MANAGEMENT AND RECONCILIATION OF INDIAN 

TRUST FlJND ACCOUNTS 

HEARING 

BEFORE THE 

TASK PORCE OX IXDLL\ TRl!ST FVXD 

:VIAXAGEJilEXT 

OF THE 

COl\tllVIITTEE ON RESOURCES 

HOUSE OF1 REPRESENTA'rTVES 

ONE HUNDRED FOURTH CONGRESS 

SECOND SESSION 

ON 

THE MANAGEMENT OF INDIAN TRUST FUNDS, THIS GOVERNMENT'S 

TRUST RESPONSIBILITY TO NATIVE AMERICANS, AND AN AUDIT 

OR RECONCILIATION OF THESE TRUST FUND ACCOUNTS 

26-403 cc 

,JUNE 18, 1996--WASHINGTON, DC 

Serial No. 104-80 

Printed for the use of the Committee on Resources 

U.S. GOVERNMENT PRINTING OFFICI> 

WASHINGTOI'< : 1996 

For sak hy the l.:.s. GovcnuncJH Printing Office 

Superilllendent or Documents, Congressional Sales Orlicc. Washington. DC 20402 

ISB N 0 · 16 ·053430 -5 
COMMITTEE ON RESOURCES 

DON YOUNG, Alaska, Chairman 

W.J. (BILLY) TAUZIN, Louisiana 

JAMES V. HANSEN, Utah 

JIM SAXTON, New Jersey 

ELTON GALLEGLY, California 

JOHN J. DUNCAN, JR., Tennessee 

JOEL HEFLEY, Colorado 

JOHN T. DOOLITTLE, California 

WAYNE ALLARD, Colorado 

WAYNE T. GILCHREST, Maryland 

KEN CALVERT, California 

RICHARD W. POMBO, California 

PETER G. TORKILDSEN, Massachusetts 

J.D. HAYWORTH, Arizona 

FRANK A. CREMEANS, Ohio 

BARBARA CUBIN, Wyoming 

WES COOLEY, Oregon 

HELEN CHENOWETH, Idaho 

LINDA SMITH, Washington 

GEORGE P. RADANOVICH, California 

WALTER B. JONES, JR. , North Carolina 

WILLIAM M. \MAC) THORNBERRY, Texas 

RICHARD \DOCl HASTINGS, Washington 

JACK METCALF, Washington 

JAMES B. LONGLEY, JR., Maine 

JOHN B. SHADEGG, Arizona 

JOHN E. ENSIGN, Nevada 

GEORGE MILLER, California 

EDWARD J. MARKEY, Massachusetts 

NICK J. RAHALL II, West Virginia 

BRUCE F. VENTO, Minnesota 

DALE E. KILDEE, Michigan 

PAT WILLIAMS, Montana 

SAM GEJDENSON, Connecticut 

BILL RICHARDSON, New Mexico 

PETER A. DEFAZIO, Oregon 

EN! F.H. FALEOMAVAEGA, American 

Samoa 

TIM JOHNSON, South Dakota 

NEIL ABERCROMBIE, Hawaii 

GERRY E. STUDDS, Massachusetts 

SOLOMON P. ORTIZ, Texas . 

OWEN B. PICKETT, Virginia 

FRANK PALLONE, JR., New Jersey 

CALVIN M. DOOLEY, Californil! 

CARLOS A. ROMERO-BARCELO, Puerto 

Rico 

MAURICE D. HINCHEY, New York 

ROBERT A. UNDERWOOD, Guam 

SAM FARR, California 

PATRICK J . KENNEDY, Rhode Island 

DANIEL VAJ. KISH , Ch ief of Staff 

DAVJD G. DYE, Chief Counsel 

CHRI STINE A. KE'INEDY, Chief Clerk./ Administrator 

J OliN LAWIU>NCE, Minority Staff Director 

TASK FORCE ON INDIAN TRUST FUND MANAGEMENT 

J.D. HAYWORTH, Arizona, Chairman 

WAYNE T. GILCHREST, Maryland DALE E. KILDEE, Michigan 

KEN CALVERT, California PAT WILLIAMS, Montana 

RICHARD W. POMBO, California BILL RICHARDSON, New Mexico 

BARBARA CUBIN, Wyoming TIM JOHNSON, South Dakota 

DON YOUNG, Alaska lex officio> GEORGE MILLER, California lex officio > 

T1~1 Guonr::'l, Counsel 

CHRISTOPI!ER STEARNS, Democratic Coun sel 
CONTEN TS 

Hearing held June 18, 1996 ............... ........ ..... ..... ........ .. ... ... .... ...... .. ................... ... . Statements of Members: 

Hayworth, Hon. J.D. , a U.S. Representative from Arizona, Chairman, 

Subcommittee on Native American And Insular Affairs ......................... . . Johnson, Hon. Tim, a U.S. Representative from South Dakota .. ....... .. ...... .. Kildee, Hon. Dale, a U.S. Representative from Michigan .... .. ..... ................ . . Miller, Hon. George, a U.S. Representative from California ...................... .. Richardson, Hon. Bill, a U.S. Representative from New Mexico ................ .. Williams, Hon. Pat, a U.S. Representative from Montana .................... ..... .. Statements of witnesses: 

Armstrong, Tom, Office of General Counsel, General Accounting Office .. .. Cagey, Henry, Chairman, Lummi Indian Nation (prepared statement) .... . Calbom, Linda M., Director, Civil Audits, Accounting and Information 

Management Division, General Accounting Office .... .. ...................... .. ..... .. Prepared statement .......... .. .................................................... . Cobell, Elouise C., Member of Advisory Council to Special Trustee ........... . Prepared statement ................................................................................. . Christie, Joe, Director of the Reconciliation Project, Office of Trust Fund 

Management, Department of the Interior .. .. ............................................. . Davenport, Eric, Chairman, Intertribal Monitoring Association on Indian 

Trust Funds ....... .. .... .................. .. .......... ................. ..................... .. Prepared statement .. ... ..... ..... .. .. ..................... ...... ............... .......... .. ....... . Echohawk, John, Director, Native American Rights Fund .................. .. Prepared statement .......... ................ .. .. . ............................................... .. Fisher, Gayle, Accounting and Information Management Division, General Accounting Office .. ........ .. .. ... .. .. .. ................. .. Homan, Paul M., Special Trustee for American Indians, Department of 

the Interior .......... .. .... ... .. ... .. .. .. .......... .................... .. Prepared statement .... .. . .. .. ................................... .. .. .... .. Simon, Jim, Deputy Assistant Attorney General, U.S. Department of 

Justice .... .... ............................ .. . .. .. ............ . Additional material supplied: 

Special Trustee for American Indians-Assessment and Strategic Plan 

Principles ....... .. .................................. .. Text of: 

H.R. 25 12 ... . ...... ........... ..... . . ....................... .. .................. . H.R. 27 10 ..... .. ........ ..... .... ... ............ .................. ........... .... .... .. .......... .. ... . H.R. 3640 ......................................... ............. ... ............... ........ .. .. ...... .. . H.R. 3828 .................... ... ............. .. ............. .... .... . Communication submitted: Mathis, Patricia: Letter of December 7, 1995, with attachments to Paul 

Homan ............ ...... ....... .............. .... ....... .. .. .. .... . 

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MANAGEMENT AND RECONCILIATION OF 

INDIAN TRUST FUND ACCOUNTS 

TUESDAY, JUNE 18, 1996 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON TASK 

FORCE OF INDIAN TRUST FUND MANAGEMENT, COMMITTEE ON RESOURCES 

Washington, DC. 

The Task Force met, pursuant to call, at 10:06 a.m., in room 

1324, Longworth Building, Hon. J .D. Hayworth [chairman of the 

Task Force] presiding. 

STATEMENT OF HON. J.D. HAYWORTH, A U.S. 

REPRESENTATIVE FROM ARIZONA 

Mr. HAYWORTH. Good morning, ladies and gentlemen. Today we 

begin our hearings on t he management of Indian trust funds. We 

read press accounts of what sounds like a gigantic breach of this 

government's trust responsibility to Native Americans. We have 

heard about an audit or reconciliation of these trust fund accounts 

which cost a staggering $21 million. Now we have learned that this $21 million audit was not really 

an audit at all. We hear that the $2 1 million expenditure did not 

even reconcile those accounts. We hear that only a small portion 

of those accounts were even examined. We hear that $2.4 billion, 

let me emphasize the word billion here, $2.4 billion in account 

transactions cannot be reconciled. I want to find out how this came about, and I want to find out 

what is being done to straighten it out. In a broader sense, I would 

hope that we could reconcile the disparity between the rhetoric and 

the reality of the BIA, or Bureau of Indian Affairs. 

One of my Navajo constituents says BIA stands for Bossing Indians Around, and in the wake of this money apparently lost or unac- counted for, BIA has also come to mean Billions In Arrears. So 

today is a learning day for all of us. We are going to hear from the 

special trustee, who is going to start with the basics and explain 

to us what kind of accounts they have, how many accounts exist, 

how the operation works, and other details of importance. 

The special trustee will also tell us what he believes must be 

done to straighten things out once and for all. Then we will hear 

from Eric Davenport, the chairman of the Intertribal Monitoring 

Association for Indian Trust Funds, who will give us his perspective on the management of Indian trust funds. Elouise Cobell, the 

Chair of the Special Trustees Advisory Board, will also bring us her 

perspective on all of this. 

( 1 ) 
2 

Then we will hear from John Echohawk, the Director of the Native Rights Fund. He will explain to us the reason for the recent 

suit which has been initiated against the Secretaries of Interior 

and Tteasury concerning the ongoing operation of Indian trust fund 

accounts. Finally, we will hear from Linda Calbom and Gail Fischer of the General Accounting Office, who has been studying this 

disaster in Federal account management for years. 

You will note that one of the GAO's many reports is in your fold- ers. At this point I am privileged to yield to my colleague and ranking minority member, the gentleman from Michigan, Mr. Kildee, for his opening statement. 

STATEMENT OF HON. DALE KILDEE, A U.S. REPRESENTATIVE 

FROM MICHIGAN 

Mr. KrLDEE. Thank you, Mr. Chairman. I also would like to submit opening statements on behalf of Mr. Miller and Mr. Richardson. 

Mr. HAYWORTH. Without objection. 

Mr. KrLDEE. Mr. Chairman, I am very grateful to you for calling 

this hearing this morning. I think people will find out that while 

you and I on certain issues may have some areas of disagreement 

that one thing we do agree upon is justice for the American Indians 

and you certainly have already proved that in your tenure here in 

the Congress of the United States. 

As we are all aware, the problems with the management of the 

Indian trust fund s has been around almost as long as the trust 

funds themselves. I understand the first General Office Accounting 

report pointing out unreconciled balances within BIA was in the 

1920's. At that time I believe there was some $40,000 that could 

not be accounted for. Unfortunately now that amount is in the billions. Over the past couple of years this trend has somewhat begun 

to turn around, but there is much work to be done. Last Congress, this Committee passed the American Indian 

Trust Fund Management Reform Act of 1994. The purpose of this 

Act was to give tribes more access to their trust fund accounts, to 

require specific actions of the Secretary in carrying out his trust 

fund management responsibilities, and to require that the Depart- ment of Interior report to the Committee on the Reconciliation 

Project undertaken by the Department. 

The Act also established a special trustee for trust funds to coordinate and implement better management of these funds. I hope 

we will hear this morning how that Act is being implemented. Before we hear from our witnesses this morning, I believe I would be 

remiss if I did not mention the person without whose perseverance 

and dogged determination we probably would not be here today. As Chairman of the Committee on Government Operations SubCommittee on Environment, Energy and Natural Resources, our 

former colleague, Mike Synar, of Oklahoma, forced light onto the 

problems of mismanagement of the Indian trust funds. For five 

years Mike held hearings, conducted investigations, and called for 

GAO and Inspector General reports on the problems. 

Consistently, he stopped any member with tribal constituents to 

talk about what he was learning of the problems and the need for 

attention to them. The report released from his subCommittee re-
3 

mains essential background material for all involved with this 

issue. Mike left Congress and this world far too soon, but I am 

proud that this Task Force continues the work he began. I thank 

all the witnesses here this morning. Thank you, Mr. Chairman . 

. [Statements of Members follow:] 

STATEMENT OF H ON. BILL RICHARDSON, A U.S. REPRESENTATIVE FROM NEW MEXICO 

I thank our Task Force Chairman, Mr. Hayworth, for conducting this hearing 

today to update us on where we are with the problems with the BIA's management 

of Indian trust funds. I wish I could believe we could solve all the BIA problems 

within our Congressional careers, but I fear none of us will be around long enough 

to reach that goal. We would do well to straighten out the long standing mess with 

the Indian trust funds. 

Last Congress I was the author of the American Indian Trust Fund Management 

Reform Act of 1994. This Act required that the Secretary give periodic account statements to Indian account holders and give Tribes more access to their funds. The 

Act drew to a conclusion the five year, $21 million Reconciliation Project being con- ducted by the BIA and required that each Tribe receive a statement on the reconciliation of their accounts. We also established the position of Special Trustee for Indian Trust Funds and required that the position be filled with a financial management expert willing to come up with a plan to overhaul the current system. I look 

forward to hearing from Special Trustee Paul Homan as to his progress. 

I see many familiar faces here this morning representing the Tribes, GAO, and 

the Department of the Interior and am pleased that so many are willing to continue 

the effort. The one face sadly missing from this hearing is that of my dear friend 

and former colleague, Mike Synar. Mike was the first in a long time to bring the 

problems of Indian trust fund management to the Congress' attention. He ignored 

those who said it was too boring and too complicated an issue for anyone to pay 

attention to. When Mike got excited about an issue and saw an injustice he wouldn't 

rest until he did all he could to right it. I was proud to work so closely with him on the Trust Fund Reform Act and if I know Mike, he is probably forcing St. Peter 

to reconcile his accounts right now. Chairman Hayworth, I congratulate you on holding this hearing and look forward 

to working with you to continue to address the decades long problems with Indian 

trust fund management. 

STATEMENT OF HON. GEORGE MILLER, A U.S. REPRESENTATIVE FROM CALIFORNIA 

I want to t.hank Chairman Hayworth for conducting this morning's hearing on the 

management of Indian trust funds by the Department of the Interior and the Federal Government. I appreciate your picking up the banner on this issue and agreeing to head up the Task Force on Indian Trust Funds. As one who has been working on these matters for several Congresses now, I can assure you the issues will con- found, frustrate and challenge you. I am confident that your perspective and approach will bring us closer to solving these problems. I look forward to working with 

you in a bipartisan manner. 

I see that we will hear from the Special Trustee for Indian Trust Funds, Paul 

Homan. This position was established as part of the American Indian Trust Fund 

Management Reform Act of 1994 passed by this Committee last Congress. I'm interested to see what progress Mr. Homan has made in addressing the policy and man- agement problems within the Department. I expect that this hearing will update us 

to where we are now that the Reconciliation Project has been completed by the Department and Tribes have received statements on their accounts. Along with the 

Special Trustee, we will hear from GAO and plaintiffs in a recently filed suit on 

behalf of the 300,000 liM account holders. 

I'm sure today's discussion will be lively and informative. The only person missing 

is our former colleague and my good friend Mike Synar, who first got me interested 

in this issue several years ago. Mike was tenacious in his pursuit to shed light on the issues of trust fund management in the BIA during the 1980's. He forced us 

all to look at the problems and was instrumental in helping us take the first steps 

toward fixing them. We have a long way to go but I believe Mike put us on the right 

track. 

I look forward to continuing the debate through this Task Force. 
4 

Mr. HAYWORTH. Thank you, Mr. Kildee. Now the gentleman from 

Montana, Mr. Williams. 

STATEMENT OF HON. PAT WILLIAMS, A U.S. REPRESENTATIVE 

FROM MONTANA 

Mr. WILLIAMS. Thank you. Mr. Chairman and my colleagues, this 

government is insistent, as it should be, in requiring American's 

private financial institutions to meet strict mandatory requirements in their private trust departments. Our Government is insistent, as it should be, in requiring American's private pension 

systems to meet strong mandatory fiduciary responsibility in their 

own private pension trust funds. 

The Congress began to suspect some years ago that a portion of 

our own Government, the Bureau of Indian Affairs, was incredibly 

negligent in protecting tribal trust fund accounts and as we have 

examined this negligence we discovered that it is not the fault of 

this Administration or the previous Administration or the Administration before that. The problem goes back perhaps 100 years. 

The money in these trust fund accounts does not belong to the 

government. It belongs to American citizens, in this instance America's first citizens, Native Americans. The BIA is charged with the 

responsibility of protecting those dollars, and the BIA has failed to 

meet that responsibility. 

About ten years ago the Congress, appalled by findings of mismanagement of those trust funds established the Indian Trust 

Fund Account Reconciliation effort. BIA spent five years and $21 

million in a substantial erstwhile effort to document and reconcile 

trust fund accounts. BIA did a fairly decent job considering the requirements and the amount of time they had, but they discovered 

that the accounts can simply not be fully reconciled because the 

trail is so old and the fund so mismanaged that the trail runs cold. There may be a number of problems in this matter. I have identi- fied two that I want to mention this morning briefly. When I say 

problems, I mean problems for which we have to find answers. 

First, we need to determine the losses and compensate the account 

holders. I suspect from my years of looking at this, both on this 

Committee in concert with our old pal, the late Mike Synar, that 

the courts may be the only way to fully pay back these account 

holders. 

The second problem is a matter of establishing an account receivable system that functions properly. The special trustee, Mr. 

Homan, has outlined the changes that are needed to bring these 

systems into compliance with trust standards and to insure the Indian account holders receive their money in the correct amount and 

in a somewhat timely fashion. 

He has estimated that the cost of instituting these necessary reforms at $100 million. I found out just yesterday that the House 

Interior Appropriations Committee is about to come to the Floor 

with legislation that contains not $100 million or $25 million, 

which means we could start toward solving this in four years. No, not $25 million, $1 million. This week the House Interior Appropriations will be on the floor with a pittance of money necessary 

to correct this problem. As I made a few calls last night and this 

morning, I have discovered that it is probably too late now to offer 
5 

an amendment to correct that problem. I question that we can 

properly inform the necessary Members of Congress in time to get 

a majority vote to add more on top of the pittance that the Interior 

Committee wants to provide. 

But the longer it takes, the more liability this government, i.e., 

the taxpayers, incur. Some suggest that the liability is amounting 

to millions of dollars every 30 days, money that eventually will 

have to be repaid should the courts so find. If this problem could 

be corrected, say in four or five or even six years with the beginning appropriations this year, then the taxpayers might avoid a liability that many estimate at one-half billion dollars. Finally, I want to say this. I want to say it as carefully as I can, 

but my examination of a number of records that have been brought 

to me indicate possible evidence of fraud, theft, and graft. Thank 

you, Mr. Chairman. Mr. HAYWORTH. I thank the gentleman from Montana and although we do not see eye to eye on every issue, I oppose the fact 

that he has chosen to leave us and go back home . And another gentleman who I guess will be taking his leave of this chamber for another experience on the other side of the Hill. I will recognize now 

the gentleman from South Dakota, Mr. Johnson. 

STATEMENT OF HON. TIM JOHNSON, A U.S. REPRESENTATIVE 

FROM SOUTH DAKOTA 

Mr. JOHNSON. Thank you, Mr. Chairman. I want to identify and 

associate my remarks with that of my friend and colleague from 

Montana, Mr. Williams. I think that he very neatly laid out the 

history of this tragic circumstance that our Task Force here today 

is grappling with. The problems that we have with the fiduciary responsibility of the Federal Government goes back to the early part 

of the 1800's in fact, and has been struggled with by many, including our departed colleague, Mike Synar. 

I am looking forward to working closely with you, Mr. Chairman, 

in a bipartisan fashion and with the Administration to make sure 

that we do in fact after countless reports and studies and investigations and periods of hammering actually begin to make progress to 

put the fiscal resources into the proper hands and that is in the 

hands of the tribes and individual Native American citizens. It is 

their money as has been noted by Mr. Williams, and we have, I 

think, a very great legal and moral responsibility to see to it that 

at last this fiasco is brought to an end. 

So I thank you again for your leadership. I look forward to working closely with you. I look forward to the testimony today. 

Mr. HAYWORTH. Thank you very much. Now we would be happy 

to hear from the special trustee, Mr. Homan. Good morning, sir. 

STATEMENT OF PAUL M. HOMAN, SPECIAL TRUSTEE FOR 

AMERICAN INDIANS, DEPARTMENT OF THE INTERIOR 

Mr. HO:viAN. Good morning, and thank you, Mr. Chairman. It is 

a pleasure for us to be here to present testimony on trust funds 

management. Before I read a brief statement, I would like to introduce my colleagues here, Mr. Joe Christie, who was the Director 

of the Reconciliation Project from the Office of Trust Fund Management. .Joe will be giving us a presentation after mine on the sum-
6 

mary findings of the report that dealt with the Reconciliation 

Project. 

To my right is Jim Simon, who is the Deputy Assistant Attorney 

General, U.S. Department of Justice; and to his right is Ed Cohen, 

who is the Deputy Solicitor, U.S. Department of the Interior. They 

will assist us in answering any legal or policy questions. 

If I may, Mr. Chairman, I will proceed with the precis statement, 

but I would like my full statement to be submitted for the record 

and that full statement also includes the strategic plan. 

Mr. HAYWORTH. Without objection, so ordered. 

Mr. HOMAN. Thank you. Mr. Chairman, my statement will focus 

on the reconciliation report of the Secretary of the Interior and 

what it may take to resolve claims arising from past trust management practices, an interim report by the Special Trustee, and what 

it may take to ensure sound trust management in the future. Each 

of these points is discussed in turn. 

Beginning with the Section 304 report required by the Reform 

Act of 1994, Section 304 required the submittal of a report by the 

Secretary of the Interior to the Congress regarding the reconciliation of tribal trust fund accounts for the period July 1, 1972, 

through September 30, 1992. The Secretary submitted the required 

report to Congress on May 31, 1996, and I believe the Committee 

has been provided with a copy of that report. Let me just briefly summarize its contents. As the Secretary's report indicates, commencing in January, 1996, each account holder 

was provided with a report on the reconciliation of its accounts, 

along with account statements that show account balances, reconciled transactions, and proposed adjustments. Subsequent to the 

distribution of the reconciliation report and account statements, a 

National meeting to which all account holders were invited was 

held in Albuquerque, New Mexico, to explain the reconciliation 

methodology, the report itself, the account statement format, content and terminology. 

And then following that a series of five regional meetings, of 

which three have already been held, were also scheduled to work 

directly with each account holder to address questions and issues 

on each tribe's specific report. Let me give you just a summary of 

the findings to date and they are largely inclusive at this point. 

As the Secretary's report indicates, through April 30, 1996, 77 of 

the 280 tribes involved in the reconciliation report have responded 

to our questionnaire. Specifically, only two accounts have accepted 

their report balances and five account holders have disputed their 

account balances. The rest of the account holders have not specifically accepted or disputed their account balances and many have 

requested additional time and/or meetings with the Department to 

go over these very complicated reports in a great deal of detail. 

And as I said we have been having the scheduled meetings, three 

of which have already been held, two of which are scheduled for 

later this month, and the final one I believe is going to be held in 

July. Further, until the regional meetings are completed and the 

tribes have had an opportunity to analyze the reports and documentation they have been provided, the Department simply will 

not know how many tribes will dispute the balance of their accounts. 
7 

At that time, which we estimate to be late summer or early fall, 

the Department will be in a position to propose a mechanism to resolve any such disputes. A final report on account holder attestations and a mechanism to resolve those disputes will be submitted 

to the Congress in final form by November 15, 1996. 

I would now like to present a brief interim report on my personal 

assessment and professional assessment of the trust management 

systems and the conceptual strategic plan which my office has devised to deal with the longstanding problems affecting the Federal 

Government's trust management systems. My assessment concludes that the undeniably poor quality of the trust management 

syst~ms and the condition of the historical records effectively prevent the Federal Government from providing an accurate and timely accounting to the American Indian trust beneficiaries. 

This can be demonstrated somewhat quantitatively both by the 

Reconciliation Project results and a report which was issued last 

year by the Department of the Interior called the liM Improvement 

Project Report. Again, both of these reports are public and one is 

the subject of today's hearing. 

First, beginning with the Reconciliation Project report, in January we disclosed the $2.4 billion you mentioned in your opening remarks. That involved 32,319 transactions for which source documentation could not be located. The point here is that these records 

should not be missing and would not be missing had the Federal 

Government followed conventional trust record keeping practices 

followed by the private sector. 

Of particular concern to me is about $694 million in unreconciled 

disbursements and another disbursement package which contains 

a little over $2 billion in so-called reconciled items for which complete disbursement packages could not be located. These are large 

disbursements to tribes in care of third parties which did not have 

both tribal and other government signed authorization. 

The Reconciliation Project also confirmed what the General Accounting Office calls the "lack of a known universe of transactions 

and leases." This stems from the Federal Government's lack of an 

ability accurately to trace a collection to a source lease or a contract. That in turn results from the fact that the Bureau of Indian 

Affairs does not maintain the master lease file, nor does it maintain a consolidated accounts receivable billing system which you 

mentioned. 

Without a master lease file and accounts receivable billing system there is no way to tell how many total contracts the Bureau 

actually manages and no way to tell whether or not the collections 

called for in those leases or contracts are actually being collected. 

So when those hit the general ledger we were only able to check 

the source documentation of the entries made to the general ledger. 

We were not able to trace those entries back to an original source 

document in every case. 

My strategic plan also discusses the deficiencies and defects in 

the liM accounting system, liM referring to the Individual Indian 

Money accounts of which there are over 300,000 maintained by the 

Office of Trust Fund Management. Let me just briefly touch on 

some of the difficulties we are presently encountering. 
8 

There are over 50,000 liM accounts with over $44 million for individuals with no address or an incorrect address and what the Office of Trust Fund Management calls whereabouts unknown. There 

is over $1 million in one of those accounts. There are over 15,000 

IIM accounts with over $21 million held for individuals who were 

formerly minors, the vast majority of which should have been disbursed when the age of majority was reached. 

There are over $43 million in overdraft interest clearing accounts 

resulting from interest mis-postings prior to 1993. Some of these 

mis-postings go back to conversions that were made in the mid-

'SO's. In effect these are non-earning assets which deprive the current IIM account holders of over $2 million in annual income. 

There are general ledger differences, losses, if you will, of over 

$26 million which are old and which should be cleared by congressional appropriations. There are over 130,000 missing Social Security numbers involving accounts with over $175 million in them. 

These are taxpayer ID numbers which are required now of the Federal Government and have been required of the private sector 

banks and trust companies for some time. 

There is a continued maintenance problem of over 153,000 accounts which are over half of the total with balances of less than 

$10. We spend far in excess of that and this is taxpayers' money 

that we are spending maintaining those particular accounts. In my 

view, Mr. Chairman , these conditions are unacceptable by any reasonable standards and continue to do significant harm and damage 

to American Indian trust beneficiaries. 

They are caused by inherent defects in the poor trust management systems the government uses to manage the Indian moneys. 

These defective systems essentially prevent the government from 

meeting the fiduciary accounting and reporting standards of the 

American Indian Trust Management Reform Act of 1994 and 

standards of ordinary prudence which are applicable to all trustees, 

public or private. 

The Special Trustee's conceptual strategic plan addresses each of 

those issues I mentioned and identifies nine initiatives designed to 

rectify the problems and bring trust accounting and management 

systems up to commercial standards within three years. What is 

needed first is basically a complete overhaul of the four basic trust 

management systems. 

We simply must acquire a new trust resource asset and management delivery system by which the Bureau manages the Indian 

lands. We must acquire a new accounts receivable and billing system that uses lease-contract, and landownership information of 

which we have none on a consolidated basis. We must acquire a 

new trust, depository, payments and delivery system for Individual 

Indian Money accounts to reduce the type of exceptions that I just 

noted. 

And finally we must address the land records and title recordation and certification system which the Federal Government utilizes. And just to note there, that system at times in terms of 

transfers of property to individual Indians runs two years in arrears. We have no staff, no staff, to catch that up. There were programs two years ago and, last year, which failed to be funded by 
9 

the Congress which actually reduced that staff from 126 to 90 last 

year. If we are ever going to catch up on some of these exceptions the 

Congress simply must appropriate the money for us to do so. Along 

with the overhaul of those four basic systems must come improve~ 

ments to the general ledger system, record keeping and archiving, 

obviously, risk management, the technology system, and organizational structure. 

As you know, implementation of this strategic plan will cost over 

$100 million, and while it is a considerable sum of money, I wish 

to note that Arthur Andersen, our contractor in 1992 in looking at 

a Reconciliation Project similar to the one you are about to see 

here, liM accounts estimated that it would cost $108 million to 

$281 million to just reconcile the liM accounts in the same way 

that we reconcile the tribal accounts and that exceeds the entire 

cost of this strategic plan. 

In closing let me just say that the problems in trust management 

systems are longstanding ones. If mismanagement or negligence or 

fraud occurred, it stemmed principally from allowing the trust 

management systems, record keeping systems, and risk management systems to deteriorate over a 20- to 30-year period. They essentially became obsolete and ineffective over that same period. For many of those years, including many years since 1990, the 

trust programs were seriously understaffed and underfunded. As a 

result, the government increasingly was unable to keep pace with 

the rapid changes and improvements in technology, trust systems, 

and prudential best practices taking place in the private sector in 

the trust industry. 

This gap continues today and will continue to increase until the 

reforms outlined in the strategic plan are funded and implemented. 

That is why they should be funded and implemented immediately 

regardless of if and when the comprehensive strategic plan called 

for in the Reform Act is completed and approved. Each day the status quo continues the Federal Government's exposure to claims of 

mismanagement and liability will continue to grow and it is another day the Federal Government cannot meet its trust responsibilities to the American Indians. 

Mr. Chairman, that concludes my statement. I would like Joe 

Christie here to take you through the absolute details and then my 

colleagues and I will be happy to answer any questions you may 

have or remarks on the Reconciliation Project itself. Thank you 

very much. 

[Prepared statement of Mr. Homan may be found at the end of 

hearing.] 

Mr. HAYWORTH. Thank you, sir. Joe, we would be happy to hear 

your presentation. 

STATEMENT OF JOE CHRISTIE, DIRECTOR, RECONCILIATION 

PRO.JECT, OFFICE OF TRUST FUND MANAGEMENT, DEPARTMENT OF THE INTERIOR 

Mr. CHRISTIE. Thank you, Mr. Chairman. This is a summary of 

the findings of the tribal trust fund reconciliation. We will be talking about non-investment funds. The total of the non-investment 

funds is $17.7 billion. Of that total we reconcile $15.3 billion with 
10 

a non-reconciled balance of $2.4 billion. This is the total value and 

the values are expressed in absolute terms. Let me explain absolute terms. You got a checking account and 

you deposit $1,000 into your account and then you turn around and 

write a check for $1,000. Your account balance is 0, but in absolute 

terms we are talking about $2,000. The reconciliation results of 

those non-investment funds that were reconciled have an accuracy 

rate of 99.97 percent. 

Now let us talk about an analysis of the unreconciled funds, the 

$2.4 billion. The analysis of the unreconciled transactions are made 

up of receipts which totaled $1.1 billion, and these are received and 

credited to the tribe's account. They are made up of transfers which 

are $479 million, and these are funds transferred within one tribe's 

account. A tribe may have numerous accounts and these are transfers between accounts within the same tribe. 

And, thirdly, they are made up of disbursements. These are 

funds paid out of a tribe's account. In an absolute term we are talking about $808 million. Now the characteristics of an unreconciled 

receipt, first of all, the funds are credited to the account, they are 

available for use by the tribe, and they are earning interest. What 

we cannot do is verify that the funds credited were credited to the 

correct account or in the correct amount. 

The characteristics of unreconciled transfers. These transfers are 

within the same tribe's account. They were credited to the account. They were available for use by the tribe. They are earning interest. 

We cannot verify the transfers to or from where to or from the correct account. 

The characteristics of an unreconciled disbursement. These are 

deductions from a tribe's account to an unidentified recipient, we 

do not know who the check went to, and we cannot verify the proper purpose or account from which it came. We know that on the 

general ledger it showed that it came from such and such account, 

but we do not know if that was the proper account. This total $808 

million. 

