19,059.45 for the two transactions.

 For 1 of the 2 transactions, Castro questioned $
in expenditures.
Specifically, Castro identified an invoice related to the repair of a damaged
roof in a Faculty Housing Complex. Two tenants were forced to relocate due
to major leaks and molding on the walls. Navajo Nation management told
us that the roof repair was necessary as it was a part of a larger project to
install new heating, ventilation, and air conditioning (HVAC) units on the
building and that the faculty housing building needed to be repaired to
allow for faculty to work from their homes to facilitate distance learning.
Management also emphasized that the installation of the HVAC units was
necessary to prevent the spread of COVID-19. Castro noted that this
eligibility explanation differed from Navajo Nation management’s original
justification memorandum, which suggested that the repairs to the roofing
were due to major leaks and molding on the walls and made no mention of
the HVAC project. Castro determined that mold and leaks were indicative of
a pre-existing condition that would have pre-dated the COVID-19 pandemic;
therefore, we were unable to verify that these expenditures were not
accounted for in the budget most recently approved as of March 27, 2020.
Castro questioned these costs as ineligible because they did not meet the
purpose of the grant agreement and were not necessary expenditures
incurred due to the public health emergency with respect to the COVID-19
pandemic.
 For 1 of the 2 transactions, Castro questioned $
in expenditures.
Specifically, Castro identified invoices relating to monthly fuel charges. The
invoices provided by management did not have sufficient explanatory notes
to explain how these fuel expenses related to COVID-19 and to the grant
agreement.

For these same 2 of 26 sub-selections, Castro also questions $82,688.51 in
unsupported costs because the partial documentation provided included a
variance between the amounts supported by the invoices and the amounts
recorded in the GrantSolutions portal.

Desk Review of the Navajo Nation Tribal Government
10

For 14 out of the 26 transactions, management provided high-level invoices from
sub-recipients summarizing requested reimbursements from the Navajo Nation
but did not provide external vendor invoices to support the expenditure amounts
incurred by sub-recipients as part of the grant program. This resulted in
unsupported questioned costs of $
.

 For 2 out of the 14 transactions where we questioned $
 as
unsupported directly above, the Navajo Nation did not provide
$
 of sub-recipient expenditure GL detail or external vendor
invoices to support transactions at the detailed level. Navajo Nation
management told us that this sub-recipient was subject to a Navajo Nation-
led internal investigation and that the Navajo Nation initially questioned
$
 in sub-recipient incurred costs. Management told us that their
onsite visit resulted in successfully accounting for $
of costs,
leaving a balance of
 in total costs the Navajo Nation planned to
disallow. The Navajo Nation plans to reverse $
 of expenses in
subsequent GrantSolutions submissions.

For 6 out of 7 original Grants transactions selected for testing, the Navajo Nation
management reported component units as grant sub-recipients within
GrantSolutions. Castro confirmed that management reported different DUNS
numbers within GrantSolutions for the Navajo Nation (prime recipient
government) and its component units (sub-recipients); however, Navajo Nation
management did not provide Castro with the Employer Identification Numbers
(EIN) and articles of incorporation for the Navajo Nation and its legally separate
component units. Without this information, we were not able to determine
whether these sub-recipients were separate entities for legal and tax purposes.
We recommend that Treasury OIG obtain evidence to verify whether these tribal
entities are separate legal and tax entities. Based on this review, we recommend
that Treasury OIG determine whether the Navajo Nation properly recorded the
expenditures at the appropriate sub-recipient beneficiary level.

For all of the above exceptions, Castro requested Navajo Nation management to
provide the root cause of the missing external vendor invoices, but Castro did not
receive an explanation of the root cause or management’s corrective action plan
prior to the end of our fieldwork.

Desk Review of the Navajo Nation Tribal Government
11

Aggregate Reporting Less than $50,000

We determined that Navajo Nation’s Aggregate Reporting less than $50,000 did
not comply with the CARES Act and Treasury’s Guidance. We selected 1
transaction for testing and question $49,000.00 in expenditures due to a lack of
supporting documentation. Navajo Nation personnel told us that due to a
contractual dispute with the consulting firm hired by management to process and
store CRF data, the Navajo Nation was unable to obtain the supporting
documentation for the selected transaction.

