[Senate Hearing 107-278]
[From the U.S. Government Publishing Office]
S. Hrg. 107-278
LEGISLATIVE PROPOSALS RELATING TO THE STATUTE OF LIMITATIONS ON CLAIMS
AGAINST THE UNITED STATES RELATED TO THE MANAGEMENT OF INDIAN TRIBAL
TRUST FUND ACCOUNTS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
ON
S. 1857
TO ENCOURAGE THE NEGOTIATED SETTLEMENT OF TRIBAL CLAIMS
__________
FEBRUARY 7, 2002
WASHINGTON, DC
_______
U.S. GOVERNMENT PRINTING OFFICE
77-685 WASHINGTON : 2002
____________________________________________________________________________
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COMMITTEE ON INDIAN AFFAIRS
DANIEL K. INOUYE, Hawaii, Chairman
BEN NIGHTHORSE CAMPBELL, Colorado, Vice Chairman
FRANK MURKOWSKI, Alaska KENT CONRAD, North Dakota
JOHN McCAIN, Arizona, HARRY REID, Nevada
PETE V. DOMENICI, New Mexico DANIEL K. AKAKA, Hawaii
CRAIG THOMAS, Wyoming PAUL WELLSTONE, Minnesota
ORRIN G. HATCH, Utah BYRON L. DORGAN, North Dakota
JAMES M. INHOFE, Oklahoma TIM JOHNSON, South Dakota
MARIA CANTWELL, Washington
Patricia M. Zell, Majority Staff Director/Chief Counsel
Paul Moorehead, Minority Staff Director/Chief Counsel
(ii)
C O N T E N T S
----------
Page
S. 1857, text of................................................. 4
Statements:
Armstrong, Tom, Office of the General Counsel................ 14
Hogen, Phillip, associate solicitor for Indian affairs,
Department of the Interior................................. 21
Inouye, Hon. Daniel K., U.S. Senator from Hawaii, chairman,
Committee on Indian Affairs................................ 1
Khoury, Mike, assistant director, Trust Department,
Department of the Interior................................. 14
Murkowski, Hon. Frank H., U.S. Senator from Alaska........... 6
Taradash, Alan, consultant, Intertribal Monitoring
Association................................................ 7
Tillman, Charles, chief, Osage Nation and chairman,
Intertribal Monitoring Association......................... 7
Williams, McCoy, acting director, Financial Management and
Assurance, GAO............................................. 14
Appendix
Prepared statements:
Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado,
vice chairman, Committee on Indian Affairs (with
attachments)............................................... 25
Cantwell, Hon. Maria, U.S. Senator from Washington........... 104
Hogen, Phillip............................................... 113
Johnson, Hon. Tim, U.S. Senator from South Dakota............ 104
Thomas, Hon. Craig, U.S. Senator from Wyoming................ 105
Tillman, Charles............................................. 105
Williams, McCoy.............................................. 110
LEGISLATIVE PROPOSALS RELATING TO THE STATUTE OF LIMITATIONS ON CLAIMS
AGAINST THE UNITED STATES RELATED TO THE MANAGEMENT OF INDIAN TRIBAL
TRUST FUND ACCOUNTS
----------
THURSDAY, FEBRUARY 7, 2002
U.S. Senate,
Committee on Indian Affairs,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m. in room
485, Russell Senate Office Building, Hon. Daniel K. Inouye
(chairman of the committee) presiding.
Present: Senators Inouye, Campbell, Murkowski, Johnson, and
Thomas.
STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM HAWAII,
CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS
The Chairman. The committee meets this morning to receive
testimony on proposals addressing the statute of limitation on
claims of tribal governments against the United States related
to the management of Indian tribal trust funds.
Over the course of the last year the committee has received
various proposals from representatives of tribal governments
that are concerned with the very real possibility that the
United States might assert that reports submitted to the tribes
whose trust funds are held by the Federal Government
constituted notice sufficient to commence the running of the
statute of limitation against tribal claims.
One such proposal was introduced in the Senate in the
closing days of the first session of the 107th Congress by the
vice chairman of this committee, Senator Campbell. I was
pleased to serve as a cosponsor of that measure.
For those who may not be familiar with the background of
such claims, I will take 1 moment here to review some of the
more recent history. As a function of treaties and the course
of dealings between the United States and Indian tribes, the
United States holds legal title to lands held in trust for
individual Indians as well as for Indian tribal governments.
The revenues derived from trust lands are also held in
trust by the United States for the benefit of individual
Indians and tribal governments. Currently, the Department of
the Interior maintains approximately 1,400 accounts of 315
Indian tribes with assets in excess of $2.6 billion and over
260,000 individual Indian money trust fund accounts with a
balance of $400 million as of September 30, 2000.
Receipts are deposited to these accounts primarily from
land use agreements, royalties from natural resource depletion,
enterprises related to trust resources, judgment awards, the
settlement of Indian claims, and investment income.
However, an independent audit of the trust funds for fiscal
year 2000 noted that reliance cannot be placed on the balances
reflected in the trust fund accounts until tribal accounts are
reconciled and/or resolved through negotiation and settlement
or until a now pending class action lawsuit that has been
brought on behalf of the individual Indian money account
holders is resolved.
The Congress first established an Indian trust fund account
reconciliation requirement in the Supplemental Appropriation
Act of 1987 in response to tribal concerns that the Interior
Department had not consistently provided them with statements
of their account balances; that their trust fund accounts had
never been reconciled and that the department planned to
contract with a third party for the management of trust fund
accounts.
The original provision required that the accounts be
audited and reconciled before the department transferred the
responsibility for managing the trust funds to a third party.
From 1990-95 provisions in the Appropriations Acts for the
Department of the Interior added a requirement that the
accounts be reconciled to the earliest possible date and that
the department obtain an independent certification of the
reconciliation work.
In 1994, the Congress required the Interior Secretary to
provide tribes with a reconciled account statement as of
September 30, 1995 in the American Indian Trust Fund Management
Reform Act.
From fiscal year 1992-2001, the Appropriations Acts for the
Department have included an additional provision which requires
that tribal and individual Indian money accounts holders be
furnished with an accounting from which the beneficiary can
determine whether there has been a loss.
Recognizing that it would be unfair to allow the statute of
limitations to run on claims until each account holder was
provided with an accounting, since fiscal year 1991, the
Congress has included in the Interior Appropriation Acts a
provision that tolls the statute of limitations on tribal and
individual Indian claims against the United States arising out
of the department's management of tribal and individual Indian
trust funds.
A similar provision is contained in the President's budget
request for fiscal year 2003. Beginning in 1992, the Interior
Department did undertake work to provide for the reconciliation
of tribal trust fund accounts and, at least initially to
examine whether individual Indian money trust accounts could
also be reconciled.
This work was accomplished through contractors, primarily
the Arthur Andersen firm, and the Congress appropriated over
$20 million so that this important work of reconciling trust
fund accounts could proceed. The Congress also called upon the
General Accounting Office [GAO] to oversee the reconciliation
process.
Following the reconciliation work performed by the
contractors and supplemented by additional work on part of the
Interior Department, reports were issued to each tribal
government for whom the United States holds funds in trust.
It is these reports that are at issue, because it's alleged
that the reports constitute notice sufficient to commence the
statute of limitations running on any claims that tribal
governments may have against the United States relating to the
Government's management of trust funds.
In May 1996, GAO issued a report on the reconciliation
process concluding that, and I quote:
Interior's reporting of the reconciliation project results
was not as complete as it could have been. Interior did not
disclose in the report packages to tribes the procedures
specified in the reconciliation contract that were not
performed or those could not be completed and the reasons.
For the procedures that were performed, Interior did not
fully disclose scope limitations or changes in methodologies
such as accounts and time periods that were not covered and
alternative source documents used.
Thus, as we will hear this morning, the reconciliation
process did not accomplish the primary objective it sought to
achieve, namely to assure the affected tribal governments that
the balances in the trust fund accounts were balances upon
which they could rely.
It has now been 6 years since many of the tribal
governments received the results of the reconciliation process.
Faced with an assertion that the receipt of these reports
commenced the running of the statute of limitations, most
prudent tribal governments would take action to preserve their
claims against the United States by filing legal claims before
the running of the statute. These actions, if filed, and across
Indian country many have been filed, hold the potential for a
multitude of adjudications by different courts with varying and
likely inconsistent results as well as exposing the United
States to unlimited liability.
So, we are here this morning to explore whether there is a
will and a way for well-intentioned people to come together and
agree on a legislative proposal that will address the statute
of limitations on tribal claims and thereby enable the parties
to pursue some other path for the resolution of these claims.
[Text of S. 1857 follows:]
The Chairman. I call upon the gentleman from Alaska.
STATEMENT OF HON. FRANK H. MURKOWSKI, U.S. SENATOR FROM ALASKA
Senator Murkowski. Good morning. Chairman Inouye, I am
pleased to be here. I do support the legislation that has been
proposed by both you and Senator Campbell to extend the statute
of limitations. But I think that the issue goes far deeper than
this.
We have had the past two Secretaries of the Interior noted
for contempt of court. That's certainly a bipartisan selection
by the court. So, this is not partisan. It's a reality. The
reality, in my opinion, and I have been on this committee for,
well, 21 years or thereabouts. I can't remember the exact
dates. In any event, this is something that we have been faced
with.
In my opinion, the BIA is inadequate to manage these trust
accounts. I don't know how long or how many decades it's going
to take for the Indian tribes to recognize this. This is not a
lessening of the BIA's power. This is a function that
ordinarily is done by competent trust departments that put
their credibility behind their ability to manage trusts and do
accounting work and keep track of records.
I recall, Chairman Inouye, being at previous hearings where
we had pictures of how this stuff has been stored and there's
just absolutely no excuse for it to go on.
So I am here to simply, I guess, express my frustration.
Whether it be Secretary Norton or previous Secretary Babbitt,
this process has been going on so long, you can't fix the blame
anywhere. You can't fix it on an administration. The
accountability obviously belongs with the BIA, but the BIA is
faceless in the sense that, you know, who caused it? Well, we
don't know. It's BIA, but it's the responsibility of the
Secretary. Until a Secretary comes along and says:
I am going to make an administrative decision to change it
and we are going to do it and get it done right, this committee
is going to be faced with extensions and situations like we
have today.
I would encourage the members of the committee, the
professional staff and the tribes and the BIA to recognize that
in my opinion we are not trying to diminish their authority. We
are trying to functionally meet the responsibility associated
with managing the individual trusts for the tribes so they can
be properly administered.
The BIA is incapable of that. It is not a criticism of the
BIA, they are just not set up to do it. So, let us get them out
of the business before we have to go through this any more. So,
thank you for the opportunity to be with you again. I wish you
well in your deliberations. I do support the legislation. Thank
you.
The Chairman. As always, you are right on target.
Senator Johnson, do you have any statement you would like
to make?
Senator Johnson. I will submit a statement for the record.
The Chairman. Without objection the statement will be made
part of the record.
[Prepared statement of Senator Johnson appears in
appendix.]
The Chairman. Now, it is my pleasure to call upon the chief
of the Osage Nation and chairman of the Intertribal Monitoring
Association, Charles Tillman.
Chief Tillman will be accompanied by Mr. Alan Taradash,
consultant to the association.
STATEMENT OF CHARLES TILLMAN, CHIEF, OSAGE NATION AND CHAIRMAN,
INTERTRIBAL MONITORING ASSOCIATION, ACCOMPANIED BY ALAN
TARADASH, ESQUIRE, CONSULTANT TO THE INTERTRIBAL MONITORING
ASSOCIATION
Mr. Tillman. Thank you, Chairman Inouye. It's a privilege
to be here before the community once again and also to
represent the Intertribal Monitoring Association before this
distinguished group.
Mr. Chairman, I am too frustrated with our trustee. We, the
500 and some tribes, the beneficiary of the natural resources
that go across this country, we, too, believe that the BIA is
not capable of handling that trust. When we talk about trust,
Dr. Charles Wilkerson of the University of Colorado was the
speaker the other day at Shepherdstown, WV where a task force
was gathered up of tribes. He said some very important things
about trust. The trust law appeared in 1831 under Chief Justice
Marshall and the Cherokee Nation case.
Marshall understood the treaty negotiations and knew what
the tribes were asking for. That was: No. 1, disease protection
against the white race protection against trespass of their
land and protection for their land. This was 171 years ago.
Here we are today asking for protection and living up to
what Congress said 171 years ago. What Congress realized, the
Tribal Trust Law is the most direct, most private and should be
held at the highest standard of all trust law. It is not a
common trust law. It should be held at its highest standard.
The moral issue has been felt since the President Nixon
administration and hopefully to every administration
thereafter. We have not forgotten what Justice Marshall said,
that Congress was the ultimate trust holder.
I am here today to ask Congress to flex some of its
authority and in this bill, on S. 1857, the Intertribal
Monitoring Association which I represent consists of 53 tribes
or large stakeholders. It is a sad day that we come before this
committee and we also recommend, highly recommend, this bill.
If it's a possibility of this bill, and I met with my board
yesterday solely for the purpose of providing an opportunity to
explore the settlement of tribal claims during the fiscal year
of 2002, the statutes of limitation shall be deemed not to have
run for any claim concerning losses or to mismanagement of
tribal trust funds and resources.
Further, with regard to the reconciliation report
distributed to tribes by Arthur Andersen and the Department of
the Interior in 1996, one, these reports shall not be
considered to have started the running of the statutes of
limitation for any claim against the United States or any
Indian tribe regarding the management of tribal trust funds and
resources, regardless of when such claim was filed.