Now let us look a little bit at the $808 million because what we 

are talking about is absolute values. First of all, $73.5 million of 

these disbursements are what we call positive disbursements. 

These are canceled checks with the amount actually was recredited 

to the account so we would deduct that. That leaves us with $735 

million. Out of that $735 million, $38.9 million of that is attorney 

fees from a judgment award and expert witnesses for a total of $1.4 

million. These are the first deductions that come off by law, statutory deducts, that come out of that award. So that leaves us with 

a net unreconciled disbursement of $694 million in tribal funds. 

Thank you, sir. Mr. HAYWORTH. Mr. Homan, I want to go to one particular question. I have a whole series of things here that I can ask and I will 

be happy to get to those in just a second, but there is one big question that comes out of all of this concerning your estimate that implementation of reforms needed will cost in excess of $100 million. 

I believe I heard $121 million. You cited the Arthur Andersen report that puts it in the range of somewhere between $108 million 

to $281 million. 
11 

Now the perception of most folks on Main Street, America, is, 

OK, we have got a situation where we cannot account for $2.4 billion. Could you explain to us the justification of an expenditure of 

$100 million plus to clear up the discrepancy because to some it 

will appear as if we are pouring gasoline on a ranging fire . This 

is a huge expenditure of money to try and rectify an account in arrears. Could you explain in layman's terms why the citizens of America 

should be willing to pony up $100 plus million to solve this $2.4 

billion problem? 

Mr. HOMAN. I would be glad to try to explain that. The $100 million I referred to fixes the system as it currently is. The system can 

be compared to a simple accounting system used in every bank and 

trust company in the United States except for the land records and 

ownership system which is unique to the government. So all we are 

saying is that it is going to take $100 million to install what every 

bank and bank trust company has to account for the Indian moneys from start to finish, starting with the revenues coming off the 

trust lands and going through an accounts receivable system, de- positing the money, and investing the money in their accounts, and 

then finally disbursing it. That will not rectify the $2.4 billion problem in the past nor rectify any of the past problems. There will have to be some sort of 

claims resolution to address any damage that may have occurred 

and as we said in our testimony we won't know what that mechanism will be until we hear from all 280 tribes later this year. $100 

million is simply to go forward. 

I compared that to just what it would take to reconcile the liM 

accounts in 1992 and that number was $108 million to $281 million. The Department and the Congress were notified of this and 

decided not to do that because the cost benefit relationship just was 

not there. So the $100 million is just to fix the system, and if we 

do not we will continue to expose the Federal Government to 

claims of more mismanagement and more liability as Mr. Williams 

indicated on a daily basis. 

Put one other way, as one of my staff members said last week, 

we may be in the fourth year of a new Reconciliation Project. We 

completed the last one in 1992. If we did another one today, I am 

convinced that we would find the same type of exceptions because 

the systems that the Bureau uses to manage trust functions are 

simply defective and cannot be brought up to a commercial standard without the type of overhaul we have just seen. 

$100 million in a lot of money, but if you look at it as a 30-year 

problem of negligence in terms of underfunding these programs, that is about what a bank this size would spend in keeping its 

technology up to snuff and these are simple accounting systems 

that we are talking about, not a Cadillac, a plain Chevrolet. Mr. HAYWORTH. Some of my colleagues here in their opening 

statements talked about a history of this that extends far beyond 

recent administrations. And of course as the Special Trustee you 

are not here as an archive historian, but in your personal opinion 

to avoid these problems in the future in addition to what you are 

recommending just to get our head above water in terms of $100 

million, it is perhaps an unfair question, I do not mean to put you 
12 

in the situation of Monday morning quarterbacking, but in a perfect world what should have been done and when should it have 

been done to solve this problem 30 years ago or whatever timeframe you would take? 

Mr. HOMAN. Well, in my view the Bureau systems are very much 

like the banks were in the 1960's, and I was a bank examiner in 

the 1960's so I · think I can speak with some authority there. The 

banks I was looking at in the 1960's were just converting from 

manual systems to automated systems. And you all know and I do 

not have to tell you of the great leaps forward in computer technology that have taken place since then. 

What has also taken place is the ability to cut deposit lag times 

and other payment systems down to instantaneous transactions 

anywhere in the world. The Bureau's systems did not keep pace 

and what may have been acceptable in the 1960's or '50's simply 

is not acceptable today. The second thing they failed to do, in my 

view, was to keep record keeping similar to what the private trust 

companies keep, which since World War II has essentially been in 

perpetuity. 

There is no excuse for missing records. There may be explanations for it, but there is simply no excuse for missing records. So 

had the Bureau kept pace with its archiving systems, record keeping systems, had it made incremental investments in technology 

over those years as every small bank did over the period, I think 

it would have had a system that would not create any extraordinary exceptions today, and that is my view. Mr. HAYWORTH. Let me ask you going from that look back to the 

past to examining the future with your own past experience as a 

bank examiner, with your knowledge of what is transpiring in 

terms of, to borrow a popular phrase, cutting edge technology, and 

in this glorious information age with the computer break-throughs 

we have now, is there not a possibility that with technological improvements, the cost factors you are dealing with here to rectify the 

situation , could the cost of reforms not be economized a little bit 

more or this chunk of change we are going to have put out in your 

opinion is the bare minimum we have to do, $100 million to get our 

head above water, so to speak, and move to rectify it, or is there 

any possibility that with the improved technology we could find an 

economical way to do these things? 

Mr. HOMA."l'. The $100 million is largely in investing in some 

1,200 work stations for both the tribes and the Bureau of Indian 

Affairs and upgrading some 800 existing work stations. It is highly 

technical. It involves core systems, investments, high tech, if you 

will, telecommunications systems. Again, not the Cadillacs of the 

world, but plain vanilla systems that are available in most financial institutions today. Once that is achieved I think you can then expect efficiency and 

you will see in the five-year projection that it costs about $20 million a year to maintain this system and keep it up to date. I will 

throw out one number that we calculated earlier this year when we 

tried to address the fractionated heir ship problem which drives 

some of our land records and ownership problems. 

We spent $33 million a year just to keep track of fractionated interests in landownership of less than 2 percent of the total. So I 
13 

think you can eliminate nearly all of that and to get your pay back 

just out of that alone. Now if this were a private sector company, Mr. Chairman, you could expect to get out of what you would call 

general and administrative expenses in the private sector or in our 

case, staffing about a 25 to 30 percent cost saving. These savings 

would exceed the $100 million cost in about three years. So the pay 

back is going to be there in efficiency and I believe we should go 

forward with that system. I do not think we have a choice. 

Mr. HAYWORTH. Mr. Kildee. 

Mr. KrLDEE. Thank you, Mr. Chairman. Are you aware of any 

other area of U.S. Government financial management that seems 

to be as badly managed as has been the Indian trust fund? 

Mr. HOMAN. I am not personally aware, no. 

Mr. KrLDEE. Do you have any suspicions that might be in the 

area as badly managed? 

Mr. HOMAN. I just cannot speculate on that. 

Mr. KrLDEE. Let me ask you, is your mission both looking backward and see what has happened and looking forward to see what 

can be done to remedy or prevent this from happening again? 

Mr. HOMAN. The mission of the Special Trustee is to produce a 

strategic plan to reform this system. That was the intent. When 

that is approved by the Administration and the Congress, then I 

am to oversee the implementation of that plan. My office sunset 

after that. It does not include a look back, although necessarily I 

have a consultation role in the Reconciliation Project results and in 

seeing it through the claims process. 

Mr. KrLDEE. Should someone be looking back? Should someone 

be looking back to see why or how this happened or who may have 

made it happen or at least permitted it to happen? 

Mr. HOMAN. There are three current reports that I would urge 

you to take a look at which go at different aspects of this problem 

in different ways. One is the Reconciliation Project report, which 

as we indicated, quantifies to a certain extent what the difficulties 

in these systems are. Another is a report issued by the Department 

itself last year, which was the liM improvement project report, which I believe the Congress has a copy of, which goes through in 

detail some 30 different exceptions, internal control exceptions, 

management exceptions, systems exceptions, if you will, on the liM 

accounting system itself. 

Those are two of the basic courses. The third report is the GAO 

report which critiques the Arthur Andersen Reconciliation Project 

report, of which you will hear about probably in the next panel or 

two. And then previous GAO reports going back the last ten years. 

Those collective reports in my view at least isolate each of the 

problems, maybe not their depth, but isolate also some of the remedies, which do not differ substantially from my own assessment, 

which is the fourth report I refer you to and my own master strategic plan. 

Those four reports quantify for the first time, I believe, in a lon g 

time, the problem. Always in the past, and someone recenty mentioned how many reports there were. I went to a NCAI, National 

Congress of American Indians, meeting last week. There was a re- port in some of their material there that indicated that since 1834 
14 

the Congressional Research Service had located about 1,050 reports 

on BIA of mismanagement. 

But I think how these reports differ from those which did not 

necessarily get acted on was the fact that all of the previous reports were based on necessarily anecdotal evidence from which it 

is very hard to generalize to the whole in terms of remedies. But 

I think those four reports that I mentioned differ in that they 

quantify the problem for the first time and really suggest remedies 

to deal with it. 

Mr. KILDEE. With your background looking at the $2.4 million 

reconciled, do you think there might be a mixture of some nonfeasance, some misfeasance and some malfeasance involved here? 

Mr. HOMAN. The contractor was not specifically instructed to look 

for malfeasance or fraud, if you will, or embezzlement, but they 

had an obligation as a professional organization to report it. This 

is Arthur Andersen. I talked to them about this and they said that 

they would have reported any malfeasance or fraud had they run 

across it. That was not their specific purpose, but they found no 

fraud. 

And these errors are spread over the Bureau's operations nationwide. There is no particular area that is any better or worse than 

the others which leads me at least to conclude that these problems 

are essentially driven by poor systems rather than by the malfeasance of particular individuals. 

STATEMENT OF JIM SIMON, DEPUTY ASSISTANT ATTORNEY 

GENERAL, U.S. DEPARTMENT OF JUSTICE 

Mr. SIMON. Congressman, may I add to that, please? Let me repeat, if I may, something I have said to many people who are concerned about this problem in many private meetings, and that is 

that if anyone has any evidence of malfeasance or misconduct in 

connection with these trust funds, I would urge them to bring that 

evidence to any number of government agencies that are interested 

in pursuing that kind of misconduct. That would include, for example, the Inspector General's office at 

the Department of the Interior, it would include the FBI, it would 

include the Department of Justice, who would be interested in pursuing any evidence that is brought to our attention. The other 

thing I would like to add is that my understanding is that Mr. Homan's future plan by improving the record keeping is designed, 

one of its goals, as I understand it, is to minimize the risk of malfeasance and to provide better deterrence and detection systems. 

Mr. K.lLDEE. A better system makes malfeasance more difficult to 

accomplish. 

Mr. HOMAN. That is exactly the point. 

Mr. KILDEE. May I ask one final question? From your background with working with banks, what would happen to a private 

bank that had such a system as this? 

Mr. HOMAN. Well, this is going to be speculation and I won't get 

into the legal aspects of it. But if this were a private bank-and 

I was also a bank supervisor for 20 years-these types of exceptions would be considered unsafe and unsound by definition in the 

bank regulatory legal terms. 
15 

And the regulators would then appropriately be compelled to 

take what they call special supervisory actions, which are legal actions, notably a cease and desist order, to compel performance on 

the part of the bank or they would be subject to civil money penalties of upwards of $1 million a day for serious violations of the 

cease and desist order. That is what a bank trust department is 

under in terms of the government requirements. 

Mr. KrLDEE. Did you want to respond to that also? 

Mr. SIMON. Certainly, Congressman. I think that-well, there is 

no one at this table who is defending the system as it exists and 

I think Mr. Homan's report and his testimony about the Interior 

Department's desire to fix the system speak for themselves. The 

question of what the legal consequences are for the past is a very 

complicated one . 

The government has certainly trust responsibility here to the account holders. How that trust responsibility should be interpreted 

in light of each account and the circumstances of each account is 

a very fact-specific situation. What we have set out in Mr. Homan's 

testimony is the plan of the Department of the Interior to receive 

from the tribes over the next few months the remainder of their 

disputes over the accounts. 

And what we hope to do by the end of the summer and into the 

early fall is to look at those disputes, see which of those disputes 

can be resolved systematically. Our goal is to determine what the 

government should compensate and to provide compensation as 

promptly as we can to determine what the government should not 

compensate and to be able to distinguish one from the other in the 

most expeditious way. 

No one wants here 50 years of litigation or hundreds of millions 

of dollars spent by attorneys to resolve those disputes. 

Mr. KrLDEE. Thank you, Mr. Chairman. 

Mr. HAYWORTH. Thank you, Mr. Kildee. I welcome the gentleman 

from California, Mr. Calvert. 

Mr. CALVERT. Thank you, Mr. Chairman. I am sorry I was late. 

This is a subject that interests me and I came when we were talking about potential remedies in accounting practices, new equipment, systems, and so forth , but just from listening it seems that 

we have a real cultural problem at the Bureau and more radical 

solutions were thought about rather than trying to solve the problem internally with system changes, accounting changes, and so 

forth, possibly outside trust management, bringing in people to actually operate the trust obviously with supervision and cooperation 

with the various Indian tribes of the Bureau itself, any type of in- vestigation into that? 

Mr. HOMA.l\f. We have looked at those alternatives. The strategic 

plan remedies of the four basic systems do not preclude that. What 

we are after is a common set of policies and procedures which are 

necessary. As trustee the government must direct under a common 

set of laws, which is what the Congress essentially must direct. 

But the systems themselves can be operated either centrally or 

under what they call a client server mechanism. The deliverer of 

those services can be an outside person. It can be outsourced so to 

speak and governed either by the Bureau itself or ultimately the 

Indian tribes themselves. Many are under self-governance, a gov-
16 

ernment that is perfectly capable in certain circumstances of operating these basic systems themselves. We are anxious and one of 

our goals is to turn it over to that process. 

We must, however, maintain a centralized system of accounting 

and control. That is our responsibility as trustee. Too, the costs 

would be prohibitive if we were to provide these types of systems 

to as many as 300 individual tribes, which is our population of 

trust accounts. So we are looking at those alternatives to gain those efficiencies, but in a sense the government is still going to have to be in the 

position of designing those systems and controlling them as long as 

we have the trustee's responsibility. 

Mr. CALVERT. Well, that is what concerns me. I think from the 

outsider observer, casual observer, even to the various tribes, if 

there is not fraud and abuse involved in this certainly there is a 

level of incompetence or something else occurring here. If you have 

the same people involved in running those systems and changing 

those accounting practices, maybe we are just going down the same 

path with the same unfortunate situation that we are in. 

Mr. HOMAN. Let me try to address that. You are correct that I 

think it is a logical assumption to make. I have taken a great deal 

of time in the last six months, however, to visit the Bureau's operations in the field to see how they and the tribes operate these systems and I can tell you that I could bring myself and 20 of the best 

bankers I know and try to operate these systems and we would be 

unable to do it as well as they do. 

So I think their systems are broke, they are obsolete, and I think 

the talent quotient there is sufficient to operate a new system with 

the proper training. So I want to say that up front that I have no 

criticisms to make of the Bureau of Indian Affairs' managers. I 

think by and large they are competent and doing the best job they 

can albeit with a broken system. 

Mr. CALVERT. Thank you, Mr. Chairman. 

Mr. HAYWORTH. Thank you. The gentleman from Montana, Mr. 

Williams . . Mr. WILLIAMS. Mr. Homan, I mentioned in my opening statement 

that the House Appropriations Committee that will be coming to 

the Floor has requested only $1 million to begin the correction of 

these systems. You estimated an amount of $100 million. For the 

first year President Clinton asked for $7,500,000. Given the arc of 

information understanding knowledge about what to do, how much 

could the correctors of this problem absorb in appropriations in the 

first year? Could you accept and absorb and appropriately spend 

$25 million? 

lVit . HOMAN. Yes. Let me try to go through the President's budget 

a bit. The l'resident's budget allocated $13.6 million for the strategic pla n implementation. In addition, it allocated $1 million for a 

requirements analysis and user inventory that we requested and 

then finally $1.2 million for the staffing of my immediate office 

which now has only two people in it. So if you add that up, that 

is about $16 million. 

We have to do about $4.5 million worth of preliminary investing 

before the plan can proceed. The preliminary investing involves $2 

million in rewriting some of the manuals, legal and operating. It 
17 

involves another $2 million to clean up the data base to try to clear 

up some of the exceptions which I noted earlier and it involves 

about a half million dollars in outside contracting fees. 

That leaves about $9 million for implementation of the plan. The 

first thing we want to start with is solving the liM accounting 

problem which we think we can fix within one year. That will cost 

$17.8 million. So how I would do this take the $17.8 million, add 

$4 million to it, that is $22 million, and then another $10 million 

to implement the first phase of the other three core systems. That 

is $32 million for the first year. Now that is complicated to follow 

and I can provide in writing those numbers. Mr. WILLIAMS. I think maybe some of us that are interested in 

trying, if not in the House perhaps in the Senate, if not there in 

a conference Committee, to increase the amount being appropriated 

and those most interested in doing that may very well be--

Mr. HOMAN. The most critical use in my view, and the Secretary 

agrees here and also the Administration, is to fix the liM system. 

You can do that this year for $22 million. But as you noted the 

House reduced all of that to $1 million which will not enable us to 

proceed with any of these reforms. 

Mr. WILLIAMS. Let me pursue a different matter. I appreciate 

your willingness to help on the appropriations. You mentioned 

quickly in answer to questions, mentioned your qualifications. Why 

don't you give us the credentials which you bring to this position 

of Special Trustee here in 30 seconds? 

Mr. HOMAN. I will do that in less than 30 seconds. I was a career 

bank examiner with the Office of the Comptroller of the Currency 

for 18 years, and I spent the last five years of that service as the 

senior deputy controller for bank supervision, which was the senior 

career position in the office. We supervised essentially the 4,700 

largest banks in this country. 

I left there in 1982 and went to the private sector and then have 

been associated with five different restructurings in the private 

sector, all successful. I was the CEO of four of those banks, the last 

being Riggs National Bank here in Washington, D.C. Mr. WILLIAMS. Thank you. In some of those positions, particularly as examiner, like all examiners as you were looking at accounts and processes, I assume that after some years of doing this 

you could identify glitches in this system, in the accounts, that indicated to you either intentional or unintentional wrongdoing, but 

in any event indicated to you that the results of those accounts 

were not what they should be. 

I assume too that there were some of these what I am calling 

glitches, for lack of knowing what the technical terms might be, 

some of these discrepancies that perhaps indicate to you and other 

examiners the possibility of the illegal movement of money, in 

other words, off ramps from the main interstate flow of money, off 

ramps that should not be there. In your look at these accounts, 

have any of those discrepancies, glitches, or off ramps been obvious? 

Mr. HOMAN. I think it is fair to say that all of those have been 

obvious here, but as I said earlier we have not detected any fraud 

or malfeasance in our look back by Arthur Andersen. However, 

having said that, as a bank examiner or accountant, the reason you 
18 

have internal controls and accounting standards and record keeping standards in the first place is to minimize those type of 

glitches. 

And with missing records there is simply nothing you can say. The possibility of course exists and the opportunity exists and lack 

of internal controls just exacerbates that opportunity for malfeasance or criminal activity, but again we have not found such to 

date. 

Mr. WILLIAMS. If there were, and I am of course among those 

who hopes there was not, if there was criminal activity given the 

nature of the accounts and the movements of the money was that 

illegal activity, that criminal activity, likely to have come from 

within or outside of the various agencies of government that have 

jurisdiction over the movement of these funds and more agencies 

than simply the BIA, of course, have a hand in the process of the 

movement of these dollars? 

Mr. HOMAN. Well, anyone by and large, and these numbers are 

going to be probably wrong, but most of the transactions taking 

place are strictly within the Bureau of Indian Mfairs. There is a 

good deal of money that is collected outside by the Mineral Management Service which sends the money directly to the U.S. Treast,Iry so they are involved in some of the financial transactions. 

But their systems are in my view at least, and I have looked at 

them, are much, much better than the Bureau's. They have kept 

up to date. They also use the same system to collect mineral revenues on behalf of the American public for the Bureau of Land Management lands. So essentially the defective systems are almost 

solely in the Bureau of Indian Affairs. And so the opportunity if it 

exists is with them. Now, Joe, you may want to add to that because Joe follows the 

transactional flows here much, much better than I did and he has 

looked at a good many of these transactions over the last five years 

and he might be able to add an insight that I cannot. 

Mr. CHRISTIE. Well, the only thing I would add to that, Mr. 

Homan, is that of known problems in American Indian resources 

many of those have occurred such as the Winnind River, where the 

resource was stolen before it was ever paid for, which would fall 

under the jurisdiction of the agency that was responsible for the 

on-site monitoring, which in most cases is not the Bureau of Indian 

Affairs. We also discovered problems where we were transferring data 

from one system to another. Most of our errors that came about 

were transposition type errors where we were moving transactions 

between MMS and the Bureau of Indian Mfairs having to take one 

code sheet and then encoded it at another spot. 

One of the things that the records do indicate, the missing 

records do indicate, is that it is across all years. There is as many 

missing records in 1992 as there were in 1973 or 1972 or 1976, so 

the record keeping is a major issue, a major problem, and it permeates not just the Bureau of Indian Mfairs, but it also goes into 

our Federal record centers and even into the archives. 

We have had to go to 12 or 15 different Federal record centers 

to try to find records. We had to go into the archives to try to find 

records. These archives and Federal record centers would shut 
19 

down and move the records somewhere else in trying to track 

those. It would have been so much easier and we did make recommendations that we create one Federal record center for all Indian transactions so that we do not lose things in the shuffles and 

we have one location to send them to. 

In addition to that, we did run across early on the fact that we 

did not have the accounts receivable. We made recommendations 

that one be established quickly. The way that money was received 

for did not always display the particular lease and the amount of 

money that was received for that lease which created audit trail 

problems. 

We made recommendations to management to rectify that situation so there are a number of different entities that do come into 

play on this in the record side, the Federal record centers, the archives on the monitoring side, BLM and MMS; but in my review 

of this, this is a systemic problem, not a competency problem. 

Mr. WILLIAMS. Finally, let me note that Mr. Simon and the Justice Department has correctly said anyone with real evidence of 

fraud or other theft, graft, other illegal activity should come forward and I applaud him for that. I wonder, Mr. Homan, given that 

you have been involved in uncovering in your past position similar 

illegal activities, would you say that the evidence, the available evidence, in this matter is such that if there was fraud, graft or theft, 

we would ever be able to identify anyone guilty of it? 

I mentioned in my opening statement very lightly and just at the 

end that some of the things I have seen indicate the possibility of 

that, but as one begins to pursue it you find that the trail goes cold 

because the records are so bad. So I ask you with your expertise 

and experience, what is your view of us ever being able either 

through investigation by the Justice Department or others to be 

able to identify any illegal activities of that type that may have 

gone on in the past? 

Mr. HOMAN. Well, with respect to the missing records which is 

the big problem here and why we could not do a complete and accurate accounting, there is no opportunity to trace those further. Now 

having said that, there is the possibility that if we spent a good 

deal of money looking for further records that we would find more. It is my view that further search is probably not going to have 

an appropriate cost benefit relationship. We did an earnest job in 

trying to find these records. That does not mean they are all missing. We just could not locate them in our first round. But without 

records you cannot trace a criminal transaction and so you will 

never be able to verify for sure whether some of those transactions 

were fraudulent or not. And that is about the only thing anyone, 

much less an expert. 

Mr. SIMON. Congressman Williams, if I may add to that. 

Mr. WILLIAMS. Mr. Simon. 

Mr. SIMON. Obviously, the better the records the greater opportunities an investigator might have to trace any fraud that might 

have occurred. However, I would not want to be too pessimistic. If 

people have evidence of crimes, we will try to pursue that and 

there are maybe all sorts of other avenues that our investigators 

might take. 
20 

And I would be loathe to conclude, to speculate on the basis of 

no information that there is a vast area where we could not do 

good investigations. I think the only thing we can do is to say that 

we will pursue whatever leads we are given. 

Mr. HAYWORTH. Your testimony and answers bring forth a few 

more questions so I know that I have one and maybe some other 

members of the panel would like to proceed as well. Mr. Homan, 

the Department of Interior has an annual budget of about $12 billion. Have you ever requested that Interior Department funds be 

reprogrammed to fund trust fund management activities? 

Mr. HOMAN. Yes, I have, Mr. Chairman. During my confirmation 

hearing last year the Senate asked me what it would take to 

launch the strategic plan for 1996. I indicated in testimony in September that it would take approximately $3.5 million. The presidential budget prior to my getting there allocated $447,000. I indicated to Senator McCain, the Committee chairman, that I would 

ask the Secretary for $3.5 million. I did. For reasons that the Department has and other priorities, they went back to the presidential budget of $447,000, so essentially that is what I had to this 

point. 

For 1997 I asked for the full funding of the first year which was 

about $50 million. Again, the Secretary made an earnest attempt 

to put it on his high priority list. He asked the Administration, I 

believe, for about $44 million to launch this plan, which would 

have been perfectly acceptable to me. It came back after the Administration set its own priorities at $13.6 million, plus the million 

dollars I mentioned for the requirements analysis and plus the $1.2 

million for my staff, so about $16 million. 

Mr. COHEN. Mr. Chairman, excuse me, if I may interject. After 

this question was raised on the Senate side, I asked our budget 

shop for some additional clarification about why Mr. Homan was 

unable to get additional funds in '96. I would like to ask, if you do 

not mind, if the budget office could submit a further response to 

that. I think it has something to do with the inability to transfer 

funds between different accounts. Moreover, we did not have an appropriation until midway into the fiscal year and there were significant constraints on the ability to move funds around to programs that previously had not been funded . But with your permission I would like the budget shop to be able to submit additional 

response to that question about 1996. 

Mr. HAYWORTH. Mr. Cohen, we would be very happy to take a 

look at that and also take a look at some of the strictures under 

which you found yourselves in terms of transferring from account 

to account. That would be most helpful. We look forward to that 

written response and help us understand that matter. 

Mr. COHEN. Thank you, Mr. Chairman. 

Mr. HAYWORTH. Thank you, sir. Mr. Kildee, any questions? 

Mr. KILDEE. Just a statement. What I worry about is the paucity 

of dollars which the Appropriations Committee seems to be addressing-directing toward this problem. I worry that it is just part 

of a lack of prioritizing Indian matters. And I say that cautiously 

but, you know, I think if, for example, there were a discrepancy in 

the congressional retirement fund, I bet the Appropriations Com-
21 

mittee would really get in hot pursuit of that and maybe appropriate adequate number of dollars. I looked at what happened in Indian health services, what happened in Indian education this year, and I would hope that what 

has happened here in the corporation's process to address this is 

not a lack of consideration and priority for the needs of Indians in 

this country. I have seen it too much this year and I say that very 

carefully, but I do think that Mr. Williams and I should approach 

the Appropriations Committee and try to encourage them to help 

the United States Government carry out its fiduciary responsibility 

to the Indians of this Nation. 

It has not been a good year for Indians. Last year was a miserable year for education and health, and I would think that these 

other areas might possibly be a part of that. I say that reluctantly, 

but I want to go on record saying that. Thank you, Mr. Chairman. 

Mr. HAYWORTH. I thank the gentleman. I would also note that 

it has been my experience in my limited tenure in the Congress of 

the United States that quite often these problems are simply explained by the traditional divisions of Republican, Democrat, or 

Liberal or Conservative. 

At times as my good friend from Michigan knows there are really 

in issues of this matter two types of people who serve on the Hill, those who represent what is now Indian country, and those who 

represent what used to be Indian country. So we have difficulties 

across the board with any number of our colleagues, but certainly 

some valid points-- Mr. KrLDEE. It is certainly not partisan, we know that. You and 

I work on Indian matters very closely. 

Mr. HAYWORTH. I thank the gentleman for his good will and his 

good works, and now I yield to the gentleman from California. 

Mr. CALVERT. I just have a question. We were talking about the 

Mineral Management Service. I think I know how this works, but 

I would like to have it confirmed. The Mineral Management Service is now collecting the royalties that are due on the various In- dian tribes throughout the Nation. After it collects those funds, then it sends those funds over to the 

BIA for ultimate distribution back to the tribes or the MMS distributes that money directly to the tribes? 

Mr. HOMAN. I believe the gentleman on my left here can give you 

the chain much better than I can. 

Mr. CHRISTIE. You are essentially correct. They collect-ELM 

monitors the on-site MMS collects, they notify us. With the statute 

change in 1985 we cannot invest the money and start to draw interest until we have at least a faxed copy and recorded to our general ledger, then we can start to draw interest. We then distribute 

those funds to the individuals and/or the tribes, whoever the owner 

is. 

Mr. HOMAN. The money actually goes to the U.S. Treasury, 

though, first. 

Mr. CALVERT. So it goes from the MMS to the U.S. Treasury to 

the BIA for management and then distributed back to the tribes? 

Mr. HOMAN. Yes, sir, that is right. 

Mr. CALVERT. We have some legislation here on the Hill right 

now which we have just negotiated with the Administration, a Sen-
22 

ate version, my bill which is H.R. 1975 which is the Royalty Fairness Act which in effect we are asking for expanded delegation of 

the States for collection of royalties, bypassing in effect the Mineral 

Management Service. 

We excluded purposely the Indian tribes because we did not want 

to entangle that in an involved situation. Would it be more practical if the tribes collected directly, delegated that authority to the 

tribes, in effect they are responsible for collection as we are doing 

for the states? Is that something that was considered? 

Mr. HoMAN. I think the operative word there is responsible for 

collection, and that would be the only way we would probably be 

able to delegate that authority as trustee. They can now, under the 

Reform Act, withdraw their trust funds from management so long 

as they accept the responsibility and the liability for running that 

system. 

However, if you did that, the Indian tribes would have to come 

up with their own system of collecting those royalties. That is a 

very expensive process. 

Mr. CALVERT. Is the MMS charging a fee for those collections? 

Mr. HOMAN. The MMS provides much of that service free of 

charge in terms of research and other activities, system maintenance and the like to the Bureau. So it's a cheap way. 

Mr. CALVERT. So it is not similar to the States where the MMS 

charges back its cost to the States? 

Mr. HOMAN. The Indians benefit from the government's research 

and maintenance system that it uses for its own. Now it does 

charge the Bureau for certain of those operational activities. But 

the Bureau gets a very reasonable and efficient deal. All from the 

MMS and thereby so do the American Indians. Mr. CALVERT. So the MMS does collect the fee , however, as does 

the Bureau? 

Mr. CHRISTIE. I am not aware that MMS charges us an administrative fee. 

Mr. CALVERT. So there is no cost to that? 

Mr. CHRISTIE. It is at no cost. The BIA has appropriated funds. Mr. HOMAN. The BIA charges nothing to the American Indians 

so it is all a free service to the American Indians and they would 

have to incur the cost of running that system if they did it themselves. Mr. CHRISTIE. It should also be noted that tribes do have the authority for direct pay so that the tribes can collect directly on the 

use of their resources if they so choose and have that as part of 

their contract. 

Mr. CALVERT. Thank you. Mr. HAYWORTH. Mr. Williams, anything else? 

Mr. WILLIAMS. Thank you. The BLM and MMS collect and pass 

money through BIA to the trust fund. Does the Forest Service have 

a hand in the same types of pass-through transactions, timber? 

Mr. HOMAN. No, sir, the timber is-trust management is run by 

the Bureau of Indian Affairs or by the tribes and the Forest Service 

has nothing to do with it. Mr. WILLIAMS. Is it correct for me to assume that or to say that 

mining companies and oil companies were sort of on the honor system when it came to providing through BLM and MMS the 
23 

amounts that were appropriate? Is the term honor system-! know 

I am asking you--

Mr. CHRISTIE. Yes, sir, that is correct. 

Mr. WILLIAMS. You would say that is correct. Mr. HOMAN. And I will just add that in my look there neither 

the MMS, BLM or the Bureau have really good quality assurance 

audits that those honor systems are truly being honored. 

Mr. WILLIAMS. Did the initial Reconciliation Project go to whether or not the .companies were paying fair value? 

