The Navajo Housing Authority will forfeit $26 million in federal housing funds as part of the settlement of a casein which the tribal organization was accused of failing to complete affordable home projects in 2012.

The settlement is a partial win for the NHA, which initiallyhad been ordered to repay $96 million to the U.S. Department of Housing and Urban Development.

The battle between the NHA and HUD was detailed in an Arizona Republic investigative series in late 2016 that found a legacy of wasteful spending on the sprawling reservation that covers much of northern Arizona.

U.S. Sen. John McCain's office also launched an investigation following the series. The senator's office confirmed many of the findings. The reports led to the ouster of the NHA board and its chief executive officer.

Appeal goes to mediator

The settlement stems from a dispute that began in 2013, when HUD issued a "Letter of Warning" alleging the NHA had not completed a number of housing activities as outlined in its 2012 Indian Housing Plan. After an administrative hearing, HUD ordered the NHA to repay $96 million for its failure to complete 10 of 17 affordable housing projects.

The NHA appealed to the 9th U.S. Circuit Court of Appeals, where a mediator asked the parties to negotiate a settlement, according to NHA.

The two sides then agreed to substantially lower the penalty.

“As a result of the mutually negotiated settlement, NHA was able to avert a potential loss of $70 million,” said attorney Craig Kaufman, who represented the Navajo Housing Authority.

Kaufman said the $26 million will be returned to the housing funding pool and will be included in the Native American Housing Assistance and Self Determination Act allocation in 2018.

The NHA is the largest recipient of those funds and receives roughly $80 million a year.

“We evaluated all the options and determined it was in the best interest of the Navajo people to settle with HUD and restore balance rather than endure a lengthy and costly litigation process,” NHA interim Chief Executive Roberta Roberts said in a statement.

“The new board wanted to begin with a clean slate and a renewed relationship with HUD, so with this behind us, we are now out of the unknown and we can now begin to move forward.”

Maria “Elena” Gaona, a HUD spokeswoman, said in a written statement that the NHA's lack of progress on projects in 2012 put tens of millions of dollars at risk.

The $26 million settlement represents the largest enforcement action under the Indian Housing Block Grant program, she said.

She added that HUD will continue to work closely with the NHA to make progress on current and future housing goals.

Reach the reporter at craig.harris@arizonarepublic.com or 602-444-8478 or @charrisazrep on Twitter.