No. 2, these reports shall not consider for any purpose to
be an accounting sufficient to fulfill the United States duty
to account as required by the American Indian Trust Fund
Management Reform Act of 1994 under other applicable law and
under general principles of trust law.
No. 3, the United States is precluded from introducing
these reports into evaluated and using them as rebuttal
evidence and otherwise relying on them in administrative or
judicial proceedings to provide any reported conclusion of fact
contained in these reports.
Senator Inouye, we do support the bill and I am here to say
that I have been here many times and I do believe in my heart
this day that I am also a frustrated person that came 1,400
miles to say that Congress needs to make sure that these trust
functions are carried out by our trustee, the BIA, and Congress
should have its own oversight committee for this purpose and I
would like to recommend that.
The Congress itself, the body itself, being the trustee
should have that committee. Who else should serve as that
committee is the Intertribal Monitoring Association because of
its membership, because of its ownership and because of the
purpose that it serves and that's to protect our asset.
I agree with Senator Murkowski. I agree that the Bureau
needs to be reformed. I do not think that we should do away
with the agency because the Native Americans across this
country, that's the only we have to rely upon in certain
matters. But it's not equipped or it is not geared to handle
the vast functions of its responsibility right now.
Now, we can draw all the boxes and we can come up with all
the management, but we have to have the M-O-N-E Y, money, to
make those functions work. That has to be in place, Senator. If
that money is not there, you may have the best widget in the
world, but you will never produce another one without the
money. That is what I am here to tell you.
We do agree on the Senate Bill 1857 and what it says, but I
also wanted to interject those things into this is hearing. I
wish we had more time, I would tell you a lot more. But I want
to pass it on to my colleague, Alan Taradash. I am sure he has
a few comments he would like to make.
[Prepared statement of Mr. Tillman appears in appendix.]
The Chairman. May I ask a few questions now before we go to
Mr. Taradash because there is a vote pending in the Senate?
Mr. Tillman. Yes, sir.
The Chairman. GAO has advised us that in 1996 over 300
tribes were provided with these reconciliation reports. Those
who wish to dispute the balances stated in those reports must
file claims within 6 years. Otherwise they run the risk that
the statute will be held to have been expired; 6 years have now
passed
Now, you are in charge of this association. Do you know how
many tribes have filed an action against the United States?
Mr. Tillman. I know that I can think of off the top of my
head approximately maybe 12 tribes that I do know of. That
includes the Osage. We were advised at that by the Assistant
Secretary, Kevin Gover because he told me personally that this
was going to drag on for years. He said, ``The only way to do
that is to take it to court.''
We filed not because of the statute of limitations, but
because of to stop the bleeding for one and to get it into the
proper area of law, which was claims court. But I also
understand there are three tribes in the northwest, or maybe
four, that are filing before the end of the month.
So, you don't have many tribes that are filing, Senator.
One reason is the lack of money. It is very expensive to get
into court and some of our smaller tribes do not have the money
to bring on a court action of this nature.
So, we represent the 53 tribes and we are beginning to find
that out, that our trustee, the United States or the BIA is
doing what it's capable of doing and everyday is the
accounting, the wrong accountability. There's no accountability
whatsoever with the BIA.
It goes on everyday and how do you stop that? Some of these
tribes have no answer for that. Some of us tribes that do have
the money have an answer to that. What I think is that when we,
the Osage Tribe, a few years ago took an assessment of our
agency in 1992 and 1996, that assessment was taken by Coopers
Lybrand and that assessment told us that the BIA was operating
back in the 1960's, the 1950's and 1960's.
Here we are in 2002 and how do you bring that system up to
standard? That's the question.
The Chairman. I'll read from the President's budget request
for fiscal year 2003. In that request there is the following
language. I quote that:
Notwithstanding any other provision of law, the statute of
limitations shall not commence to run on any claim, including
any claim in litigation pending on the date of enactment of
this act concerning losses to or mismanagement of trust funds
until the affected tribe or individual nation has been
furnished with an accounting of such funds from which the
beneficiary can determine whether there has been a loss.
Mr. Taradash, you are the consultant and the expert here.
In your view, what would constitute an accounting from which a
beneficiary can determine whether there has been a loss?
Mr. Taradash. That is a very important point, Senator. I
also want to first express my gratitude to you and the members
of the committee for allowing us to present these views here.
Many years ago, approximately ten, along with the president and
delegation from the tribal council, the Hickory Apache Tribe
and its auditor, we met with you, Senator Inouye, and showed
you at that time the deficiencies in just oil and gas
accounting that resulted in huge losses in the collection of
disposed of, non-renewable resources.
I remember your reaction at the time. As you sat with this
huge spreadsheet on your lap you said, ``This is theft.'' Those
words stuck with me because of the obviousness with which you
grasped the deficiencies.
Now, there has been a great deal of focus on the so- called
accounting. When one looks at what the Department of Justice
produces in claims by tribes in the court of Federal claims as
accounting reports, they do not give you the information you
need to determine what happened to your assets, both cash and
non-cash assets.
The difference is this, Senator: If one gets a report that
is filled with disclaimers, such as all of the reconciliation
reports produced by Arthur Andersen, and the disclaimers, I
might add, are by design so that Andersen cannot be sued by any
tribe--this is what they sought to achieve--for detrimental
reliance upon any of the numbers in that report, not the
opening balance, not the additions or subtractions nor the
closing balance.
So, Andersen receives, by its disclaimer, insulation from
accountability and we were told in meetings with the then
Comptroller of the United States, Ed Mazor, in 1992 that what
he wanted were numbers he could defend on the Hill in this
exercise that Andersen then proceeded with. He did not want a
complete and accurate accounting because we discussed with him
the need to account for completely and accurately non-cash
assets that become the trust corpus of funds.
It's ludicrous for anyone to suggest that if one accounts
for the cash that you happen to find in the bank, that that's
an adequate accounting of one's assets.
We even have horrible examples. There was a Kickapoo
gentleman, for example, that died under a bridge a millionaire,
not known to him because the Bureau had never told him that he
had that money from valuable mineral resources. These
accounting reports do not give one any information on the
totality of one's assets and what happened to them. And we are
expressly told that you can't rely upon them.
If it is good enough for Arthur Andersen to stand behind as
a shield against liability, then it ought to be good enough for
the tribes to make the claim that they should not be bound in
any way by those numbers, not even as notice of incompetence in
the management of their money.
There is a case about 10 years vintage in the Court of
Federal Claims which precluded a tribe from getting an
accounting and going after damages because the judge in that
case, with no citation to authority held that the tribal
council had been complaining to the Bureau of Indian Affairs
for years about no financial reports.
Because the tribe could not show that it was, and these are
the judge's words, ``shockingly ignorant'' of their financial
affairs, that they were going to be held to have been on notice
from the time they started complaining.
Now, no one else is provided with that sort of ludicrous
standard. When the savings and loan problems came up, nobody
held the savings and loan account holders to those kinds of
stratagems by the Department of Justice and Interior. That
should not be done to tribes.
The Chairman. That was pretty clear. I will have to leave
now to vote but Senator Campbell has already voted so he will
continue the hearings.
Senator Campbell [assuming Chair]. Thank you, Mr. Chairman.
I apologize for being here a little bit late. It was my
understanding that the hearing was going to start after the
vote, so I went over and did my duty.
It's nice to see you here, Chief Tillman, my old friend.
Alan, welcome here, too. To the other witnesses who are here, I
am sorry I didn't hear Senator Inouye's questions.
I apologize for not being here in time to do an opening
statement, but will submit that for the record. I know that
most of the witnesses recognize that this hearing, even though
there are many aspects of the trust fund debacle, this
basically is not about the history of the trust fund's
management or about the proposals to reform it and not about
the Cobell litigation either. It's about avoiding litigation.
That is what this bill is all about. So, I know we will try to
keep directed to that.
If you have already answered the questions I am going to
ask you Alan, you might just tell me that so I don't encumber
you again.
First of all, when the tribal lawsuits were filed, have any
of your clients filed in the belief that they must do so or
lose their right to having them filed?
Mr. Taradash. Yes, Senator Campbell; on January 8 I filed
three cases in the Court of Federal Claims, one for the
Delaware Tribe of Oklahoma in Bartlesville, OK which is where
they are located; one for the Pueblo of Laguna in New Mexico
and one for the Hickory Apache Tribe, also in New Mexico,
claiming losses to and mismanagement of all of their trust
assets, both cash and non-cash assets.
We have had to make those claims precisely for the reasons
that you alluded to.
Senator Campbell. Do you anticipate others being filed,
too, if we don't get an extension of the statute of
limitations?
Mr. Taradash. Absolutely. There's a decision in the
Shoshone-Arapaho case of November 30 of last year in the Court
of Federal Claims that expressly determined and interpreted the
meaning of the tolling language that Congress has put into
appropriations bills, that losses to is different from
mismanagement of trust funds and thus in that case permitted
those two tribes to go back to August 14, 1946 because they
have never been provided an accounting of their trust funds
which include upstream, so to speak, losses with respect to
disposition or use of trust assets that should have gone into,
resulting in cash that should have gone into the trust funds.
Obviously, the Government may appeal that case at some
point when it gets concluded, but under the umbrella of very,
very good reasoning in that case, I filed those three cases on
January 8.
Senator Campbell. Those cases that you did file, did you
have an opportunity to get some feedback on how those tribes
would feel about extending the statute of limitations and
therefore making the filings unnecessary?
Mr. Taradash. Obviously, Senator, we would much prefer not
to have to litigate. It is terribly expensive. I can't stress
how expensive it's. It's absolutely unconscionable, and I think
obscene, for the Department of the Interior and Justice, along
with the then Comptroller of the United States, to have a
calculated plan to require especially little tribes that don't
have the resources to, if you don't like the number that
Andersen is going to churn out, then you sue us. That's an
indecent proposal and it's an indecent strategy, which has been
implemented. There's a need to correct that.
Senator Campbell. Thank you.
Chief, did you have comments along that line?
Mr. Tillman. Yes; the comment I have is the haves and the
have-nots. That pretty well sums it up. The tribes that have
the money, they can file. The have-nots, they are at the mercy
of whatever.
But the ITMA and its 53 membership and its website has made
it known that what the Government claims, that the Arthur
Andersen report, as long as it's running, when it runs out in
the 6 years, wherever the statutes are, that you need to file
something.
So, our organization has put that information out, sir.
Senator Campbell. Well then, let me ask you, will this
bill, assuming you have had a chance to look at it, do you
think that your clients would be inclined to negotiate with the
Federal Government to settle other claims if we can't extend
the statute of limitations?
Mr. Tillman. The ITMA, in its board meeting as of 2 days
ago, has sat down and looked at this bill and concurrently we
support this bill wholeheartedly.
Mr. Taradash. Senator Campbell, may I add one thing to
that?
Senator Campbell. Yes.
Mr. Taradash. With respect to settlement, I would like to
mention that it's terribly important to be mindful of the
judicial closure and unintended results that occurred the last
time Congress visited, in a sense, these kinds of issues when
it passed the Indian Claims Commission Act in 1946.
What Congress intended was that tribes be fully
compensated, not only for things which smacked of wrongs and
legal theories recognized that law, but it added a section
that's very unique in the annals of legislation that deal with
litigation. The fair and honorable dealings clause.
Tribes were supposed to be able to come to court under the
purview of that act and demonstrate that they had been dealt
with dishonorably or even just unfairly and had resulted in
losses and be compensated for it.
However, when one looks at those cases tribes lost
horribly, initially because they couldn't prove up the cases
because they didn't have the money to hire the experts
necessary to do the prove-ups. One of the things that Senator
Inouye alluded to before you arrived, Senator Campbell, was
what about the desirability of entering into some kind of
negotiation process.
I would like to bring to the committee's attention the
structural problem that has a solution that if it were to be
implemented I think it would make settlement discussions very,
very fruitful and possible.
The structural problem is this: By statute the Attorney
General of the United States must defend the United States when
sued. Defense of the United States with respect to all of the
Department of Justice is the only thing that has to be
vindicated upon lawsuit.
There's no statute that says the functional equivalent of a
private trustee's lawyer's duty and that's, if you find or are
aware of losses to or mismanagement of the trust corpus that
your client, the trustee, is responsible for, you as a lawyer
have an obligation to tell the beneficiary, the failure of
which in your performance subjects you to suit and liability
for the failure to disclose. The trustee has a similar duty.
Our trustee has no such duty. Our trustee's lawyers have no
such duty. So, the duty that they have is to defeat those
claims by any means necessary. And the problem, Senator, comes
up not just in the Court of Claims, but in district courts
throughout the country there are at least 15 cases. In the last
15 years when lawyers in the Department of Justice have been
sanctioned because of obstruction of justice and deceit of
courts in Indian claims cases of other cases brought by Indian
tribes or allottees.
The reason is, they go to the extreme to defend because
they have no legal duty to disclose. If Congress were to fix
that and provide that same kind of vindication of honor and
duty that a private trustee and a private trustee's lawyer has,
then there would be remedies for the brief that are far more
direct.
More importantly, there are very, very good people at
Justice and Interior that work very hard. They need to have the
right incentive to do the job correctly. They don't have it
because by statute they have a different mandate.
Senator Campbell. Well, we have dealt with this trust fund
problem for a number of years. I am not an attorney and I can
tell you that the more we get into it, the more complicated it
gets for me.
I think most Americans, other than people who have a pretty
strong background in the law, would be completely confused.
Maybe we even confused it more in 1991 when we refined the
definition of ``accounting'' and began using the phrase, ``An
accounting of such funds from which the beneficiary can
determine whether there has been a loss.''
Did we make it worse?
[Mr. Taradash nods his head in the affirmative].