Mr. CHRISTIE. In the design of the Reconciliation Project one of 

the issues that came up was MMS operations. It was determined 

we could not reach a conclusion as to how we would do MMS so 

as part of what we call modification nine was a review of the systems for MMS with a report, but that is as far as we went. There 

was no reconciliation into MMS or on down to BLM as part of the 

monitoring agency. Mr. WILLIAMS. Is there any intention in the future to try to pursue the company accounts to determine whether or not the legal 

amount due to Native Americans was in fact paid by either agriculture interests off of Indian ag land or oil or gas or mining interests off of Indian land? 

Mr. HOMAN. Yes. Part of the strategic plan involves what I call 

risk management, which is really audit internally and externally 

and that will be included as part of the risk management system 

we intend to put in place. But you must first have something to 

audit so we must change the system before we are going to be able 

to audit it correctly. That would apply to MMS--

Mr. WILLIAMS. So to look back is not possible to determine 

whether or not there is tens or tens of millions of dollars missing 

from these companies? 

Mr. HOMAN. It is always possible. This is a very expensive undertaking. 

Mr. WILLIAMS. Within the $100 million is it possible? 

Mr. HOMAN. I beg your pardon? 

Mr. WILLIAMS. Within the $100 million budget it is not possible? 

Mr. HOMAN. The $100 million is strictly for operational improvements going forward and does not have any money for further reconciliation or technical assistance in that regard. Mr. CALVERT. Mr. Williams, if you would yield. Mr. WILLIAMS. Yes. 

Mr. CALVERT. I was wondering if in the question you just 

brought up would Mineral Management Service within its jurisdiction as the collector of those royalties, could they go back and audit 

mining companies or oil companies that are collecting on Indian 

land within their budget? 

Mr. HOMAN. They have a better audit system and do do that for 

the public lands as well as the Tribal lands, but they do not do 

what I would call a quality assurance audit which is to compare 

the amount of dollars being generated by those oil levels say 

against what the private company next door gets for the same barrel. 

Mr. SIMON. Congressman Williams, if I may, with your permission and the Chairman's permission it might be helpful for us to 

supplement our answers with respect to what accounts receivable 
24 

systems exist currently and in the past and in particular including 

the MMS system since none of us at the table have come prepared 

specifically to address the MMS accounts. If we have your permission, we would be happy to provide that information. 

Mr. HAYWORTH. I have no objection to that. We look forward and 

also would note that we will hear from our friends at GAO that 

may have a perspective, but if you would also like to take a look, 

I have no objection to that. 

Mr. CALVERT. Mr. Chairman, could we have some questions that 

we could extend in writing later on for some answers on regarding 

MMS. 

Mr. HAYWORTH. Certainly. I would have no objection to both 

sides here to do that. 

Mr. WILLIAMS. I appreciate the Committee's indulgence in time 

here. This is a critically important matter. Let me get back to what 

I fully understand is a very sensitive matter and that is this matter of illegal activity. I just want to make this point because anumber of Indian people have made it to me, and that is when one 

hears the terms of fraud, abuse, waste, illegal activity, draft or 

theft, one instantly thinks of individuals doing this. An individual 

at the end of that off ramp collecting a few thousand dollars every 

few months and putting it into that individual's own pocket. 

A number of Indian people have said to me there is also such a 

thing as illegal activity and theft by companies. I am not in saying 

this making an accusation, but it does seem to me that if the Justice Department or other agencies are going to pursue this matter 

we need to understand that the largeness of the crime should not 

make that crime invisibie. 

It is an interesting thing in America, if the crime is small enough 

we notice it, if it is large enough it becomes transparent and invisible. If there has been massive theft by major corporations throughout the decades then Indian people have lost, many of them poor 

people, have lost enormous amounts of money because of potential 

illegal corporate activity here. 

And so if we are going to pursue it, we ought to pursue not just 

an occasional individual that might have been able to take advantage in a relatively small way of the terrible misuse of these funds, 

but we also ought to pursue large corporations that may be equally 

guilty of even larger theft. I thank you, Mr. Chairman. 

Mr. HAYWORTH. I thank the gentleman from Montana for his 

point. If in fact this is the case we should pursue wherever we find 

problems wherever they exist, with individuals, with businesses, 

with the complicity of individuals outside the business world as 

well. It is a valid point to look and that is the intent of the Task 

Force and I thank the gentleman for bringing that to bear. Any further questions of this panel? 

If not, then we thank you, Mr. Homan. We thank you and your 

colleagues for being here. We would ask, we know you have schedules that may force you to go other places, but if you can stay or 

have members of your staff here to hear the rest of the comments, 

we welcome that as well. 

Mr. HOMAN. Thank you, Mr. Chairman. 
25 

Mr. HAYWORTH. Thank you very much. The Chair would also 

note that we will take about a ten-minute recess here and reconvene at 11:45 for our next witness. [Recess.] 

Mr. HAYWORTH. The Task Force will come to order and reconvene. In the spirit of comity, c-o-m-i-t-y, not comedy, but c-o-m-it-y, in the spirit of bipartisanship the Task Force members here 

after consultation with our witnesses have decided now to put together a panel of our next three witnesses and then we will turn 

to our friends from the General Accounting Office for information 

following the testimony of those who are with us right now. 

I would point out that next in line to visit with us are Eric Davenport, the Chairman of the Intertribal Monitoring Association for 

Indian Trust Funds, John Echohawk, Director of the Native American Rights Fund, and I would defer to my good friend from Montana to introduce the third member of the panel. 

Mr. WILLIAM. Well, thank you, Mr. Chairman. Elouise Cobell is 

an old pal, almost of equal importance she is also the Chair of the 

Special Trustee's Advisory Board. She is a Montanan from Browning, Montana, a member of the Blackfeet tribe. She served as treasurer and controller of the Blackfeet tribe for more than 15 years 

so she, like some of our other witnesses, brings great credentials 

to her position on the Special Trustee's Advisory Board. Elouise, 

nice to see you here today. 

Ms. COBELL. Nice to see you. 

Mr. HAYWORTH. And I would just simply say, Eric Davenport, I 

understand you have another representative of your organization 

here with you today on the panel as well. 

Mr. DAVENPORT. Yes, that is correct, and if it is OK with the 

panel David Harrison has joined us and I think can speak to some 

of the issues of questions that were raised earlier. 

Mr. HAYWORTH. Well, David, we thank you very much and, Eric, 

thank you for your initiative in having David here for consultation 

as well. Given the fact that our colleague, Mr. Williams, speaks so 

glowingly of his dear friend from Montana and also the admonition 

of the ladies first, I defer then and ask Elouise to begin with her 

testimony, and then we will follow up with the others. 

Ms. COBELL. Thank you, Mr. Chair. I would request the members 

of the Task Force to let me testify last and I would like to follow 

up at the end because many of the things that I need to talk to 

you about needs to have Mr. Davenport and Mr. Echohawk's testimony first, so would that be fine? 

Mr. HAYWORTH. Without objection, it is so ordered. 

Ms. COBELL. Thank you. 

Mr. HAYWORTH. Ms. Cabell, with that in mind we then turn to 

Eric Davenport for his remarks. 

STATEMENT OF ERIC DAVENPORT, CHAIRMAN, INTERTRIBAL 

MONITORING ASSOCIATION ON INDIAN TRUST FUNDS 

Mr. DAVENPORT. Well, Mr. Chairman and members of the Task 

Force, good morning to you and thank you very much for scheduling this oversight hearing on an issue that is most critical to Indian country. My name is Eric Davenport and I am the Chairman 

of the Intertribal Monitoring Association on Indian Trust Funds. 
26 

My Clickate name is TuAn Aan, and I am the executive officer for 

the Central Council of Click and Hidi Indian Tribes located in Juneau, Alaska. At this first hearing of the Task Force, ITMA wishes to extend 

our great appreciation to Chairman Hayworth and the ten other 

Task Force members for your commitment on this most important 

issue, and Congress' attention to the trust fund reforms that are 

very, very necessary. ITMA on behalf of the tribal governments 

across the country who form our membership stands ready to work 

with the Task Force in any way possible to get to the bottom of 

many of these issues, some of which are extremely complex. I would like to discuss three major points involving the Indian 

trust issues. First of all, the recently completed Reconciliation 

Project of tribal trust fund accounts, secondly, the trust management reforms instituted thus far and the need for additional reforms and implementation of those. And finally the need for this 

Task Force's continuing support and oversight. 

With regard to the Reconciliation Project, I believe it is important for all of us to remember that the Indian Trust Fund Reform 

Act of 1994 requires the Special Trustee to insure that the BIA provides trust account folders with a reconciliation which is a fair accounting, fair and accurate accounting, of their account balances. That responsibility has not been met and cannot be met based 

on the information provided in the report. After an expenditure of 

$21 million and five years of effort, the government's accounting 

contractor, Arthur Andersen, disclaims their work by stating that 

the report is not an audit made in accordance with generally accepted accounting standards and they also go on to express a noopinion stance on any of the work elements of the reconciliation report. 

The Task Force needs to know that when the Reconciliation 

Project began, it began with a very big picture, a very big image, 

to deal with all tribal accounts and all elements of it. During the 

course of that project there were nine official amendments to the 

contract that were issued and there were over 120 unofficial socalled issue papers issued and published, each of which continued 

to narrow and narrow and narrow the focus of the Reconciliation 

Project. It clearly is not a report of which any of us expected when 

we started the process. 

The Trust Fund Reform Act now requires as a result of this report that each tribe either dispute the report or State that they accept the reconciliation report balances as published, and note that 

it is a full and complete accounting as far as possible. But the fact 

of the matter is, I should say, and the facts are that only a few 

tribes may feel that they have an accurate accounting, a very small 

number of tribes that maybe only have a few thousand dollars on 

account and maybe they only got it within the last two years. The vast majority of tribes, however, have got to take a look at 

these reports and realize that they are not complete, they are not 

a full accounting, that there are many, many missing documents in 

them, and to that extent are not able to state that they have gotten 

a full accounting, nor can they accept their account balances. It is critically important that this Task Force not be misled into 

thinking that a settlement is possible for these tribes. Among 
27 

major shortcomings in the travel reconciliation reports are the following. First, $17.8 billion in non-investment transactions were 

considered, but no reconciliation was given in regard to the $200 

billion in investment transactions except for only a few that occurred very early on. 

Second of all, of the non-investment transactions the government 

was not able to reconcile $2.4 billion of which over $800 million 

went out in the form of disbursements. If we can pause here for 

just a moment and put this into some perspective, the $2.4 billion 

in very general terms represents about 10 percent of what was 

dealt with. In other words, $2.4 of roughly say $20 billion. If that 

accuracy rate stands and we now go in and reconcile $200 billion 

in investment transactions and they are unable to reconcile 10 per- cent of those, we could be talking about a $20 billion unreconcilable 

amount. 

There is neither an agreed-upon beginning balance for any tribe 

with accounts prior to 1972, nor any effort on the part of the BIA 

to establish any beginning balances for the reconciliation period. 

The project did not support revenues from any mineral, oil, or gas 

production monitored by MMS or BLM. For many of the tribes 

these are very substantial assets. And for some tribes more than 

50 percent of the documentation for support of transactions are 

missing. 

You heard earlier that there was an accuracy rate of 99 percent 

that was reported to you by Mr. Christie. I think this needs some 

clarification. First of all, it seems to me if you have a 99 percent 

accuracy rate on accounting, how can you not reconcile $2.4 billion? 

What that 99 percent accuracy relates to is the clerical function of 

when the lease was received by the Department was it properly 

posted to the general ledger? 

So we are talking about a one-step transactional figure and that 

is what they have tied to this 99 percent accuracy amount. Clearly, 

as I mentioned earlier, the $2.4 billion does not reconcile with the 

.fact of that level of an accuracy rate. Clearly it was much, much 

higher. Most importantly in the Reconciliation Project was the fact 

that the liM accounts or the Individual Indian Money accounts of 

which there are 300,000 account holders and $509 million in funds 

was not reconciled. This has caused extreme frustration on the part of liM account 

holders and you are going to hear more about that a little bit later 

this morning. Tribes and Indians all over the country are very supportive of the efforts to pursue a fairness standard on the part of 

liM account holders. Nor did the reconciliation address the several 

trust accounts which the government managed on behalf of Alaska 

natives. 

Both of these are dealt with in the Trust Fund Reform Act and 

a simply fairness requirement should be applied here to receive 

reconciliation on these two categories of accounts as well. In short, 

the report does provide us with more information than we have 

ever had before, but it is only the tip of the iceberg. It is only the 

beginning of this process. 

The second point I want to discuss relates to trust fund management advances and what remains to be done, developed and implemented. Let me be clear at the outset here and state that many 
28 

significant trust fund management reforms have occurred during 

the past five years. These reforms were possible because of congressional and tribal support. 

First, the Office of Trust Fund Management or OTFM was reorganized increasing the number of staff and qualifications of those 

staff. This development better permit OTFM to perform many of 

the functions required by the Trust Fund Reform Act. Secondly, an 

automated trust funds accounting system has been installed and 

this allows OTFM to daily reconcile and post activities to tribal accounts. 

Thirdly, the appointment of Paul Homan as Special Trustee and 

the establishment of the Office of the Special Trustee provides the 

government with a qualified trust management resource that it has 

never had before. In fact, the appointment of Ms. Erwin I believe 

about two or three years ago was the first time that the government has ever had in the Bureau of Indian Affairs anybody with 

professional trust experience and yet they were managing billions 

and billions of dollars in trust funds and trust assets. 

And, fourthly, the 1994 Trust Fund Reform Act provides a statutory infrastructure offering guidelines for future reform. The Congress, tribal leaders, ITMA, and the Special Trustee can all take 

pride in these advances and we can also experience extreme frustration in the fact that it is only partially done. A great deal is yet 

to be accomplished to even come close to meeting the standards 

that we see in the private sector. 

The reform process is far from complete and you may find it hard 

to believe that there still is no centralized custodial services for securities held in the trust portfolio. These repositories are all over 

the country. Second of all, there is no accounts receivable system 

to track, collect and account for funds derived from Indian trust assets. 

Thirdly, there is no automated accounting system for liM accounts. So in addition the Trust Fund Reform Act requires the Secretary to account for the daily and annual balance of all accounts 

held in trust for an Indian tribe or individual Indian account holder and that responsibility is still not being fully met. Until these 

and other reforms are completed the government's breach of trust 

to Indian account holders continues. In fact, until these reforms are 

achieved the Department remains in violation of the provisions of 

the Trust Fund Reform Act of 1994. This leads me to my third point which is the importance of the 

continuing support of this Task Force on the Indian Trust Fund 

issue. With your support, greater and needed reforms are possible. 

Without your support I am confident that any ongoing reforms will 

stop. The Special Trustee must have the additional resources necessary to accomplish the required reforms, in particular this fiscal 

year 1997 request to begin building the infrastructure that is necessary to accomplish the daily collection, investment, accounting 

and disbursement of trust funds is critically important to the ultimate success of the implementation of reforms. 

Technical assistance funds are needed for tribes to implement 

the Trust Fund Reform Acts which will offer these tribes the opportunity for self-determination. This could well include the management of liM accounts. ITMA believes that it is in the best interest 
29 

of the Federal Government to assist those tribes who desire to take 

over these activities and relieve the government of further responsibility. Technical assistance is also necessary if tribes are going to be 

able to develop the information which is absent from the reconciliation report. If it is not there somebody is going to have to go out 

and do it and the BIA was unable to do that. The BIA's reconciliation report does not provide that information and thus tribes must 

pursue it if they are going to know what they are managing in the 

future in terms of their own tribal account balances. 

ITMA and tribes greatly appreciate this Task Force support in 

the effort to correct the gross mismanagement of Indian trust funds 

and trust assets during the last 100 years. The reforms that have 

been achieved would not have happened if tribes themselves had 

not been at the table and they would not have been at the table 

if Congress had not pressed for that to happen. 

The additional reforms required and the full implementation of 

the 1994 Trust Fund Reform Act will require continued active participation of the tribes themselves. ITMA is very grateful for the 

opportunity to assist the Task Force and tribes in this effort and 

look forward to a good continued working relationship with this 

Task Force and the Office of the Special Trustee. At the conclusion 

or whenever it is the desire of the Chairman, I am available to answer questions. 

[Prepared statement of Mr. Davenport may be found at the end 

of hearing.] 

Mr. HAYWORTH. Thank you very much, Mr. Davenport. We would 

also note for the record that your full testimony will be included 

without objection as will be the case with other witnesses before 

this panel. 

Mr. DAVENPORT. Thank you very much. 

Mr. HAYWORTH. In that spirit, the gentleman who has been in 

the headlines as of late, Mr. Echohawk, we call on you for your 

opening statement. 

STATEMENT OF JOHN ECHOHAWK, DIRECTOR, NATIVE 

AMERICAN RIGHTS FUND 

Mr. ECHOHAWK. Thank you, Mr. Chairman and members of the 

Task Force. I appreciate the opportunity to provide testimony on 

this important matter. At stake are the rights of 300,000 individual 

Indians and 200 Indian tribes. I will summarize my written testi- mony here and ask that it be included in the record in its entirety. Mr. HAYWORTH. Without objection, so ordered. 

Mr. ECHOHAWK. My name is John Echohawk. I am a member of 

the Pawnee Tribe of Oklahoma. I am an attorney and serve as the 

Executive Director of the Native American Rights Fund. We are a 

nonprofit organization providing legal advice and assistance to Native Americans on issues of National significance. 

We are dedicated to securing justice on behalf of Native Americans and Indian tribes, something we have been doing for 26 years. 

Our mission is guided by five priorities. One of those priorities is 

holding the government accountable to Indian people and tribes, and that is why I am here today. 

26- 403 0 - 96 - 2 
30 

The complete failure of the United States government to properly 

discharge its trust responsibility in this case is wholly unacceptable. It implicates what we believe is the largest and longest lasting financial scandal ever involving the Federal Government. And 

in our view it represents yet another serious and continuing breach 

in a long history of dishonorable treatment of Indian tribes and individual Indians by the United States Government. What is particularly disturbing is the cavalier treatment of the 

crisis by the Executive Branch and the Congress. Both branches of 

government have acknowledged that the Federal Government has 

failed to account for out trust moneys, yet each branch continually 

refuses to take the necessary steps to fix the system. That is why 

the Native American Rights Fund, along with other attorneys, filed 

a class action lawsuit last week in the Federal district court here 

in Washington on behalf of 300,000 individual Indians. 

By this action, these individuals hope to compel the Federal Government to honor its word and its legal responsibilities. Before I 

discuss the substance of my testimony, there are several factors 

which warrant the attention of the Task Force. First, while the class action litigation is limited to individual Indians, we are in full support of the tribes to seek redress for the 

government's mismanagement of tribal trust funds. We are equally 

appalled and disturbed about this aspect of the trust fund mismanagement scandal. We therefore support the good work of the 

Intertribal Monitoring Association. We also support the testimony 

given today by Eric Davenport, who chairs and leads the important 

work of ITMA with respect to tribal trust funds. We look forward to working with the ITMA and the tribes to 

bring a just and equitable end to this conduct which continues to 

unlawfully deprive us of money each day. Second, given the stereotypes about American Indians that seem to exist, it is important 

to note that the money we are talking about is our own money, 

both individual and tribal, as the case may be. This Indian money 

is derived from our own assets and it is not government money, nor 

did it originate from appropriated funds. 

Third, I want everyone to know that the lawyers in this case will 

not accept contingency fees. Fully 100 percent of the recovery in 

this class action lawsuit will go to the individual Indians who are 

losing their money every day at the hands of the Federal Government. Further, I want to make it clear that private funds are being 

used to support this effort. 

Fourth, I want to affirm that we bring this litigation as a last 

resort. As noted, the Executive Branch and Congress, as well as 

independent auditors, have repeatedly indicated that the trust fund 

management system is hopelessly broken. Successive Administration, both Republican and Democrat, have admitted that there are 

serious problems and abuses with the management of Indian trust 

moneys. 

In this sense, the responsibility is bipartisan in nature. Notwithstanding, each successive Administration, including the current 

one , has refused outright to remedy the problem. No Administration has ever come close to asking Congress for adequate dollars 

to fix the problem and Congress has always cut back the Administration's terribly inadequate funding requests. 
31 

To make a long story short, we are in court because we have 

been unable to persuade the executive and Legislative Branches of 

government to honor the United States' solemn trust and legal obligation to 300,000 individual Indian trust account holders. The defendants in the lawsuit are the Secretary of the Interior, Assistant 

Secretary of Interior for Indian Affairs, and the Secretary of the 

Treasury. It is on their watch that the problem goes unabated and continues to be swept under the rug. The suit asks the court to order the 

defendants to follow the law, fix the system, provide the account 

holders with an accounting, and make restitution. We further seek 

to assure that the Special Trustee has all the tools he needs to fix 

the system to get the job done right just like Congress mandated 

when it enacted the Trust Fund Management Reform Act of 1994. I will now briefly address the Federal Government's trust responsibility, the nature of the individual trust accounts, and some aspects of how the government has grossly breached its trust responsibility to over 300,000 individual Indians. There are more than 300,000 Individual Indian Money accounts 

with a total balance of about $450 million. The liM accounts are 

invested as a single pool. The bulk of the funds in the liM accounts 

is derived from income produced from individual land allotments. 

In addition to the $450 million held in these liM accounts approximately $250 million flows through them each year. 

The liM account holders, most of whom are poor, need their 

money for basic subsistence. I want to explain the nature of the 

government's fiduciary duty in the management of trust funds. 

Briefly stated, the Federal trust responsibility imposes traditional 

fiduciary standards on the conduct of executive agencies and offi- cials in administering Indian assets. Federal officials are required 

to exercise due care and are held to the most exacting fiduciary 

standards. 

They are further held to moral obligations of the highest responsibility and trust. Courts also require Executive Branch officials to 

adhere to the ordinary standards of a private fiduciary when managing and administering Indian assets. This includes Indian trust 

funds. 

With regard to trust fund management, the Executive Branch 

agencies and officials hold certain duties to the account holders as 

trust beneficiaries. In the case of the 300,000 liM account holders, 

the Federal Government breached every one of its duties, including 

the duty to maintain adequate books and records, the duty to 

maintain adequate systems and controls to guard against error and 

dishonesty, including an accurate accounts receivable system, and 

separating the billing and collection functions, the duty to deposit 

trust asset receipts, and safely and soundly invest these funds, the 

duty to account regularly and accurately to the beneficiaries, the 

duty to distribute the earned income to the proper Indian beneficiaries, and the duty to refrain from self-dealing and benefiting 

from management of these trust funds. As a result of breaching these duties the Federal Government 

has no idea how much liM money it has, how much liM money it 

should have, how much liM money it has lost, or how much liM 

money that could easily be and may be stolen every single day. The 
32 

government's trust fund system is in such disarray that the Arthur 

Andersen accounting firm would not even attempt to reconcile the 

liM accounts. 

In fact, the Andersen firm estimated that it would take at least 

$108 million to $281 million just to attempt to reconcile the liM 

accounts. Even that would be likely of no value in providing the 

liM account holders with assurance about the correctness of the account balances. Indeed, at the special hearing before the Senate 

Committee on Indian Affairs on June 11, 1996, Special Trustee 

Homan testified that the liM account system was "as bad or worse" 

than the tribal trust accounts. 

Notwithstanding the Department of Interior has no plans or 

money to do historical accounting regarding the liM accounts. The 

longer it waits and continues to violate the law, the more expensive 

it will be to fix the system and the greater the government's liability will be to tribal and individual account holders who are being 

forced to pay the price for the government's breach of trust and the 

price goes up every day. 

The resolution of this crisis is the joint responsibility of both 

Congress and the Administration. It is likewise the joint responsibility of both the Republican and Democratic parties. As we have 

indicated, one of the major problems preventing system reform is 

the routine lack of adequate appropriations. In short, the Special 

Trustee's hands are tied due to a lack of funds and resources. It will take an additional $22 million in fiscal year '97 to begin 

to satisfactorily reform the trust system as it relates to the liM accounts. Without this minimal amount, the government could be 

paying substantially more to correct the staggering losses that are 

hitting these 300,000 individuals every single day. 

We respectfully urge the Task Force to do everything it can to 

insure that the Special Trustee receives the $22 million in fiscal 

year '97 which he needs to fix this system as it pertains to the liM 

accounts so that he can do the job Congress required him to do 

when it passed the 1994 Act. That concludes my testimony, Mr. 

Chairman. I will be glad to take questions later. 

[Prepared statement of Mr. Echohawk may be found at the end 

of hearing.] 

Mr. HAYWORTH. We thank you for your comments, Mr. 

Echohawk, and now we will turn to Ms. Cobell. 

STATEMENT OF ELOUISE C. COBELL, MEMBER OF ADVISORY 

COUNCIL TO SPECIAL TRUSTEE 

Ms. CaBELL. Mr. Chairman, members of the Task Force, thank 

you for letting me testify today before you. I would like to especially thank my Congressman, Pat Williams, for all the effort that 

he has put into establishing this Task Force. I also bring you warm 

wishes from the Blackfeet Indian Nation, and especially from our 

chairman, Earl Old Person. I would also like to take this opportunity to thank you for all 

your work that you have done over the past 18 years and all of the 

issues that you have worked on for every Indian in this United 

States. We surely appreciate it, and I am going to tell you we are 

going to miss you very much. 
33 

When Congressman Williams introduced me, he forgot a couple 

issues that I thought that I ought to bring to your attention. When 

I was the treasurer of the Blackfeet Indian tribe in the '70's, the 

early '70's, when I became the treasurer it was then when I first 

discovered the mismanagement of what was happening within the 

Indian trust funds. 

At that time I started writing letters probably to Pat and every 

Congressman and every Senator that I could to bring attention to 

the situation. I would also like to let you know that I am one of 

the lead plaintiffs in the class action lawsuit against Secretary 

Babbitt and others on behalf of 300,000 individual Indian account 

holders. 

Another area that I would like to touch on is I was the lead organizer and serve on the Board of Directors of the Blackfeet National 

Bank, so when Congressman Williams talked about the standards 

the private financial institutions are held to, I can relate to that 

very much. And I will tell you the way our Indian trust funds is 

being managed is totally unacceptable as far as our standards. 

Today I want to talk about the gross mismanagement of our 

funds. This is not a case of the government's mismanagement of its 

own funds, which is serious enough. It is the mismanagement of 

the money, land and assets of someone else's money, in this case 

some of the poorest and least educated people in the country. I 

want to deviate a little bit from my prepared testimony to just tell 

you a little story. When our Trust Fund Reform Act was approved in 1994, many 

of the people that are in this room today deserve credit for, we 

were very ecstatic because we were on the road of reforming the 

systems. After the Special Trustee was selected and put into place 

I had the opportunity to accompany him to four Indian Nations in 

Montana. We went to those Indian Nations and Mr. Homan wanted 

to let the beneficiaries meet him and explain his role and to me 

that was the first time that anybody had really made a concerted 

effort to go out and talk to the beneficiaries. 

But as we were driving by some of the areas I could tell that Mr. 

Homan was struck by the poverty, the poverty that existed in our 

Indian communities and we were going by one little settlement and 

it was quite poor and he commented to me, and I told Mr. Homan, 

I said, you know, I bet if we were to drive in to that driveway, pull 

up to that little house with clothes hanging on the clothesline blowing in the wind and the children playing out front and a couple 

cars around in front, the very first thing that would happen is they 

would invite us in, and if it was their last piece of food in the house 

they would offer it to us to eat because that is our way. 

And so with that I want to talk a little bit about the purpose of 

Title III of the Trust Fund Reform Act that established the Office 

of the Special Trustee. His assignment is to insure that the trust 

funds and trust asset systems are brought into compliance with the 

basic trust standards and to assist in bringing to the closure of the 

historical reconciliation and accounting for tribal and liM accounts. In his first year he was ordered to, according to the Act, prepare 

a comprehensive strategic plan for making necessary improvements. Upon receipt of the plan Congress and/or the Secretary was 

to address the questions of the reorganization and to look at the 
34 

well thought out plan. Under the Act his plan is due on September 

31, 1996, a year from the date he was sworn in. 

He will not be able to meet this date because the Secretary and 

the Congress have failed to give him any resources which would develop this plan. The purpose of the Special Trustee title was to provide the Department with three things it has been lacking and that 

had contributed to the continuation of this outrageous problem for 

100 years, even though it has been known to every Secretary and 

every Congress over that period of time. 

First, he would provide expertise in the trust fund management 

since historically the high-level officials and the Department tasked 

with making decisions regarding trust funds has little or no experience in trust fund management. He would also provide continuity 

so that the efforts of the trust fund reform would not be put on 

hold for 18 to 24 months every four years while a new Secretary 

tried to get up to speed on this complex issue. 

And, thirdly, he was to be the official with a single focus on this, 

and exclusive loyalty to the trust beneficiaries. This is the fiduciary 

responsibility of every trustee, but in the Department trust funds 

are just another program whose interests have been sacrificed for 

the benefit of other programs. Congress believed that it would be unwise to give him direct 

operational authority over any functions until he had a plan in 

place. Otherwise, he would be overwhelmed by the day-to-day problems that he would be unable to focus on in his plan. It was also 

concluded that no effort should be made to move the program out 

of the BIA or the Interior until it had been fixed, since moving it 

while it was broken would simply dump the problem somewhere 

else. 

Today, 20 months after the Act was signed into law, and nine 

months after the Special Trustee was sworn in, I believe the Secretary has refused to use the Special Trustee as intended, has severely undercut his ability to carry out his mission and has shown 

that to be successful the Special Trustee needs independent authority. 

The problem goes deeper than Secretary Babbitt. It is a wellknown principle that management of a broken down company cannot be expected to reform itself or the company that is mismanaged. In keeping with that principle, it appears to be institutionally impossible for a political appointee like the Secretary with 

responsibility for numerous programs to put his legal obligations as 

trustee ahead of his political and programmatic preferences. In addition, Congress has failed to provide the Special Trustee with the 

resources he needs to do his job. 

To walk you through the past year's events, the Special Trustee 

was sworn into office on September 21, 1995. He was and continues 

to be everything the account holders and Congress had hoped for 

when the Reform Act was being considered. He is experienced in 

the trust funds, has a successful history of turning around troubled 

financial institutions, believes he has the legal obligation as trustee 

that the courts have placed on the United States Government, and 

is a strong executive. 

In the President's budget as we heard earlier it only provided 

$44 7,000 for the Special Trustee. That barely covered his salary 
35 

and the deputy and the secretary. It left no money with which to 

prepare the strategic plan called for in the Act. The Special Trustee 

as you heard from him today asked Congress to provide the money 

through a supplemental appropriation. Congress said to go get it 

from the Secretary. 

And as we know and we heard earlier, we know what happened 

with that. The Secretary did not give him any money. This continues to be the problem. It seems to be that we are running around 

in circles and everybody is pointing the finger at each other, either 

go get it from Congress, Congress does not have the money, go cut 

it from the other programs. I do want to make a plea especially to 

this Task Force when you approach the Appropriations Committee 

is that you make sure that they do not reprogram the money out 

of our Indian programs. I am very concerned about that. . In a specific case where we had known that there was money 

missing out of the IIM pool and went to the Appropriations Com- mittee and asked that that money be replaced, we were told that 

do you want the money back in the liM pool or do you want your 

children to go to school. So I want to make sure that that does not 

happen, that you do not reprogram that money that is needed so 

badly in our Indian communities. 

I also would like to talk a little bit about our role as the advisory 

board. Sitting here today by me, Mr. Eric Davenport, Chair of the 

Intertribal Monitoring Association, and one of my favorite associations and organizations since I was involved in it from the inception. It is a very important organization. For the first time tribes 

have a voice on their trust funds. For the first time. And we had 

to fight hard to stay involved and be part of the solutions on how 

our money was to be managed. 

And I also would like to talk about the importance of the advisory board to the Special Trustee. Our job is a totally different role 

than the Intertribal Monitoring Association. Our job is to see that 

the Trust Fund Reform Act is implemented properly and that the 

Special Trustee bounces all of the implementations and the solutions and the needed amendments that have to happen with the 

Trust Fund Reform Act off of the board. The board is made up of five tribal leaders. We have other very 

professional people that are going to be sitting on the board and 

helping the Special Trustee implement this Act. I would also like 

to ask you, and I guess I have heard from most of the conversation 

this morning, is that we would like to add $22 million to the budget to help fix the systems especially focusing on the liM system 

and it is my understanding from listening to the conversation within the Task Force that will either have to be done in conference or 

within the Senate, but I do beg and plead with this Task Force to 

give us as much support that you can to fix the systems. 