Aggregate Payments to Individuals

We determined that the Navajo Nation’s Aggregate Payments to Individuals did
not comply with CARES Act and Treasury’s Guidance. We question $6,954.64 in
ineligible expenditures, including $
 related to non-payroll COVID-19
hardship payments and $
 in non-public health and safety payroll costs.
We selected 18 transactions for testing, of which 7 were for public health and
safety payroll costs, 7 were for non-public health and safety payroll costs, and
4 were for non-payroll hardship payments to tribal citizens.

For 1 of the 18 transactions reviewed, Navajo Nation personnel provided support
for the amount of the non-public health and safety payroll, but was unable to
demonstrate that $
 of payroll expenditures were eligible for the CRF
program. Management provided a timesheet; however, most of the information
was redacted and did not provide descriptions of specific work assignments to
prove that tasks performed related to COVID-19. Castro requested that
management provide the root cause of the missing support, but Castro did not
receive this information before the end of fieldwork.

The Nation had a significant number of expenditures within its Aggregate
Payments to Individuals payment type related to the issuance of COVID-19
hardship checks to individual Navajo Nation tribal citizens. The Navajo Nation
passed a resolution to issue CRF payments to eligible tribal citizens who
submitted applications for COVID-19 hardship relief payments. The applications
included a form requesting details regarding the applicant’s spouse and
dependents and included a request for a self-certification/applicant signature
attesting to the truth and accuracy of the information submitted. The Navajo
Nation personnel reviewed the applications to ensure that each application
contained a first and last name, Certificate of Indian Blood, date of birth, address,
and responses to the self-certification questions. Additionally, the Navajo Nation
personnel ensured that the identity of the applicant matched the Navajo Nation
Vital Records Office (NNVRO) database information prior to processing payment.

Desk Review of the Navajo Nation Tribal Government
12

The Navajo Nation’s hardship applicants were required to attest to at least one out
of nine eligible hardship statuses.

For 1 of the 18 transactions reviewed, Castro questions $
 in expenditures.
Specifically, Castro identified a transaction related to the Financial Hardship
Assistance Program where the beneficiary had unfortunately passed away prior to
receiving the hardship check. We asked management if the CRF charge was
reversed and were told that the amount was reversed in Cycle 11.28 These
corrections were not made during the scope of our desk review; therefore, Castro
did not corroborate that these corrections were made.

Other Matter

Castro also questions expenditures totaling $1,968,661.41 for Aggregate Payments
to Individuals, including $
 in fraudulently cashed duplicate COVID-19
hardship payments and $
 in stale-dated COVID-19 hardship checks
not cashed by beneficiaries. Because these errors were self-reported by Navajo
Nation management, we did not perform additional testing on the amounts. As
noted in footnote 26, these amounts are not listed in the table of amounts tested
by Castro.

Fraudulently Cashed Duplicate Hardship Payments

During our meetings with Navajo Nation management, Castro asked about any
potential fraud within the context of the Desk Review objectives. Management
initially stated that there were no instances of known or suspected fraud.
However, management subsequently responded to our follow-up request for
instances of potential fraudulent claims by providing the following:
 a list of $
 in payments made to Navajo Nation tribal citizens who
fraudulently cashed duplicate hardship payments.
 a list of Navajo Nation tribal citizens that attempted to execute various
schemes to receive fraudulent hardship payments, such as altering checks,
attempting to cash counterfeit checks, etc. These instances were detected
and corrected by management prior to being claimed as CRF expenditures.

Castro questions $
 of hardship payments as ineligible. Management stated
that these claims represented known instances where tribal citizens and small
business COVID-19 hardship beneficiaries fraudulently cashed duplicate checks
instead of reporting the receipt of the duplicate payments to the Navajo Nation.
These balances were reported in Navajo Nation’s Cycle 329 GrantSolutions

28 Calendar quarter ending December 31, 2022.
29 Calendar quarter ending December 31, 2020.

Desk Review of the Navajo Nation Tribal Government
13

submission, but management told us that as of Cycle 9,30 these expenditures had
not been reversed. Management told us that they are pursuing criminal charges
against the individual hardship recipients that committed the fraud.