Senator Campbell. We did. That is the way we do it around
here, unfortunately. A lot of times, in an effort to try to
correct things we end up making things worse.
Well, let me go on and ask Senator Thomas if he has any
questions of you before we move on.
Senator Thomas. Thank you, Senator. I share your
frustration sometimes and I wanted to come primarily to listen
to the witnesses because this is an issue that has hung on and
it needs to be resolved and we need to find a way to come to
that resolution.
I have a short statement for the record.
Senator Campbell. Okay. Without objection that will be
included in the record.
[Prepared statement of Senator Thomas appears in the
appendix.]
Senator Campbell. We have also, before we go on to the next
panel, some comments here that I was asked to read in the
record for the benefit of the General Accounting Office [GAO].
We have called upon the GAO to appear before the committee
today not in relation to the most recent work of the GAO which
has related to the efforts of the previous administration to
implement the TAAMs system, but because of the GAO's work in
overseeing the department's efforts to reconciliation tribal
trust fund accounts in the early 1990's.
At that time the GAO followed the work of the two
contractors hired by the Interior Department including the work
conducted by Arthur Andersen. However, we should understand
that the GAO did not evaluate each of the reports that were
sent to the tribal governments for their sufficiency or
content, nor have we asked the GAO to appear before the
committee to comment on any of those legislative proposals.
We do appreciate your being here. We will go on to the GAO
witness, which is McCoy Williams.
STATEMENT OF McCOY WILLIAMS, ACTING DIRECTOR, FINANCIAL
MANAGEMENT AND ASSURANCE, GAO, ACCOMPANIED BY MIKE KHOURY,
ASSISTANT DIRECTOR, TRUST DEPARTMENT, DEPARTMENT OF THE
INTERIOR AND TOM ARMSTRONG, OFFICE OF GENERAL COUNSEL
Senator Campbell. Mr. Williams, welcome to the committee.
You may proceed at your leisure.
Mr. Williams. Mr. Chairman and members of the committee,
thank you for the opportunity to be here today to summarize
observations from our past work regarding Indian travel trust
fund accounts.
I am accompanied by Mike Khoury who is the assistant
director responsible for our trust work at the Department of
the Interior and Tom Armstrong who is from our Office of
General Counsel.
As has been stated in the opening remarks and in other
comments this morning, in a June 1993 letter to this committee
we noted that the Appropriations Act for the Department of the
Interior had for many years contained a provision that told the
statute of limitations on claims for losses to or mismanagement
of tribal trust funds until the tribe had been furnished with
an accounting of its funds from which to try to determine
whether there had been a loss.
We also noted that the parties envisioned that such an
accounting would result from Interior' then ongoing
reconciliation and audit of the tribe for trust fund accounts
which the Congress had mandated.
At that time we expressed our view that until there was a
mutually acceptable basis for determining account balances and
any associated losses, it would be premature to allow the
statute of limitations to run. We observed that holding the
statute of limitations until reconciliation and audit of an
account with this completed or until some mutually acceptable
agreement was reached as to the account balance had two overall
purposes.
First, it provided all interested parties, including
account holders, Interior and the Congress, an opportunity to
examine and evaluate all pertinent account information.
Second, it permitted interested parties to resolve all
claims arising from Interior's management of the accounts
rather than address the specific claims in a piecemeal fashion.
To fulfill reconciliation requirements established by the
Congress first in the Supplemental Appropriations Act of 1987,
Interior contracted with two major independent public
accounting firms. One to reconcile the trust accounts and the
other to do an independent certification to indicate that the
reconciliation resulted in the most complete reconciliation
possible.
Interior's Indian trust fund account reconciliation project
was completed in January 1996. During the reconciliation
project, Interior spent about $21 million for contract costs
over a 5-year period in a massive effort to locate supporting
documentation and reconstruct historical trust transactions as
well as to perform other reconciliation procedures in its
attempt to validate tribal account balances.
In January 1996, Interior began providing to each tribe a
report package containing the tribe's reconciliation results.
During a February 1996 meeting at which Interior officials and
the reconciliation contractor summarized the reconciliation
project results, tribes raised questions about the adequacy and
reliability of the reconciliation results.
In May 1996, we reported on shortcomings of Interior's
reconciliation project, including procedures that were not
completed due to missing records, systems limitations, time and
cost constraints.
In May 1997, we reported to this committee that as of May
6, 1997, Interior had provided reconciliation reports to 310
tribes; 51 of those tribes had disputed the reconciliation
results and 41 had accepted the results. Of the remaining 218
tribes, 47 had requested more time to consider the result and
171 had not responded to the reconciliation results.
In summary, although Interior made a massive attempt to
reconcile tribal accounts during this reconciliation project,
missing records and systems limitations made a full
reconciliation impossible.
Mr. Chairman, I would be glad to respond to any questions
that you may have at this time.
Senator Campbell. Did your colleagues have any comments?
While Senator Inouye is getting reseated, let me ask you a
couple of questions. On the certification of audits in 1990,
Congress required an independent certification that the Arthur
Andersen reconciliations were the most accurate possible. Did
that certification occur?
Mr. Williams. No.
Senator Campbell. It did not?
Mr. Williams. It did not occur.
Senator Campbell. Why not?
Mr. Williams. There were procedures that were not
performed. There were steps that they were unable to perform. I
guess the bottomline is just that all of the procedures that
were needed to give a full account were not complete.
Senator Campbell. They were not fulfilled. The GAO has
concerns about the Department of the Interior's process, the
reconciliation process. Did the BIA follow the GAO's
recommendations for informing tribes about the limited scope of
the reconciliation reports and the changes that GAO believed
were necessary in the reconciliation process?
Mr. Williams. We recommended that the tribes be provided
full disclosure about the areas. A full disclosure of that
information was not provided.
Senator Campbell. And you have no way of knowing if those
concerns were then passed on to the tribes?
Mr. Williams. No.
Senator Campbell. Senator Inouye, did you have questions? I
will turn it back to you.
The Chairman. [presiding] Needless to say, this is a very
complicated matter. In my opening statement I quoted from the
GAO. Do you believe that a tribe receiving a reconciliation
report would be more likely to question its accuracy if each
report had fully described the limitations I quoted in the
GAO's, May 1996 report?
Mr. Williams. If I had known of the limitations then I
would have scrutinized the accuracy of the reports very
carefully. Now, each tribe's interest may vary based on the
circumstances. For example, some tribes may not have certain
type of leases and shortcomings in that area may not be of a
concern to me. But given the fact that there were limitations,
I would have given it much scrutiny.
The Chairman. In the May 1996 GAO report the following also
is stated:
GAO suggested that substantial changes in the scope of
procedures as a result of contract modifications and issue
papers be explained in the report package transmitted to
tribes.
BIA considered providing issue papers to tribes on compact
discs, however, the reconciliation project manager told us that
due to cost considerations BIA considered instead that these
issue papers be made available to tribes at the OTFM in
Albuquerque or that tribes could request copies of specific
documents by mail.
Would it be fair to say that the process ultimately
followed by the BIA in making this information available was
less certain to bring home to them an awareness of the
deficiencies of the reports than were the alternatives GAO had
proposed?
Mr. Williams. We believed in 1996, as well as today that if
the tribes had received full information about the process and
the shortcomings in the reconciliation process, then they would
have been in the best position possible to make an informed
decision.
The Chairman. In a June 1993 letter to this committee GAO
sugested that tolling the statute until a reconciliation and
audit of each account is completed or until some mutually
acceptable agreement is reached as to the account balance
serves two overall purposes. Can you describe those purposes?
Mr. Williams. Yes; as I included in my statement, we
basically stated that first it provides all interested parties,
account holders, BIA and the Congress an opportunity to examine
and evaluate all pertinent account information.
Second, it permits parties to attempt to resolve all claims
arising from BIA's management of the accounts, taking into
consideration the practical limitations on the scope of the
reconciliation such as the loss of critical records rather than
addressing specific claims on a piecemeal fashion.
The Chairman. Can you explain why GAO believed that until
there was a mutually acceptable basis for determining account
balances and associated losses it would be premature for
Congress to delete the Interior Department Act language tolling
the statute?
Mr. Williams. In a 1993 letter GAO stated:
The thrust of our position has been that the government, to
fulfill its fiduciary responsibilities, must provide account
holders a full accounting
The Chairman. Would the GAO still recommend that Congress
continue to toll the statute until the tribal accounts are
reconciled and/or resolved through negotiation and settlement?
Mr. Williams. I will let me Armstrong talk to that one, our
attorney.
Mr. Armstrong. Mr. Chairman, as you recognized in your
opening statement, we have not done any work recently that
would relate to that question. But I think we would suggest to
the committee that if you feel that a tribe would be
disadvantaged by an argument that a reconciliation report
provided the tribe started the running of the statute of
limitations and if you think that giving the parties more time
to discuss this, to negotiate, possibly to come to settlement
by giving them more time, you could avoid expensive litigation,
I think we would suggest that you toll the running of the
statute of limitations.
The Chairman. From what you know of the situation as of
this moment, would you recommend that?
Mr. Armstrong. From what I heard this morning--
unfortunately, I have to apologize--I haven't been involved in
this area for 4 or 5 years now. I was brought here because I
was involved in the area back in the early 1990's when we were
monitoring the reconciliation effort.
But from what I heard here this morning, you have Chief
Tillman advising you that there are a number of tribes who are
concerned and Mr. Taradash also advising you that there are a
number of tribes who are concerned that they need to go to
court in order to preserve their right to file a claim against
the United States.
And you heard Mr. Taradash testify that that is a very
expensive proposition.
The Chairman. Thank you. The committee understands that GAO
did not review the individual reconciliation report packages
that Interior sent to the tribes but you did review the
prototype report package.
Based on this review, does GAO believe that the reports are
accurate and reliable and do they provide tribal accountholders
and tribal governments with a full accounting of their trust
funds?
Mr. Williams. GAO has found that a number of reconciliation
procedures called for by the original contract between the
Department of the Interior and the independent professional
auditor were either not performed or not completed as
originally envisioned which could affect the reliability of the
account statements.
In addition, the prototype report package did not explain
to the Indian tribes the numerous changes in reconciliation
scope and methodologies or extent to which reconciliation
packages a fair and complete accounting.
The Chairman. Finally, if I may ask, what are the most
significant limitations and shortcomings in the scope of
methodology of BIA's reconciliation report?
Mr. Williams. A couple of the most important points are the
ones that I pointed out earlier and that would be the missing
documentation and the inability to reconcile the systems.
The Chairman. In other words, am I correct to conclude from
your responses that this committee should proceed with what we
are trying to do?
Mr. Williams. Yes.
The Chairman. Thank you very much, Mr. Williams.
Senator Thomas.
Senator Thomas. Well, thank you, Mr. Chairman. I am clearly
not as up on the details as you two gentlemen are. Let me just
ask you some general questions. Is there in your opinion the
possibility a satisfactory reconciliation through audits?
Mr. Williams. Two thoughts here: The audit would be a
separate component from a reconciliation. You could do an
audit, but you would need the reconciliation if you wanted to
get a full accounting. As long as you have missing
documentation and you can't reconcile these various areas, then
your audit is not going to give you what you are trying to
achieve in the end result and that's to be able to determine
what those exact balances should be for those accounts.
Senator Thomas. What do you have to do to accomplish that?
Mr. Williams. As long as you have those missing documents,
that will be difficult. We have recommended in the past that
the Congress should consider some type of negotiated
settlement. So, you would have to look at some of the other
options in our previous testimonies and statements. We have
made some of those and I think we would still be making those
same ones today.
Senator Thomas. So, getting together the information you
think is available will only get you part of the way and then
you have to negotiate?
Mr. Williams. You have to negotiate the rest of the way,
that's exactly right, because if you have missing documentation
and there's no way that you are going to find that
documentation, then it's going to be nearly impossible to do a
complete reconciliation.
Senator Thomas. If you have 1 year extension, what are you
going to do in that year? What are you going to do differently?
This has been going on for a very long time. What is the
solution? What is the remedy?
Mr. Williams. Yes; I must admit, I have testified and
reported on various agencies that have had long-standing
accounting problems, but I think this one kind of sets the
record for its long standing is concerned.
You have to work in a diligent manner to see how many of
the records can you actually locate and based on that, then you
had to begin from that point in trying to come up with some
solution. That is the only way that you can do this. You make
every effort possible to find all of the records that you
possibly can and you do as good of a reconciliation as you
possibly can. It's at that point in time when you make the call
that:
This is all we can find. We have done everything that we
possibly can and we have to come up with some solution to this
problem through some negotiate.
Senator Thomas. The accumulation of all the possible
records has not been accomplished. Is that what you are saying?
Mr. Williams. If there was some missing documentation you
would never be able to do a complete reconciliation of all of
the transactions.
Senator Thomas. You are saying you can't do it all, but you
can get together what is available. Has that been done?
Mr. Williams. Yes; based on what we saw in 1996, we thought
they couldn't go any further.
Senator Thomas. So the accounting part is completed?
Mr. Williams. Well, that's basically why that particular
point in time we stated that there should be some negotiation
to try to come to some settlement. Yes, I think as far as
looking for the records, the accounting part, I guess you could
say would be complete.
Senator Thomas. Thank you.
Mr. Williams. But it wasn't a complete accounting of the--
--
Senator Thomas. Well, now that was my question. Has the
accounting part, the reconciliation or the accounting for the
records available, has that been completed?
Mr. Williams. They have done as much as they can with the
documents, but an accounting has not been completed of the
activities.
Senator Thomas. In 5 years you have not been able to do the
accounting on the documents that are there?
Mr. Williams. Yes; of the documents that are there that
they have looked at, they have done an accounting for those.