I also feel that this Task Force has to definitely support and 

make whole the account holders that have lost in this terrible mismanagement over the 150 years. I would like to end by saying that 

I think that we can all work together. We need to work together. 

We need to provide the money that is needed to fix the systems, 

the over $100 million over the next three years. You have to make 

a commitment to work with us to make sure that we start fixing 

the systems. 
36 

I want to end by saying I hope that little story that I told you 

about stopping in and visiting the home in this Indian community 

that is very poverty stricken, but yet would give their last bit of 

food to share, is that you would also make the wrongs right. You 

would also have a way and maybe your way could be our way too. 

Thank you very much. 

[Prepared statement of Ms. Cobell may be found at the end of 

hearing.] 

Mr. HAYWORTH. Thank you very much, Ms. Cobell, and as I have 

listened to your testimony I noted the eloquence and the poignancy 

of the story of the Special Trustee visiting Native peoples. I also, 

as I read through your testimony, which of course will be included 

in the record, a disturbing tendency here. In other words, all you 

panelists lay out the paramount mission which is to adhere to the 

trust obligations as provided for within treaty law, and just as that 

is preeminent and responsibility that should almost be really involuntary as it is for each of us to breathe, not think about it. 

That should be the central commitment. I know your testimony, 

Ms. Cobell, and especially disturbing tendency, and to be fair it exists both within the Executive Branch and within the Legislative 

Branch to a large degree, but I notice here a specific mention of 

the request made by the Special Trustee of Secretary Babbitt to 

find him more funding to the tune of $2 million and yet the Secretary could not find the money for this most essential role that the 

Federal Government should be playing in terms of treaty law and 

rights and obligations, but he could find the $2 million for emergency repairs on the C. & 0 . Canal. 

Now a wise philosopher once said isn't it a shame that youth 

must be wasted on the young. I would share his lament to this degree. It is also a tragedy that policy must be predicated upon politics and yet I see this type of action and I believe it is imminently 

fair and desirable to ask all three panelists, beginning with you, 

Ms. Cobell, is it not also reasonable in terms of trying to deal with 

this that the Secretary be compelled in that rather considerable 

budget of billions of dollars that the Secretary be compelled because of this egregious situation to allocate more of existing funds 

to remedy this situation. Ms. COBELL. I would say that this has to be the top priority of 

the Secretary. I believe that the Secretary has not put this as the 

top priority. What I am worried about with your question is that 

to go out and find the $2 million that it definitely should not come 

from our existing Indian programs. I am sure that there probably 

is other fat in the budget of the Department of Interior. I am not 

aware of what that budget-where the money is. 

I do want to make sure that Congress though understands that 

there has to be more than $2 million appropriated to fix this system, that you are going to have to deal with the real tough question is bite the bullet and allocate some good money to this to fix 

it. And I guess the priority was to fix the C. & 0 . Canal versus 

give some money to fix this formidable problem. You know what 

my answer is. 

Mr. HAYWORTH. Thank you. Mr. Echohawk. 

Mr. ECHOHAWK. I would hope that the court could be of some 

help in this regard by ordering the Secretary to come up with mon-
37 

eys sufficient to do the accounting and to do that from whatever 

moneys were available to him withjn his Interior Department 

budget. Of course, that whole process could be expedited though by 

sufficient appropriations specifically earmarked for that purpose. Congress, of course, could in fiscal year '97 and that was how I concluded my testimony. Again we are hoping here that we will have 

a bipartisan effort, both Democratic and Republican, an effort on 

behalf of both branches of government, Executive and Legislative, 

to come up with the funds that everybody acknowledges are necessary to fix the problem. It is just kind of a matter of how we get 

that done. 

Mr. HAYWORTH. Mr. Echohawk, J .D. in my name does not stand 

for Jurist Doctor. I am not an attorney, a lawyer. We are just here 

making the laws. And that is the way it should be. The Fathers 

didn't name this the House of Attorneys. But with your knowledge 

of the Constitution and of the trust funds and what role the Congress can play, in your mind is it within the rights of the Legislative Branch to compel the Secretary to use his funds in such a way 

as to make this his top priority? 

Mr. ECHOHAWK. Yes, I believe it is within the power of Congress 

to do that. Mr. HAYWORTH. Mr. Davenport, your remarks were both most 

welcome and most disturbing for as you mentioned it is your assessment that this $2.4 billion, I may be quoting now from my 

memory, is just the tip of the iceberg. Would you revisit that for 

me in terms of the financial problems that may exist here and why 

you say it is just the tip of the iceberg? 

Mr. DAVENPORT. It is the tip of the iceberg because the $2.4 billion is the derivative of the $17.8 billion of non-investment transactions that occurred during that 20-year period. And that is what 

was not reconcilable. They did not even look at the $200 billion in 

investment transactions, so they have not looked at roughly 10 percent of the total activity during that period and out of that 10 percent of total activity they found $2.4 billion that was unreconcilable 

so when we begin to expand that and look at it then you begin to 

see that the scope of this issue is much, much broader. 

The other fact gets to the fact that the trust assets in terms of 

minerals and oil and gas and coal and so on, as we talked about 

with MMS and BLM, has not been addressed. Huge assets out 

there. We know that in some cases that tribes-the documentation 

on lease documents, only 50 percent of them are there. 

When they, being Arthur Andersen, were going through and 

looking for a universe of leases to examine at a particular tribal 

site and if they needed to get 100 leases and they had a box there 

once they started going through these different records, if they did 

not find all of the records in one particular file folder they would 

go to the next one or the next one or the next one until they found 

one that was complete and then they tested it, but never noted the 

fact that the earlier ones were absent of necessary materials to reconcile. 

So once we begin to distill this and bring this together you can 

see that the $2.4 billion deals only with non-investment transactions for that period of time and there is much, much more out 

there. 
38 

Mr. HAYWORTH. I thank you. I would yield to my distinguished 

colleague, the ranking minority member, Mr. Kildee. Mr. KILDEE. Thank you very much, Mr. Chairman. I want to 

thank the witnesses. I have always known that the sovereign relationship does not exist just in the Executive Branch, it does exist 

with the Congress, and I am glad you reminded us of that this 

morning too that we cannot shirk our responsibility, that the sovereign relationship is with the entire U.S. Government. We have to 

make sure that we recognize our role in that. 

And that is the most important element in this whole thing, that 

sovereign to sovereign relationship; and I certainly want to make 

sure that I as a Member of Congress and a member of this Task 

Force and Member of this Committee do not try to pass the buck 

onto just the Executive Branch. We have an obligation, and, Mr. 

Echohawk, I appreciate your bringing that clearly to our attention. 

I think that the handling of the Indian trust funds is another element of our shameful record of our relationship with the Indian 

people, the sovereign Indian tribes, the sovereign Indian Nations. 

It has not been a good record at all. I came to Congress 20 years 

ago and got involved in Indian matters. It was a record of injustices. Prior to that serving in the State legislature I read the treaty 

of Detroit. I commended the Indians to read the treaties. It was a 

treaty between sovereign to sovereign, entered in good faith, sometimes not too willingly, but signed by the chiefs there in Michigan 

at the time in Detroit. 

If we were handling Nicaragua's money it would go to the world 

court. This is a terrible handling of money. We are handling money 

really that belonged to the sovereign tribes and sovereign Nations 

and we have done a miserable, miserable job on it. And Congress 

has a responsibility to try to find a remedy for that. Not just a prospective remedy, but I think we ought to go back and see what 

money had accrued to the Indian Nations and tribes and was lost 

to them. 

I really believe that. We spend a lot of money around here, but 

I think to address injustice is a very, very important thing. Mr. Echohawk, you say in your testimony that you asked the court to 

order the defendants to follow the law, fix the system, provide the 

account holders with an accounting, and make restitution. Do you 

have any idea or don't we know just what the dollar amount might 

be in that restitution? 

Mr. ECHOHAWK. Congressman, I think at this point we just do 

not know. I think we, of course, need to start with the accounting 

and, of course, it is through that process that we will come to find 

out what that number is. 

Mr. KILDEE. You also indicated in your testimony here in 1987 

the Department of the Treasury destroyed all of its records pertaining to liM accounts and continues to destroy records each year. Is 

that a matter of public record, the destruction of those records? 

Mr. ECHOHAWK. Yes, I understand that it is. 

Mr. KILDEE. Mr. Chairman, I think that we should probably 

through our Chairman of the Full Committee, but we should seriously consider contacting the Treasury Department and askingthis is not good fiduciary responsibility. As Mr. Homan announced 

that banks generally keep their records for perpetuity. And when 
39 

you start destroying records, one wonders why one is destroying 

records. 

I think we should really pursue, Mr. Chairman, in some way, 

maybe contact the Chairman of the Full Committee, and, first of 

all, ask the Treasury Department why they have done that, and I 

think we should also tell them that we insist that from this day 

on they not destroy any more records. And if you would pursue 

that with the Chairman of the Full Committee, I think that might 

be very helpful. 

Mr. HAYWORTH. The gentleman from Michigan makes an entirely 

valid point and I think that is the very least this Task Force could 

do immediately, contact the full Chairman. I will simply note this 

is far more egregious than any 18-minute gap on a recording tape 

of the White House or any 341 FBI files that end up mysteriously 

under the direction of the current Administration. 

This is absolutely inexcusable. It defies logic and my friend from 

Michigan is absolutely on target that we need to move to restore 

what is an elemental concept here of fiduciary responsibility so I 

stand shoulder to shoulder with my colleague on the other side of 

the aisle in this regard. We will contact the full Chairman. We will 

also contact the appropriate folks within the Administration with 

reference to what has transpired at the Treasury in this regard. Mr. KILDEE. I appreciate that, Mr. Chairman. I think again that 

very often when people look at Congress they think that we are 

constantly feuding, Democrat and Republican, but there are things 

that so cry out for justice, and you and I have been working on this 

and other Indian issues since you came to Congress this term, that 

partisanship goes out the window and I think that this is really 

more than sloppiness. This is something that I think cries out for 

justice. I would formally request that and I really appreciate your 

support for that. 

Mr. HAYWORTH. I thank the gentleman from Michigan, the ranking minority member, for his observation and his suggestion. Mr. Davenport, I believe you had a point you would like to add. 

Mr. DAVENPORT. Yes, I do. I want to be sure and get on the 

record the fact that in the testimony of the panel prior to us there 

was a statement made that there was no fraud involved or something that alluded to the fact that there was no evidence of that 

in the Reconciliation Project, that it really was not their scope as 

they were doing their work. 

But the reality of the matter is that there have been-there has 

been fraud and there have been people convicted as it relates to 

this. And that is one of the reasons I wanted to have Mr. Harrison 

here who has much more knowledge on this particular issue, but 

the Committee needs to know that this whole-the purview of this 

issue is not absent of people going to jail, is not absent of the fact 

that there has been theft and it has been documented. 

Mr. HAYWORTH. To follow up on that line then, Mr. Harrison, do 

you have both anecdotal and empirical evidence you could provide 

to this Committee of such abuses? 

Mr. HARRISON. Yes, Mr. Chairman, we do. With respect to Mr. 

Kildee's previous question there was in the President's budget request for this fiscal year a request for $12.5 million to make whole 

one such instance and the Congress did not see fit to approve that 
40 

request, but it is one of the issues that Ms. Cobell and Mr. 

Echohawk are now suing over, I suspect. 

But we know for a fact, and we can provide the Committee with 

depositions from the court case, I might point out here that at least 

it is our view and I guess maybe I should say my view, that the 

government has still not been particularly forthcoming about instances or incidents which might result in liability on their part. This particular case we uncovered ourselves as a result of going 

through court records in a courthouse in Kansas City from a case 

many years ago, but the government actually did put people in jail 

for bilking the trust fund office out of several million dollars, but 

they never told us about it. Their bookkeeping allocated what funds 

were recovered to those accounts from which it was likely to be 

missed. 

The more than $5 million or so that was not recovered were allocated to the individuals spread across 300,000 individual Indian accounts and no mention was ever made of it and had we not uncovered it at that time under Elouise's leadership, had we not uncovered it we would not have been told about it to this day and I suspect neither would you. 

But having uncovered it, they did calculate the lost interest to 

date as of the beginning of this fiscal year and they did make a request to Congress for funds to restore that, but it was not appropriated, so this is merely one incident but going to Mr. Kildee's 

question there is at least $12.5 million we know about because they 

have acknowledged it, calculated it, and asked for it. 

And we also know that there have been other instances where 

people have been prosecuted for pilfering these funds and we will 

be happy to provide the Task Force with whatever documents we 

have on those situations. I might point out, Mr. Chairman, that 

your newspaper a few years ago, the Arizona Republic, reported 

that there was an account in Oklahoma through which more than 

$600,000 had been disbursed and the name of an individual that 

nobody had ever heard of. And so far as we know there has been 

not much effort made to follow up on that. Mr. HAYWORTH. I think the points are well taken, Mr. Harrison, 

although I do not always agree with the Arizona Republic newspaper. In this instance I think it is something that bears more research. We appreciate your diligence in that regard. We would also 

appreciate the written documentation which you have compiled to 

bring before this Task Force so that we might continue to try and 

deal with this problem. And I might also say that I know speaking for both the ranking 

minority member and myself and other members of this Task 

Force, we appreciate your tenacity because what is emerging here, 

and I say this free from hyperbole and the theatrics that unfortunately often accompany these types of hearings, but indeed what 

gives us all pause and cause for concern is that it appears a climate has developed where the perfect crime could be pulled off, the 

heist of the century. And it is extremely disturbing and so we will move within this 

Task Force and given our limited scope then within the Full Committee to try and redress this. One final question for Mr. 

Echohawk. With reference to the suit that has now been filed, will 
41 

the suit end up putting a Federal judge in charge of the day-to-day 

operations of the Office of Trust Fund Management? 

Mr. ECHOHAWK. I would hope not. I would hope that the Secretary would find a way hopefully with the cooperation of Congress 

to provide the funds to the Special Trustee for him to do his job 

and so we will basically see the '94 Reform Act carried out, but if 

somehow there is difficulty in getting the Special Trustee equipped 

to do his job financially, then there may be some continuing oversight by the court to make sure the Secretary inch by inch, dollar 

by dollar, provides that accounting, yes. Mr. HAYWORTH. And, again, given the proclivities of many who 

sit on the bench in recent remedial actions taken by various judges, 

it is not far afield to assume that this in fact could happen? 

Mr. EcHOHAWK. Possibly so. I believe the court will basically enforce the law and make the Federal Government provide the accounting that is due and the court will do whatever it has to to 

make sure that happens. 

Mr. HAYWORTH. Thank you, Mr. Echohawk. Mr. Kildee, any 

other questions? 

Mr. KrLDEE. I want to thank the witnesses. I think you come to 

us seeking justice and, as I say, we are part of that-there are two 

sovereignties, we are part of the one sovereignty and we have to 

assume our responsibility. And I think your testimony not only 

gave us information which is very important, but gave us hopefully 

some inspiration to follow through hard on this. Thank you very 

much. 

Mr. HAYWORTH. Thank the ranking member and the panel. We 

thank you very much for your testimony and we know we will be 

visiting again, and again invite you if your schedules permit to stay 

and to hear from our friends in the General Accounting Office on 

their perspectives. We thank you very much. 

Welcome, Ms. Calbom, and the others with her from the General 

Accounting Office. Linda, if you would, please introduce those who 

accompany you today. 

STATEMENT OF LINDA CALBOM, DIRECTOR, CIVIL AUDITS, ACCOUNTING AND INFORMATION MANAGEMENT DIVISION, 

GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY GAYLE 

FISHER, ACCOUNTING AND INFORMATION MANAGEMENT DIVISION, AND TOM ARMSTTRONG, OFFICE OF GENERAL 

COUNSEL 

Ms. CALBOM. Yes. Mr. Chairman and Congressman Kildee, I 

have with me here today Gayle Fisher from our Accounting and Information Management Division who has worked in this area for 

a number of years, as well as Mr. Tom Armstrong from our Office 

of General Counsel, who also has been very involved in these issues 

over the years. 

We appreciate the opportunity to be here today to discuss our 

work on the Department of the Interior's management of the Indian trust funds. My statement summarizes our assessment of Interior's efforts to reconcile Indian trust fund accounts, discusses the 

Secretary's May 31 report to the House Resources Committee on 

trust fund reconciliation results, and provides information on the 

status of Interior's trust fund management improvement initiatives 
42 

which of course are needed to ensure that the trust fund accounts 

will be accurate going forward . 

In the interest of time, I know everybody is probably hungry by 

now, I promise to keep my comments to no more than five minutes--

Mr. HAYWORTH. Linda, you would not be talking about the preponderance of physical evidence of the Chairman of the Task 

Force? Forgive me. 

Ms. CALBOM. But I do ask that my full statement be submitted 

for the record. 

Mr. HAYWORTH. Without objection. 

Ms. CALBOM. Thank you. As discussed in our report issued last 

month, while Interior has brought its Reconciliation Project to a 

close, tribal accounts could not be fully reconciled due to missing 

records and the lack of an audit trail in Interior's accounting systems. In addition, the report package that Interior provided to 

tribes in January of this year did not make evident the limitations 

of the reconciliation process. 

For example, nowhere in the package did Interior describe the 

numerous changes in reconciliation scope and methodology or the 

procedures that had been planned, but were not performed. Further, due to cost considerations and the potential for missing 

records, individual Indian trust fund accounts were not included in 

the Reconciliation Project. 

As you can imagine and as we have heard here today, tribes 

have expressed concerns about the scope and results of the reconciliation process. As stated in the Secretary's May 31 report, by 

April 30 only two tribes had accepted their reconciliation results, 

three tribes had disputed their results, and the remaining 275 

tribes had not decided whether to accept or dispute their account 

balances. 

If Interior is unable to resolve tribes' concerns about the reconciliations, a legislated settlement process could be used as a 

means to resolve disagreements about tribal account balances. Our 

September 1995 report contained draft legislation outlining such a 

settlement process. We prepared this report at the request of the 

House Committee on Resources and the Senate Committee on Indian Affairs to initiate discussions on options for resolving disputed 

balances. 

However, the unreconciled accounts are only a symptom and not 

a cause of Interior's trust fund management problems. While Interior has initiated several management improvement actions over 

the last three years, the needed improvements will take years to 

complete. In the meantime, the current trust fund management 

and accounting systems and controls remain inadequate to ensure 

accurate trust fund accounting and asset management. 

Unless Interior corrects its longstanding weaknesses in these 

areas it may be faced with additional costly reconciliations and settlements in the future. The appointment of the Special Trustee for 

American Indians was an important step in establishing high level 

leadership at Interior for Indian trust fund management. As you 

know, the Office of the Special Trustee was actually implemented 

in February of this year and the Special Trustee has recently devel-
43 

oped a concept paper which outlines needed trust fund management improvements. The concept paper is a positive first step, but will need to be expanded to include various options and alternatives and their associated costs and benefits and ultimately it will need to be developed 

into a comprehensive strategic plan. The bottom line here is that 

solving Interior's trust fund management problems will require 

comprehensive planning, management commitment across all Indian trust program offices and additional resources. That concludes 

my prepared comments. I will be happy to answer any questions 

that you may have at this time. [Prepared statement of Ms. Calbom may be found at the end of 

hearing.] 

Mr. HAYWORTH. Your May 3 report concerning your proposed legislated settlement process states that the settlement process could 

be used to resolve questions about liM account balances. Now how 

would that work for liM accounts when there has been no reconciliation whatsoever of the liM accounts? 

Ms. CALBOM. I would like to have Mr. Armstrong address that 

question. 

Mr. ARMSTRONG. Of course, Mr. Chairman, with liM accounts 

the starting point would be different than what we propose for tribal accounts. With the tribal accounts, we were keying off the reconciliation, but we felt that the structure that we provided, the 

process that we proposed, could be used for liM accounts as well. 

It could start with the government sending liM account holders a 

statement with the balance on it and then asking the account holders to agree or disagree with that balance. 

Mr. HAYWORTH. Really a two-part question. One to follow up. 

Any cost projections of what that might be to send statements to 

the various liM account holders? 

Ms. CALBOM. We don't have cost projections, but I would not 

think that simply sending out statements-because we are not 

talking about embarking on another reconciliation process-would 

pose an exorbitant cost-to begin the process in that manner. However, that is probably a question better addressed to the BIA. 

Mr. HAYWORTH. Let me ask about some preceding testimony. Mr. 

Davenport offered the very disturbing perspective that the $2.4 billion that currently cannot be accounted for is but the tip of the iceberg. Do you share that assessment? 

Ms. CALBOM. I think what Mr. Davenport was addressing is a 

couple things. One thing is that the actual investment transactions 

were not specifically reconciled transaction by transaction. Instead, 

my understanding is the approach that the accounting firm took 

was doing more overall reasonableness tests by looking at yield 

analysis and investigating where the yield fluctuated more than 

they would expect it to fluctuate . 

That kind of a test is a good overall reasonableness test, but it 

is not necessarily going to get you down to determining transaction 

by transaction whether things were properly recorded. The other 

major area, and we share this concern, is that the complete universe of transactions really is not known. What the reconciliation 

process was designed to do was to take information that had been 
44 

posted to the general ledger and try to trace it back to supporting 

documentation to the extent that documentation was available. 

However, with leases, as we have been discussing numerous 

times today, there is no inventory of leases that are out there and 

there is no receivable system which tells you what you should expect to receive on a monthly basis so you know to go follow up if, 

in fact, the money does not come in. And I think that is one of the 

big problems as far as the accountability for these funds. 

Mr. HAYWORTH. Gayle, the General Accounting Office as its 

name implies deals with so many different challenges, should we 

realistically say, and the discrepancies in the country across the 

board in terms of the Federal Government. It might be the time 

here that we have been made aware of a myriad of problems and 

challenges, if you will, faced by several different governmental 

agencies in the departments and to be fair again this institution itself, the Congress of the United States, specifically the House of 

Representatives, and we have had problems addressed by outside 

audits in that regard. Based on your experience, what you see here 

and perhaps what we fail to see because of the lack of a known universe-if you were to set up an alarm scale or some criteria by 

which we look at the magnitude of problems-in your field of experience, Gayle, does anything you have run across outrank the type 

of problem we are finding here-within this systemic mess-that 

we are finding with these accounts and the lack of accounting 

thereof? 

Ms. FISCHER. While I have not audited every Federal agency out 

there, I know GAO has identified some serious problems with the 

Department of Defense and other agencies. But, this particular 

problem has been so longstanding and it involves money that is not 

Federal money but money that the government is keeping for others; that it cries out for a solution. 

Mr. HAYWORTH. Mr. Kildee. 

Mr. KILDEE. Thank you, Mr. Chairman. Mr. Echohawk in his testimony indicated that since 1987 that the Department of Treasury 

had destroyed its liM records. Could you comment on that? 

Ms. CALBOM. Actually I would like to have Ms. Fischer go ahead 

and comment on that. 

Ms. FISCHER. I was not aware until I saw Mr. Echohawk's testimony that Treasury had been accused of destroying the liM 

records. I know there has been a problem with BIA keeping records 

over the years, the Mineral Management Service at Interior keeping records over the years, and the Federal records centers, but I 

was not aware of any evidence that Treasury had not kept the liM 

records before this hearing. 

Mr. KILDEE. What is good fiduciary action on keeping records 

like that? 

Ms. CALBOM. Congressman, I guess my experience comes from 

not only the GAO here, but also being in public accounting in the 

private sector with one of the large accounting firms and I was involved in auditing a lot of financial institutions over the years and 

good fiduciary responsibility tells you that you keep 100 percent accuracy, which means you keep 100 percent of the records. 
45 

You have audits consistently. You resolve any discrepancies at 

the time. Discrepancies just are not acceptable in that kind of a 

role in the private sector. 

Mr. KILDEE. You know, we talk about records lost. It seems to 

me records destroyed is another dimension. Records lost would be 

carelessness, but records destroyed, that is a specific positive action 

taken there, which I think gives this Task Force grave concern. That is why I have asked that we pursue that further. In the private sector you would not find that records were destroyed? 

Ms. CALBOM. Well, you would hope not. I mean if that was the 

case certainly the fiduciary responsibility would be in question. 

Mr. KILDEE. The fiduciary responsibility would be in question. 

Thank you very much. 

Mr. HAYWORTH. We would like to thank you for coming before us 

today. Again, with the dimensions, scope, responsibilities of this 

Task Force, we may be checking back with you in the not too distance future and that indeed may be the understatement of the 

day; but we would like to thank not only this panel from GAO, but 

all those who have appeared today. And again I would like to 

thank the ranking minority member, the staff, and others associated with this Task Force hearing. We will continue our inquiri~s 

and our endeavor into seeing what we can do to make changes for 

the better. And with that, this Task Force stands adjourned. 

[Whereupon, at 1:12 p.m., the Task Force was adjourned and the 

following was submitted for the reacord:] 

PREPARED STATEMENT OF HEKRY CAGEY 

Mr. Chairman and members of the House Task Force on Trust Fund Management, on behalf of the Lummi Indian Nation, I am pleased to have this opportunity 

to submit a written statement to the House Committee on Resources and representatives of the Task Force on Trust Fund Management. 

The Lummi Nation has reviewed the prepared statements and testimony submitted to the House Committee on Resources for the hearing held on ,June 18, 1996. 

We have grave concerns regarding the Federal Government's complete failure to uphold their trust responsibility to Indian people as the Trustee of Indian funds. Furthermore, it appears that the Federal Government's efforts to reconcile past negligent practices on the part of the U.S. Department of the Interior have proven futile. In a Recent class action lawsuit filed by the Members of the House Task Force on Indian Trust Fund Management, Against the Federal Government, Indian people are understandably alarmed that the Task Force Members were forced to take such 

drastic measures to protect the interests of Indian people. 

The testimony presented to the Committee substantiates that the Executive 

Branch has taken insufficient action to implement correctivP- procedures. The Con- gress has not been supportive of the Executive Branch to provide sufficient appropriations to ensure plans can be implemented to reconcile the differences in the 

trust fund accounts. The Department has utilized vacancies in trust fund management positions to place unqualified employees into positions to oversee Indian trust 

funds because the Congress has forced a "downsizing" of the Bureau of Indian Affairs. Testimony from the U.S. General Accounting Office observations stated "a lack 

of comprehensive planning, lack of management commitment across the organizations, and limited resources-have impeded lnterior's progressing correcting longsta nding trust fund management problems " These are just a few of the gross, but 

accurate examples of how the Federal Government has failed to acknowledge the 

seriousness of this matter. 

There are documented examples of bureaucratic negligence surrounding the trust 

responsibility obligations of the United States for Indian people. Instead, the Department of Interior continues to conduct "business as u sual'" under the guise of 

being the custodian for the welfare of Native peoples; a fa cade that is about to be 

unveiled a process that has never worked for the benefit of Indian people. 

While there has been an interest over the years to try and resolve these long 

standing problems, there seems to be no firm commitment to see that this is done. 
46 

This type of malfeasance and mismanagement would not be tolerated by the Congress or the Administration in any other area of Government. For example, when over hundred FBI records were a lleged to have been violated by the White House 

personnel, immediate Congressional hearings were held, firings demanded, and res- ignations submitted. Congressional investigations into the business practices of the 

U.S. President's wife have cost millions of dollars even though she is not a public 

official of the Federal Government. 

Meanwhile, no one seems concerned about the gross negligence of the Federal 

Government and the mismanagement of many hundreds of millions of dollars of 

tribal trust assets. To this day, no one has been brought to account for the blatant 

violation of sacred trust committed by the United States in the misappropriation of 

the trust assets that are the rightful property of hundreds of tribes that comprise 

the most impoverished segment of the population. 

The United States has become the quintessential abusive, negligent guardian in 

the trustee relationship between our respective governments. As in any a busive relationship, the parties being harmed must be removed from the relationship for 

their own protection. We agree that now is the time to resolve these long-standing 

problems, to correct this formula of neglect and condescension, and secure a commitment by Congress and the Administration to change the process. It is time to separate the Bureau of Indian Affairs from the Department of the Interior, with all of 

its inherent conflicts of interest and its history of disinterest and neglect, in order 

to ensure that this issue does not, once again, descend into a State of disrepair and 

confusion. 

We commend the efforts of Congress a nd the people that have dedicated their 

time to resolve this issue, and it DOES need to be resolved. The Lummi Nation 

would like to give further support to statements made by the witnesses at the hearing who have asked that the management of trust funds be separated from the secretary of the Interior. We would like to see more separation occur than to make the 

special Trustee an independent authority. 

There needs to be action taken to change the relationship between the Indian 

tribes, their peoples and the United States that advocates the fulfillment of the obligations of the United States. A separate department with a secretary at the cabinet 

level should to be created and be given the sole jurisdiction to deal with Indian Affairs exclusively. This will eliminate the inherent conflict of interest that now exists 

in many of the divisions of the U.S. Government. 

The Lummi Nation is not the only India n Nation of this opinion. Tribal leaders are prepared to come forward to present the congress with their ideas for such a change to occur and work with the U.S. Government to help improve the trust relationship with Indian Nations as the relationship was intended to be with Treaties, 

Executive Orders and Acts of Congress. I thank you for the opportunity to present this testimony to the Committee. 
47 

United States Bouse of Re presen tatives 

Committee on Re sourc es 

Task Force on Indian Trust Fund Management 

Hearing on Indian Trust Funds Mana gement 

Testimony of Paul H. Boman 

Sp ecial Trustee for American Indians 

J u ne 18, 1996 

Thank you for the opportunity to present testimony on Indian Trust Funds 

Management. The hearings are focusing on the reconciliation report of the 

Secretary of the Interior, what it may take to resolve claims arising from past 

trust management practices, a n interim report by the Special Trustee and what 

it may take to ensure sound trust management in the future. Each of these 

focal points is discussed in turn. 

The Reconciliation Project 

Let me begin by explaining how the reconciliation project came about . 

Although I was not present when the effort began , it is instructive to 

understand what brought us to the point where we are at today. 

Beginni ng in 1987, the congress began directing the Bureau of Indian 

Affairs to audit and reconcile Indian individual and tribal accounts. Language 

i ncluded i n a FY 1987 Supplemental Appropriations Act prevented the outsourcing 

of trust fund services to a commercial bank (which was BIA1 s management 

initiative at that time ) until the funds had been audited and reconcil ed and 

the t ribes or individuals had been provided with an accounting of such funds . 

The Bureau of Indian Affairs previously had made two unsuccessful attempts to 

transfer portions of the trust fund o peration to major private financial 

institutions. 

Pursuant to these directives, BIA commenced its reconciliation project i n 

1990 . In the fall of 1990, an ad hoc Tribal advisory group worked in 

conjunction with the General Accounting Office (GAO) and the Department• s 

Inspector General to develop a request for proposal for the reconciliation 

contract. In May 1991, the contract was awarded to a national accounting firm, 

Arthur Andersen, L.L . P. The ad hoc group constituted itself as the Intertribal 

Mon itoring Association (ITMA). 

The results o f Phase r of the contract disclosed that a ll supporting 

documents cou l d not be located, but to the extent they cculd be located, they 
48 

could be examined. 3eca~se some records could not be located, it was resolved 

that a n audit would ~at produce meaningful results. 

2 

In vie•..; o f this, the Department of the Interior, in consultation with the 

Office o f Managemen~ and Budget (OMB) and ITMA, considered alternative 

methodologies and approaches with the goal of p r oducing as accurate an 

accounting as practicable. As a result, the BIA modified the Arthur Ande rsen 

contract to incorporate the agreed-upon procedures methodology, which does not 

constitute an audit in accordance with generally accepted auditing standards, 

bu t was u sed to reccncile the Tribal trust fund accounts back to 1973. The 

reconciliation did not address IIM accounts because it wao determined that a 

s i milar reconciliati~n effort for IIM accounts would cost somewhere in the 

range of $108 to $281 million. 

While the BIA reconciliation efforts were ongoing, in 1994, Congress 

passed the American Indian Trust Fund Hanagement Reform Act, 25 U.S.C. 4001-

4061 , which established the Office of Special Trustee. The statute also 

requires that the Secretary transmit to Congress by May 31 , 1996 , a report that 

describes the methodology and results of the trust fund reconciliation process, 

includes Tribal attestations as to d isputed account balances, and utli~es 

efforts the Secretary will undertake to resolve such disputes. 

