FLAGSTAFF, Ariz. — The Navajo Nation has had trouble spending hundreds of millions of dollars in federal housing funds over the past several years, which has been no secret to the tribal housing authority or the federal government.

Now, the U.S. Department of Housing and Urban Development says the unexpended balance has hit an unacceptable level of more than $434 million and has threatened action against the Navajo Housing Authority. The department recently told NHA that if it doesn't explain how it is complying with federal regulations or return more than $105 million in unspent funds from 2012, it could see reductions in grant funding, be replaced or face civil penalties.

NHA chief executive Aneva Yazzie fired back this week, saying the warning came as a shock, is inaccurate and contradicts the results of a 2012 performance review that didn't include any violations or recommendations for corrective action. She said that HUD is well aware of a plan to reduce the unexpended balance through large-scale development by the end of 2016 and substantial work done by NHA.

"If it was your intention to require improved performance' within 30 days, that is grossly unreasonable and illogical," she wrote in a letter Thursday to HUD administrator Randy Akers.

The Navajo Nation receives the largest chunk of federal housing funds granted to American Indian tribes, which often cite lack of housing as one of the top issues for tribal members.

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The Navajo Nation has unmet housing needs of more than $9 billion alone, according to a housing study done by NHA.

Akers wrote in a letter to Yazzie on April 30 that the Navajo Housing Authority historically has been slow to implement projects, some of which have been in the pipeline for years. He pointed out a dozen projects in 2012 that included rehabilitating rental units, enhancing security, emergency shelters and developing infrastructure — none of which have been abandoned, Yazzie said. NHA had planned to build 188 rental units at a cost of $56 million, for example, but only spent $3.6 million on 30 units, the letter said.

Akers said HUD has provided technical assistance to NHA, conducted weekly conference calls and met face-to-face with NHA staff, but the cooperation by tribal officials has dropped off this year. He said the warning letter is necessary to fix performance problems and that NHA would be provided with an administrative hearing before the department took any action against the housing authority.

Yazzie said that HUD never acknowledged its own failures allowing the unexpended balance to creep up before she took over in 2007, which included a lack of technical assistance. She said NHA is still dealing with the effects of a 3-year moratorium on new development and construction that was imposed after her predecessor was indicted in federal court but ultimately acquitted.

"It is therefore a shared responsibility and NHA requires the agency's cooperation and acknowledgement of its role in the expenditure pipeline problem that we are all currently faced with," she said.

Yazzie said NHA has automated its financial system, revised procurement policy, conducted a study on housing needs and developed a master plan for large-scale housing development on the reservation, which NHA plans to initiate in fiscal year 2013 to expend a large amount of its funding. She explained that each of the 12 projects that Akers said fell short of the stated goals is still on track.

A tribal lawmaker who sits on the Resources and Development Committee that oversees NHA suggested Friday that lawmakers become more involved to prevent funds from being returned to the federal government.

"I think they've been lying to us when they told us they have an NHA entity that has a clean bill of health," said Leonard Tsosie. "This HUD letter proves otherwise, and I think what Ms. Yazzie is doing is giving excuses."

The committee and NHA repeatedly have clashed over the past year with the committee trying to wrest control of the housing authority at one point.

NHA attorney Patterson Joe said the program is a highly technical and regulated federal housing program that would suffer with another layer of supervision.

"If we allowed the RDC and others to take control as they want to, it's like appointing someone right off the street to supervise a hedge fund trader," he said.