Senator Thomas. It is very confusing. You are talking about
what you can get and what you can't get. Of what you can get,
has that been accounted? Has that been added up? Is that there?
Mr. Williams. Yes.
Mr. Armstrong. Being involved in GAO's work back in the
early 1990's, I think where we were in 1996 when we reported to
this committee was that the work that the Interior Department
and their contractors had done to that date was deficient
because they were missing documents.
We felt the Government was spending good money but not
getting much bang for the buck, that it would be impossible,
given the missing records, to prepare a complete accounting.
So, we recommended to this committee a settlement proposal,
legislation----
Senator Thomas. So the documents are there, all the
documents you think that are ever going to be there are there?
Now you are dealing with an abstract.
Mr. Armstrong. I am not sure that all the documents are
there.
Senator Thomas. Well, that's what you said.
Mr. Armstrong. I'm sorry?
Senator Thomas. You just got through saying that the
accounting of the documents that were available was completed.
Mr. Armstrong. But remember, too, that we were concerned
with the limitations that the Interior Department had imposed
on its contractor and looking for documents and in looking at
documents.
Senator Thomas. Then the answer is perhaps there are more
documents that have not been looked at.
Mr. Armstrong. Perhaps there are, yeah.
Senator Thomas. That is what I am trying to find out.
Mr. Armstrong. We were not in a position. We weren't in a
position. We didn't go looking for documents. We were just
monitoring the process. So, we are not in a position to say
that there are in fact more documents there. But what we were
saying was that there were other steps that could be taken to
see if there were more documents there.
Senator Campbell. One last question: Since the missing
documents have created such a problem with getting a clearer
account, this bill as you probably know, extends the statute of
limitations for one year. But considering how complicated it
has been, would you recommend that it be 2 years or 5 years or
some other timeframe?
Mr. Armstrong. You know, back in 1993 when we did recommend
a tolling of the statute of limitations, our point was let's
maintain the status quo to give the parties time to work this
out. Mr. Thomas' point is well taken, I think, and your point,
Mr. Campbell, is well taken, how much are we going to be able
to accomplish in 1 year?
I think the committee needs to look at that very closely
because you may find yourselves back here in another year
considering legislation to toll the running of the statute of
limitations another year or another two years.
Our point, our advice to you is that based on the work we
did back in the early 1990's, the early to mid 1990's, was that
if you think that a tribe is disadvantaged by an argument and
having to deal with an argument that a reconciliation report
that the tribe received would start the running of the statute
of limitations and if you think that giving the parties more
time even by simply tolling the running of the statute of
limitations, if you think by giving the parties more time you
could avoid expensive litigation, Mr. Taradash just testified
as to the expense of litigation. Then we would encourage you to
consider very seriously tolling the running of the statute of
limitations.
Senator Campbell. Well, my concern, of course, is if tribes
feel in the next 8 or 9 months as we get close to that year
end, if this passes, which I assume it will, that they will
still feel they will have to have a rush to judgment. I don't
know but there still seem to be documents out there that many
people believe are going to surface that have not yet. So, it
might be wise to extend this timeframe.
Mr. Armstrong. Mr. Campbell, I think that's a fair
observation. I mean, part of the reasoning behind the
settlement proposal, the legislation that we proposed back in
1995 or 1996 to this committee was as we had crafted that
proposal it would give all of the parties a better opportunity
to come up with and to present to the mediators and arbitrators
any evidence, any documentation that they might have that would
be useful to the settlement of their claims.
I think that your point is well taken that you could find
yourselves back here in another 8 or 9 months dealing with
legislation to extend the statute of limitations another year
or for another period of time.
Senator Campbell. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you very much. Just for clarification,
because we are speaking of documents that are not available,
lost or destroyed, et cetera, are we speaking of records that
were held by the BIA in the 12 regions and since they were
handled manually, were there some that were misplaced or lost?
Second, there was an incidence where records were
contaminated by deer mice droppings causing Hantavirus and
therefore these records were not made available.
Third, a mysterious fire in the archives in Suitland, MD,
destroyed some of the documents.
Fourth, some of the records were destroyed at the
instruction of the Treasury and Justice Departments. Finally,
some of the records were not located because the Arthur
Andersen firm applied a model which excluded certain documents
from review.
Is that what we are talking about?
Mr. Williams. Yes; that is correct.
The Chairman. So, you cannot fault Indian governments for
the loss?
Mr. Williams. No; we did not.
The Chairman. I thank you very much, sir.
Mr. Williams. Thank you.
The Chairman. I appreciate your testimony. You have been
very helpful.
Mr. Williams. Thank you.
The Chairman. Now, our final witness, the associate
solicitor for Indian Affairs, Department of the Interior,
Philip Hogen.
STATEMENT OF PHILIP HOGEN, ASSOCIATE SOLICITOR FOR INDIAN
AFFAIRS, DEPARTMENT OF THE INTERIOR, WASHINGTON, DC
The Chairman. Welcome, sir.
Mr. Hogen. Good morning, Mr. Chairman, Senator Campbell,
Senator Thomas. I am Philip Hogen, the associate solicitor for
Indian affairs with the Department of the Interior.
I am an Oglala Sioux from South Dakota and I have been on
the job since late October so I have some catching up to do.
The Department of the Interior is on board with what the
proposed legislation intends to do: Extend the statute of
limitations as has been discussed here.
It is a very complicated, frustrating issue with which we
are faced. It is very expensive to litigate these cases. All
would be better served if we might settle them and resolve
them. I think it's obvious from what has just been said we are
never going to find every last piece of paper to answer
everyone's questions and consequently settlement would better
address that situation than trying to sort it out in the
courts.
With respect to what the committee intends to do, we have
suggested some language that we think might better capture what
the committee intends to do. That is, just extend the statute
of limitations rather than get into these issues such as, what
is the significance of these reconciliations which we have been
discussing and the accountings and so forth.
We think that those issues are better handled in these
negotiations that would occur during the period of time during
which this statute might be extended.
The Department of the Interior today has devoted more time
and attention and energy and focus to the issue of trust reform
and trust accounts than I think ever before in its history.
Yesterday over on the House side Secretary Norton testified
with respect to trust reform. She told the committee that she
has been devoting approximately 60 percent of her time to these
trust reform issues; that trust reform is receiving not only
more attention from her and from the department's leadership
than any other issue in the department, but also more than all
of the other issues in the department.
That is unfortunate with respect to those other issues, but
nevertheless, it is because of the significance of this issue,
because we have been at it so frustratingly long with so little
success and frankly because the Cobell litigation has captured
necessarily the attention of the department in this regard.
We are focused on it over there. We are doing historical
accounting. We are proposing some reorganizational changes; we
are consulting with tribal leadership. Last weekend the
Secretary spent all weekend with a tribal task force discussing
this very issue.
So far nothing is carved in stone. Nothing is cast in
concrete. We want to set up a mechanism that will solve the
problems of the past and make it work in the future.
We will be better equipped as we move down this road to
sort these things and address these issues with these new
mechanisms, with these new systems. We have learned that some
of the things in the pipeline so to speak, the TAAMS program,
things that we have talked about, were perhaps ill-designed or
now we know that they were ill-designed.
With the benefit of this restructuring we should be able to
not only come up with better numbers but have a better sense of
the big picture and I think thereby be able to successfully be
able to negotiate settlements with the tribes.
Certainly there will be things that we won't agree on. But
right now, as has been observed, when the statute of
limitations kicks in there's an obligation for the United
States to assert that as a defense.
We believe the committee is on the right track here by
suggesting that that be tolled. We suggest that the language
set forth in my written testimony would crisply and simply
capture this and we urge you to do that as you move in this
direction.
I would be happy to respond to attempt to respond to
questions you might have in this regard.
The Chairman. Well, I appreciate your candor and your
response. From the Secretary's statement, it's obvious that the
process is inadequate. The staffing is inadequate. It isn't
possible to focus upon the problem.
Do you have any suggestions as to what this Congress can be
doing legislatively to assist and expedite this process because
it is not fair to Indian Country to have this dangling and
having them wait another decade or two before we can come up
with any sort of resolution.
Do you have any suggestions? I don't expect you to have
them at this moment, but if you do, we would appreciate it if
you could share them with us. I would like to look them over.
Mr. Hogen. Well, we certainly will be happy to send that to
you, Mr. Chairman. I would also, I guess, say in the same
breath, the President's budget that recently was sent this way
contains a big shot there that would be devoted to these very
problems.
As that comes before you, we ask that you look
sympathetically to those requests.
Senator Campbell. Mr. Hogen, I know you haven't been in
that position in all the years we have dealt with this problem,
but I want to tell you: All we have heard over and over is:
If we had new systems, if we had more money, if we had more
computers, if we could revise the process, if we had increased
staffing, whatever, we could fix it.
But in my view the Bureau has simply dropped the ball over
and over and over. After hearing the GAO's testimony, I am even
more convinced of it. They are all just forms of passing the
buck to me. I don't think that is satisfying anybody that is
involved in litigation now or in future litigation to try to
get fairness out of this government for what should have been
done a long time ago.
Everybody knows Indian people across this country have been
cheated out of their money, that the Government has cheated
them out of their money. I want to tell you, if it was mine in
the private world and a bank did that to me, I would be raising
a lot more hell than they are raising with the Government. They
have had a lot of patience. But I think they are running out of
patience.
I have to tell you that as I understand your testimony this
bill should be redrafted to cover the tribes that have already
filed claims. That's not what this bill is about. It's to try
to provide an atmosphere where they could get some negotiated
settlement so they wouldn't be forced to file more and more
claims, which is in no one's best interest.
We are trying to provide assurance to them that we are
going to get to the bottom of this and we are going to fix it
without prolonged litigation and fighting it out in court. That
is what this bill is all about.
Would you like to comment on that?
Mr. Hogen. Yes, I would, Senator; if that's the way you
understood what I have suggested, I apologize because that's
not what I intended to convey. We do not want to merely limit
the application of an extension of the statute of limitations
to the several tribes that have currently filed their claims or
perhaps will file it before enactment of this legislation,
which we hope is very soon.
We have nine, I believe, cases that have been filed, some
in the Court of Federal Claims, some in U.S. District Court. We
know that in the pipeline are probably dozens, if not hundreds
of other cases. We would want this to apply to all of them and
those that have filed, and that is why we said what we said, so
we could go to the court and say, ``We seek a stay so that we
may continue these negotiations.''
So, I certainly did not mean to narrow or limit that and I
share your frustration.
Senator Campbell. Well, part of my frustration, I guess, is
that the faces keep changing over there and the problem keeps
going on. I just think that tribes' patience is wearing thin
and they are very justified in their patience wearing thin,
too.
I have no further questions, Mr. Chairman. I would ask
unanimous consent to include my formal statement for the
record, if you would, and also submit the attached letter from
the GAO dated August 30, 2001, for the record.
The Chairman. I can assure you that your statement and the
letter from GAO will be made part of the record.
[Prepared statement of Senator Campbell appears in
appendix.]
The Chairman. Mr. Hogen, sitting there you must have felt
the frustration of Indian country. There is an atmosphere of
uncertainty and a lack of credibility on the part of the
Department. Until we can resolve these things and bring about
certainty and credibility, it may be fair to say that you
should be anticipating about 300 suits being filed in various
courts throughout this land. That will not help the situation.
As Vice Chairman, Cochairman Campbell has indicated, time
is running out. So, I hope we can get together, not just
Congress and the department, but more importantly, the
beneficiaries and come up with a solution that all of us can
accept.
With that I thank you very much.
Senator Thomas, do you have any questions?
Senator Thomas. I have no further questions, thank you.
The Chairman. We are in recess.
[Whereupon at 11:18 a.m., the committee recessed, to
reconvene at the call of the Chair.]
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A P P E N D I X
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Additional Material Submitted for the Record
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Prepared Statement of Hon. Ben Nighthorse Campbell, U.S. Senator from
Colorado, Vice Chairman, Committee on Indian Affairs
Good Morning. Thank you Mr. Chairman for holding this hearing. It
is worth stressing, it seems to me, that this hearing is not about the
history of trust funds management. It is not about proposals to reform
trust management. And it is not about the Cobell litigation.
It is about avoiding litigation which I think is in everyone's
interest.
In the 1980's Congress directed the Department of the Interior to
reconcile tribal trust accounts; required an independent certification
to ensure the reconciliation was complete; and provided that the
statute of limitations would not be triggered until the account holder
received an accounting.
In January 1996, the Department of the Interior provided a report
to each tribe. When the tribes received and reviewed the reports
concerns were raised, concerns about their accuracy and reliability.
In May 1996, the GAO issued a report also raising concerns. If
these reports constitute ``accountings'' then the statute of
limitations will be considered ``running'' and out of a sense of
caution many tribes will feel compelled to file suit to protect their
claims.
Many tribes have already filed suit, as you know Mr. Chairman.
What we are interested in, and what the Chairman and I have been
working on for some time now, is trying to provide a ``cooling off
period'' in which the United States and the tribes have a chance to
settle potential claims arising out of this reconciliation process.
I very much believe that a wave of lawsuits against the United
States will serve no good purpose and will further alienate the
parties.
Mr. Chairman, since 1996 the United States has been embroiled in
litigation for Individual Indian Money [IIM] accounts in the case of
Cobell v. Babbit [and now Cobell v. Norton].
I believe this committee can play a role in guiding the parties to
a just settlement of all trust claims.
I also believe that legislation along the lines of S. 1857 could
encourage settlement and discourage protracted and expensive
litigation.
I know this Mr. Chairman: Without assurances to the tribes that
their claims will not be barred, we will see an avalanche of lawsuits
and that doesn't help anyone--other than the lawyers.