Because of the due dates established in the Reform Act and because of 

funding reductions, the Bureau ended reconciliation efforts in December, 1995. 

As a result, s everal p lanned procedures were not completed or not commenced. 

Summary of Findings 

BIA examined $17.7 billion o f tribal trust fund non-investment 

transactions for the twenty-year period from July 1972 through September 1992. 

A total of 26 percent o r $15.3 billion of those transactions were reconciled. 

For the $1 5.3 billion in reconciled transactions, there wae an error rate of 

:03%. In most cases, the errors consisted o f mispostings within the accounts 

held by a p articula r Tribe . That is, either the wrong amount was posted to a 

particular account, Qn amount was post ed to the wro~g account of a particular 

Tribe, or .,1as posted to the wrong Tribe. 

The press has reported that the reconciliation found that $2.4 billion of 
49 

Indian trust funds cannot be accounted for by the Bureau of Indian Affairs. 

These conclusions are misleading. 

The $2.4 billion figure represents the dollar value of the 14 percent of 

transactions examined for which BIA could not locate the supporting financial 

source documents. In other words, there are $2.4 billion of ''unreconciled" 

transactions: transactions that are recorded in the general ledger and posted 

to tribal accounts but for which back-up documentation to support the general 

ledger entries is lacking. It may be that additional documents could be found 

to support the general ledger entries. However, additional searching was 

precluded by the time and funding constraints imposed on the reconciliation. 

3 

In many cases documents were unavailable because they were destroyed pursuant 

to the document retention policies followed by the Federal Records Centers 

where the documents were stored, or were in unusable condition as the result of 

storage in BIA warehouses for which there was insufficient funding to maintain 

adequate storage conditions. 

The $2.4 billion represents 13 percent or 32,901 of the total 

transactions examined in the reconciliation. Each transaction was recorded in 

a specific tribal account. The transactions can be better understood by 

breaking them down into receipts, disbursements, or internal transfers. A 

receipt is a transaction where funds are received and credited (posted) to an 

account. A transfer is a transaction where funds are transferred from one 

account to another account of a particular Tribe. A disbursement is a 

transaction where funds are paid out from an account. 

The receipts, which total $1,123,315,969, are funds that were posted to 

tribal accounts, and were available to the owner of the account for use and 

were earning interest. Because the supporting financial documents (e.g., 

collection vouchers from grazing leases, deposit tickets from BIA Area and 

Agency offices, etc.) are incomplete or unavailable, we cannot verify that the 

$1.1 billion in receipts was accurately credited to the proper tribal account 

or to the correct Tribe. The transfers, which total $479,621,822, are 

transfers between a single Tribe's accounts. These funds are found in tribal 

accounts. However, we cannot produce all the documentation necessary to state 
50 

4 

that t~e funds wer e tran sferred to t~e proper accounts of a single Tribe. 

The disburs eme nts, which have a g ross value of $808,636,374 are better 

unders tood if they a re d ivided into catego ries. For example, the total v alue 

of the disbursements includes so-cal led "positive disburse ments" of $73.6 

million. Positive d i sbu rsements are fu nds that were recredited to a Tribe 's 

acc ou nt, for examp le, i n cases where the check was not cashed for some reason. 

In addition, the disbursement s include some $39.0 million in attorneys fee s 

f rom awar d settlemen t s a nd $1.5 million in payments of expert witnesses related 

to award settlements. No attorneys o r expert witnesses to date have said that 

they did no t receive their fees. so, althoug~ the lack of supporting documents 

make s it impo ssibl e to verify t o whom the payment was made and for what 

purpose , if one excludes the attorney and e xpert witness fees as the positive 

disbursements, the a ctual value of the d i s bursements is probably more 

accurately estimated to be $695 million. 

Section 304 Report 

Section 304 o f the American Indian Trust Fund Management Reform Act of 

1994, P.L. 103-412 (25 u.s.c. §4001, ~ ~-) (Reform Act of 1994) provides for 

the submitt al of a report by the Secr e tary of the Interior (Secretary) to the 

Committee on Natural Resources of the House of Representatives and the 

Committee on Ind i an Affairs of the Senate by May 31, 1996, regarding the 

reconc iliation o f Tribal t rust fund accounts. The Secretary submitted the 

required report to the Congress on May 31, 1996 (Secretary• s Report). Section 

304 of the Reform Act of 1994 provides that the secre.tary' s report shall 

contain the following: 

( 1) A description of the methodology in reconciling trust fund accounts; 

( 2) In f o r mation o n attestations by e ach account holder that t hey accept 

t he balances in t he ac c ou nt statements o r that they dispu~e the ba lances 

along with the reasons fo r their dispute; and, 

(3) The effo rts t he Secretary will undertake to resolve the disputes. 

As the Secretar y' s Report indicates, tribal trust fund accounts were 

reconciled for the pe riod of Ju l y 1 , 19 ?2 through September 30, 199 2, by Arthur 

Andersen LLP usi ng proc edures in a contr act with the Bureau o f Indian Affairs. 
51 

The agreed- upon procedures methodology was followed after alternative 

methodologies and approaches were considered by the Department of the Interior 

in consultation with the Office of Management and Budget and the Intertribal 

Monitoring Association. Comme ncing in January 1996, each account holder was 

provided a report on the reconcil iatio n o f its accounts along with account 

statements that show account b alances, reconciled transactions, and proposed 

ad justments . Each account holde r was also provided account statements for the 

period of October 1 , 1992 through Septembe r 30 , 1995, wh ich were reconciled 

interna lly by the Office of Trust Funds Management. In addition, e ach account 

ho l de r was provide d images on CD ROM of the financial documents reconciled by 

Arthur Ande rsen LLP. The imaged documents are Arthur Andersen LLP' s actual 

working papers. 

5 

Subsequent to the distribution of the reconciliation report and account 

statements, a national meeting, to which all account holders were invited, was 

held in Albuquerque, New Mexico, to explain the reconciliation methodology and 

the report and account statement format, content and terminology. A series of 

five (5) regional meetings, o f which three have been held, were also scheduled 

to wor k d irec tly with each account holder to address questions and issues on 

its specific report and account statements. At the national and three regional 

meetings, account holders s tated that they want their comments to be included 

in any report to the congress. 

Through April 30, 1996, 77 account holders have responded. Specifically, 

two account holders have accepted and three account holders have disputed their 

account balances. The remaining respondents have requested additional time 

and/or a meeting. Because al l of the scheduled meetings h ave not been held to 

receive a nd d iscuss account holder i ssues and comments and since many account 

holders have not communicated their accep ta nce o r dispute o f their account 

bal ances , on l y an i nterim report o n the account ho l der' s attestation was 

provided in the secretary's report. 

Once the rema ining scheduled meetings have been held and account holders 

have had an opportunity to commu nicate their reaction to the ba lances, a final 

report on account holder a ttest ations will be submitted to t he Congress. The 
52 

6 

final report will be sent by November 15, 1996. 

Methodology 

The methodolcgy used to reconcile the Tribal trust fu nd accounts 

consisted o f agreed- upon procedures applied to specific elements, accounts or 

i tems of a financial statement. The agreed-upon procedures methodology was 

followed after alter~ative methodo logie s and approaches were considered by the 

Department of the Interior, the Office of Management and Budget, the General 

Accounting Office and the Intertribal Monitoring Association. The performance 

of the wo rk and the reporting of the finding s were governed by the Statement on 

Auditing Standa rds 35 issued by the Auditing St andards Board, American 

Institute of Ce r tified Public Accountants. The work performed , however , is 

not an audit as defined by the American Institute of Certified Pub lic 

Accountants becaus e all the necessary financial records required to perform an 

audit cou ld not be located. Con sequently , the conclusi ons that c an be drawn 

f r om the resu l ts can o nly be related to the records reviewed and cannot be 

applied to any unreconciled transaction. The s pecific p rocedures applied by 

Arthur Andersen LLP are described in i ts • Agreed-Upon Procedures and F indings 

Report of Independent Pub l ic Account a nts• dated December 31 1 1995 . That report 

and a copy of a ~ Sample• repo rt submitted to each account holder which 

demonstrates t he report format, detailed description o f t he reconciliation 

methodology and the terminology used were attachments to the Secretary' a 

Report. 

Attestation 

Distribution of the agreed-upon procedures report and account statements 

to account ho lders commenced in January 1996 . The report and account 

s tatements were sent to 280 account holders. The whereabouts of nine account 

ho l ders we re unknown and distribution could not be made. Also , account 

s tatements we re not sent to individual Indians that received a per capita 

distribut ion of Tribal trust fu nds. 

To assist account holders in making an in formed decision on the Agreed 

Upon Procedures and Findings Report and account statements, all account ho lders 

were invited to send representatives to a national meeting held February 14 and 
53 

7 

15 , 1996 , in Albuquerque, New Mexico . At this meeting , the Office of the 

Spec ial Trustee for Americ a n Indians a nd Arthur Andersen LLP discussed the 

methodology and findings r esulting from applying the agreed-upon procedures and 

described in detail the format, content and terminology of the report and 

account statements. A demonstration o n the use and content of the CD ROM was 

a l so provided. 

In addition to the natio nal meeting , a series o f five regional meetings 

were s cheduled throughout the country to provide account holders with 

ind i v i d ual consultat ion on t heir report and account statements. The first 

three regional meetings have been completed. None of the account holders 

a ttending these meetings ac c epted o r d isputed their account balances. The 

regional meetings schedul e is as fo llows: 

March 19-22, 1996 Sacrame nto, California 

April 9-12, 1996 Portland, oregon 

June 3-7, 1996 Tulsa, Oklahoma 

June 18-21 , 1996 Billings, Montana 

July 16-19, 1996 Albuquerque, New Mexico 

In addition to the regional meetings, final exit conferences we re held 

with four o f the five Tribes that participated in the Five Tribes Pilot to 

d iscuss their individual report f indings and account statements. The Five 

Tribes Pilot project involved the Hopi, Yakarna, Flathead, Fort Berthold and 

Fort Peck Tribes and had two components. First, it used available records to 

reconcile the accounts of those Tribes on an expedited basis. Second, staff 

worked on site to compare the terms o f the leases with the actual amount of 

cash collected. The Hopi representative only sought clarification of the 

Tribe' s report, statements a nd the settlement process. The Tribe has not 

c ommu nicate d a decision as to a c cept a nce o r dispute o f their accou n t b alances. 

At the meeting with the Ya kama Tribal r epresen tatives, we received a resolution 

from the Yakama Tribal Cou ncil t hat se t forth measures to meet the local needs 

and priorities of the Tribe but d i d not directly address the account balance 

issue. A copy of the r eso l u tion wa s attached to the Secretary' a Report . The 

Flathead Tribe advised by a formal statement (also attached to the Secretary's 
8 

Report) that they did not accept ~he account balances and requested meetings to 

attempt a negotiated settlement. The Fort Peck Tribe maintained their position 

that they would accept o nly a ful l accounting of their trust assets and that 

the reconciliation project was not su fficient. The full statement of the 

Aesiniboine and S ioux Tribes of the Fort Peck Reservation was attached to the 

Secretary's Report. A final exit conference with the Fort Berthold Tribe is 

still pending. 

Through April 30, 1996, 28 percent of the account holders that were 

provided a repo rt and account statements have communicated with us concerning 

their account b a lances. Included with each account holder's individual report 

and account statements was an •Acknowledgment• form for the convenience of the 

account holder to communicate its acceptance or dispute of its account 

balances. Seventy seven o f the 280 account holde rs that were sent report and 

account statements have responded by use of the acknowledgment form or other 

formal written communication. Specifically, two account holders have accepted 

and three ac c ount holders have disputed their account balances. Three of the 

77 account holders only requested a meeting to discuss their specific questions 

or concerns regarding the report a nd account statements, but did not request 

additional time. Sixty-nine responded that they required additional time to 

review the reports and made no response as to acceptance or dispute of the 

account balances. Thirty of this latter category also requeseed an individual 

meeting to discuss their report and statements. The purpose of the regional 

meetings is to accommodate the account holders wishing individual meetings. 

Dispute Resolution 

Subsection 3 o f Section 304 of the Act requires •a statement by the 

Secretary with regard to e ach account ba lance disputed by the account holde r 

outlining efforts the Secretary will undertake to resolve the dispute.• As 

noted, through April 30 , 1996 , three account holders have disputed the balance 

of their accounts. Until the regiona l meetings are completed and the Tribes 

have had an opportunity to analyze the reports and documentation they have been 

provided , the Department will not know how many Tribes will dispute the balance 

of their accounts. At t hat time, the Department will be in a position to 
55 

p r opose a mechanism to resolve any suc h disputes. 

Special Trustee' s Interim Report and What It May Take to Ensure Sound Trust 

Management in the ruture 

In Oc tober ! 995 , he Office of the Special Trustee for American Indians 

(OST) commenced an asse ssment of the U. S. Gover nment's trust management 

policies, procedures, practices and systems as they apply to individual 

9 

American Ind ian and American I ndian t riba l accounts. By February 1996, the OST 

completed the p reliminary asses s me nt and produced a conceptua l s trategic plan 

to acquire and institu tional ize s pecified systems. I mplementation o f this plan 

will per~it a nd en sure that t he u. s . Government establishes appropriate 

policies and procedures, d evelops n ecessary systems and takes the affirmative 

ac t ions necessary to p r ov i de a n a ccurate and timely accounting to American 

Ind i an t r ust benef ic iari es. In t his manner t he proper discharge o f the 

Secretary' s trust respo nsibilities can be accomplished. The Assessment and 

Phase I of t he Strat eg ic Plan are i ncluded i n a document entitled "Special 

Trustee fo r Ameri can Indians, Assessment a nd Strategic Plan Principles, Phase 

I, February 1996" which i s attached to this statement. 

The principles are conceptual in nature. The Special Trustee will 

c ontinu e to receive input from I TMA, the Adviso r y Board, affected bureaus 

within t he Department, Departmental staff o ffices , tribes and tribal members, 

a n d the Of fi ce of Manageme nt and Budget a s t h e conceptual p lan is transformed 

i nto a detailed s trategi c pl an as required under the American Indian Trust Fund 

Management Reform Act . 

As noted, in December 1995, the U. S . Department o f the Interior 's Bureau 

of Indian Affairs s ub s tantially completed a mu lti-year "Tribal Trust Funds 

Reco nciliation Project" (Reconciliation Project) and issued an "Agreed-Upon 

Procedu r es a nd F indings Report" fo r the pe r iod Jul y 1, 1972 throug h September 

30 , !992 . !ts maj o r f~ndi~qs are substantial l y i ncorpo r a ted in the Special 

Trustea' s Assessmen~. 

In A~g~ot !995 , ~h e U. s . Depa r:ment o f the Interio r substantiall y 

completed a :::>tudy o f t!":e tr-ust :":":anagement :;ystems r elatin g to Individual Indian 

Monie s ( ;~q a ccount::; and i::;sued a repo rt ent itled "IIM Related Systems 
56 

10 

:mprcvemcnt ProJeCt ~epo rt .· · 7he find ings o ! this report are also 

s ub stantiall y i~c crpora~ ed in :~e Spe cial Tru stee' s Ass essment. 

The Speci a l 7rust ee's As se s s ment, the Recon cil iatio n Project reports , the 

IIM Related Sy stem !::;pr-:::::ver!"tent Pro jec t Repo rt and ea rlie r and later reports 

issued by t!'le Genera l t\ccount i r:g Of fice all confirm that the U. s. Government's 

trust ~anagcment ~ystc~s. pol~=ies, ?roce dur es and p ract ices coupled with the 

co nd tio:-~ o : ':he t :::"ust :-ec::r::!s a.nd, ~otabl , large :-.umbers of r:~issing 

doc~~e nt , a r e ~nadog~a: e to al~ ow fo r: 

1 . u proper, uccu r ate and tir:~ely accounting for t r ust account ba lances, 

collec tions , disbu rseme n t s and investments and the max imizatio n of the 

return on invest~e ~ts. 

2 . the repara~~cn of accurate a nd timely r eports to trust a ccount 

holders regardi~g all co llecticns, d isbursements, i nvestments and return 

on ~nve stments . 

3 . an a u dit ~d r genera lly accepted au diting standards. 

4. any fu r t her ~Qconcil~a ion e fforts, s ince the costs o f such efforts 

would likely s ubstantially exceed the benefits and at the same time 

would probably y ie ld u nsatisfactory and inconclusive results. 

While s i gnificant .:..:npro·..-eme n ts have been made over the last several 

years, the inadequa ci es o f the trust management s ystems, the condition of the 

historical records a nd the u. s . Government's inabil ity to p rovide an accu rate 

and timely account ing c an not ~e remedied without the ma jor reforms requ i red by 

the Reform Act of !.9 94 . To address these issues, t he Special Trustee ' s 

strategic p l a n identified nine initia~ivee o r p rinciples designed to rectify 

the probl ems and b r ing r~st account ~g and ma nagement systems up to comme r cia l 

standards ·w ithin :hree years. ':'his, a t a min imum , will involve acquiring , 

autcmati~g, updating , ~tegrati~g. coo rdinating and consolidat ing to produce: 

1. A trust =esourc e f asset ma nagement d el ivery syst em . 

This wil l involve ~a ini~g a new t rust r esource/asset rn ana ge ~ent and 

d e livery ~y 5t ern fe r a sse t !~asi~g , c ontracting , le ndi ng , b uying and 

i~ . taqe:he = ·:i : h ~:~ndardi~ed a nd /or i ntegrated a sset ~anagement , 

c rec.i it J:1d .-.)r.:•:1ra: .:.. >~ FVl i::ics , proced ur es ;1nd p rac -.:i.c es . 'Yhe s ystem must 

b e an:.e ·· - :.:..e :..~ .;nd ':.:=u.ck :r-cr:1 l~nd and o·....:ners~ ip records . 
57 

11 

lease - contract and land and ~nership informat ion. 

This will ~nvolve obtaining a new acccunts receivable, billing and 

collect ion d ata system ~hat uses lease- cont r act and owne r ship. i nformation 

for trust income verificat i o n, reconciliation, billing , payments, 

collection, accounting , disbursement, audit, asset quality review and 

compliance pu r poses. 

J. A trust, d epository, payments and deli•Je r y system for Individual 

Indian Money ( IIH) accounts . 

Th is will e n t ail pu r chasing a t rust, depository, payments a nd other 

f inancial se rvices accounting a nd s tatement sy stem and a delivery syatem 

to mo re efficiently p rov ide cu rrent financial s erv ices a nd to facilitate 

new and improved financial se rvices to individ ual Indians a nd Tribes. 

4. A la nd records a nd title recordation and c ertification s yst em. 

This wi ll involve a cquiring a new land records and t itle recordation and 

c ertification system, capable o f instantaneous linkage with the trust 

resou rce asset management, accounts receivabl e and t r ust accounting 

s ystems. 

5. A general ledger a nd general accounting system. 

This will involve ob tain ing o r modifying a general ledger and general 

accounting s y stem to accommodate all present a nd p lanned ~ystems and 

account i ng improvements. 

6 . A technology se r vices ce n te r ded icated t o trust resource a nd funds 

man agemen t. 

Thin will nv olve btaini~g a ce ntralized tec hnology 5e r vices cente r 

dic~ted ~o trus= ~csou=ces , rus t f~nds and :and c wnersh ip and =ecords 

management ;rocesses. 

7 . A na t i c n a l archiv es a~d records ce nt er . 
58 

12 

~his will ~nvolve obt aining a~d centralizing a modern national archives 

a nd =ccords center for ~ru~t resource , asset and funds r ecord storage and 

re:r~cval . 

B. A risk ~anagement and contr ol system. 

?his wil l entail obtaining a risk management and control system that will 

pro~ide fe r adequate operational audits, c redit a nd asset quality audits, 

co~ p!iance reviews, ~ndependent asset appraisa ls and liaison with 

ou:~ide , indepe ndent audi~crs . 

9. An i ndependent institutional s tructure. 

This will involve consolidat ing trust r esou r ce , tru st f unds and l and 

own ership and records manageme nt processes i nto a single, independent 

i nstitutional unit with its own ~anag ment str uctu re to accommodate the 

restructuring and reorganization contemplated by Phase I of the strategi c 

p l an. The unit s hou l d be o rgan i zed by function and dedicated exclusively 

to trust ~a agement. The unit should have agency o r bur eau status within 

the Department o f the Interior o r e l s e where . 

The conceptual ~ork o n the strategic p lan is completed. An i ndependent 

con tractor was hir ed for the pu rpose of determi n i n g approx imate costs 

a s sociated wit h the deve l opment of the comprehensive s yst ems overhaul j ust 

me ntioned . Ou t f an abu nda nce o f ca u tion , however, a requirements analysis, 

use r ~eeds su r vey and invent ory must be comple ted be f o re cost estimates can be 

complete ly v alidated and the comprehensive strategic p l a n completed. 

The next step i s therefore a requirements analysis, user needs a ssessment 

and a comprehensive inventory of existing skills, har dware and softwa re , 

related ~etwork support and facilities requirements , al l of which will l ead to 

a technical requirements report f or RFP purposes and confirm o r revise t he cost 

data contair.ed i~ the c~n ceptual s trategic p l an. Th is wi l l require the use of 

an outside co ntrac~ or . 7he 19 97 ?resident's budget request includes $1 million 

to ccr.d~ct ~~e a~alyses. 

Once the a~ lyses a re c~mplc ted {expected to take 90 days from funding 

d ate) a na once :he otaf: of the OST is hired, the remaining e lements nec essary 
59 

13 

to produce ~he c~~pre~ens1ve strategic plan required by the Reform Act of 1994 

can be co~.pleted •/:it!-:i:-1 90 days cr by March 31, :..997, if the President's budget 

request for FY 1997 ~s approved. 

The ~~~al ~Y :._;97 request for OST ~s S36.3 million, a $20 million 

1ncrease ever ~he :396 conference level of $16.3 million. The request includes 

$13.6 m1llion to teg1n implementation of the strategic plan. The funds will be 

used primarily to upgrade and establish a new IIM accounting system, which is 

long overCue. The :..997 budget requests r.o-year funding to allow adjustments 

resulting from rc-esti~ates or delays in plan i~plementation. However, it 

should be !'"'.oted t~.at ;__: funding for the strategic plan is delayed, the reform 

effort wil: be delayed. 

The S20 mLllion ~equested increase in OST' s budget for FY 1997 also 

Leflects t:~,e hiqh pri:::::~ity· ':he Administration and the Secretary place on Indian 

Trust Asset Reform efforts. :mprovement efforts are critically needed to ensure 

the Federal Govern~ent ~eets its fiduciary obligations to Indian Tribes and 

individual American Indians. While the Federal Government's trust 

responsibility is unique, systems, policies, practices and procedures of 

commercial trust operations can be applied to ensure that the Federal 

Goverr..ment better fulfills its fiduciary obligations. Beginning in 1997, the 

evolution of trust system reforms will be at a point where increased resources 

can be prudently expended. 

In closing, I would like to emphasize that ·resolving the past• presents 

a difficult challenge to the Administration, the Congress, and individual 

Indians and tribes. The ending of the tribal reconciliation process represents 

only t!le beginning of an effort ':.a resolve problems with the U.S. Government's 

past trust !und managereent practices. The problems in trust fund management 

have long been recognized by GAO, the Department's Inspector General, and 

others in Congress. ~his Adm~nistration is committed to solving these 

longstanding problems and has made significant progress in strengthening trust 

funds operations, ~~ conducting the massive reconciliation effort we are 

reporting on today, and in taking the steps necessary to ensure the highest 

~evel of ~~duclary ~nd investment GtandardG are in place in the management of 

these ~~nds. Future r~for~s will continue in earnest under ~he comprehensive 

strateg Lc plan req,-.:: ~-c~ by the P.mer.:...can I~~dian Trust Fund Management Reform 
60 

14 

Act, provided that adequace resources are appropriated by Congress. 

Enactment of the President' s 1997 Budget request would represer.t a 

substantial step to ensuring that Indian trust reform effort9 a re implemented 

in a man n er that ensures the fiduciary ~esponsibilities of the Federal 

government are met. However, as you may be aware, the House Appropriations 

Subcommittee on Interior and Related Agencies made its recommendations on the 

1997 request of the Office of the special Trustee last week. The subcommittee 

recommended a funding level of $19.1 million for OST for 1997. This is a 

reduction from the comparable 1 996 resource l evel of $20.4 million and $19 

million reduction from t he President's Budget request. At the House mark, no 

funds would be available for OST to progress on research to clear past problems 

o r implement improveme n t in itiatives. Particularly problematic would be the 

failure to implement improved systems for the management o f Individual Indian 

Money Accounts. Each day this system remains status quo, the Federal 

government's exposure to claims o f mismanagement continues. 

While the House provided funding for analyses necessary to complete the 

comprehensive strategic plan, no additional resources were provided for 

staffing wh ich is also necessary to complete the strategic plan. At the 

funding level provided by the House , the strategic plan will no t be completed 

in 1997 . 

This concludes my statement. I will be happy to answer any questions you 

may have. 
61 

TESTIMONY 

OF 

ERIC DAVENPORT, CHAIRMAN, 

INTERTRIBAL MONITORING ASSOCIATION 

ON INDIAN TRUST FUNDS 

FOR THE 

OVERSIGHT HEARING ON 

MANAGEMENT OF INDIAN TRUST FUNDS 

HOUSE TASK FORCE ON TRUST FUND MANAGEMENT 

JUNE 18, 1996 

Mr. Chairman and Members of the House Task Force on Trust Fund 

Management: 

Thank you for providing this opportunity to appear before the Task 

Force to provide testimony on this issue of such vital importance to so 

many Indian tribes and individuals. 

At this first hearing of the Task Force, the InterTribal Monitoring 

Association wishes to extend our appreciation to Chairman Hayworth and 

the 10 other Task Force members for your commitment to directing 

Congress' attention to the issue of trust fund reform. ITMA, on behalf of 

the tribal governments across the country who form our membership, 

stands ready to work with this Task Force and to be of whatever 

assistance we can be. 

The Indian Trust Fund Management Reform Act of 1994 requires the 

Special Trustee to ensure that the Bureau of Indian Affairs provides trust 

fund account holders with "a fair and accurate accounting of all trust 

funds". After an expenditure of about $21 million and over five years of 

effort, the BIA contractor, Arthur Andersen and Company, has produced a 

reconciliation report which explicitly states that it is not "an audit made in 

accordance with generally accepted auditing standards". Arthur Andersen 

also does not express any opinion on the work elements of their 

reconciliation report. In view of these disclaimers and what we know 

26-403 0 - 96 - 3 
62 

about how the reconciliation was performed, we believe that the 

reconciliation report cannot be viewed realistically as meeting the 

requirement for a "fair and accurate accounting". 

The initial scope of this reconciliation contract began as a broad 

effort to achieve reconciliation of tribal accounts, but for a number of 

reasons this objective could not be achieved. This contract was "officially" 

modified numerous times, and "unofficially" modified more than one 

hundred twenty (120) times by "issues papers." The resulting tribal reports 

are not what we were led to believe that they would be when we began 

this exercise. Instead, Tribes have very qualified, incomplete information 

of very narrow scope. 

The reconciliation grew out of a BIA proposal in the mid-1980's to 

transfer much of the trust fund administration to a private financial 

institution. The tribes were concerned that the move would lock in their 

current account balances, which the BIA admitted could not be verified, 

and would bury the errors of the past. In response to the tribes' concerns, 

in 1987 the House Interior Appropriations Subcommittee instructed the 

BIA to conduct a reconciliation, audit and certification of tribal and liM 

accounts before it contracted out any trust functions. The purpose of this 

was to be able to provide the account holders with reasonable assurance 

that their account balances were accurate. 

After three years of delay by the BIA, the OMB Deputy Director for 

Management and the Comptroller took charge of the process. They 

quickly concluded that there was no point in asking Arthur Andersen to try 

to perform an audit. Based on the results of prior audit attempts, any 

audit would be so qualified that it would be of little value. 

Instead, they settled for a package of those accounting procedures 

they thought could be accomplished, given the limitations imposed and 

given the absence of records and viable accounting systems. Like someone 

trying to fix an old car, they ended up taking bits and pieces from various 

procedures and cobbled them together into what has now been called "the 

reconciliation." In fact, it is an ad hoc set of procedures that does not fit 

into anything found in generally accepted accounting principles. As a 

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63 

result, Arthur Andersen and the BIA have exercised broad discretion to 

create the processes they used in each area being reconciled. 

As a result, over 90% of the reconciliation focused solely on whether 

entries in the general ledger for deposits and disbursements were 

accurately posted; that is, whether any clerical errors were made in 

copying information from one document to another. This procedure only 

covered the period from 1972-1992. In addition, some rough procedures 

were performed to check on deposit times and interest yields and only for 

the period 1978-1992. Nothing was or could be done in regard to the other 

elements of the reconciliation process because records were missing or 

never existed in the first place. 

The reconciliation covered only the 2000 tribal accounts. It did not 

include the 300,000 JIM accounts or the special deposit accounts. After 

doing some scoping on the JIM records at three reservations, Arthur 

Andersen advised the BIA that an audit of liM deposits and investments 

alone could cost in excess of $200 million to perform. Even then it probably 

would be of doubtful value in providing the liM account holders with 

assurance about the correctness of their account balances. At the present 

time, the Department has no plans and no funding to do any historical 

accounting in regard to the JIM accounts. 

The bulk of time and money expended by Arthur Andersen on the 

tribal accounts was devoted to trying to track a portion of the deposits and 

disbursements. This was called the "basic reconciliation", though actually 

it was more of a reconstruction of the existing records. It consisted of 

matching the deposit tickets sent in by the local BIA offices with the entries 

in the general ledger to see if the dollar amount of the deposit was 

accurately copied and if it was entered into the proper tribe's account. 

Arthur Andersen also matched the disbursement tickets to the general 

ledger. Thus, the process only caught errors by the clerk responsible for 

transferring the information from one document to the other. 

The missing $2.4 billion that has been reported in the media 

represents the results from this matching process. All told, the general 

ledger showed there were $17.7 billion in deposits or disbursements to or 

from tribal accounts during the period 1973 through 1992. The BIA was 

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64 

able to locate and match the disbursement or deposit ticket with the 

general ledger entry for $15.3 billion. Although there should have been a 

total of six different documents supporting each general ledger entry, an 

entry was treated as fully reconciled even if only one of those six 

documents could be located. 

The missing documents that make up this $2.4 billion fall into three 

categories. The BIA was unable to locate deposit tickets, or any other 

confirming document, for $1.1 billion in deposit postings. This means that 

for $1.1 billion that was posted in the general ledger to the accounts of 

various tribes during this period, the BIA cannot confirm that it was posted 

to the correct tribe or that the amount posted in the general ledger was the 

same as the amount on the deposit ticket. 

In regard to disbursements, for $845 million that the general ledger 

shows was withdrawn from the accounts of certain known tribes, the BIA 

cannot locate the disbursement documents and thus is unable to verify that 

the money was disbursed to the tribes from whose account it was 

withdrawn or that the disbursement was properly authorized. The BIA 

also lacked the documents to support $476 million in transfers between 

accounts of the same tribe. 

For all of these non-reconcilable deposits and disbursements, there is 

no evidence that the money is missing. On the other hand, there is no 

evidence that the money is there or that it went to the proper party. The 

missing documents for all three categories were evenly spread out over the 

20 year period. That is, as many documents were missing for the period 

1987-1992 as for the period 1973-1978, showing that it was not simply a 

case of inability to locate 20 year-old documents. 

Under the second major procedure performed by Arthur Andersen, 

called the "yield analysis", the reconciliation compared the average 

interest each tribe earned on all its accounts each year with the average 

earned by all tribes for that year. This all tribal annual average was called 

the benchmark. If a tribe's average was more than 2% below or 5% above 

the benchmark, Arthur Andersen examined the files to try to determine the 

source of the problem. However, the only problems it searched for and 

corrected through this examination were posting errors. It made no effort 

-4-
65 

to find out if the lower earning occurred because the money was under 

invested, such as by leaving it in short-term investments for an excessive 

period. 