Management told us that the duplicate payment errors occurred because a third-
party consultant handled the issuance and reissuance of checks, therefore
bypassing Navajo Nation’s internal controls for check issuance. Management told
us they would take steps to correct these errors in a future GrantSolutions cycle
submission, and would take steps to ensure that Navajo Nation’s internal control
processes are followed going forward.

Stale-Dated Hardship Checks

Hardship assistance checks paid to deceased individuals that were returned to the
Navajo Nation’s Office of the Controller (OOC) were subsequently voided. Other
hardship assistance checks that were returned due to undeliverable addresses
were unclaimed, became stale-dated, and were subsequently voided.

Navajo Nation management identified and self-reported $
 of hardship
checks issued to Navajo Nation citizens that had not been cashed. As of
September 2022, management told us that they planned to re-issue these checks
to the hardship recipients and monitor future stale-dated checks to make any
required reversals for uncashed checks. Management was still in the process of
making these changes at the end of our fieldwork. We question $
 and
consider the stale-dated check issue to be pending additional action by Navajo
Nation management.

Conclusion

We found that use of CRF proceeds for Contracts greater than or equal to $50,000
and Direct Payments greater than or equal to $50,000 complied with the CARES
Act and Treasury’s Guidance. However, we determined that expenditures related
to Grants greater than or equal to $50,000, Aggregate Reporting less than $50,000,
and Aggregate Payments to Individuals did not comply with the CARES Act and
Treasury’s Guidance. We identified total questioned costs of $80,844,218.61, to
include $78,875,557.20 of questioned costs identified through our testing and
$1,968,661.41 of questioned costs related to issues self-identified by Navajo
Nation personnel. We determined that Navajo Nation’s risk of unallowable use of
funds is high.

30 Calendar quarter ending June 30, 2022.

Desk Review of the Navajo Nation Tribal Government
14

Castro recommends Treasury OIG personnel follow-up with Navajo Nation
management and request that missing documentation to support expenditures is
provided and necessary corrections are made in the GrantSolutions portal. Based
on Navajo Nation’s responsiveness to Treasury OIG’s requests and its ability to
provide sufficient documentation, we recommend Treasury OIG personnel
determine the feasibility of performing a focused audit for Grants greater than or
equal to $50,000, Aggregate Reporting less than $50,000, and Aggregate
Payments to Individuals. For Aggregate Payments to Individuals, we recommend
a specific focus on Navajo Nation’s non-payroll COVID-19 hardship claims, as well
as payroll expenditures for employees substantially dedicated to COVID-19
recovery efforts.

In addition, Castro recommends that Treasury OIG follow-up on the following
outstanding items.

 Ensure Navajo Nation management re-issues $
 in stale-dated
checks before the end of the CRF period of performance end date of
December 31, 2022, and ensures that checks are cashed by the
beneficiaries, or funds are returned to Treasury.
 Ensure Navajo Nation management has reversed the $
 in sub-
recipient incurred costs that they determined to be ineligible as a result of
their internal investigation.
 Confirm that Navajo Nation management has reversed $
 in duplicate
hardship check payments that were fraudulently cashed by tribal citizens
and recorded by management within the Aggregate Payments to
Individuals payment type in the Cycle 331 GrantSolutions submission.
 Follow-up on corrective action related to $141,187 in questioned costs
reported in Single Audit finding number 2020-009.
 Follow-up to obtain the status of the Navajo Nation’s 2021 Single Audit.
 Obtain evidence to verify whether tribal entities are separate legal and tax
entities, and based on the information, determine whether Navajo Nation
management has properly recorded these transactions in GrantSolutions.

31 Calendar quarter ending December 31, 2020.

Desk Review of the Navajo Nation Tribal Government
15

*****

All work completed with this letter complies with the Council of the Inspectors
General on Integrity and Efficiency’s Quality Standards for Federal Offices of
Inspectors General, which require that the work adheres to the professional
standards of independence, due professional care, and quality assurance to
ensure the accuracy of the information presented.32 We appreciate the courtesies
and cooperation provided to our staff during the desk review.

Sincerely,

Wayne Ference
Partner, Castro & Company, LLC

32 https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf

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