I ask unanimous consent to include in the Hearing Record a letter
dated August 30, 2001, from the GAO that summarizes its concerns about
the reconciliation process, and with that I look forward to hearing
from our witnesses this morning.
Thank you Mr. Chairman.
U.S. General Accounting Office,
Washington, DC, August 30, 2001
Hon. Ben Nighthorse Campbell,
Vice Chairman,
Committee on Indian Affairs,
U.S. Senate, Washington, DC.
Dear Mr. Vice Chairman: This letter responds to your request that
we summarize observations from our past work regarding the Department
of the Interior's Indian trust fund account reconciliation project,
which was completed in January 1996. From 1992 through 1997 we
monitored and reported on various aspects of Interior's planning,
execution, and reporting of results for the reconciliation project.
Enclosure II to this letter is a list of GAO products on various
aspects of Interior's Indian trust fund reconciliation project.
The Indian trust funds are of two types: tribal trust funds and
Individual Indian Moneys (IIM) trust funds. An independent public
accounting firm (IPA) audit of the trust funds for fiscal year 2000
showed a total of about $2.6 billion in approximately 1,400 separate
tribal accounts for about 315 tribes, and about $400 million in
approximately 260,000 IIM accounts as of September 30, 2000. Receipts
are deposited to these accounts primarily from land use agreements,
royalties on natural resource depletion, enterprises related to trust
resources, judgment awards, settlement of Indian claims, and investment
income, according to the IPA's audit report. The audit report noted
that reliance cannot be placed on the balances reflected in the trust
fund accounts until many tribal accounts are reconciled and/or resolved
through negotiation and settlement and the IIM class action litigation
is resolved.
The Congress first established an Indian trust fund account
reconciliation requirement in the Supplemental Appropriations Act,
1987, in response to tribes' concerns that Interior had not
consistently provided them with statements on their account balances,
their trust fund accounts had never been reconciled, and Interior had
planned to contract with a third party for management of trust fund
accounts. The original provision required that the accounts be audited
and reconciled before the Bureau of Indian Affairs (BIA) transferred
funds to a third party. A provision in Interior's fiscal year 1990
appropriations act added a requirement that the accounts be reconciled
to the earliest possible date and that Interior obtain an independent
certification of the reconciliation work. A description of the history
of the reconciliation requirements, which continued to be included in
Interior's appropriations acts through fiscal year 1995, is included as
enclosure I\1\ to this letter. In 1994, the Congress, through the
American Indian Trust Fund Management Reform Act of 1994 (Pub. L. 103-
412, October 25, 1994; 108 Stat. 4239), required the Secretary of the
Interior to provide tribes with reconciled account statements as of
September 30, 1995.
---------------------------------------------------------------------------
\1\ Enclosure I also describes a related provision tolling the
statute of limitations for certain types of Indian trust fund claims.
---------------------------------------------------------------------------
To fulfill these requirements, Interior contracted with two major
IPA's, one to reconcile the trust accounts and the other to do an
independent certification that the reconciliation resulted in the most
complete reconciliation possible. Following a preliminary assessment in
March 1992 by Interior's reconciliation contractor, Interior decided to
have the contractor reconcile the tribal accounts for fiscal years 1973
through 1992 and omit accounts for individual Indians from the
reconciliation project due to the potential lack of supporting
documents and the cost and level of effort that would be needed to
include them in the project. Subsequent to this decision, Interior had
BIA reconcile the tribal accounts for fiscal years 1993 through 1995 to
comply with the 1994 act's requirement that Interior provide tribes
with reconciled account statements as of September 30, 1995.
During the reconciliation project, Interior spent about $21 million
for contract costs over a 5-year period in a massive effort to locate
supporting documentation and reconstruct historical trust fund
transactions, as well as to perform other reconciliation procedures, so
that tribal account balances could be validated. In January 1996,
Interior provided to each tribe a report package containing the tribe's
reconciliation results, including unreconciled account statements with
schedules of proposed adjustments based on reconciliation project
results for each year covered by the reconciliation, and a transmittal
letter that described the information provided. During a February 1996
meeting at which Interior officials and the reconciliation contractor
summarized the reconciliation results, tribes raised questions; about
the adequacy and reliability of the reconciliation results. We also,
reported shortcomings of Interior's reconciliation project.\2\
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\2\ Financial Management: BIA's Tribal Trust Fund Account
Reconciliation Results (GAO/AIMD-96-63, May 3, 1996).
---------------------------------------------------------------------------
As we previously reported, the reconciliation project's
shortcomings consisted of procedures that were not completed due to
missing records, system limitations, or time and cost considerations as
well as inadequate information in Interior's reports to tribes on the
project's results. These are detailed in the following paragraphs.
Basic (Noninvestment) Transaction Reconciliation Procedure: The
basic transaction reconciliation segment of the project included
tracing 251,432 noninvestment transactions that had been recorded in
the general ledger to source documents such as deposit tickets and
disbursement vouchers. The total value of these receipt and
disbursement transactions was $17.7 billion. Due to missing records,
32,901 of the transactions, with a total value of $2.4 billion (14
percent of the total value of the transactions), could not be
reconciled. In addition to the limitation related to the unreconciled
transactions, this segment focused only on transactions that had
already been recorded in the general ledger, and no reconciliation
procedure was performed to address the completeness of the general
ledger itself.
Investment Transaction Reconciliation Procedure: The reconciliation
contractor also did individual testing of $21.3 billion, or 16 percent,
of the recorded investment transactions. However, to achieve
efficiencies, Interior and the contractor substituted a review of
tribal account investment yields for individual transaction testing for
the remaining investment transactions.
Fill the Gap (Leases) Procedure: Another segment of the project
reconciled collections for certain tribes with a sample of lease
documents and timber sales contracts. Initially, the contractor was to
review all leases greater than $5,000 and a test sample of 100
additional leases of less than $5,000 on a cross section of tribes. The
reconciliation contractor identified 6,446 surface leases with annual
collections of over $5,000. However, due to time constraints for
completing the reconciliation, only 692 leases--10.7 percent of the
leases originally identified for testing--were tested. In addition,
because of missing records, a number of leases, and sample test months
for timber contracts, were substituted for those in the original
sample.
Systems Reconciliation Procedures: The systems reconciliation was
to include reconciling (1) information in the trust fund investment
system to the General Ledger in the Finance System, (2) the tribal
general ledger in the Finance System to U.S. Treasury records, and (3)
the Integrated Records Management System (IRMS) subsidiary records to
the Finance System general ledger. The latter two reconciliations could
not be performed or completed due to time and funding limitations,
according to Interior officials.
Tribal IIM and Special Deposit Accounts Reconciliation Procedure:
Interior maintained some IIM accounts for tribes in the IRMS accounting
system. It also used Special Deposit accounts primarily as clearing
accounts for funds received that had not been distributed to account
holders because the account owners had not been identified. Due to
missing records and the lack of an audit trail through IRMS, tribal
transactions could not be efficiently isolated from individual Indian
transactions. Because of this, tribal IIM accounts maintained in IRMS
were not reconciled to source documents, and Special Deposit accounts
were not reconciled with source documents that moved funds to tribes'
general ledger accounts, as had been planned.
Fill the Gap (Minerals Management Service) Reconciliation
Procedure: Interior's Minerals Management Service (MMS) collects and
accounts for oil and gas royalties on Indian leases. The reconciliation
project was to include some procedures to trace collections from the
leases, through MMS, to the general ledger maintained by BIA. However,
because MMS retained records for only 6 years, records for most of the
20-year reconciliation period were not available, and alternative
procedures at MMS were not performed due to time constraints.
Certification Procedure: Interior's fiscal year 1990 appropriations
act required a separate, independent certification that the accounts
had been reconciled and audited to the earliest possible date and that
the results were the most complete reconciliation possible. However,
BIA's certification contract required that the certification contractor
ensure only that the reconciliation effort was performed in accordance
with the reconciliation contract and no independent assessment of
completeness was required. In addition, because of cost and time
constraints, the certification contract was terminated before the
certification contractor completed its verification that the procedures
in the reconciliation contract were performed. The certification
contractor issued a status letter, which communicated preliminary
results. However, because the certification work was performed while
the reconciliation was in process and the certification procedures were
not completed, the usefulness of the status letter is limited.
Individual Indian Accounts Reconciliation Procedures: As previously
mentioned, accounts for individual Indians were excluded from the
reconciliation project due to the potential lack of supporting
documents and the cost and level of effort that would be needed to
include them in the project.
Reporting of Reconciliation Project Results: Interior's reporting
of the reconciliation project results was not as complete as it could
have been. Interior did not disclose in the report packages to tribes
the procedures specified in the reconciliation contract that were not
performed, or those that could not be completed, and the reasons. For
the procedures that were performed, Interior did not fully disclose
scope limitations or changes in methodologies, such as accounts and
time periods that were not covered and alternative source documents
used.
To summarize, although Interior made a massive attempt to reconcile
tribal accounts during its reconciliation project, missing records and
systems limitations made a full reconciliation impossible. In addition,
due to cost considerations and the potential lack of supporting
documentation, reconciliations for individual Indian accounts were not
performed.
If we can be of further assistance, please phone me on (202) 512-
9508.
Sincerely yours,
Linda M. Calbom,Director, Financial
Management and Assurance
Enclosures
______
Enclosure I
SELECTED INDIAN TRUST FUNDS PROVISIONS CONTAINED IN APPROPRIATIONS ACTS
Appropriations Act Provisions for Audit and Reconciliation Requirements
for Tribal and Individual Indian Trust Funds
In Supplemental Appropriations Act, 1987, the Congress established
a requirement that tribal and individual Indian trust funds be audited
and reconciled prior to the Bureau of Indian Affairs' (BIA) contracting
with third parties for the management of Indian trust fund accounts.
Pub. L. 100-71, 101 Stat. 391, 416 (1987). Similar provisions were
included in the Department of the Interior's appropriations acts
through fiscal year 1995. The provision in the 1987 Supplemental
Appropriations Act stated:
The Bureau of Indian Affairs shall not transfer funds under a
contract with any third party for the management of tribal or
individual Indian trust funds until the funds held in trust for
such tribe or individual have been audited and reconciled and
the tribe or individual has been provided with an accounting of
such funds, and the appropriate Committees of the Congress and
the tribes have been consulted with as to the terms of the
proposed contract or agreement.
Pub. L. 100-71, 101 Stat. 391,416 (1987).
Interior's fiscal year 1988 and 1989 appropriations acts included
the same requirement, albeit with a slight difference in language:
Provided further, That none of the funds in this act shall be
used by Bureau of Indian Affairs to transfer funds under a
contract with any third party for the management of tribal or
individual Indian trust funds until the funds held in trust for
such tribe or individual have been audited and reconciled, and
the tribe or individual has, been provided with an accounting
of such funds, and the appropriate Committees of Congress and
the tribes have been consulted with as to the terms of the
proposed contract or agreement. (emphasis added).
Pub. L. 100-202, 101 Stat. 1329 (1987); Pub. L. 100-446, 102 Stat.
1774 (1988).
From fiscal year 1990 through fiscal year 1995, Interior's
appropriations acts added a requirement that the funds be reconciled to
the earliest possible date and an independent party certify the
reconciliation of the funds held in trust. See, for example, Pub. L.
101-121, 103 Stat. 701 (1989)(``until the funds held in trust for such
tribe or individual have been audited and reconciled to the earliest
possible date, the results of such reconciliation have been certified
by an independent party as the most complete reconciliation of such
funds possible. . .''). See also B-236146, March 20, 1990
(certification must be performed by a party independent of the party
performing the reconciliation).
Tolling of Statute of Limitations on Tribal and Individual Indian
Claims Against the United States for Management of Trust Funds
Since fiscal year 1991, the Department of the Interior's
appropriations acts have included a provision that tolls the statute of
limitations on tribal and individual Indian claims against the United
States arising from BIA's management of tribal and individual Indian
trust funds. The provision in the fiscal year 1991 appropriations act
stated:
Provided further, That notwithstanding any other provision of
law, the statute of limitations shall not commence to run on
any claim concerning losses to or mismanagement of trust funds,
until the affected tribe or individual Indian has been
furnished with the accounting of such funds.
Pub. L. 101-512, 104 Stat. 1915 (1990).
From fiscal years 1992 through 2001, Interior's appropriations acts
have included the provision tolling the statute of limitations and
added language requiring that the tribe or individual Indian be
furnished an accounting ``from which the beneficiary can determine
whether there has been a loss . . .'' See, for example, Pub. L. 102-
154, 105 stat. 990 (1991).
Enclosure II
Related GAO Products
Indian Trust Funds: Tribal Account Holders' Responses to
Reconciliation Results (GAO/AIMD-97-102R, May 23, 1997).
Responses to Questions from June 11, 1996 Hearing (GAO/AIMD-96-
125R, June 24, 1996).
Financial Management: Interior's Management of the Indian Trust
Funds (GAO/T-AIMD-96-111, June 18, 1996).
Financial Management: Interior's Efforts to Reconcile Indian Trust
Fund Accounts and Implement Management Improvements (GAO/T-AIMD-96-104,
June 11, 1996).
Financial Management: BIA's Tribal Trust Fund Account
Reconciliation Results (GAO)/AIMD-96-63, May 3, 1996).
Financial Management: Indian Trust Fund Accounts Cannot Be Fully
Reconciled (GAO/T-AIMD-95-94, March 8, 1995).
Responses to Questions From September 26, 1994, Hearing (GAO/AIMD-
95-33R, December 2, 1994).