The reconciliation recomputed the interest earned on "cash", which 

was defined as money kept in Treasury before it was invested in 

government bonds or COs. Arthur Andersen used 4% or 5% simple interest 

from 1978 through 1984. The interest could not be recomputed for the 

years 1972 through 1977 because revenue codes were not used by the BIA so 

it was not possible to determine what interest had been posted. The 

computation for 1978 through 1994 reported $2.4 million due to the tribes. 

However, this amount would probably be much larger if the missing years 

were included and if reasonable interest rates were used rather than 4% or 

5%. This computation also excluded the "interest" accounts from 1978 

through 1984 since the BIA did not pay interest on interest accounts. 

To determine the potential lost interest because money was left in the 

form of cash for long periods of time, Arthur Andersen comp,~ted proforma 

interest calculations on cash balances at the BIA's average benchmark 

rates for 1978 through 1992. The results of this work was not reported for 

all tribes. However, the amount of this work for two different tribes was 

$212,000 and $426,000 additional potential interest. 

Arthur Andersen also reconciled the investment system, Money Max, 

to the general ledger, which again, served to catch posting errors only. 

Posting errors were possible because the various BIA systems were unable 

to talk to each other, so data had to be transferred manually. This has now 

been corrected for the tribal accounts but not for the liM accounts. 

The results of the reconciliation of the investment system indicated 

$8.6 million due to tribes and $1 million due from Tribes for a net amount 

of $7.6 million due to tribes. During the reconciliation effort, five tribes 

were selected as "pilots" for the purpose of testing and adjusting the 

process. At several pilot tribes, Arthur Andersen tried to match deposit 

tickets to lease documents to see if the amount paid was the amount called 

for in the underlying lease document. However, it found that up to 50% of 

the leases could not be located. When Arthur Andersen tried to perform 

-5-
66 

such a match for all tribes on deposits in excess of $5000, again 50% of the 

leases could not be located . 

The reconciliation determined the number of days receipts lay idle 

before being deposited. Approximately $273 million took 7 days or longer 

to be deposited . Over $28 million took over 30 days to deposit. No interest 

was computed for the delays. If the date of receipt could not be 

determined, the deposit was considered to be timely. 

The final reconciliation report addresses each of these components 

individually, but never provides a summary that enables a non-accountant 

to grasp what was and what was not accomplished by this $21 million 

effort. Nor does it ever total the amounts due to and due from the tribes as 

a result of the various procedures performed. When totaled by ITMA as 

best we could, it is believed the report proposes adjustments of $24 million 

in favor of the tribes, that is $24 million is owed to the tribes by the federal 

government, and $21 million in proposed adjustments in favor of the 

government. These two numbers cannot simply be netted because a tribe 

that has money owed to it may not be one of the tribes that owes money to 

the federal government. 

For several of the reconciliation procedures, the report identifies 

possible exceptions but does not propose actual adjustments in the 

accounts, such as interest for pro forma and deposit lag time as well as 

several other possible adjustments, so these amounts are not included in 

the final tallies. Instead, the report indicates that these data are provided 

for "informational purposes only." The report does not discuss how the 

$2.4 billion in missing reconciliation documents should be treated. Nor 

does it address the implications of the missing leases. 

As limited as the reconciliation of deposits and disbursements was, 

the complete inadequacy of this process becomes even clearer when one 

considers the full context of the BIA's responsibility for Indian trust assets. 

For example, the reconciliation did not include an asset management 

review to determine if an asset such as grazing land had been allowed to 

be under utilized or overgrazed or whether mature commercial timber was 

not cut in a timely manner. Nor has there ever been a comprehensive asset 

review, though various Inspector General reports and Congressional 

-6-
67 

investigations have documented deficiencies in BIA's management of 

timber and other resources. 

Without an accounts receivable system and with so many leases 

missing, the BIA is unable to tell the trust account holders whether all of 

the income due on their asset leases has been collected. The BIA collects 

approximately $250 million per year in asset income from tribal leases and 

$200 hundred million a year from individual Indian trust assets. We do not 

know whether this is the right amount, 90% of what should be collected, 

50% or some other percentage. 

With regard to the management of the trust funds investment 

portfolio, the BIA has a duty to obtain the highest return possible within 

the investment limits established. Here the limits are those established by 

25 U.S.C. 161-162a. The reconciliation made no effort to determine if 

money was under-invested. In the yield analysis, all that Arthur Anderson 

did if it found that a tribe's yield fell below the benchmark, was check to see 

if there were any posting errors that were responsible for this. lt did not 

check to see if a tribe was below the benchmark because money was under 

invested. No audit was performed to determine if investments were lost, 

held beyond the call dates, or otherwise handled improperly. 

There is evidence that the BIA kept money in overnighters, at low 

interest rates, for inappropriately long periods, when most of the money 

should have been invested in longer term instruments. The Treasury paid 

the account holders 4% simple interest on overnighters, because the statute 

so provides. However, there is Federal case law holding that this 4% rate 

set by statute is a floor rather than a ceiling and finding the U.S. liable for 

the difference between 4% and what the market was paying for similar 

investments at that time. During at least a seven year period between 

1976 and 1985, the average interest earned exceeded 10%, so it is likely that 

overnighters were paying in excess of 4% simple interest. In addition to 

failing to make the money maximally productive, the trustee benefitted at 

the expense of the beneficiary because the U.S. Treasury had the use of the 

Indian money at rates far below what it was paying to all other lenders. 

Arthur Andersen did not address this issue because it was outside the scope 

of its engagement. 

-7-
68 

The Department of Treasury cannot tell the BIA how much Indian 

trust money it has. While the deposit tickets documenting lease payments 

were sent to the BIA general ledger in Albuquerque, the money itself was 

deposited in the United States Treasury. A reconciliation of the Treasury 

accounts to the BIA general ledger is necessary to determine if money was 

deposited. The BIA knew it could not reconcile these accounts prior to 1987 

because Treasury had destroyed all of its records prior to 1987. The BIA 

asked Arthur Andersen to reconcile the period 1987-1992. However, 

Arthur Andersen was able to reconcile only for 1992 because for the past 20 

years Treasury had commingled trust money belonging to Indians with 

Federal appropriated dollars. Arthur Andersen was able to separate trust 

money from appropriated funds only for that one year. 

The reconciliation process did not include oil and gas activities. 

Approximately $200 million a year is collected by MMS from oil and gas 

and other mineral leases on Indian lands and then transferred to the BIA's 

OTFM or paid directly to the tribes. No effort was made to determine if 

the payments reported by the lessees were accurate, whether the amount 

they paid was consistent with the rate called for in the lease, and whether 

the money was paid in a timely manner. All that Arthur Andersen did in 

the oil and gas area was to reconcile the MMS transfer documents with 

the entries in the BlA general ledger to identify clerical errors. 

Mr. Chairman, I have presented all of this detail about the problems 

with the reconciliation report in the hope that it will help us all to 

understand that we still have a long way to travel before we can put the 

problems with the trust funds behind us. Let me also be clear in stating 

that many significant trust fund management reforms have occurred 

during the past five years. These reforms were possible because of 

Congress' support. 

•The Office of the Trust Fund Management (OTFM) was 

reorganized, increasing the number of staff and the 

qualifications of those staff. This development better permits 

OTFM to perform many of the functions required by the Trust 

Funds Reform Act. 

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69 

• An automated trust funds accounting system has been 

installed for tribal accounts. This allov,rs OTFM to daily 

reconcile and post activities to tribal accounts. 

•Appointment of Mr. Homan as Special Trustee, and the 

establishment of the Office of the Special Trustee provides the 

government a qualified trust management resource never 

before available to the trustee or beneficiaries. 

•The 1994 Indian Trust Fund Reform Act provides a statutory 

infrastructure offering guidelines for future reforms. 

Congress, Tribal Leaders, ITMA and the Special Trustee can take 

pride in these advances and at the same time feel great frustration in 

realizing that we are only partially there in terms of a trust management 

system even approaching those of the private sector. 

The next steps in the reform process arc not easy. They include: 

•Centralized custodial services for securities held in the trust 

portfolio. 

• An accounts receivable system to track, collect and account 

for fund s derived from Indian trust assets. 

•Automated accounting system for liM accounts. 

In addition, the Trust Fund Reform Act requires the Secretary to 

account for the daily and annual balance of all funds held in trust for an 

Indian tribe or individual Indian trust account holder. That responsibility 

is still not being fully met. This situation must be corrected as promptly as 

the resources can be made available to the Secretary for the necessary 

systems and personnel. The Special Trustee must have the additional 

resources necessary to accomplish the required management reforms. In 

particular, his fiscal year 1997 request to begin building the infrastructure 

required to accomplish the daily collection, investment, accounting, and 

disbursement of trust funds is critically important to the ultimate success of 

this effort. 

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Until these and other reforms are completed, the government's 

"breach of trust" to Indian account holders continues. In fact, until these 

reforms are achieved, the Department remains in violation of the · 

provisions of the Trust Fund Reform Act. 

The final issue I want to address today is the question of settlements. 

The Trust Fund Reform Act requires each tribe to either dispute the 

reconciliation report or to state that they accept the reconciliation report 

"as full and complete accounting as possible to the earliest possible date". 

It is possible that some tribes may have enough information to reach a 

settlement with the government in respect to their account balances; and 

we encourage those tribes and the government to reach settlements as 

quickly as possible. 

However, it seems certain that many, if not most tribes, with 

substantial amounts in these accounts, do not have enough information to 

enter into account balance settlement negotiations. It is critically 

important that this Task Force not be mislead into thinking that a 

settlement is possible for these Tribes at this time. 

Technical assistance funds are needed to implement the Trust Fund 

Reform Act provisions which offer Tribes the opportunity for selfdetermination in the management of their trust funds and trust assets. 

This could well include the management of IIM accounts. ITMA believes 

that it is in the best interest of the federal government to assist those tribes 

who desire to take over these activities and to relieve the Government of 

further responsibility. Technical assistance is also necessary if Tribes are 

going to be able to develop the information which is absent from the 

reconciliation reports but which must be available to reach fair settlement 

of Tribal account balances. Tribes cannot responsibly exercise their 

authority to manage these funds unless and until they have thorough and 

reliable information on the account balances. The BIA's reconciliation 

report does not provide that information for most, if not all, tribes. 

As we move forward with the impleme.ntation of the Trust Fund 

Reform Act, we will need to find an effective way to evaluate the liM 

accounts. We know that the Department lacks the funds for an actual 

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audit of those accounts. We also know that an audit may not be feasible 

for such practical reasons as the absence of essential records. However, it 

is vitally important that we try to agree upon a process for an evaluation 

of these accounts and their balances which will be accurate and provide as 

fair and full an accounting as possible to the account holders. We look 

forward to working with the Task Force toward that end. 

In closing, on behalf of the members of ITMA, I want to thank the 

Task Force, and particularly Chairman Hayworth, for your help and 

assistance on this issue. With your continued interest and support, I am 

confident that we can arrive at a fair and reasonable resolution to the 

problems which have been created by the mismanagement of the trust 

funds. 

I will be pleased to answer any questions the Task Force may have. 

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72 

TESTIMONY 

OF 

JOHN E. ECHOHA WK, EXECUTIVE DIRECTOR 

NATIVE AMERICAN RIGHTS FUND 

PRESENTED TO 

THE HOUSE TASK FORCE ON TRUST FUND MANAGEMENT 

AT THE 

OVERSIGHT HEARING ON 

MANAGEMENT OF INDIAN TRUST FlJli.'DS 

Jilli.'E 18, 1996 

Mr. Chairman and Members of the House Task Force on Trust Fund 

Management: · 

I appreciate the opportunity to provide testimony on this important matter 

affecting the fundamental rights and interests of over 300,000 individual Indians 

and two hundred Indian tribes. 

I. L'\'TRODUCTION 

My name is John Echohawk. I am a member of the Pawnee Tribe of 

Oklahoma and serve as the Executive Director of the Native American Rights 

Fund (NARF). NARF is a public interest, nonprofit law firm dedicated to 

securing justice on behalf of Native Americans and Indian tribes--something we 

have been doing for 26 years. Our mission is guided by five priorities. One of 

these priorities is holding the government accountable to Indian people and tribes. 

That is why I am here today. 

The trust fund mismanagement crisis is a prime example of why it is so 

vitally important to hold the government accountable. The complete failure of the 

United States government to properly discharge its trust responsibility implicates 

what we believe is the largest and longest-lasting financial scandal ever involving 

the federal government. And in our view it represents yet another serious and 

continuing breach in a long history of dishonorabl e treatment of Indian tribes and 

individual Indi ans by the United States governmem. 

What is particularly disturbing is the cavalier acknowledgment by the 

executive branch and Congress that the federal government has failed to account 

for our trust monies, yet the federal government continually refuses to take the 
73 

necessary steps to fix the system. This is precisely why the Native American 

Rights Fund, along with other attorneys, filed a class action lawsuit last week in 

federal district court here in Washington on behalf of 300,000 individual Indians. 

By this action, these individuals--the victims of the very government that is 

required by Jaw to protect and advance their interests--hope to compel the federal 

government to honor its word and its legal responsibilities. 

Before I discuss the substance of my testimony concerning this ongoing 

breach of trust affecting the 300,000 individual Indians who comprise the class of 

plaintiffs in this lawsuit, there are several factors which warrant the atte:1tion of 

the Task Force . 

First, although the class action litigation is limited to the government's 

breach of trust affecting individual Indians, we express full support for the efforts 

of over two hundred Indian tribes to seek redress for the government's gross 

mismanagement of tribal trust funds. We are equally appalled and disturbed about 

this aspect of the trust fund mismanagement scandal. We therefore support the 

good work of the Intertribal Monitoring Association (ITMA), as we11 as the 

testimony given today by Eric Davenport, who chairs and leads the important 

oversight work of the ITMA relative to tribal trust funds. We look forward to 

working with the ITMA and the tribes to bring a just and equitable ehd to this 

conduct which continues to unlawfully deprive our people of our money every 

single day of every single year for over one hundred years. 

Second , given the stereotypes about American Indians that seem to exist, it 

is important to note that the money we are talking about is our own money, both 

individual and tribal , as the case may be. This Indian money is derived f;·om our 

own assets--it is not government money, nor did it originate from appropriated 

funds. 

Third, I want Congress and the public to know, including Indian Country, 

that neither the lawyers involved in this class action litigation, nor the accounting 

firm we have retained , Price Waterhouse LLP, will accept contingency fees 

available in a case like this. Fully, 100 % of the recovery in this class action 

lawsuit will go to the individual Indians who lost and continue to lose their money 

daily at the hands of the federal government. The lawyers and experts have been 

retained by the Individual Indian Trust Correction and Recovery Project of the 

Blackfeet Reservation Development Fund, and private funds are being used to 

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74 

support this effort. 

Fourth, I want to affirm the testimony of Elouise Cabell, who is the lead 

named plaintiff in the class action lawsuit: WE BRING THIS LITIGATION AS 

A LAST RESORT. As the record overwhelmingly indicates, the federal 

government and independent auditors have repeatedly acknowledged over time that 

the current tru st funds management system is hopelessly broken. This includes 

numerous reports by the executive and legislative branches of government, 

including the General Accounting Office (GAO), Office of Management and 

Budget (OMB), and Inspector General of the Department of the Interior. as well 

as House and Senate hearing records and reports. Successive Administrations--

both Republican and Democrat--have admitted that there are serious problems and 

abuses concerning what unequivocally amounts to gross mismanagement of Indian 

trust monies. In this sense, the responsibility is unquestionably bi-partisan in 

nature, and neither the executive branch nor Congress can avoid accountability. 

Notwithstanding, each successive Administration--including the current one--has 

abjectly refused to seriously address or even attempt to resolve the problem. No 

Administration has ever come close to asking Congre ss for sufficient funds to fix 

the system--and Congress has summarily, routinely and drastically cut b~ck the 

Administration's terribly inadequate funding requests. To make a long story short, 

we are in court because we have been unable to persuade the executive and 

legislative branches of government to honor the United States' solemn trust and 

legal obligation to 300,000 individual Indian account holders. 

I cannot overemphasize the fact that Ms. Cobell and others have attempted 

in good faith to work with Administration officials over the course of the past few 

years to reform the system. Our people have urged these federal officials to honor 

their trust responsibilities. to prudently manage and protect the Indian money at 

issue. They have repeatedly explained to the Secretary of the Interior and his staff 

that the money of these 300,000 Indians continues to be lost every single day and 

that these individuals desperately need their money. These efforts have fallen on 

deaf ears. Regrettably, there was no other choice but to go to court. 

The defendants in the lawsu it are the Secretary of the Interior, Assistant 

Secretary of Interior for Indian Affairs, and the Secretary of the Treasury. It is 

on their watch that the problem goes unabated and continues to be swept under the 

rug. The suit asks the court to declare that the defendants have breached, and 

continue to breach , their trust obligations to the 300,000 class members. It further 

3 
75 

asks the court to order the defendants to follow the law, fix the system, provide 

the account holders with an accounting, and make restitution. Finally, we seek to 

assure that the Special Trustee has all the tools he needs to fix the system--and to 

get the job done right--as Congress mandated when it enacted the Trust Fund 

Management Reform Act of 1994. 

I will now address the federal goverrunent"s trust responsibility, the nature 

of the individual trust accounts, and some aspects of how the government has 

grossly breached its trust responsibility to over 300,000 individual Indians as a 

result of its malfeasance, mismanagement and self-dealing of unprecedented 

historical magnitude. 

II. ORIGIN Al\'D NATURE OF 1:\'DIVIDUAL, TRIBAL Al'.'D 

OTHER TRUST FUND ACCOUNTS 

For more than 100 years, the federal goverrunent by law has held in trust 

for the benefit of both Indian tribes and individuals, those lands, minerals, timber 

and other natural resources and assets that were not appropriated from us by the 

United States. These resources generate income. The sources of income include, 

but are not limited to, surface leases, timber, minerals, and settlement of land and 

water rights claims where the money was distributed by the tribe on a per capita 

basis to its members, with the money for minors and incompetents placed in trust 

accounts. 

There are two major components to the trust funds, tribal trust funds and 

Individual Indian Money (liM) accounts. There are 2,000 tribal accounts owned 

by some 200 tribes: each such account is managed separately. There is a total of 

approximately $2.3 billion in these tribal accounts. 

There are more than 300,000 individual Indian accounts with a total balance 

of approximately $450 million. The JIM accounts are invested as a single pool. 

The bulk of the funds held by the United States in trust for liM account holders 

is derived ultimately from income generated from individual land allotments. 

These allotments date from the era , lasting until 1934, when it was the policy of 

the United States to break up Indian tribes and tribal lands. In the implementation 

of this policy, the bulk of tribal land was divided into tracts normally of 80 or 160 

acres (called "allotments") and the tracts were patented to individual Indians, with 

legal title held by the United States as trustee for the allottee. In many instances, 

4 
76 

such tracts produce income from, ~' the lease of tracts for grazing or farming 

purposes, the sale of timber from tracts, and the grant of oil, gas, or mineral 

mining rights. The income so derived forms the core of the liM accounts. 

To a limited extent, moneys from the following additional sources may be 

contained in, or have passed through, IIM accounts: (a) funds originally held in 

trust for a tribe which were distributed per capita to tribe members; (b) per capita 

distributions of funds appropriated to meet judgments of the Indian Claims 

Commission and courts and in settlement of claims; (c) income from investment 

of funds; (d) money paid from tribal funds to equalize all otments; (e) proceeds of 

sales of allotments; (f) compensation for rights of way; (g) rent for allotments of 

aged or incompetent allottees; (h) proceeds of sales of allotments of incompetent 

Indians; (i) money due to incompetent or orphan Indians; (j) money accruing from 

the Department of Veterans Affairs or other government agencies to minors or 

incompetent adul!s; (k) apportionment or allotment of pro rata shares of tribal or 

trust funds; and (l) per capita annual payments to members of certain specified 

tribes. 

In addition to the $450 million held in these IIM accounts, approximately 

$250 million flows through them each year. The IIM account holders, most of 

whom are poor, need their money for basic subsistence . 

In addition to tribal trust funds and liM accounts, there are several smaller 

accounts. For example, the Alaska Native Escrow Account was established to 

escrow income from land that was to be transferred under the Alaska Native 

Claims Settlement Act (ANCSA) to Native corporations, but final transfer was put 

on hold pending the completion of surveys and other processing. While the annual 

amount in this fund never exceeds $30 million, at least several hundred million 

dollars have flowed through the trust over the years. 

III. THE FEDERAL GOVERNMENT'S TRUST RESPONSIBILITY 

IN THE MANAGEMENT OF JIM, TRIBAL AND OTHER 

TRUST FUNDS 

The federal trust responsibility imposes traditional fiduciary standards on the 

conduct of executive agencies and officials. Since the trust obli gations are binding 

on the United States, these standards of conduct govern all executive departments 

that deal with Indians, not just those such as the Department of the Inti!iior or 

5 
77 

Bureau of Indian Affairs which have specific statutory responsibilities for Indian 

affairs. 

Federal law imposes important trust responsibilities upon executive branch 

agencies and officials in administering Indian assets. The Supreme Court has long 

held that, unless Congress has directed otherwise , the federal executive must 

properly discharge its fiduciary duties. In the management and administration of 

Indian property, executive agencies and officials are required to exercise due care, 

and are held to the "most exacting fiduciary standards " and "mora l obligations of 

the highest responsibility and trust." Moreover, they are "bound by every moral 

and equitable consideration to discharge [the United States') trust with good faith 

and fairness." Courts also require executive branch officials to adhere to the 

ordinary standards of a private fiduciary when managing and administering Indian 

assets. See generally , Felix Cohen, Handbook on Federal Indian Law, 1982 

edition, at 225-26 (citations omined). Indian trust funds are no exception, either 

tribal or individual. 

With particular regard to trust fund management, as trustee of the funds in 

the liM (and tribal) accounts, executive branch agencies and officials owe certain 

duties and responsibilities to the account holders as trust beneficiaries. These 

include the duty: (a) to maintain adequate books and records; (b) to maintain 

adequate systems and controls to guard against error and dishonesty, including an 

accurate accounts receivable system and separating the billing and collection 

functions; (c) to deposit trust asset receipts and safely and soundly invest these 

funds; (d) to account regularly and accurately to the beneficiaries; (e) to distribute 

the earned income to the proper Indian beneficiaries; and (f) to refrain from selfdealing and benefiting from the management of these trust funds . 

IV. THE FEDERAL GOVERNMENT'S l\1IS!\1A~AGEMENT Al\'D 

BREACHES OF TRUST RESPONSIBILITY REGARDING liM 

ACCOUNTS 

For years. Congress, the General Accounting Office (GAO), the Inspector 

General of the Department of the Interior. and pri vate accounting firms have 

issued numerous reports confirming that the federa l government has failed to carry 

out these fiduciary duties and has breached its trust responsibility to over 300,000 

individual Indian account holders. These breaches of trust committed by the 

federal government, as set forth in the class action lawsuit filed last week, include 

6 
78 

but are not limited to: (a) failure ever to reconcile or audit the accounts. so that 

federal officials are unable to provide accurate account balances or to determine 

how much money that should have been collected and credited to IIM accounts 

was not collected or was diverted to improper ends; (b) deliberate destruction of 

records from which the amounts that should have been credited to IIM accounts 

could be determined: (c) failure to establish an accounts receivable system, so that 

the federal government has no way of confirming that the income due from the 

trust assets. and other funds that should have been credited to liM accounts, has 

in fact been collected: (d) failure to separ2.te billing and collection functions or to 

install other systems necessary to guard against diversion of beneficiaries' funds: 

(e) failure to maintain accurate ownership records. so that federal officials have no 

way of determining to whom the income that has been collected belongs; (f) failure 

to provide regular. accurate reports to beneficiaries to tell them the correct 

amounts and sources of their income; (g) failure to exercise prudence and observe 

the requirements of law with respect to investment and deposit of liM funds. and 

to maximize the return on investments within the constraints of law and prudence: 

and (h) engaging in self-dealing and benefiting from the management of the trust 

funds. 

V. PARTIAL CONSEQUENCES OF 1\HSMk'\'AGEI\IENT A ... '\1) 

BREACHES OF TRUST RESPONSIBILITY CONCER..l\'li\'G liM 

ACCOC~TS 

The consequences of these and other acts of mismanagement in breach of 

trust include. but are not limited to. the following: (a) as of the close of fiscal 

1995, there was a total of more than 387.000 liM accounts, among which there 

were at least 15.599 duplicate accounts with the same number; (b) there were 

many duplicate accounts with the same name: (c) twelve separate databases of 

accounts were maintained and there was no common database: (d) there were more 

than 54,000 accounts, containing over $46,000,000, for individuals with no 

address or no correct address; (e) out of more than 48,000 accounts containing 

more than $159,000.000 supposedly held in trust for minors until they reach the 

age of 18, mer 15.000 accounts, containing more than S24,000,000, were held for 

persons who in fact were over 18: (f) more than $122.000.000 was held in nearly 

22,000 accounts which were supposedly temporary repositories pending 

determination of ownership of the funds: more than 4.000 of these accounts, 

containing over $3,000,000, had no activity for 18 months; (g) there were more 

than 21,000 accounts with more than $36.000.000 for persons who had died; at 

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79 

least 2400 of these were for closed estates, yet more than $600,000 due to heirs 

under such estates had still not been distributed; and (h) there were more than 280 

overdraft accounts totaling over $325 ,000. 

Because it does not have an adequate accounts receivable system, and 

because so many lease documents are missing, the federal government cannot even 

report to liM account holders whether lease income has been collected from the 

lessees, or if it has been collected in the correct amount, or if it has been paid on 

time. Nor can the government determine with certainty whether payments from 

the JIM accounts are made to the correct individual Indian account holder. 

Moreover, in 1987 the Department of the Treasury destroyed all of its records 

pertaining to liM accounts, and continues to destroy additional records each year. 

As a result of these breaches, just like the problems recently disclosed about funds 

collected by the IRS, the federal government in actuality has no idea how much 

IIM money it has; how much liM money it should have; how much liM money 

it has lost; or how much liM money that could easily be and may be stolen every 

single day . 

The government's trust fund system is in such disarray that the Arthur 

Andersen accounting firm would not even attempt to reconcile the liM accounts 

because federal officials had either willfully destroyed, or never created , the 

crucial documents necessary for a reconciliation. In fact, Arthur Andersen, LLP 

estimated that it would take at least Sl08 to S281 million just to attempt to 

reconcile the liM accounts, and that even then, it would likely be of no value in 

providing the liM account holders with assurance about the correctness of their 

account balances. Indeed , at the hearing before the Senate Committee on Indian 

Affairs on June II , 1996, Special Trustee Homan testifi ed that the liM account 

system was "as bad or worse" than the tribal trust accounts. Notwithstanding, the 

Department of the Interior has no plans or money to do any historical accounting 

regarding the liM accounts, to determine how much money the liM account 

holders may have lost and continue to lose each day as a result of the 

government's ongoing mismanagement and gross breaches of trust. 

It should not escape the Task Force that the Department of the Interior was 

quoted in the Washington Post last week, in response to our class action lawsuit,as 

having fixed the trust fund management system. Nothing could be further from 

the truth. The fact of the matter is that Interior has done absolutely nothing to 

improve the system for the management of Individual Indian Money accounts, and 

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80 

it should be clear by now that it does not have any plans to do so. In short, the 

federal government continues to turn its back on 300,000 individual Indian account 

holders everyday. Again, that is why we had no choice but to seek relief in court. 

VI. CONCLUSION AND RECOMMEl'.'DATIONS 

Over 300.000 individual Indians and 200 tribes and their members are the 

direct victims of this continuing scandalous government wrongdoing. The price 

for this government negligence and malfeasance is being paid by some of the 

poorest citizens of this great country. And each day that this mismanagement 

continues, these individuals and their families lose more and more of their money 

to the open, outstretched hands of the federal government--which by law is 

required as a fiduciary to protect their interests. 

This egregious government misconduct is inexcusable and must stop once 

and for all. The longer it is permitted to continue, the more expensive it will be 

to fix the system. and the greater the government's liability will be to the 300,000 

individual Indian account holders and 200 tribes and their members who are being 

forced daily to pay the price for the government's breach of trust. And the price 

goes up every day. 

The resolution of this crisis is the joint responsibility of both Congress and 

the Administration: it is likewise the joint responsibility of both the Republican and 

Democratic parries. As we have indicated, one of the major problems preventing 

system reform is the routine lack of adequate appropriations. In short, the Special 

Trustee's hands are tied due to lack of funds and resources. For example, the 

Special Trustee indicated that it would take almost S50 million in FY 1997 just to 

begin to resolve this problem. However, the Administration asked for only $18 

million in its appropriation request. Just recently the House Interior 

Appropriations Subcommittee marked this down to a paltry S1 million--about 2 

percent of the amount the Special Trustee sought just to begin to reform the 

system, as mandated by Congress in 1994. 

In fact. the S 1 million in new money added by the Subcommittee is not even 

sufficient to complete the Strategic Plan, despite the Subcommittee's claim to the 

contrary. The $1 million will only pay for the user-needs survey. and will not 

cover the staff that the Special Trustee requires to actually write the plan. As a 

result, the plan, which Congress required to be completed no later than September 

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81 

1996, will be impossible to complete by September 1997. 

It will take at least an additional $22 million for FY 1997 to begin to 

satisfactorily reform the trust fund system as it relates to the Individual Indian 

Money (liM) accounts. Without this minimal amount, the government could be 

paying substantially more to correct the staggering losses that are hitting these 

300,000 individual Indians every single day. We respectfully urge the Task Force 

to do everything it can to assure that the Special Trustee receives the $22 million 

dollars for FY 1997 which he needs to fix the system as it pertains to the liM 

accounts, so that he can do the job mandated by Congress when it enacted the 

Trust Fund Management Reform Act of 1994. 

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82 

TESTIMONY BEFORE THE INDIAN TRUST FUND TASK FORCE 

OF THE 

HOUSE COMMITTEE ON RESOURCES 

JUNE 18, 1996 

SUBMITTED BY 

ELOUISE COBELL, CHAIR 

SPECIAL TRUSTEE'S ADVISORY COMMITTEE 

Mr. Chairman and members of the Task Force. Thank you for the 

opportunity to testify before you today. I would like to say a special thank you 

to my Congressman, Pat Williams, who was instrumental in getting this Task 

Force established, and who has been a great and good friend of the Indian 

people on the trust fund issue and so many other issues over the years. I, the 

members of the Blackfeet Tribe, and Indians everywhere will miss you when 

you retire at the end of this year; but we want you to know how much we 

appreciate everything you have done for us over the past 18 years. 

My name is Elouise Cobell. I am a member of the Blackfeet Tribe in 

Montana. I served as treasurer and comptroller of that tribe for over 15 years, 

during which time I received my first exposure to the horrible status of our 

trust fund s. Since then , I have devoted a great deal of my time to trying to get 

that problem co rrected. Presently, I serve as chair of the Special Trustee's 

Advisory Board, a board mandated by the 1994 Trust Fund Management 

Reform Act. I am also the lead plaintiff in the class action law suit filed last 

week against Secretary Babbitt and others on behalf of 300,000 Individual 

Indian account holders. I am also Project Director of the liM Trust Funds 

Correction and Recovery Project, and served as chair of ITMA for the first five 

years of its existence. Finally , I am secretary of the board of the Blackfeet 

National Bank, which permits me to see the kinds of close regulation the 

Federal Government exercises over private financial institutions but has failed 

to apply to itself when it was and is managing Indian trust funds. 

I appreciate the Task Force making the Indian witnesses the first panel at 

the hearing. I know the usual protocol is to put the federal witnesses first. 

However, this is appropriate for this hearing and helps me to make one of the 

most important points of my testimony -- what is at issue today, what is being 

lost by the United States Government as a result of mismanagement even as we 
83 

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speak, is our money, not the Federal government 's. It is money that is ea rned 

from land owned by tribes and individual Indians, the last remnants of the huge 

territories that were our before the non-Indians came to this country. On its 

own initiative, the United States assumed a legal trust responsibility over our 

lands, the assets on our lands, and the income earned from our land and made a 

legal commitment to properly manage the land, money and assets. So when we 

talk today about gross mismanagement, this is not a case of government 

mismanagement of its own money , which is serious enough; it is the 

mismanagement of the money, land and assets of someone else's money, in this 

case some of the poorest and least educated people in the country. 

Nor is it a case of a "feel-good " commitment by the Federal government. 

The courts have consistently held that the United States has taken on a legal 

trust responsibility, with all of the fiduciary obligations and attendant liability 

for losses that apply to any private trustee . So what we are talking about today 

are violations of the law. It is unfortunate that the Secretary and his cou nsel 

have fa iled to address this problem as they should; as a very serious breach of 

trust rather than just an annoying program issue that has a much lower priority 

than their other program interests. 

As some one who was deeply involved in the enactment of the Trust 

Fund Management Reform Act, and is now involved in its implementation as 

cha ir of the Special Trustee's Advisory Board, my testimony addresses what 

Congress and the Indian account holders hoped to achieve through the passage 

of the Act; how that intent has been fru strated by the Inte rior Department and 

Congress; and some recommendations for amendments needed to enable the Act 

to accomplish its original purposes. 

A. The Purposes of the Special Trustee Title of the Reform Act 

Title III of the Re form Act established the Office of the Special Trustee, 

directly under the Secretary. His assignment is (1 ) to insure the trust fu nd and 

trust asset systems are brought into compliance with basic trust standards, and 

(2) to assist in bringing to closure the historical reconciliation and accounting 

for triba l and liM accounts. Rather than giving him direct operati onal authority 

over trust programs or having Congress dictate how the boxes should be moved 

around , the Act instructed him to spend his first year preparing a 

comprehensive strategic plan for making the necessary improvements. If, in 

developing that plan, he concluded that there was a need to realign fun ctions 

within th e Department, such as bringi ng all of the trust fun ctions under a single 
84 

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agency, he was to include that as a recommendation in the Plan. Upon receipt 

of the Plan, Congress and/or the Secretary would then be able to address the 

question of reorganization with a well-thought out plan in front of them, 

Under the Act, his plan is due on September 30, 1996, a year from the 

date he was sworn in. As I will get into shortly, he will not be able to meet 

this date because the Secretary and the Congress have failed to give him any 

resources with which to develop a plan. 

The purpose of the Special Trustee Title was to provide the Department 

with three things it had been lacking and that had contributed to the 

continuation of this outrageous problem for 100 years, even though it has been 

known to every Secretary and every Congress over that period. First, he would 

provide expertise in trust fund management, since historically, the high-level 

officials in the Department tasked with making decisions regarding trust funds 

had little or no experience in trust fund management. Secondly, he would 

provide continuity, so that efforts at trust fund reform would not be put on hold 

for 18-24 months every four years while a new Secretary tried to get up to 

speed on this complex issue. Third, he was to be the official with a single 

focus on, and absolute loyalty to, the account holders. This is the fiduciary 

responsibility of every trustee; but in the Department, trust funds are just 

another program whose interests have been sacrificed for the benefit of other 

programs. 

Congress believed that it would be unwise to give him direct operational 

authority over any functions until he had a plan in place. Otherwise, he would 

be so overwhelmed by the day-to-day problems that he would be unable to 

focus on his plan. It was also concluded that no effort should be made to move 

the program out of the BIA or Interior until it had been fixed, since moving it 

while it was broken would simply dump the problem somewhere else. 

Thought was given to placing him outside the Department, but ultimately 

it was concluded that the Secretary should be given an opportunity to show he 

would use the Special Trustee as intended, before trying to establish the Special 

Trustee outside the authority of the Secretary. 

B. The Experience Under the Act 

Today. 20 months after the Act was signed into law, and nine months 

after the Special Trustee was sworn in, I believe the Secretary has refused to 
85 

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use the Special Trustee as intended, has severely undercut his ability to carry 

out his mission and has shown that, to be successful, the Special Trustee needs 

independent authority. 

As I will detail below, I believe that the Interior Department, under 

Secretary Babbitt's personal direction, has been particularly insensitive to its 

legal obligations and has failed to provide leadership on the trust issue. One 

superficial indication, but a good one in Washington, is that while the Secretary 

has found the time to fly all over the country and to meet with hundreds of 

groups, he has never once in his three and a half years in office been able to 

find the time to meet with tribes on the trust fund issue. 

However, the problem goes deeper than Secretary Babbitt. Rather, it is a 

well-known principle that management of a broken down company cannot be 

expected to reform reform itselfor the company that is mismanaged. In keeping 

with that principle, it appears to be institutionally impossible for a political 

appointee like the Secretary , with responsibility for numerous programs, to put 

his legal obligations as a trustee ahead of his political and programmatic 

preferences. In addition, Congress has failed to provide the Special Trustee 

with the resources he needs to do his job. 

To walk you through the past year's events, the Special Trustee was 

sworn into office on September 21, 1995. He was and continues to be 

everything the account holders and Congress had hoped for when the Reform 

Act was being considered. He is experienced in trust funds, has a successful 

history of turning around troubled fin ancial institutions, believes he has the 

legal obligation as trustee that the courts have placed on the United States 

government, and is a strong executive. 

However, for the FY 96 fiscal year beginning nine days after he was 

sworn in, the President had requested, and the Appropriations committees had 

approved, only $447,000 for the Office of Special Trustee. This barely 

covered his salary, that of his deputy and a sec retary. It left no money with 

which to prepare the strategic plan called for by the Act, which as I indicated, 

is due by September 1996. The Special Trustee asked the Secretary to find $2 

million in his $12 billion FY 96 budget to enable him to prepare the plan. The 

Secretary said he could not find the money. Yet several months later, the 

Secretary could find $2 million for emergency repairs to the C&O canal. 

know the canal is an important recreational spot for residents of this area, but it 

is not a legal obligation as is the trust responsibility. 
86 

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The Special Trustee then asked Congress to prov ide the money through a 

supplemental appropriations; Congress said no, go get it from the Secretary . 

Since neither provided the money, we are now three months from the 

September 21st deadline and all that he has been able to produce is a brief 

outline of the plan. He will not be able to meet his statutory obligation to 

prepare a plan within a year of taking office. 

In addition to being inconsistent with the law and a hoax on the Indian 

people, this refusal to spend money is foolish, since the government will incur 

far more than $2 million in liability during this year, as a result of the losses 

the account holders continue to suffer because of the Government's trust 

mismanagement. One of the purposes of the law suit we filed last week is to 

make it crystal clear to the Secretary, OMB and Congress that at some point the 

government will be forced to make restitution for these losses. 

Last week the House Appropriations Committee marked up the FY 97 

Interior Appropriations Act. While it provided the Special Trustee with $1 

million to conduct a user su rvey, one component of the strategic plan, it failed 

to provide him with the $1.5 million he needs to hire the staff to actually write 

the plan. If this is not changed before the appropriations bill is enacted, there 

will not be a strategic plan by the end of FY 97, two years after the statutory 

deadline; and there will be two years of government liability for individual 

Indian trust fund s that are being lost every single hour of every single day . 

Nor did Congress provide the $22 million he needs to begin making the reforms 

in the system that can be made even before the plan is fi nalized . 

The Special Trustee's second major responsibility is to help bring to 

closure the reconciliation of the accounts so that there will be agreement on the 

account balances go ing forwa rd. As Mr. Davenport addresses in his testimony, 

the $2.4 billion identified as unreconcilable by the Arthur Andersen report is 

just the tip of the iceberg. 

As Mr. Echohawk addresses in his testimony, the liM accounts are in 

much worse shape than are the tribal accounts, so the federal government's 

breach of trust to the individual Indian beneficiary is even more egregious. 

While Congress instructed the Department in 1987, almost ten years ago, to 

provide the liM account holders with an adequate accounting, the Secretary still 

has absolutely no plans to do so. 
87 

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In sum, the Department is in breach of its fiduciary responsibility every 

single day. At this point, it looks like the courts are the only branch of the 

government we can depend on to force the Department to honor its trust 

responsibilities. This is a sad commentary on the federal government when it 

takes a court to compel the executive branch to meet its trust obligations, 

obligations that the U.S. Government enforces vigorously in its supervision of 

regulated financial institutions. 

Efforts have also been made to limit tribal involvement in the reform 

effort. There are two complementary organizations in this effort that work 

together closely to insure the Interior Department is constantly reminded that it 

is our money and that we must have a say in the reform effort. The Intertribal 

Monitoring Association on Indian Trust Funds (ITMA) is a tribal organization. 

It is the voice of the tribes on trust fund issues. It was instrumental to the 

enactment of the Reform Act and has tried to make sure the Department does 

not cover up the limitations of the Arthur Andersen reconciliation. 

The Special Trustee's Advisory Board serves a different purpose-- that 

of providing advice and guidance to the Special Trustee. Its membership 

includes five tribal leaders -- President Ivan Makil from the Salt River Pima 

Maricopa Indian Community, Ed Thomas from the Tlingit and Haida Central 

Council, Chairman Gregg Bourland from the Cheyenne River Sioux Tribe, and 

President Wendell Chino from the Mescalero Apache Tribe, plus myself and 

four outside experts on trust fund management. 

The Department has tried to cut off both of these voices of the Indian 

people. While the Secretary seems to have plenty of money to travel around 

the country making speeches, he could not find any money to enable the Special 

Trustee to bring his advisory board together, except for our organizational 

meeting last December. We have not yet met this year and it appears we will 

not be able to meet for the remainder of at least this fiscal year. In sum, we 

are a Board in name only, but are unable to do anything. 

The funding for ITMA for FY 96 was cut in half, severely handicapping its 

ability to represent Indian country on this important issue. As a result, there 

has been no Indian input into the discussions now going on in Interior and we 

have every reason to believe the Department wants to do every thing it can to 

keep our organizations from raising the difficult issues it would rather keep 

buried during this election year, such as the Federal government's massive 

potential liability for its breach of trust. 
88 

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C. Proposed Solutions 

What can be done to stop this illegal and dishonorable behavior by the 

Interior Department, behavior that will end up costing the American taxpayers 

millions or billions of dollars in liability? The answer is simple -- the Special 

Trustee needs money and independent authority. The much more difficult 

question is how to get those to him. In regard to money, I ask the Task Force 

to seek to add an amendment to the Interior Appropriations bill when it comes 

to the floor, that requires the Secretary to find $22 million in his $12 billion FY 

97 budget to enable the Special Trustee to complete the plan and make the 

immediate improvements in the liM system that at least will stop the bleeding. 

This money must not come from Indian programs. Indians have suffered and 

paid enough as a result of this breach of trust. In its final report, the Task 

Force should recommend an approach for insuring the remaining $80 million 

needed to complete the reforms is available over the next three years. We are 

available to work with the Task Force in exploring the options. 

In regard to increased authority, the Special Trustee needs to be given a 

five-year term, his own legal counsel (since the Interior Solicitor may have a 

conflict of interest) and the power to hire staff and consultants outside of the 

usual bureaucratic process. He also needs direct authority that is not subject to 

a veto by the Secretary. 

Again, the Advisory Board and the liM Corrections and Recovery project 

are available to work with you. I hope and pray that the end result of this Task 

Force's efforts is not just another report that will gather dust alongside the 

many reports now on the shelf. Thank you. 
GAO 

For Release on Delivery 

Expected a1 

IOa.m. 

Tuesday. 

June 18. 1996 

GAO!f·AIMD·96·lll 

89 

United States General Accounting Office 

Testimony 

Before the Comminee on Resources 

Task Force on Indian Trust Fund Management 

House of Representatives 

FINANCIAL 

MANAGEMENT 

Interior's Management of the 

Indian Trust Funds 

Statement of Linda M. Calbom 

Director, Civil Audits 

Accounting and Information Management Division 
90 

Mr . Chairman and Members of the Task Force: 

We appreciate t he opportunity to be here today to discuss our 

work on the Department of the Interior's management of the Indian 

trust funds. My statement 

summarizes our assessment of the results o f Interior' s 

efforts to reconcile Indian trust fund accounts, 

discusses the Secretary's May 31, 1996 , report on trust f und 

reconciliation results, and 

provides information on the status o f Interior 's t rust fund 

management improvement initiatives which are needed to ensure 

that the trust fund accounts will be accurate in the future. 

In summary, as discussed in our May 1996 report , 1 while Interior 

has brought its reconciliation project to a close, tribal 

accounts were not fully reconci led due to missing records and the 

lack of an audit trail in Interi or' s automated accounting 

systems. In addition, the January 1996 report package that 

Interior provided to each tribe on the reconciliation results d i d 

not explain or describe the numerous changes in reconciliation 

scope and methodologies or the procedures that had been planned 

but were not performed. Therefore, the limitations of the 

reconciliation were not evident. Also, due to cost 

considerations and the potential for missing records, individual 

Indian trust fund accounts were not included in the 

reconciliation project. 

Tribes hav e expressed concerns about the scope and results of the 

reconciliation process. As stated in the Secretary's May 31, 

1996, report to the House Committee on Resources on Indian trust 

fund reconciliation results, by April 30, 1996, only 2 tribes had 

accepted their account reconciliation results, 3 tribes' had 

disputed their results, and the remaining 275 tribes had not 

decided whether to accept or dispute their account balances. If 

Interior is unable to resolve tribes' concerns, a legislated settlement process could be used to resolve disputes about tribal 

account balances. Our September 1995 report' contained draft 

legislation outlining a settlement process, which we prepared in 

' Financial Management: BIA's Tribal Trust Fund Account 

Reconciliation Results (GAO / AIMD-96-63, May 3, 1996). 

2The Secretary's report did not include i n the number of tribes 

that disputed their account balances two tribes whose attorneys 

submitted letters on behalf of tribes that they represent 

indicating that these tribes disputed their reconciled account 

balances. 

' Indian Trust Fund Settlement Legislation (GAO/ AIMD/OGC-95-237R, 

September 29, 1995) . 

1 
91 

response to a request from the House Committee on Resources and 

the Senate Committee on Indian Affairs to initiate discussions on 

options for resolv ing disputed balances. 

While Interior has ini tiated several management improvement 

actions over the past 3 years to correct the long-standing 

problems that gave rise to the concerns over the accuracy of 

tribal trust fund account s, the improvements will take several 

years to complete. Additionally, the current trus t fund 

management and accoun ting systems and controls remain inadequate 

to ensure accurate trust fund accounting and asset management. 

Unless Interior corrects its long-standing trust fund management , 

accounting, and control weaknesses, it may be faced with 

additional costly reconciliations and settlements in the future. 

The appointment of the Special Trustee for American Indians was 

an important step in establishing high-level leadership at 

Interior for Indian trust fund management. The Office of the 

Spe cial Trustee was implemented in February 1996 . The Special 

Trustee has recently developed a concept paper which outlines 

needed trust fund management improvements. This concept paper 

will need to be expanded to include various options and 

alternatives and their associated costs and benefits and 

ultimately developed into a comprehensive strategic plan. 

Ultimately, so l ving Interior 's trust fund management problems 

will require comprehensive planning, management commitment across 

all Indian trust program offices, and additional resources. 

BACKGROUND 

Several Interior agencies are responsible for carrying out the 

Secretary's Indian trust responsibilities. These agencies 

include the Bureau of Indian Affairs (BIA) and its Office of 

Trust Responsibilities (OTR), which is responsibl e f or resource 

management and land and lease ownership information; BIA 's 12 

Area Offices and 85 Agency Offices; the Bureau of Land Management 

(BLM) and its lease inspection and enforcement functions; and the 

Minerals Management Service's (MMS) Royalty Management Program, 

which collects and accounts for oil and gas royalties on Indi an 

leases. 

In addition, an Office of the Special Trustee for American 

Indians was established by the American Indian Trust Fund 

Management Reform Act of 1994. This office, implemented by 

Secretarial Order in February 1996, has oversight responsibility 

over Indian trust fund and asset management programs in BIA, BLM, 

and MMS. The Order transferred BIA's Office of Trust Funds 

Management (OTFM ) to the Office of the Special Trustee for 

American Indians and gave the Special Trustee responsibility for 

the financial trust services performed at BIA's Area and Agency 

Offices. 

2 
92 

At the end of fiscal year 1995, OTFM reported that Indian trust 

fund accounts totaled about $2.6 billion, inc luding approximately 

$2.1 billion for about 1,500 tribal accounts and about $453 

million for nearly 390,000 Individual Indian Money (IIM) 

accounts. The balances in the trust fund accounts have 

accumulated primarily from payments of claims; oil, gas, and coal 

royalties; land use agreements; and investment income . Fiscal 

year 1995 reported receipts to the trust accoun ts from these 

sources totaled about $1 . 9 billion, and disbursements from the 

trust accounts to tribes and individual Indians totaled about 

$1.7 billion. 

OTFM uses two primary systems to account f or the Indian trust 

funds- -an interim, core general ledge r and investment system and 

BIA's Integrated Resources Management System (IRMS). OTR's 

realty office uses the Land Records Information System (LRIS) to 

record official Indian land and beneficial ownership information. 

BLM maintains a separate system for recording mineral lease and 

production information and MMS maintains separate royalty 

accounting and production informat ion systems. 

Our assessment of BIA's trust fund reconciliation and reporting 

to tribes is detailed in our May 1996 report, which covered our 

efforts to monitor BIA's reconciliation project over the past 5 

and one-half years. As you requested, we a lso assessed 

Interior's trust fund management improvement initiatives . In 

order to do this, we contacted the Special Trustee for American 

Indians, OTFM officials, and OTR's Land Records Officer for 

information on the status of their management improvement plans 

and initiatives. We also contacted tribal representatives for 

their views. We focused on Interior agency actions to address 

recommendations in our previous reports and testimonies and 

obtained information on new initiatives. 

TRUST FUND RECONCILIATION RESULTS 

BIA recently completed its tribal trust fund reconciliation 

project which involved a massive effort to locate supporting 

documentation and reconstruct historical trust fund transactions 

so that account balances could be validated. BIA provided a 

report package' to each tribe on its reconciliation resul ts in 

January, 1996. Interior's prototype summary reconciliation 

'The report package presented the results of the reconciliation 

procedures performed by BIA's contractor for fiscal years 1973 

through 1992, and BIA's reconciliations for fiscal years 1993 

through 1995. It included unreconciled account statements and a 

schedule of proposed adjustments for each of the year s covered by 

the reconcil iation, and a transmittal letter which described the 

information provided and BIA's plans to meet with tribes to 

d i scuss the reconciliation results. 

3 
93 

report to tribes shows that BIA's reconciliation contractor 

verified 218,531 of tribes' noninvestment receipt and 

disbursement transactions that were recorded in the trust fund 

general ledger. However, despite over 5 years of effort and 

about $21 million in contracting fees, due to missing records, a 

total of $2.4 billion for 32,901 receipt and disbursement 

transactions recorded in the general ledger could not be traced 

to supporting documentation and only 10 percent of the leases 

selec ted for reconciliation could be verified. 

In addition, BIA's rec onciliation report package did not disclose 

known limitations in the scope and methodology used for the 

reconciliation process. For example, BIA did not disclose or 

discuss the procedures included in the reconciliation contract 

which were not performed or could not· be completed. Also, BIA 

did not explain substantial changes in scope or procedures 

contained in contract modifications and issue papers, such as 

accounts and time periods that were not covered and alternative 

source documents used. Further, BIA did not disclose that the 

univer se of leases was unknown or the extent to which 

substitutions were made to the lease sample originally selected 

for reconciliation. 

In order for the tribes to conclude on whether the reconciliation 

represents as full and complete an accounting as possible, it was 

important that BIA explain the limitations in reconciliation 

scope and methodology and the procedures specified under the 

original contract that were not performed or were not completed. 

At a February 1996 meeting in Albuquerque, New Mexico, where BIA 

and its reconciliation contractor summarized the reconciliation 

results, tribes raised questions about the adequacy and 

reliability of the reconciliation results. 

SECRETARY'S REPORT ON RECONCILIATION RESULTS 

The American Indian Trust Fund Management Reform Act of 1 994 

required that the Secretary of the Interior report to the House 

Committee on Resources and the Senate Committee on Indian Affairs 

by May 31, 199 6, including a description of the methodology used 

in reconciling trust fund accounts and the tribes' conclusions as 

to whether the reconciliation represents as full and complete an 

accounting of their funds as possible. 

During BIA's February 1996 meeting with tribes to discuss the 

reconciliation reports and results, several tribes stated that 

they would n eed significant time to review their reconciliation 

reports and the supporting documents. OTFM planned five regional 

4 

26- 403 0 - 96 - 4 
94 

meetings' between March 1996 and July 1996 to serve as wo r kshops 

to assist individual tribes in reviewing their reconciliation 

results. Because BIA has no t yet held all of the scheduled 

meetings to discuss accoun t holder issues and comments and many 

account holders have not communica ted their acceptance or dispute 

of their reconciled account balances, the Secretary ha s provided 

an interim report on account holders' communications through 

April 30, 1996. The Secretary plans to submit a final repo rt on 

account ho l der attestations of their acceptance or dispute of 

their reconciled account balances by Ncvember 15, 1996. 

According to the Secretary's May 3 1, 1996, report 

3 tribes, including two tribes for which additional pilot 

reconci liation procedures were performed, have disputed the ir 

reconciled account balances, 

2 tribes with nominal balances have accepted their reconciled 

account balances, and 

275 tribes, including 3 tribes that had additional pil ot 

reconciliation procedures performed, have not yet decided 

whether to accept or dispute their account balances. 

Tribal representatives have told us that they are still reviewing 

their reconciliation report packages and that they have a numbe r 

of questions and concerns about the results . If Interior is not 

able to reach agreement with tribes on the reconciliation 

results, a legislated settlement process would prove useful in 

resolving disputes about account balances. Our March 1995 

testimony' suggested that the Congress consider establishing a 

legislated settlement process. Our September 1995 report 

provided draft settlement legislation for discussion purposes. 

The draft legislation would provide for a mediation process and, 

if mediation does not resolve disputes, a binding arbitration 

process . The proposed process draws on advice provided us by the 

Federal Mediation and Conciliation Service and the rules of the 

American Arbi tration Association. Both of these organizations 

have extensive experience in the us e of third party facilitators 

to provide alternative dispute resolution. The proposed process 

offers a numbe r of benefits, including flexibility in 

presentation of evidence and, because the decision of the 

arbitrators would be binding and could not be appealed, a final 

50TFM has he l d three of the five planned meetings--on March 19-22 

in Sacramento, California , on April 9-12 in Portland, Oregon, and 

on June 4- 7 in Tulsa, Oklahoma. The fourth workshop is scheduled 

for June 18-21 in Billings, Montana. 

'Financial Management: Indian Trust Fund Accounts Cannot Be 

Fully Reconciled (GAO/T-AIMD-95-94, March 8, 1995). 

5 
95 

resolution of the dispute. In addition, arbitration has 

generally been found to be less costly than litigation. 

TRUST FUND MANAGEMENT IMPROVEMENT INITIATIVES 

BIA's reconciliation project attempted to discover any 

discrepancies between its accounting information and historical 

transactions that occurred prior to fiscal year 1993. While it 

is important for the Congress to consider legislating a 

settlement process to resolve discrepancies in account balances, 

unless the deficiencies in Interior's trust fund management that 

allowed those discrepancies to occur are corrected, such 

discrepancies could continue to occur, possibly leading to a need 

for future reconciliation and settlement efforts. Since 1991, 

our testimonies and reports on BIA's efforts to reconcile trust 

fund accounts have recommended a number of corrective actions to 

help ensure that trust fund accounts are accurately maintained in 

the future. While QTFM and OTR have undertaken a number of 

corrective actions, progress has been slow, results have been 

limited, and further actions are needed. 

OTFM, Interior, and OTR have initiated several trust fund 

management improvements during the past 3 years. These include 

acquiring a cadre of experienced trust fund financial 

management staff; 

issuing trust fund liM accounting procedures to BIA field 

offices, developing records management procedures manuals, 

and issuing a trust fund loss policy; 

implementing an interim, core general ledger and investment 

accounting system and performing daily cash reconciliations; 

studying IIM and subsidiary system issues; 

reinstating annual trust fund financial statement audits; and 

initiating improvements to the Land Records Information 

System. 

Qualified Staff 

Our 1991 testimonies' and June 1992 report' identified a lack of 

trained and experienced trust fund financial management staff. 

Previous studies and audits by Interior's Inspector General and 

public accounting firms also identified this problem. Our June 

'Bureau of Indian Affairs' Efforts to Reconcile and Audit the 

Indian Trust Funds (GAO/T-AFMD-91-2, April 11, 1991), and Bureau 

of Indian Affairs' Efforts to Reconcile, Audit. and Manage the 

Indian Trust Funds (GAO/T-AFMD-91-6, May 20, 1991). 

'Financial Management: BIA Has Made Limited Progress in 

Reconciling Trust Accounts and Developing a Strategic Plan 

(GAO/AFMD-92-38, June 18, 1992) 

6 
96 

1992 report recommended that BIA prepare an organization and 

staffing analysis to determine appropriate roles, 

responsibilities, authorities, and training and supervisory needs 

as a basis for sound trust fund management. In response to our 

recommendation, in 1992, OTFM contracted for a staffing and 

workload analysis and developed an organization plan to address 

critical trust fund management functions. 

The appropriations committees approved OTFM's 1994 reorganization 

plan. As of October 1995, OTFM had made significant progress in 

hir~ng qualified financial management and systems staff. 

However, during fiscal year 1996, 27 BIA personnel displaced by 

BIA's reduction-in-force were reassigned to OTFM. This 

represents about one-third of OTFM's on board staff. Some of 

these reassigned staff displaced OTFM staff, while others filled 

vacant positions that would otherwise have been filled through 

specialized hiring. As a result, OTFM will face the challenge of 

providing additional supervision and training for these 

reassigned staff while continuing to work with BIA's Area and 

Agency Office trust accountants to monitor corrective actions and 

plan for additional improvements. 

Policies and Procedures 

Our April 1991 testimony identified a lack of consistent, written 

policies and procedures for trust fund management. We 

recommended that BIA develop policies and procedures to ensure 

that trust fund balances remain accurate once the accounts are 

reconciled. Our April 1994 testimony9 reiterated this 

recommendation and further recommended that BIA initiate efforts 

to develop complete and consistent written trust fund management 

policies and procedures and place a priority on their issuance. 

BIA has not yet developed a comprehensive set of policies and 

procedures for trust fund management. However, OTFM developed 

two volumes of trust fund IIM accounting procedures for use by 

BIA's Area and Agency Office trust fund accountants and provided 

them to BIA's Area and Agency Offices during 1995. 

Also, during 1995, OTFM developed two records management manuals, 

which address file improvements and records disposition. Missing 

records were the primary reason that many trust fund accounts 

could not be reconciled during BIA's recent reconciliation 

effort. In addition, OTFM is developing a records management 

implementation plan, including an automated records inventory 

system. 

9Financial Management: Status Of BIA's Efforts to Reconcile 

Indian Trust Fund Accounts and Implement Management Improvements 

(GAO/T-AIMD-94-99, April 12, 1994) 

7 
97 

In January 199210 and again in January 1994,n we reported that 

BIA's trust fund loss policy12 did not address the need for 

systems and procedures to prevent and detect losses, nor did it 

instruct BIA staff on how to resolve losses if they occurred. 

The policy did not address what constitutes sufficient 

documentation to establish the existence of a loss, and its 

definition of loss did not include interest that was earned but 

not credited to the appropriate account. Our January 1994 report 

suggested a number of improvements, such as articulating steps to 

detect, prevent, and resolve losses. OTFM addressed our 

suggestions and issued a revised trust fund loss policy in 1995. 

However, while OTFM has made progress in developing policies and 

procedures, OTFM officials told us that BIA's Area and Agency 

Office trust accountants have not consistently implemented these 

policies and procedures. 

In addition to developing selected policies and procedures, OTFM 

officials told us that they began performing monthly 

reconciliations of the trust fund general ledger to Treasury 

records in fiscal year 1993 and that they work with BIA Area and 

Agency Offices to ensure that unreconciled amounts are properly 

resolved. OTFM officials also told us that they have had limited 

resources to monitor Agency Office reconciliation performance and 

assist BIA Agency Office personnel in resolving reconciliation 

discrepancies. While we have not reviewed this reconciliation 

process, it is expected that it would be reviewed in connection 

with recently reinstated trust fund financial statement audits. 

In addition, an OTFM official told us that a lack of resources 

has impeded OTFM's performance of its quality assurance function, 

which was established to perform internal reviews to help ensure 

the quality of trust fund management across BIA offices. For 

example, according to the OTFM official, until recently, funds 

were not available to travel to Area and Agency Offices to 

determine whether the accounting desk procedures and trust fund 

loss policy have been properly implemented. 

Interim Trust Accounting System 

Our June 1992 report recommended that BIA review its current 

10BIA Reconciliation Monitoring (GAO/AFMD-92-36R, January 13, 

1992). 

nBIA's Trust Fund Loss Policy (GAO/AIMD-94-59R, January 14, 

1994). 

12The loss policy addresses Indian trust fund account losses that 

are due to BIA errors, such as mathematical errors or other 

losses that resulted from poor accounting practices or controls. 

8 
98 

systems as a basis for determining whether systems modifications 

will most efficiently bring about needed improvements or whether 

alternatives should be considered, including cross-servicing 

arrangements, contracting for automated data processing services, 

or new systems design and development. In response to our 

recommendation, OTFM explored commercially available off-theshelf trust accounting systems and contracted for an interim, 

core general ledger and investment accounting system. 

OTFM made a number of other improvements related to implementing 

the interim, core trust accounting system. For example, OTFM 

obtained Office of the Comptroller of the Currency assistance 

to develop core general ledger and investment accounting 

system operating procedures; 

initiated direct deposit of collections to BIA Treasury 

accounts through the Automated Clearing House; 

initiated automated payment processing, including electronic 

certification, to facilitate direct deposit of receipts to 

tribal accounts; 

conducted a user survey and developed a systems user guide; 

established a help desk to assist system users by providing 

information on the new system, including a remote 

communication package for tribal dial-in capability; and 

provided system access to Area and Agency Offices and tribal 

personnel. 

While the new system has eliminated the need for manual 

reconciliations between the general ledger and investment system 

and facilitates reporting and account statement preparation, 

tribes and Indian groups have told us that the new account 

statements do not provide sufficient detail for them to 

understand their account activity. For example, they said that 

because principal and interest are combined in the account 

statements, it is difficult to determine interest earnings. They 

told us that the account statements also lack information on investment yields, duration to maturity, and adequate 

benchmarking. 13 For tribes that have authority to spend interest 

earnings, but not principal amounts, this lack of detail presents 

accountability problems. Representatives of some tribes told us 

that they either have or plan to acquire systems to fill this 

information gap. OTFM is planning system enhancements to 

separately identify principal and interest earnings. However, 

additional enhancements would be needed to address investment 

management information needs. 

13 0TFM provides benchmarks that are the average annual yield of all 

tribal trust funds rather than comparable private sector yield 

benchmarks. 

9 
99 

IIM and Subsidiary Accounting System 

In January 1996, the Special Trustee formed a working group 

consisting of tribal representatives and members of allottee 

associations, which represent individual Indians; BIA and Office 

of the Special Trustee field office staff; and OTFM staff to 

address IIM and subsidiary accounting issues. In addition, OTFM 

has scheduled four consultation meetings with tribes and 

individual Indians between June and August 1996 to determine how 

best to provide customer services to IIM account holders. These 

groups will also consider ways to reduce the number o f s ma l l, 

inactive IIM accounts. According to the Special Trustee, about 

225,000 IIM accounts have balances of less than $10. 

Trust Fund Financial Statement Aud its 

In 1995, OTFM initiated a contract to resume audits of the trust 

fund financial statements. OTFM had not had a trust fund 

financial statement audit since 1990, pending completion of the 

trust fund account reconciliation project. The fiscal year 1995 

audit is covering the trust fund Statement of Assets and Trust 

Fund Balances, and the fiscal year 1996 audit will cover the same 

statement and a Statement of Changes in Trust Fund Balances. 

Land Records and OwnershiP System Improvements 

In 1993, BIA's Office of Trust Responsibility (OTR) initiat ed 

improvements to its Land Records Information System (LRIS). 

These improvements were to automate the chain-of-title function 

and result in more timely land ownership determinations. In 

September 1994, we reported" that OTR had 2-year backlogs in 

ownership determinations and recordkeeping which could have a 

significant impact on the accuracy of trust fund accounting data. 

We recommended that BIA provide additional resources to reduce 

these backlogs, through temporary hiring or contracting, until 

the LRIS improvements could be completed. 