Financial Management: Focused Leadership and Comprehensive Planning
Can Improve Interior's Management of Indian Trust Funds (GAO/T-AIMD-94-
195, September 26, 1994).
Financial Management: Focused Leadership and Comprehensive Planning
Can Improve Interior's Management of Indian Trust Funds (GAO/AIMD-94-
185, September 22, 1994).
Response to Questions on Two Recommendations in April 12, 1994,
Testimony (GAO/AIMD-94-138R, June 10, 1994).
Letter on BIA Trust Fund Reconciliations (GAO/AIMD-94-110R, April
25, 1994).
Financial Management: Status of BIA's Efforts to Reconcile Indian
Trust Fund Accounts and Implement Management Improvements (GAO/T-AIMD-
94-99, April 12, 1994).
Financial Management: BIA's Management of the Indian Trust Funds
(GAO/T-AIMD-93-4, September 27, 1993).
Indian Trust Funds: Tribal Account Holders' Responses to
Reconciliation Results (GAO/AIMD-97-102R, May 23, 1997).
Responses to Questions from June 11, 1996 Hearing (GAO/AIMD-96-
125R, June 24, 1996).
Financial Management: Interior's Management of the Indian Trust
Funds (GAO/T-AIMD-96-111, June 18, 1996).
Financial Management: Interior's Efforts to Reconcile Indian Trust
Fund Accounts and Implement Management Improvements (GAO/T-AIMD-96-104,
June 11, 1996).
Financial Management: BIA's Tribal Trust Fund Account
Reconciliation Results (GAO/AIMD-96-63, May 3, 1996).
Financial Management: Indian Trust Fund Accounts Cannot Be Fully
Reconciled (GAO/T-AIMD-95-94, March 8, 1995).
Responses to Questions From September 26, 1994, Hearing (GAO/AIMD-
95-33R, December 2, 1994).
Financial Management: Focused Leadership and Comprehensive Planning
Can Improve Interior Management of Indian Trust Funds (GAO/T-AIMD-94-
195, September 26, 1994).
Financial Management: Focused Leadership and Comprehensive Planning
Can Improve Interior's Management of Indian Trust Funds (GAO/AIMD-94-
185, September 22, 1994).
Response to Questions on Two Recommendations in April 12, 1994,
Testimony (GAO/AIMD-94-138R, June 10, 1994).
Letter on BIA Trust Fund Reconciliations (GAO/AIMD-94-110R, April
25, 1994).
Financial Management: Status of BIA's Efforts to Reconcile Indian
Trust Fund Accounts and Implement Management Improvements (GAO/T-AIMD-
94-99, April 12, 1994).
Financial Management: BIA's Management of the Indian Trust Funds
(GAO/T-AIMD-934, September 27, 1993).
Response to Request for Views on Freeze of the Statute of
Limitations on Claims Against the States Arising From BIA Management of
Tribal and Individual Trust Funds (GAO/AFMD-93-84R, June 4, 1993).
Financial Management: BIA Has Made Limited Progress in Reconciling
Trust Accounts and Developing a Strategic Plan (GAO/AFMD-92-38, June
18, 1992).
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______
Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington
Mr. Chairman, I am pleased that we have this opportunity to hear
from the witnesses testifying today to help us determine whether
legislation would be an appropriate and desired course of action to
address the statute of limitations that may have been triggered by
reports of tribes' trust accounts released in 1996.
Mr. Chairman, I have serious concerns about the management of both
tribally held and individual Indian trust accounts. The Federal
Government has a legal responsibility to maintain these accounts
accurately, and I believe that account holders should be able to hold
the Government accountable if this is not done.
In 1987, Congress first mandated that the Department of the
Interior audit and reconcile trust fund accounts and provide these
statements to account holders. Since fiscal year 1992, the
appropriations acts for the Department have included requirements that
tribes and individuals with trust accounts be provided with reconciled
accounting statements, and, in 1994, Congress reiterated the need to
give tribes this information with the passage of the Trust Fund
Management Reform Act. This law required the Secretary of the Interior
to supply tribes with reconciled account statements as of September 30,
1995.
Interior contracted with one public accounting firm in order to
reconcile trust accounts and a second firm to verify that the
reconciliation was as thorough as possible. In January 1996, each tribe
was given a report of its account. However, tribes and the U.S. General
Accounting Office have concerns that the 1996 reports may not provide
reliable or sufficiently thorough information about the accounts. As a
result, tribes cannot rest assured that these reports accurately
represent the actual value in their accounts, and tribes may not have
the necessary information to make informed decisions regarding whether
accounts have been mismanaged and, if so, to take legal action.
Because of the doubts surrounding the sufficiency of these reports,
it is uncertain whether the reports actually triggered the 6-year
statute of limitations for tribes to file claims against the United
States. However, the committee has been advised that the Department of
Justice believes that the reports did do so. Several tribes have
already filed claims because the statute of limitations, if it began to
run, expired last month or will expire in the very near future.
If the Government is providing tribes with inaccurate or incomplete
reports of their accounts, then these reports should not work to limit
tribes' recourse toward holding the Government responsible for trust
fund mismanagement. Moreover, it is likely in the best interests of
tribes and the Government alike to extend the statute of limitations
specifically to allow more time to explore how these claims might be
settled out of court. Bringing hundreds of cases before the courts
would cost tribes and the government dearly in time and resources.
In the final days of the last session of Congress, my distinguished
colleagues Senators Campbell and Inouye introduced a measure to
encourage the negotiated settlement of tribal claims. This bill would
extend the statute of limitations on claims against the United States
relating to trust fund account mismanagement through fiscal year 2002.
I am very interested in the views of today's witnesses and my
colleagues on the committee regarding how this legislation might help
efforts to resolve trust fund mismanagement.
Indeed, the daunting task of rectifying trust fund mismanagement
will require the diligent participation, patience, and wisdom of the
Department of the Interior, the Native American community, the courts,
and Congress. We are meeting today to discuss only one facet of this
complex problem, but I am interested in what Congress can do to see
that the problem is addressed with consistency, efficiency, and most
importantly, justice.
______
Prepared Statement of Hon. Tim Johnson, U.S. Senator from South Dakota
Chairman Inouye, Vice Chairman Campbell, and other members of the
committee, the issue of trust fund mismanagement is one of the most
urgent problems we are faced with in Indian country. Of all the
extraordinary circumstances we find in Indian country, and especially
in South Dakota, I do not think there is any more complex, more
difficult and more shocking issues then the circumstances we have
surrounding trust fund mismanagement.
This problem has persisted literally for generations, and continues
today. Administrations of both political parties have been inadequate
in their response, and the level of direction and the resources
provided by Congress over past decades has also been sadly inadequate.
The Federal Government, by law, is to be the trustee for Native
American people. When the Trust Fund Management Act of 1994 was passed,
I was hopeful that this accounting situation would at last be remedied.
Unfortunately, this has not been the case.
During my service in the House of Representatives, I was appointed
to the Congressional Task Force on Indian Trust Fund Management, to
review and study the management and reconciliation of funds
administered by the Department of the Interior's Office of Trust Fund
Management. Those meetings were informative but far from productive, as
many years and millions of dollars later, this problem still persists.
A few years ago, this committee directly saw the reverence the
Department of the Interior held for the records of this Nation's First
Americans. Records were heaped into piles with trash, appliances, and
cleaning supplies interspersed with the trust records of Native
Americans. Other records were burned, flooded, and infested with
colonies of rodents. All of this gives great concern to the Native
people in my State and across the country.
I am convinced that there is no way for the Federal Government,
regardless of political party, to be able to account for every last
record that was lost. However, we should not simply throw up our hands
and say ``oh well.'' This does not adhere to the trust responsibility
of the Federal Government on behalf of the American Indians and Alaska
Natives of this Great Land. We need to do better.
We need to address the millions of dollars that will never be
accounted for, and we need to come to a solution where those Native
Americans who are owed money are paid money. Some of these account
holders are of the poorest of the poor. Some of these account holders
solely rely on these payments as their only source of income. We need
to end the practice of treating our First Americans as Third Class
citizens.
Mr. Chairman, I thank you for holding this first in a series of
hearings on this important issue. I look forward to working with my
colleagues of this committee, as well as tribal leaders to come to a
viable solution to this problem. I look forward to hearing the
testimony of the witnesses we have here today.
______
Prepared Statement of Hon. Craig Thomas, U.S. Senator from Wyoming
Thank you, Mr. Chairman. Let me begin by saying it is important for
this committee to remain interested and involved with Indian trust
management issues. Throughout my time in Congress and as a member of
this committee, I have been involved with efforts to remedy the
existing problems with the current management system. It continues to
be my hope that we can develop a dependable system.
As we are all aware, the Cobell v. Norton litigation has prompted
an intense re-evaluation of our Government's trust responsibility.
Consequently, Secretary Norton has put forth a proposal to restructure
the Bureau of Indian Affairs [BIA], thereby creating a new agency
solely charged with managing Indian trust accounts. I understand this
proposal has been met with opposition throughout areas in Indian
country. I also understand the tribes' frustration with the
Department's consultation process. However, I strongly believe that we
must not lose focus in our efforts to resolve this long-standing
problem and move forward to establish an accountable system of trust
management.
The Department of the Interior is not the only agency to bear the
burden of finding a solution or addressing the problem. Each branch of
our Government continues to shape the future outcome of Indian trust
management. We are here today to discuss one of the many issues
surrounding trust reform. The history of mismanagement must be
eradicated and replaced with a renewed commitment to providing a fair,
accountable system. I look forward to working with my colleagues as we
proceed in this difficult task.
Thank you, Mr. Chairman, I look forward to hearing from our
witnesses.
______
Prepared Statement of Charles Tillman, Chief, Osage Nation and
Chairman, InterTribal Monitoring Association
Mr. Chairman, Mr. Vice Chairman, and members of the committee, this
written testimony is submitted to supplement the oral testimony given
on behalf of the InterTribal Monitoring Association on Indian Trust
Funds by Charles Tillman, Chairman of the ITMA Board of Directors and
Chief of the Osage Tribal Council. ITMA is an unincorporated
association of 53 federally recognized Indian tribes committed to
monitoring the Indian trust fund and asset management and reform
efforts of the U.S. Department of the Interior. The Association was
formed in 1990 to provide a coherent voice from Indian country on
Indian trust issues and to inform its member tribes of developments and
setbacks in the attempts to reform a deficient system.
The dilemma faced by tribes today was created by the issuance of
reports to each tribe by Arthur Andersen LLP in 1996 purporting to
``reconcile'' tribal trust accounts for the fiscal years 1973-92. For
the reasons stated below, those reports cannot be considered adequate
accountings, as required by law, of the beneficiaries' trusts by their
trustee, the United States. And yet, tribes are justifiably concerned
that the Department of Justice would raise a statute of limitations
defense based on the issuance of those reports. Given that the 6-year
statute of limitations would run this year if such an argument by
Justice were accepted, tribes must either file suit now or risk that a
remedy might be unavailable in the Federal courts. As discussed below,
it is neither in the interest of tribes or the United States to force
tribes to file suit at this time.
The Association will not belabor the tortured history of the United
States' mismanagement of tribal trust funds and resources. The
committee is well aware that the Department of the Interior has failed
its Indian beneficiaries for decades by mismanaging their land, their
natural resources, and their funds. As a House committee concluded in
1992:
[s]cores of reports over the years by the Interior Department's
inspector general, the U.S. General Accounting Office, the
Office of Management and Budget, and others have documented
significant, habitual problems in BIA's ability to fully and
accurately account for trust fund moneys, to properly discharge
its fiduciary responsibilities, and to prudently manage the
trust funds.
``Misplaced Trust: The BIA's Mismanagement of the Indian Trust Fund,''
H.R. Rep. 102-499, at 2 (1992). The House Committee further
resoundingly condemned BIA's ongoing obdurate refusal to implement
the needed reform:
The committee is particularly troubled by BIA's efforts-
undertaken only grudgingly--to implement repeated congressional
directives designed to provide a full and accurate accounting
of the individual and tribal account funds. In short, the BIA
has repeatedly failed to take resolute corrective action to
reform its longstanding financial management problems. The
Bureau has repeatedly ignored directives to undertake needed
management reform measures. As a result of this dismal history
of inaction and incompetence, there is no assurance that the
Bureau actually desires to, or will, make any substantial
advancement toward rectifying the basic financial management
failures brought to their attention.
Id. at 2-3, 5. The intervening 9 years have proven the House committee
to be prophetic. We are no closer to a ``full and accurate
accounting'' of the tribal trust than we were then.
The Arthur Andersen Reports
The directives mentioned in the House Report included numerous
mandates from Congress that the BIA and the Department provide tribes
with an accurate accounting of their trust funds and assets.\1\
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\1\ See Act of December 22, 1987, Pub. L. No. 100-202 and Act of
September 27, 1988, Pub. L. No. 100-446 (requiring the Bureau of Indian
Affairs (``BIA'') to audit and reconcile tribal trust funds, and to
provide tribes with an accounting of such funds; Act of October 23,
1989, Pub. L. No. 101-121, Act of November 5, 1990, Pub. L. No. 101-
512, and Act of November 13, 1991, Pub. L. No. 102-154 (requiring the
BIA to audit, reconcile, and certify through an independent party the
results of the reconciliation of tribal trust funds as the most
complete reconciliation of such funds possible, and to provide tribes
with an accounting of such funds).
---------------------------------------------------------------------------
The current dilemma faced by tribes arises from the Department's
response to those mandates. In 1991, the Department contracted with
Arthur Andersen LLP to conduct a so-called ``reconciliation'' of tribal
trust accounts. The original charge to Arthur Andersen was that it was
to ``reconcile[ the accounts] as accurately as possible back to the
earliest date practicable, using available accounting records and
transaction data.'' After 5 years, roughly $20 million in fees, and 31
contract modifications, Andersen submitted a report to each tribe
regarding it purported trust fund balances.
The Andersen project was fatally flawed for a number of reasons.
Andersen itself acknowledged the deficiencies in each report. It stated
that each report did ``not constitute an audit made in accordance with
generally accepted auditing standards.'' Therefore, Andersen did not
express an opinion on the accuracy of any of its findings. As Andersen
stated in each report:
The congressional mandate for the Bureau Tribal Trust Funds
Reconciliation Project [Reconciliation Project] requires an
accounting to each tribe for each of their trust accounts. The
primary objective of the Reconciliation Project, as stated in
the contract, is to reconstruct historical transactions, to the
extent practicable, for all years for which records are
available for all tribal trust accounts managed by the Bureau.
Phase I of the Reconciliation Project substantiated that not
all records would be available for a full accounting of such
funds. Due to the unavailability of some records, the scope of
the Reconciliation Project is designed to provide reasonable
assurance as to the accuracy of each tribal trust account
balance. The agreed-upon procedures performed, as required by
the contract, represent the Bureau's standard of
reasonableness.
[Emphasis added.] Most tribes agree that the reconciliation project did
not provide any ``reasonable assurance'' regarding their account
balances, in part for the reasons summarized below. But this
statement by Andersen is particularly relevant to the issue
currently before the committee because Andersen concedes expressly
that, although Congress required an accounting, a full accounting
was not possible. Instead, the Bureau substituted its own
``standard of reasonableness'' for the accounting required by
Congress and by trust law.
Many of the reports' deficiencies are obvious from the ``agreed-
upon procedures'' that guided Andersen's work.\2\ Only a few of the
deficiencies are discussed here to give the committee some
understanding of the incomplete nature of the project and to underscore
the fact that the reports cannot be considered an accounting that would
trigger the statute of limitations for tribal claims.
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\2\ Of course, only the Department and Andersen ``agreed upon''
those procedures. The beneficiaries had no role in determining how
their trust funds and assets would be analyzed.
---------------------------------------------------------------------------
Because of the limited availability of electronic data, Andersen
only looked at records from 1972 forward. Losses to the tribal trust
prior to that date were not analyzed in any way. This means that there
is simply no way to know whether the beginning balance used by Andersen
bears any resemblance to the amount that should have been in any given
tribal account in 1972.
Another significant deficiency involves investment of tribal trust
funds. Andersen--with the consent of the Department--did little
substantive analysis of the investment of each tribe's trust funds.
Instead, Andersen conducted an ``Interest Yield Analysis'' for each
tribe. This ``agreed-upon'' procedure involved calculating each tribe's
investment yield for each year. Andersen then derived a ``benchmark
rate'' for all tribes based on the total return for all tribes in any
given year. If the investment return on a given tribal account was
within 2 percent below or 5 percent above the so-called benchmark,
Andersen did nothing else.
Several flaws in this procedure are worth highlighting. First, the
``benchmark'' rate was derived not from some external source but from
tribal trust accounts themselves. Thus, systemic problems in trust fund
management could not be identified because they were simply included in
the average against which individual tribal accounts were measured. If
better returns were available generally--either through different
investment strategies or through better procedures--Andersen's
procedure could not have identified the losses. Second, the margin of
deviation allowed by Andersen from that flawed benchmark is
considerable. A tribe that consistently received almost 2 percent less
than the benchmark would have earned less than two-thirds of the
interest over a 20-year period that a tribe that received the benchmark
return each year would have earned.
Perhaps the most egregious failing in the Andersen project was that
Andersen was not charged with analyzing the Department's management of
the underlying trust assets that generate the majority of trust funds
in the first place. Without attention to the underlying trust assets,
there can be no analysis of what the true balances should be. For
example, natural gas producers leasing Indian lands have routinely
underreported their production of gas from leased Indian lands by 20 to
40 percent, but the MMS has only recently--and even then sporadically--
begun auditing production with any degree of care. Mismanagement of
other trust resources has resulted in similar losses. And yet, with the
exception of five ``Fill-the-Gap'' tribes, no attempt was made to sure
that adequate rents, royalties, and other income was being collected in
exchange for use or purchase of tribal resources.
For these reasons, and others too detailed to explore here, it
would be dishonorable and legally impermissible for the United States
to construe the Arthur Andersen reports as fulfilling its legal
obligation to the tribes to account for tribal trust funds and assets.
The Annual Appropriations Language
Congress has recognized the legal interrelationship between an
accounting and the statute of limitations. In each Interior
appropriations act passed since 1990, Congress has stated in this or
similar language, ``notwithstanding any other provision of law, the
statute of limitations shall not commence to run on any claim
concerning losses to or mismanagement of trust funds until the affected
tribe or individual Indian has been furnished with the accounting of
such funds.'' See, e.g., Pub. L. 101-512, 104 Stat. 1915, 1930 (1990).
ITMA believes that this language, which has appeared unchanged
before and after issuance of the Andersen reports, would assist tribes
in defeating any statute of limitations defense raised by the
Department of Justice. But tribal leaders cannot be expected to risk
the claims of their tribes based on language that does not make it
clear that the Andersen reports were not the ``accounting'' Congress
directed and that has been mentioned in each appropriations bill.
The Importance of Trust ``Resources'' or ``Assets''
The importance of tribal trust resources, or assets, was mentioned
in the discussion of the Andersen report above. ITMA wishes to stress
the importance of mismanagement of those underlying resources to the
committee. If the goal of Congress and the United States is to make
tribes whole for the losses tribes have suffered because of breaches of
trust by the Department, mismanagement of the underlying land,
minerals, oil, gas, timber, and other resources must be examined and
quantified. If tribes--and individual Indians--are not able to recover
for that mismanagement, whether through a comprehensive settlement or
tribe-by-tribe litigation, one of the greatest thefts in history will
have been countenanced by the United States.
Time after time, tribes have litigated and won substantial
judgments or settlements because of the United States' failure to
fulfill its duties as trustee of Indian lands. For example, in
Confederated Tribes of the Warm Springs Reservation v. United States,
248 F.3d 1365, 1371, 1375 (Fed. Cir. 2001), the Federal Circuit
required a determination of damages regarding several categories of
BIA's failure to manage tribal timber resources in a manner that
obtained the greatest appropriate revenue for the tribal beneficiaries.
In Jicarilla Apache Tribe v. Andrus, 687 F.2d 1324, 1331 (10th Cir.
1982), the Tenth Circuit found that the Secretary of the Interior did
not even intend to comply with the regulatory notice requirements for
offering tribal mineral leases, and indeed failed to comply with those
requirements. Just 4 years later, the Tenth Circuit held that the
Department had again breached its fiduciary duties to the same tribe by
failing to correctly interpret the royalty terms in leases and
regulations, by failing to ensure that lessees complied with lease
terms, and by failing to insure the protection of leased lands. See
Jicarilla Apache Tribe v. Supron Energy Corp., 728 F.2d 1555, 1565
(10th Cir. 1984) (Seymour, J. concurring & dissenting), adopted as
majority opinion as modified, 782 F.2d 855 (1986) (en banc),
supplemented, 793 F.2d 1171 (1986), cert. denied, 479 U.S. 970 (1986).
The Tenth Circuit also has found that the Secretary
``uncontrovertedly'' breached trust duties to a tribe by failing to
examine all relevant factors before approving a communization agreement
for mineral development. See Cheyenne-Arapaho Tribes of Oklahoma v.
United States, 966 F.2d 583, 590 (10th Cir. 1992), cert. denied, 507
U.S. 1003 (1993). More recently, the Federal Circuit flatly rejected
the Government's contention that a balancing of national interests
excuses the Secretary's flagrant breach of fiduciary duties by
suppressing and concealing an administrative appeal decision to favor a
mineral lessee to the detriment of the relevant tribe. See Navajo
Nation v. United States, 263 F.2d 1325, 1332 (Fed. Cir. 2001).
Given the documented failure of the United States to fulfill its
duties regarding management of tribal resources, any comprehensive
settlement of the tribal trust debacle must include the damages arising
from that mismanagement. If a settlement is not forthcoming, tribes
must be able to litigate those issues. In the meantime, tribes should
not be forced to file suit simply because of concerns relating to their
resource claims and the statute of limitations.
The Need for Legislation
The Department of Justice is infamous in Indian country for raising
every possible defense to Indian claims in litigation. Whether
considered dishonorable attempts to avoid the United States' fiduciary
obligations or vigorous advocacy in defense of its client, those
historical tactics lead to the very real concern that the Government's
lawyers will attempt to construe the Arthur Andersen reports as
accountings that would trigger the statute of limitations. If tribes
are to avoid the cost and risk of litigating that issue, they must
either file suit immediately or Congress must act.\3\
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\3\ There is some uncertainty as to precisely what date might be
regarded as beginning the running of the statute of limitations were
the Andersen reports considered to be ``accountings.'' Summary reports
were issued in January 1996. More detailed reports were issued to at
least some tribes in February 1996. Exit conferences with tribes were
held throughout that year.
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Because tribes should not be expected to shoulder the burden for
the United States' failures and because a flood of litigation is in
neither the tribes' nor the United States' interests, ITMA urges
Congress to Act. Since the Andersen reports were issued, tribes (and
Congress) have received a series of promises from the Department that
the trust system would be reformed. Presumably, any reform would also
include efforts to rectify the effects of past mismanagement. But as
tribes have waited anxiously, each successive reform effort has
stalled.
ITMA believes that a comprehensive settlement would be in the best
interests of tribes and the United States. But thus far, the Department
has failed to show any willingness to develop a process that could lead
to such a settlement. Regardless, it seems certain that no meaningful
settlement could be reached in a matter of months-the necessary
analysis (probably including modeling) would require a significantly
longer period. If tribes are to continue to wait for a tenable
settlement plan, they must be assured that they are not foregoing their
rights in court in the meantime.
Comments on S. 1857
ITMA is grateful for the support of the Vice Chairman, who
introduced S. 1857 in the closing days of the last session in an
attempt to resolve this problem; the Chairman, who cosponsored that
bill; and other members of both houses of Congress who have already
recognized the importance of the issue before the committee. It is
hoped that today's hearing will lead to the passage of legislation that
will resolve the Hobbesian choice faced by tribes.
With the qualifications discussed below, ITMA supports S. 1857 as
currently drafted. It would provide tribes with some additional months
in which to file suit or to secure the passage of additional
legislation further extending the statute of limitations. If S. 1857 is
to go forward in its current form, however, ITMA believes that the
legislation would be much more effective if section 1(a) were amended
to read:
(a) IN GENERAL.-Solely for purposes of providing an opportunity
to explore the settlement of tribal claims, during fiscal year
2002, the statute of limitations shall be deemed not to have
run for any claim concerning losses to or mismanagement of
tribal trust funds and resources. Further, with regard to the
reconciliation reports distributed to tribes by Arthur Andersen
and the Department of the Interior in 1996:
(i) Those reports shall not be considered to have started the
running of the statute of limitations for any claim against the
United States by an Indian tribe regarding the management of
tribal trust funds and resources, regardless of when such claim
is filed; and (ii) Those reports shall not be considered for
any purpose to be an accounting sufficient to fulfill the
United States' duty to account as required by the American
Indian Trust Fund Management Reform Act of 1994, under other
applicable law, or under general principles of trust law.
(iii) The United States is precluded from introducing those
reports into evidence, from using them as rebuttal evidence, or
otherwise relying on them in any administrative or judicial
proceeding to prove any purported conclusion or fact contained
in those reports.
With such an amendment, ITMA would enthusiastically support passage
of S. 1857.
Since the pressures of the final days of a session are no longer
present, ITMA respectfully suggests that the committee might also
consider revisiting the basic goals of the legislation. If the
committee is willing to explore a more comprehensive solution to the
current problem, ITMA would propose that an amended bill specifically
include the following in addition to the amendments discussed above:
Specific language stating that the statute of limitations
defense shall be deemed not to have run for any claim
concerning losses to or mismanagement of tribal trust funds and
resources through the end of fiscal year 2007.
Comment: It would waste the resources of both Congress and the
tribes to require annual legislation regarding the statute of
limitations issue. Five years is a reasonable period for the
Department, if it proceeds in good faith, to develop a fair
settlement structure in conjunction with tribes. In the
meantime, tribes should not have to be concerned that they will
surrender legal rights by pursuing a good faith settlement.
Note: tribal trust ``resources'' are included for the reasons
stated above.
Specific language mandating that the Department attempt in good
faith to negotiate a full and fair settlement regarding losses
resulting from mismanagement of tribal trust funds and
resources by the end of fiscal year 2007.
Comment: Generally, see above. Tribes have seen no sincere
attempt by the Department to develop a comprehensive
settlement. Without a mandate from Congress to do so, it is
very likely that ITMA will be before this Committee again in 5
years and that many tribes will be forced to file suit.
Specific language creating a right to reasonable attorneys'
fees and costs (including expert costs) for any successful
tribal claim relating to mismanagement of trust funds and
resources:
(1) in which judgment is entered after the end of fiscal year
2003, if suit was filed before the enactment of this
legislation, or
(2) in all suits filed after the end of fiscal year 2007.
Comment: Such a provision would encourage timely resolution,
hopefully through settlement, of such suits that are currently
pending. It would also provide a strong incentive for the
Department to comply with the mandate that a comprehensive
settlement acceptable to tribes and to Congress be reached
within a 5-year period by imposing a penalty, tribes'
litigation costs, if tribes must ultimately litigate their
claims. The two-tier structure is intended to discourage tribes
from filing suit after enactment of this legislation and before
the settlement period ends.
As laudable as S. 1857 is, now is the time for Congress to consider
how the trust fund debacle can be resolved fairly and finally within a
reasonable period of time. ITMA would welcome the opportunity to work
with the Committee on an amendment, or separate legislation,
incorporating these additional concepts.
Conclusion
The statute of limitations issue relating to the Andersen reports
of vital importance to tribes, and ITMA is grateful for the opportunity
to testify and to enter these written comments in the record. Whether
the Committee opts for an interim measure or a bill intended to reach
the broader issues of Indian trust reform and past mismanagement, ITMA
urges the Committee to move forward to ensure that the dilemma faced by
tribes does not force them into litigation unnecessarily.
______
Prepared Statement of McCoy Williams, Acting Director, Financial
Management and Assurance, GAO
I am pleased to be here today to summarize observations from our
past work regarding Indian tribal trust fund accounts.
In a June 1993 letter to this committee, we noted that the
appropriations acts for the Department of the Interior had for many
years contained a provision that tolled the statute of limitations on
claims for losses to, or mismanagement of, tribal trust funds until the
tribe had been furnished with an accounting of its funds from which the
tribe could determine whether there had been a loss. We also noted that
the parties envisioned that such an accounting would result from
Interior's then-ongoing reconciliation and audit of the tribal trust
fund accounts, which the Congress had mandated.
At that time, we expressed our view that until there was a mutually
acceptable basis for determining account balances and any associated
losses, it would be premature to allow the statute of limitations to
run. We observed that tolling the statute of limitations until
reconciliation and audit of an account was completed, or until some
mutually acceptable agreement was reached as to the account balance,
had two overall purposes. First, it provided all interested parties,
including accountholders, Interior, and the Congress, an opportunity to
examine and evaluate all pertinent account information. Second, it
permitted interested parties to attempt to resolve all claims arising
from Interior's management of the accounts rather than addressing
specific claims in a piecemeal fashion.
The Congress first established an Indian trust fund account
reconciliation requirement in the Supplemental Appropriations Act of
1987. The requirement was in response to tribes' concerns that Interior
had not consistently provided them with statements on their account
balances, their trust fund accounts had never been reconciled, and
Interior planned to contract with a third party for management of trust
fund accounts.
The original provision required that the accounts be audited and
reconciled before the Bureau of Indian Affairs [BIA] transferred funds
to one-third party. A provision in Interior's fiscal year 1990
appropriations act added a requirement that the accounts be reconciled
to the earliest possible date and that Interior obtain an independent
certification of the reconciliation work. In 1994, the Congress,
through the American Indian Trust Fund Management Reform Act of 1994
(Pub. L. 103-412, 108 Stat. 4239; Oct. 25, 1994), required the
Secretary of the Interior to provide tribes with reconciled account
statements as of September 30, 1995.
To fulfill these requirements, Interior contracted with two major
independent public accounting firms, one to reconcile the trust
accounts and the other to do an independent certification to indicate
that the reconciliation resulted in the most complete reconciliation
possible. Following a preliminary assessment in March 1992 by
Interior's reconciliation contractor, Interior decided to have the
contractor reconcile the tribal accounts for fiscal years 1973 through
1992. Subsequent to this decision, Interior had BIA reconcile the
tribal accounts for fiscal years 1993 through 1995 to comply with the
1994 act's requirement that Interior provide tribes with reconciled
account statements as of September 30, 1995.
Interior's Indian trust fund account reconciliation project was
completed in January 1996. During the reconciliation project, Interior
spent about $21 million for contract costs over a 5-year period in a
massive effort to locate supporting documentation and reconstruct
historical trust transactions, as well as to perform other
reconciliation procedures, in its attempt to validate tribal account
balances. In January 1996, Interior began providing to each tribe a
report package containing the tribe's reconciliation results. Each
package included unreconciled account statements with schedules of
proposed adjustments based on reconciliation project results for each
year covered by the reconciliation, and a transmittal letter that
described the information provided.
During a February 1996 meeting at which Interior officials and the
reconciliation contractor summarized the reconciliation project
results, tribes raised questions about the adequacy and reliability of
the reconciliations results. In May 1996, we reported on shortcomings
of Interior's reconciliation project.\1\ The shortcomings consisted of
procedures that were not completed due to missing records, systems
limitations, or time and cost considerations. Attachment I to my
statement describes the major shortcomings presented in our 1996
report.
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\1\ U.S. General Accounting Office, Financial Management: BIA's
Tribal Trust Fund Account Reconciliation Results. GAO/AIMD-96-63.
Washington, DC: May 3, 1996.
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From 1992 through 1997, we monitored and reported on various
aspects of Interior's planning, execution, and reporting of results for
the reconciliation project. In May 1997, we reported\2\ to this
committee that as of May 6, 1997, Interior had provided reconciliation
reports to 310 tribes, 51 of those tribes had disputed the
reconciliation results, and 41 had accepted the results. Of the
remaining 218 tribes, 47 had requested more time to consider the
results, and 171 had not responded to the reconciliation results.
Attachment II is a list of GAO products issued between 1992 and 1997 on
various aspects of Interior's Indian trust fund reconciliation project.
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\2\ U.S. General Accounting Office, Indian Trust Funds: Tribal
Account Holders' Responses to Reconciliation Results. GAO/AIMD-97-102R.
Washington, DC: May 23, 1997.
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In summary, although Interior made a massive attempt to reconcile
tribal accounts during its reconciliation project, missing records and
systems limitations made a full reconciliation impossible.
I would be pleased to respond to any questions that you or other
members of the committee may have.
Attachment I
RECONCILIATION PROJECT SHORTCOMINGS
Basic (Noninvestment) Transaction Reconciliation Procedure: The
basic transaction reconciliation segment of the project included
tracing 251,432 noninvestment transactions that had been recorded in
the general ledger to source documents such as deposit tickets and
disbursement vouchers. The total value of these receipt and
disbursement transactions was $17.7 billion. Due to missing records,
32,901 of the transactions, with a total value of $2.4 billion (14
percent of the total value of the transactions), could not be
reconciled. In addition to the limitation related to the unreconciled
transactions, this segment focused only on transactions that had
already been recorded in the general ledger, and no reconciliation
procedure was performed to address the completeness of the general
ledger itself.
Investment Transaction Reconciliation Procedure: The reconciliation
contractor also did individual testing of $21.3 billion, or 16 percent,
of the recorded investment transactions. However, to achieve
efficiencies, Interior and the contractor substituted a review of
tribal account investment yields for individual transaction testing for
the remaining investment transactions.
Fill the Gap (Leases) Procedure: Another segment of the project
reconciled collections for certain tribes with a sample of lease
documents and timber sales contracts. Initially, the contractor was to
review all leases greater than $5,000 and a test sample of 100
additional leases of less than $5,000 on a cross section of tribes. The
reconciliation contractor identified 6,446 surface leases with annual
collections of over $5,000. However, due to time constraints for
completing the reconciliation, only 692 leases--10.7 percent of the
leases originally identified for testing--were tested. In addition,
because of missing records, a number of leases, and sample test months
for timber contracts, were substituted for those in the original
sample.
Systems Reconciliation Procedures: The systems reconciliation was
to include reconciling (1) information in the trust fund investment
system to the General Ledger in the Finance System, (2) the tribal
general ledger in the Finance System to U.S. Treasury records, and (3)
the Integrated Records Management System [IRMS] subsidiary records to
the Finance System general ledger. The latter two reconciliations could
not be performed or completed due to time and funding limitations,
according to Interior officials.
Tribal IIM and Special Deposit Accounts Reconciliation Procedure:
Interior maintained some IIM accounts for tribes in the IRMS accounting
system. It also used Special Deposit accounts primarily as clearing
accounts for funds received that had not been distributed to account
holders because the account owners had not been identified. Due to
missing records and the lack of an audit trail through IRMS, tribal
transactions could not be efficiently isolated from individual Indian
transactions. Because of this, tribal IIM accounts maintained in IRMS
were not reconciled to source documents, and Special Deposit accounts
were not reconciled with source documents that moved funds to tribes'
general ledger accounts, as had been planned.
Fill the Gap (Minerals Management Service) Reconciliation
Procedure: Interior's Minerals Management Service [MMS] collects and
accounts for oil and gas royalties on Indian leases. The reconciliation
project was to include some procedures to trace collections from the
leases, through MMS, to the general ledger maintained by BIA. However,
because MMS retained records for only 6 years, records for most of the
20-year reconciliation period were not available, and alternative
procedures at MMS were not performed due to time constraints.
Certification Procedure: Interior's fiscal year 1990 appropriations
act required a separate, independent certification that the accounts
had been reconciled and audited to the earliest possible date and that
the results were the most complete reconciliation possible. However,
BIA's certification contract required that the certification contractor
ensure only that the reconciliation effort was performed in accordance
with the reconciliation contract and no independent assessment of
completeness was required. In addition, because of cost and time
constraints, the certification contract was terminated before the
certification contractor completed its verification that the procedures
in the reconciliation contract were performed. The certification
contractor issued a status letter, which communicated preliminary
results. However, because the certification work was performed while
the reconciliation was in process and the certification procedures were
not completed, the usefulness of the status letter is limited.
Individual Indian Accounts Reconciliation Procedures: Accounts for
individual Indians were excluded from the reconciliation project due to
the potential lack of supporting documents and the cost and level of
effort that would be needed to include them in the project.
Attachment II
RELATED GAO PRODUCTS
Indian Trust Funds: Tribal Account Holders' Responses to
Reconciliation Results. GAO/AIMD-97-102R. Washington, DC: May 23, 1997.
Responses to Questions from June 11, 1996, Hearing. GAO/AIMD-96-
125R. Washington, DC: June 24, 1996.
Financial Management: Interior's Management of the Indian Trust
Funds. GAO/T-AIMD-96-111. Washington, DC: June 18, 1996.
Financial Management: Interior's Efforts to Reconcile Indian Trust
Fund Accounts and Implement Management Improvements. GAO/T-AIMD-96-104.
Washington, DC: June 11, 1996.
Financial Management: BIA's Tribal Trust Fund Account
Reconciliation Results. GAO/AIMD-96-63. Washington, DC: May 3, 1996.
Financial Management: Indian Trust Fund Accounts Cannot Be Fully
Reconciled. GAO/T-AIMD-95-94. Washington, DC: March 8, 1995.
Responses to Questions from September 26, 1994, Hearing. GAO/AIMD-
95-33R. Washington, DC: December 2, 1994.
Financial Management: Focused Leadership and Comprehensive Planning
Can Improve Interior's Management of Indian Trust Funds. GAO/T-AIMD-94-
195. Washington, DC: September 26, 1994.
Financial Management: Focused Leadership and Comprehensive Planning
Can Improve Interior's Management of Indian Trust Funds. GAO/AIMD-94-
185. Washington, DC: September 22, 1994.
Response to Questions on Two Recommendations in April 12, 1994,
Testimony. GAO/AIMD-94-138R. Washington, DC: June 10, 1994.
Letter on BIA Trust Fund Reconciliations. GAO/AIMD-94-110R.
Washington, DC: April 25, 1994.
Financial Management: Status of BIA's Efforts to Reconcile Indian
Trust Fund Accounts and Implement Management Improvements. GAO/T-AIMD-
94-99. Washington, DC: April 12, 1994.
Financial Management: BIA's Management of the Indian Trust Funds.
GAO/T-AIMD-93-4. Washington, DC: September 27, 1993.
Response to Request for Views on Freeze of the Statute of
Limitations on Claims against the United States Arising from BIA
Management of Tribal and Individual Trust Funds. GAO/AFMD-93-84R.
Washington, DC: June 4, 1993.
Financial Management: BIA Has Made Limited Progress in Reconciling
Trust Accounts and Developing a Strategic Plan. GAO/AFMD-92-38.
Washington, DC: June 18, 1992.
______
Prepared Statement of Phillip Hogen, Associate Solicitor, Division of
Indian Affairs, Department of the Interior
Good morning, Mr. Chairman and members of the committee. My name is
Phil Hogen. I am the associate solicitor for Indian affairs at the
Department of the Interior. Thank you for the opportunity to present
the Department of the Interior's views on S. 1857, an act ``To
Encourage the Settlement of Tribal Claims.''
The Department supports the intent of S. 1857, although we suggest
clarifying changes in order to make the language of the bill consistent
with the intent. S. 1857 attempts to establish a date certain on which
the statute of limitations would commence to run on claims concerning
alleged losses to or mismanagement of tribal trust funds. The bill
seeks to provide the tribes and the Government with additional time to
address and determine a process to encourage and facilitate the
resolution of tribal trust fund mismanagement claims based on the
results of the Arthur Andersen reconciliation reports that were
provided to the tribes in 1996. The proposed legislation would also
provide tribes that have already filed litigation with a sufficient
basis to obtain a stay of their pending claims, until the tribes and
the Department have had further opportunity to engage in attempts to
resolve those claims, before resorting to what will almost certainly be
expensive and burdensome litigation for both sides. We support this
approach, but recommended the following changes:
With respect to subsection (a), we recommend that the language be
amended to state as follows:
(a) IN GENERAL--Solely for purposes of providing an opportunity to
explore the settlement of tribal claims, the statute of limitations
shall be tolled through September 30, 2003, for any claim not already
time-barred concerning losses to or mismanagement of tribal trust
funds.
This recommended change would obviate the need for the language
currently found in subsection (b) of the bill. As such, we recommend
that subsection (b) be deleted.
Once again, I would like to thank you the opportunity to testify on
this legislation. I would be pleased to answer any questions you may
have.