However, according to OTR's Land Records Officer, the addi t ional 

resources were not made available as a result of fiscal year 1995 

and 1996 budget cuts. Instead, BIA eliminated 6 Land Title and 

Records Office positions in fiscal year 1995 and an additional 30 

positions in BIA 's fiscal year 1996 reduction-in-force. As a 

result, OTR's five Land Title and Records Offices and its four 

Title Service Offices now have a combined staff of 90 full-time 

equivalent (FTE) positions--compared with 126 staff on September 

30, 1994--to work on the backlog in title ownership 

determinations and recordkeeping while also handl ing current 

"Financial Management: Focused Leadership and Comprehensive 

Planning Can Improve Interior's Management of Indian Trust Funds 

(GAO/ AIMD-94-185, September 22, 1994). 

10 
100 

ownership determination requests. While current OTR backlogs are 

somewhat less than in 1994, BI A's Land Records Office r estimates 

that over 104 staff years of effort would be needed to e liminate 

the current backlog. However, because LRIS improvements are on 

hold, these backlogs are like l y to grow. 

Additional Improvements Are Needed 

Wh i le BIA a n d OTFM have begun actions to addr ess many of our past 

recommendations for management improvemen ts, progr ess has been 

l imited and additional improvements are needed to ensure that 

trust fund s are accurately maintained in the f uture and the needs 

of the benefi c i aries are well-served. For example, BIA's IRMS 

subsidiary a n d IIM system may contain unverified and potentially 

incorrect information on land and lease owners hip that some BIA 

offices may be using to distribute trust fund receipts to account 

hol ders. According to a BIA official , some of BIA's Agency 

Office staff update IRMS ownership f i les based on unverified 

i n f o r ma tion they have developed because LRIS information is 

signi f icantly out-of-date. Our September 1994 report stated that 

without adminis t rative review and final determination and 

certification of ownerships, there is no assurance that the 

ownership information in BIA's accounting system is accurate. 

Our report l~ o stated that eliminating r edundant systems would 

help to ensure that only official, certified data are used to 

distribute trust fun d revenue to account holders. 

Al though Interior formed a study team to develop an IIM 

subsidiary system plan, the team's August 1995 report did not 

include a detailed systems plan. Further, BIA and OTFM have not yet performed an adequate user needs assessment; explored the 

costs and b enefits of systems options and alternatives; o r 

developed a systems archi tecture as a framework for integrating 

trust fund accounting, land and leas e ownership, and other trust 

fund and asset management systems. 

However, even i f OTR resolves i ts ownership determination and 

recordkeeping backlogs and OTFM acquires reliabl e liM and 

subsidiary account ing systems, IIM accounting will continue to be 

problematic due to fractionated ownerships . Under current 

practices, fractionated ownerships, which result from 

inheritances, will continue t o complicate ownership 

determinations, accounting, and reconciliation efforts because of 

the increasing number of ownership determinations and trust fund 

accounts that will be n eeded. 

11 
101 

Our April 1994 testimony15 stated that BIA lacked an accounts 

receivable system. Interior officials told us that developing an 

accounts receivable system would be problematic because BIA does 

not have a master lease file as a basis for determining its 

accounts receivable. As a result, BIA does not know the total 

number of leases tha t it is responsible for managing or whether 

it is collecting revenues from all active leases. BIA has not 

yet begun to plan f or or develop a master lease f i le. 

In addition, BIA and OTFM have not developed a comprehensive set 

of trust fund management policies and procedures. Comprehensive 

written policies a nd procedures, if consistently implemented, 

would help to ensure proper trust fund accounting practices. 

Also , to encourage consistent implementation of p ol icies and 

procedures, quality assurance reviews and audits are an important 

tool. 

In 1994, OTFM developed a plan to contract for investment 

custodian and advisor services. These initiatives were planned 

for implementation in fiscal year 1995 . However, OTFM has 

delayed its contract solicitation for investment custodian 

services until the e nd of June 1996 and has only recently begun 

to develop a contract solicitation for investment advisors. OTFM 

officials told us that a lack of resources has caused them to 

delay contracting for these serv ices . 

Strategic Plan for Trust Fund Management 

Since 1991, our testimonies and reports have called for. Interior 

t o develop a comprehensive strategic plan to guide trust fund 

management improvements across Interior agencies. We have 

criticized Interior' s past planning efforts as piecemeal 

corrective action plans which fell short of identifying the 

departmentwide improvements needed to ensure sound trust fund 

management . Our June 1992 and September 1994 reports and our 

April 1994 testimony recommended that Interior's strategic plan 

address needed improvements across Interior agencies, including 

BIA, BLM, and MMS. We endorsed the American Indian Trust Fund 

Management Reform Act of 1994, which established a Special 

Trustee for American Indians reporting directly to the Secretary 

of the Interior. The act made the Special Trustee responsible 

for overseeing Indian trust fund management across these Interior 

agencies and required the Special Trustee to develop a 

comprehensive strategic plan f or trust fund management. 

The Senate confirmed the appointment of the Special Trustee for 

American Indians in September 1995. In February 1996, the 

15Financial Management; Status of BIA's Efforts to Reconcile 

Indian Trust Fund Accounts and Implement Management Improvements 

(GAO/T-AIMD-94-99, April 12, 1994). 

12 
102 

Special Trustee reported that the $447,000 provided for his 

office for fis cal year 19 96 is insufficient to f ina nce the 

development of a comprehensive strategi c plan for trust fund 

financial management. De spite the fundi ng l i mitations, using 

contractor a ssistance, the Special Trustee h as prepared an 

initial assessment and strategic planning concept paper. 

However, the concept paper foc u s e s on one p otential system 

solution f or addressing critical OTFM and BIA financial 

management informa tion requi r ements and does n ot address other 

alte r na t i ves. I t also does not address programs across Interior 

agenc ies or al l n eeded improvements . In addition , the concept 

paper does not explain t he rationale f or many o f the assumptions 

that support the detail f or the $147 million estimate to 

i mplement the spec ified improvements. 

In contrast t o the concept paper, a comprehensive strategic plan 

would refl ect the requirements of the Department, BIA, BLM, MMS, 

OTFM , and o ther I nterio r agency Indian trust progr ams. I t wou ld 

also address the relationships o f the strategic plans for each of 

these entit ies, inc l uding information resour ce management, 

policies and procedures , and automated systems. 

In addition, a comprehensive strategic plan wou ld address various 

trust fund related systems options and alternatives and their 

assoc iated costs and benefits. For e xample, the concept paper 

proposes acquiring new trust fund general ledger and subsidiary 

accounting systems but , unlike a strategic plan, it d oes n ot 

a n a lyze the costs, benefits, advantages, and disadvantages of 

enhancing OTFM's c urrent core general ledger and investment 

system or contracting for services instead of acquiring new 

systems. 

Further, since 1993 , OTR has been p l anning f or LRIS upgrades, 

i nc luding automated chain-of-title , which would facilitate 

ownership determinations and recordkeeping. Because it is 

planned that LRIS will provide a BIA link to Interior 's core 

Automated Land Records Management System (ALMRS), a comprehensive 

s t r ategic plan would need to consider the merits of LRIS in 

determining how trust ownership and accounting informa tion needs 

can best be addressed. ALMRS is being dev eloped by BLM ·at an 

estimated cost of $450 million. Because ALMRS and LRIS were 

costly to develop and they contain interrelated data, a 

comprehensive strategic plan would also need to consider the 

advantages and disadvantages of linking LRIS to the trust fund 

accounting system, .as compared with acquiring a new land r ecords 

and ownership system, in determining the best way to manage 

Indi an trust funds and assets. 

The Spe cial Trustee and OTFM Director told us that they currently 

lack the resources to adequately plan for and acquire needed 

trust fund system improvements. However , without accurate, upto-date ownership and subsidiary accounting information , trust 

13 
103 

fund account statements will continue to be unreliable. 

The Special Trustee told us that due to limited resources and the 

need for timely solutions, he is considering ways to use changes 

in polic ies and procedures to deal with some trust fund 

management problems. Many of the problems identified in his 

concept paper are not strictly systems problems, and they do not 

necessarily require systems solutions. 

We agree that certain changes should be considered that would not 

require systems solutions. For example, centralizing management 

functions could he lp resolve the problems of inconsistent 

ownership determinations and i nconsistent accounting practices. 

The centralization of some functions, such as handling trust fund 

collections through l ock box payments to banks, could also result 

in management efficiencies. Similarly, ownership determination 

and recordkeeping backlogs might be better addressed by 

centralizing the five Land Title and Records Offices and using 

contractor assistance or temporary employees until system 

improvements are in place. Even with centrali zation of some 

functions, customer information and services could continue to be 

p rovided locally for customer convenience. 

GAO OBSERVATIONS 

Although OTFM made a massive attempt to reconcile tribal 

accounts, missing records and systems limitations made a full 

reconciliation impossible. Also, cost considerations and the 

potential for missing records made individual Indian account 

reconciliations impractical. A legislated settlement process 

could be used to resolve questions about tribal account balances. 

Three major factors--lack of comprehensive planning, lack of 

management commitment across the organization, and limited 

resources-··have impeded Interior's progress in correcting longstanding trust fund management problems. When the trust fund 

reconciliation project was initiated, it was envisioned that by 

the time it was completed, adequate organizational structures, 

staffing, systems, and policies and procedures would be in place 

to ensure that trust fund accounts were accurately ma intained in 

the future . However , piecemeal planning and corrective actions 

continue, and Interior still lacks a departmentwide strategic 

plan to correct trust fund management problems. 

In addition, while it is critical that all parts of the 

organization are committed to supporting and implementing trust 

fund management improvement initiatives, some BIA field offices 

are continuing to follow improper and inconsistent accounting 

practices . Given the continuing difficulty in managing a trust 

program across approximately 60 BIA offices, it is important to 

consider streamlining options such as centralization of 

14 
104 

collections, accounting, and land title and recordkeeping 

functions. 

Finally, Interior and BIA officials told us that they lack the 

resources to implement many needed corrective actions. Howev~r, 

the development of a comprehensive strategic plan that addresses 

interrelated functions and systems, identifies costs and benefits 

of options and alternatives, and establishes realistic milestones 

is a necessary first step. A departmentwide plan would provide 

the basis for management and congressional decisions on requests 

for resources. 

Mr. Chairman, this concludes my statement. I would be glad to 

answer any questions that you or the Members of the Task Force 

might have. 

(913752) 

15 
SPECIAL TRUSTEE FOR AME

ASSESSMENT A

STRATEGIC PLAN PRI

PHASE I 

FEBRUARY 199

Note: The assessment, opinions and plan contajned herein are a w

Special Trustee for American Indians. The product is subject to m

final and is recommended Co the Secretary of the Interior, the Offi

Congress. 
SPECIAL TRUSTEE'S ASSESSMENT: 

PRESENT POLICIES, PROCEDURES AND SYSTEMS WILL NO

AFFAIRS: 

1.. PROPERLY TO ACCOUNT FOR AND INVEST, AS WE

INVESTMENT OF ALL TRUST MONIES OF AMERIC

AMERICAN INDIAN TRIBES. 

2. TO PREPARE AC<.1JRATE AND TIMELY REPORTS T

ALL COLLECTIONS, DISBURSEMENTS, INVESTMEN

RELATED TO THEIR ACCOUNTS. 
AFFIRMATIVE ACTION REQUIRED: PHASE I O

L PHASE I OBJECTIVES AND LEGALLY REQUIRED AFFIRM

The principal objectives of Phase I of lbe Stnoliegic Plan - lbe acquisition and 

and ensure lbat lbe U. S. Government establishes approprialie policies and proce

affirmative actions required which will lllow it 1o meet lbe objectives and legal

I. The American Indian Trust Fund Management Reform Act of 1994 requires 

in part, certain of lbe Secretary's trust responsibilities lo include: 

I. Providing adequalie sysliems for accounting for and reporting trust fun

l. Providing adequalie controls over receipts and disbursements. 

J. Providing periodic, timely reconciliations lo assure lbe accuracy of ac

4. Dellermining accuralie casb balances. 

5. Preparing and supplying account holders wid! periodic staliements of 

lbeir account wbicb shall be available on a daily basis. 

6. Establishing consistent, written policies and procedures for trust fund 

7. Providing adequate staffing, supervision, and training for trust fund m

8. Appropriately managing the natural resources located within tbe boun
PHASE I OBJECTIVES (Continued) 

2. The American Indian Trust F\md Management Reform Act of 1994 requires 

ensure that the Bureau of Indian Affairs (BIA) establishes appropriate policies 

that will allow it: 

I. properly to account for 1111d invest, as well as maximize the relum on 

2. to prepare accuralie and timely reports to account holders (and others 

collections, disbursements, invesbnents, and relum on invesbnents relate

l. to establish policies and practices to maintain complete, accurate, an

lndi an l1111ds. 

l. The commercial trust standard is embodied in the following principles: 

"A trustee is under a duty to the beneficiaries of the trust to keep dear 

"If the truslee fails to keep proper accounts, all doubt! will be resolved 

- A. Scott, uw of Tru

To meet these objectives and deal with the present and the future, accounting a

brought up to commercial standards available in the private sector as soon as p

accounting to American Indian beneficiarie• and allow for the proper discharge 
IL SPECIFIC ACTIONS REQUIRED 

Phase I or the Slnllrgic Plan is designed to bring the trust accoun~ng and man

within three yean. Tbis, at a minimum, will involve acquiring, automa~ng, up

consolida~ng to produce: 

I. A trust resource/asset management delivery syslrm. 

Tbis will involve obbining a new trust resource/asset management and 

lending, buying and selling, together with slaodardized and/or inlr&ralr

procedures and prac~ces. Syslrm must be able to lie to aod Inlet rrom 

2. An accounts receivable data aod billing syslrm that uses lease-conln

Tbis will involve obtaining a new accounts receivable, billing and coll

ownership information for trust income verification, reconciliation, billi

audit, asset quality review aod compliance purposes. 

3. A trust, depository, payments and delivery syslrm ror Individual In

Tbis will enlllil purchasing a trust, depository, payments and other finan

a delivery syslrm to more erficiendy provide cUJTent financial services 

services to individual Indians and tribes. 

4 
SPECIFIC ACTIONS REQUIRED (Continued) 

4. A land records and tide reconiation and certification system. 

lbis will involve acquiring a new land records and tide reconiation and 

linkllge with the lru!Jt resource asset management, accounts receivable a

5. A general ledger and general ledger accounting system. 

lbis will involve obtaining or modifying a general ledger and general a

planned systems and accounting improvements. 

6. A technology services center dedicated to lru!Jt resource and funds m

lbis will involve obtaining a centralized technology services center ded

ownership and records management processes. 

7. A national archives and records center. 

lbis will involve obtaining and centralizing a modem national archives 

funds reconi storage and retrieval. 
SPECIFIC ACTIONS REQUIRED (Continued) 

8. A risk management and control syst>em. 

This will entail obtaining a risk management and control sysllem that 

and asset quality audits, compliance reviews, independent asset appni

9. An independent institutional structure. 

This will involve consolidating trust resource, trust funds and land ow

single, independent institutional unit with il5 own management structu

reorganization cont>emplalled by Phase I of the slrallegic plan. The un

uclusively to trust management The unit should have agency or bu

elsewbere. 
Ill SPEOAL TRUSTEE'S ASSESSMENT DETAILS 

The basic problem is that the U.S. Government, using p~sent systems, was, 

beneficiary American Indian tribes and individual Indians with an accurate an

with the historical and cun-ent: 

I. lack or an efreclive trust asset, leasing and ~source system which 

being managed prudendy and consistendy in the best inte~st or the be

2. lack or an accounts ~ceivable (billing) system which ~dudes com

required under tbe lease contracts. 

3. lack or an errective UM accounting system ror collections, deposits 

whether tbe rigbt beneficiary was c~dited witb tbe comet amount. 

4. lack or an effective land records and ownership system wbicb p~ve

individual Indian or tribal account and ~dudes audits to determine w

~ceiving tbe biehe•t rate of ~tum consistent witb trust and prudential 

S. lack of an adequate archives and ~cord keeping system wbicb bas 

~cords and the consequent inability to do acceptable audits and ~conc

6. lock of an effective risk management system which p~vents pruden

and appraisal•. 

7. lack of an organizational •true~ organized by function and dedic

7 
SPECIAL TRUSTEE'S ASSESSMENT DETAILS (Continued) 

These weaknesses have resuiRd in many instances in tbe historical and ctuTent 

I. ln<e many or tbe general ledger postings of individual Indian and tr

contract sucb as tbe lease of oil and gas properties, timber, farm and ran

Consequendy, tbe government is unable to prove lhe source of tbe mon

credit for tbe income. 

2. compare lbe money received to lbe amount required by tbe lease or 

prove in many instanc .. tbat tbe lessee paid as agreed. 

3. deRrmine wbelher lhe lease was made based on comp11n1ble marl<et 

tbe government cannot always prove it maximized tbe trust income for 

4. deRrmine wbelber lbe trust lands and minerals are leased to lbeir fu

5. derermine whether tbe trust assets and resources are being maintaine

6. derermine wbelher tbe proper account party received credit for tbe p

resources and funds. 

8 
SPEClAL TRUSTEE'S ASSESSMENT DETAILS (Continued) 

At the core of many of the accounting and reconciliation problems is the lack 

ledger entries. There is not a complete way to estimate the number of missing 

RECONCILIATION effort disclosed the types of problems which prevent a fu

1. There were 32,319 unreconciled transactions which totaled S2.4 billi

disbursement and internal transfer transactions posted to tribal accoun

documents were not located: 

Unlocated Receipts: 

Unlocated Disbursements: 

Unlocated Transfers: 

Total 

S

S

S

S2

2. Some offices of the Bureau of Indian Affairs have in the past sent tr

records center where they are retained under federal records retention 

was that many records were destroyed which should not have been des

retention rules for trust leases and contracts, which normaUy required 

contracts expire. Thus, some records were destroyed which should not 

3. Some documents are missing for other reasons. For example, in one 

found to have been destroyed. GeneraUy, the "Fill the Gap" part of th

because large numbers of leases and contracts could not be located. 

4. There is not a complete system of redundant record keeping. Thus, 

cannot be located for some other reason. 

9 
SPECIAL TRUSTEE'S ASSESSMENT DETAILS (Continued) 

There are numerous problems and issues concerning OM: ucounting which h

in several internal and external reports. Some of these ucounting and system

balances of approximately $450 million have resulted in the following: 

I. 12 different non-integrated databases to manage. File strudures a

inucurate. Automated systems applkations and routines are not con

appliulions are used. 

2. 15,599 dupliute ucounls. These ucounts should be researched an

procedures. 

3. 54,192 accounts with $42.1 million for individuals with no address 

accounts contains $1,237,664. Policies and procedures must be establi

persons and what to do if a person cannot be located. These accounts 

status under appropriate policies and procedures if owners cannot be 

4. The Office of Trust Funds Management is responsible for ucounti

recipient until he/she reaches 18. There are 48,279 such accounts with 

accounts and $24,065,650 are for individuals over 18 and one of the o

accounts should be researched and re.olved under an appropriate set 

5. Special Deposit Accounts aggregating $122,641,993 in 21,958 accou

money until the ownership of the funds can be determined. Yet there 

activity in the last 18 months. These accounts should be researched a

procedures. 

6. The database contains 21,002 accounts with $36,168,336 for deceas

which are coded as being closed estates. However, because of the prob

been distributed to heirs. This problem should be addressed. 

10 
BASIC PROBLEM DETAILS (Continued) 

7. There are 283 ac:counts for individuals in the database which have ov

are authorized. Ovenlraft prohibitions should be enforced. 

8. As of Janulll)' 5, 1995: 

A. 37% of lbe UM accounts bad a bal1111ce of less th1111 S I. 

B. 60% of tbe UM accounts bad a bal1111ce of less th1111 $10. 

C. 35,000 UM accounts bad no activity during tbe last eighteen m

These accounts are expensive to administer and maintain. Policy and leg

them or otberwise reduce tbem to levels tbat can be admini•tered more e

9. Ownership of tbe land and its as•ociated assets is critical to trust asse

processe5. The BIA system• and proce55e5 are t~J~Tendy not capable of e

records tbat are neces•ary for lbe lease management proce5se5. In additio

l1111d records revisions, additions and deleeiom n.iol The lime lags assoc

tbe problem as well. Even if tbe reconb were u..-to-date, tbe Bureau's c~

not integrated witb its Lease M1111agement sy•tems. Databases are separa

contain redund1111t ioform1tioo. Finally, lbere are m8Dy instances repomd 

m1111agement (e.g., leasing), due to hardware or communic1tiom problems

I 0. Reconl retention and riling procedures at certain locatiom tbroughou

sufricient to document certain activities and account bal1111ces. 

II. No accounts receivable system to assure that all income due is collec

colleceions are not adequately controlled or deposited timely. UnwiUTllllt

Minerals Management Service and final distribution to tbe owners. 

II 
SPECIAL TRUSTEE'S ASSESSMENT DETAILS (Continued) 

ll. Poor intemal controls and incoruoistent policies and (1111Ctices nist T

on liM related systems and activities have identified many ... es or incon

Inconsistency prevents dJe accumulation and anaJysis of information with

provide oversight and mlUlJII!ement, make management decisioruo, demons

credibility in dJe trwt .. set and trwt funds mlUlJII!ement processes. Poor 

account for over 50% or tbe tbirty consolidated problems identified in dJe 

of Augwt 1995. AccordiDI! to Chat Report, this category of problems ''pe

Report notes: "The Bure.u h .. developed procedures and policies for a n

in place. However, dJey are eicber unknown to dJe starr performing tbe f

enough to provide dJe requisite guidance." 

13. Many of dJe BIA's le .. ing and oCher resown management actions re

of dJe benefit received from dJe leased resource, e.g., grazing fees. Unfo

create or record an amount due and dJey do not create and account for hi

le .. es, dJe collection aod follow-up on this trwt asset income rests wid! d

cases, BIA staff have developed P. C. software to perform leasiDI! functio

amounts due, oChers have manual hard copy records Chat prompt action, b

Bureau. The resultina: condition is Chat it is possible Chat amounts due are 

uncollected, or actions against lessees that may be necessary may not be 

duties at dJe agency level, adequate internal control over dJe entire proces

often not possible. 

14. The cash auount at dJe U. S. Treasury is not verifiable due in part t

dJe U. S. Treasury is not able to provide dJe Bureau wid! accurate inform

ll 
SPECIAL TRliSTEE'S ASSESSMENT DETAILS (Continued) 

15. The BIA's O'llaoizalional alignment causes decision-making and man

intricate and complex coordinalion process and an ineffeclive one at lime

O'llaoizalions all reporling direcdy to one entity, who bas direct line auth

program. Further, the activilies are carried out by over 100 field oflices

many instances informed and npedilious decisions because of the numbe

and complnity of the decisions their aclivities generate. That structure a

responsibilities or. bigber order not receiving the attention and focus the

Bureau priori lies of a lower order. The BIA offices must expend signifi

supervisors and starr across the Bureau to obblin cooperalion. Coordinat

because the BIA is not organized and managed by funclion, all too often 

programs or functions are not universally followed because the staff that 

general managen in area or field oflices, not the trust program oflicos. 

13 
COST OF PHASE I OF THE STRATEGIC PLAN 

(

FY FY FY 

1996 1997 1998 

1. Purchase and upgrades of hardware and software for 0 7,145 1,949 

I ,236 new PC workstations and 824 nJstlng workstations 

2. Core systems development and related costs 0 6,665 5,078 

J. End-unr administration, general system support 0 8,188 6,669 

and maintenance 

4. Ettunal professional services 0 3~'160 2,060 

5. Data convenlon and Imaging 0 5,270 200 

6. Systems integration and lmplemenhtlon 0 2,500 2,500 

7. Access by Individuals and tribes 0 5,854 0 

- - -- -- 

Sub-Total requlremenh for four bade trust/accounting systems 0 39,182 18,456 

(Items I through 7) 

Co!t Details of above are contained in a report 

dated December 7, 1995 by Mathis & Associatu 

14 
Additional Ph a. • Costs 

(DoUart ID Thounn

J'Y J'Y J'Y 

1996 1997 1998 1

8. R.hk Management Syttem111 

9. Notional Alchlves Ctntn and System 0 0 11,000 1,

10. Upgrades to the ceneul ledger system 0 2,000 0 

II. Controctboc for: 

A.. A Uter needs arsessmeot and a toblprebenstve inventory 1,000 0 0 

of eiirtin&skllb, hardware and software, related 

network support and f.cWties requirements, and a 

techtlieal report for RFP purposes. 

B. Rewrites of aU operating and lecal manuals. 0 3,!00 250 

C. A file urub and data and document cbedt berore conver.sfon. 0 1,000 0 

D. AD oveuU tecbnlul stnUglr plan manager to oversee above 0 1,000 1,000 1,

a111d to oversee spectlk action plans and budgets to implement 

the atrategic: plan. 

ll. Advisory Board Fundinc 400 400 400 4

IJ, Omce of the Special Trustee (Detail previously suppUed) 1,600 1,600 1,600 1,6

Sub-Tole! (Items 8 tbrouc• 13) 3,000 10,!00 14,250 4,

GRAND TOTAL (Items I through 13) 3,000 49,681 32,706 10,3

•Risk Management System b estimated to coat $5 million/year beglnnin1 LD second year. This, however, Is no

Management System will be sbtred and funded from uhtlng nsourrts. 

Note: CGsts ne increment• I to current running rates for trust management wblch wtJI have to rontinue runa

before cost 1avings c.an be achieved aa a result of the tystemt upgrades. 

15 
121 

1'1/\TI-IIS 

& ASSOCIATES 

Mr. Paul Homan 

Special Trustee 

Oftice of Trust Fund Management 

Department of Interior 

Washington, D. c. 

Dear Mr. Homan: 

December 7, 1995 

Your office recenuy engaged our organization for the purpose of determining 

approximate costs associated with the development of a comprehensive automated 

records system to support the information needs of the omce of Trust Fund 

Management 

Based on our review of documents and preliminary discuSsions with the OTFM 

starr, we understand that your basic needs indude a comprehensive master trust 

beneficiary accounting system with master trust and custody funCtionality and should 

also indude all the funCtions related to handling financial assets. We further 

understand that supplementary systems are necessary to handle real assets such as 

real estate, oil and gas rights, timber rights, fishing rights, etc. 

In order to exea.rle the various analyses required by the task, our own core 

researd'l and consulting units here at Mathis & Associates have wor1ted Intensely over 

the past month to review information supplied by the OTFM starr and we have been · 

supported in our efforts by a number of external private sector experts. We have 

explored insights with informed commentators (such as the GAO team that examined 

and commented on some of the issues raised in their report over a year ago) and we conduded a number of interviews with private sedor vendors with specialized 

products that might be appropriate in the new environment you envision. 

In the course of exploring your primary objeCtives, It has become dear to us 

that a Whole new "information lnfrestrudure" is needed throughout BIA in order to 

support the services you envision, specifically a "distributed, diem-serverenvironment This means that every member of OTFM and OTR Who handles 

information - nearly the entire starr- will need an up-t(Hjate PC on hislher desktop (a 

"dient" wor1cstation), and that PC should be able to access any database via the wide 

area network (WAN) and a •server- (a mini-computer that mediates data between the 

central source and the local wor1c group). 

2000 S Street, N.W., Washington, D.C. 20009 
122 

Page2 

The current major systems that impact your area of responsibility - LRIS, 

IRMSIIIM, and OmniTrust - have been aptly desaibed by those intimately familiar 

with their limitations as "islands of automation with no ferry serviee in between." A 

major benefit of the future system will be to provide the necessary "ferry service" 

(integration) between the successor sub-systems, so that an entry in one sub-system 

will result In automatic and consistent update of all related sub-systems, and •next 

steps• will be taken insofar as possible without human intervention. 

But the "client-server" environment you envision will also provide ferry service 

(connectivity) to and from virtually every desktop at OTFM. In this way, data and 

functionality are passed to the lowest possible level, so that end users and clients can 

selectively access and update the data they need on a daily basis. Thus, a 

secondary benefit of the immediate project will be to provide the lon~elayed 

modernization necessary to attain true "office automation." 

We cannot emphasiza enough that this shift to diem-server environment will be 

costly in Itself; it will change the way work can and should be done in this new 

environment; and it will challenge individuals' and organizations' ability to adapt 

Nevertheless - with appropriate management skill and sensitivity to end~ser needs 

(both "Internal" bureau personnel and •externar Indian clients) - we are confident that 

the client-server environment will address defiCiencies of the current system, while 

making possible· the improved services and capabilities that you envision. 

We have also identified and reviewed industry-embraced forecast models for a 

client-sever environment and associated land management and trust systems similar 

to those proposed. In creating the model we developed for your purposes, we have 

relied heavily on the work of a Stamford, Connecticut-based consulting organization, 

The Gartner GroUp, which is well-established in its reputation and service to the 

electronic industries. Based on their on-going research and the cooperation of over 

three dozen major American corporations-Compaq Computer, IBM, Hewlett-Packard 

and Microsoft among them-their research assisted us greatly in creating some of the 

assumptions upon which our current model has been developed. 

Because of the complexity and uniqueness of some aspects of your 

requirements-most notably the data conversion and systems integration issues-not all 

private sector modeling elem~ntS were appropriate. We have also relied significantly 

on information provided us by OTFM in instances where private sector norms were not 

appropriate. And, we have also relied on our own experience to make modifications 

wherever we believed them to be necessary. 
123 

Page 3 

In creating this model, we were necessarily limited by the amount of information 

rurrently available to us. In many instances, the data in hand is far from complete 

and we were, therefore, left to our own devices to suggest what we believe to be 

reasonable assumptions. For instance, we were unable to get an exact number of 

external users-either individuals or tribes-who would require access to the system. 

We have assumed your policy will dictate universal access for approximately 300 

tribes and the financial impact of that assumption is reftected in the last Item on the 

spread &heel 

In the weeks ahead, you and your staff will want to thoughtfully consider some 

of these basic assumptions-such as the number of ultimate end-users who will access 

the envisioned system and the number of existing woi'X stations that can be modified 

to meet new requirements-as these statistics form the bedrock of our model. This 

woi'X should be part of a comprehensive inventory and user needs and requirements 

study. 

Most trust systems generally have an accounts payable and receivable system 

with full tax accounting at the state and federal level. Thus, the visionary objectives of 

the Special Trustee-as we understand them-are accommodated today in most 

master trust systems. For the sake of this model, we have estimated that a 

comprehensive suite of systems with the master trust and global rustody system at its 

core will cost in the range_ of $5 million, with all installation and systems integration 

costs inrurred as additional expenses. (This represents, of course, only a small 

fraction of the overall cosl) 

We have also taken note of the fact that as of January 5, 1995, 37% of the liM 

accounts had a balance of less than $1.00, while over 60% of the accounts had less 

than $10. These accounts Should be esc:heated or some way must be found to get 

them outside the trust account processing cyc:te. A trust account costs between $40 

and $60 to process each month-at a minimum-and the low balances do not justify 

this. This is also true of the over 60% of accounts with less than $10 in balances. 

We are aware that some trust departments within banks do not accept balances of 

less than $100,000. An option may be to move them to a standard deposit account 

(held in trust) 

We also note that 35,000 accounts had no activity during the last eighteen 

months and over 51,000 accounts have no instructions or lad( a valid address. This 

points to a significant file maintenance problem and the data needs to be scrubbed 

before conversation. The cost of doing this activity is substantial and should not be 

under estimated. Other findings point to a file/data integrity problem that needs to be 

addressed before the implementation of a new system. · 
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Page 4 

We understand that at the present time, there are over 377,000 accounts in 

total - the vast majority of these individual Indian accounts, Jess than 2,000 tribal 

accounts - with more than $2.1 Billion in assets. \Nhile the number of accounts are 

high, the asset size is low (overall and per account) This makes it important to dean 

up the operations, processes and data. The cost of processing trust accounts in a 

service bureau may be preferable after the dean-up is completed. But finding such a 

vendor to do this may not be easy, as many such businesses are reluctant to engage 

in business with government agencies as they have better opportunities in the private 

sector. This must be kept in mind as the project progresses. 

Creating a cost model for LRI8-0TR's land records and ownership systemhas been a partioolar challenge, given the limited of specialized vendors who build 

and support such applications. But our research has produced enough information 

for us to offer some ballpark estimates of the likely costs of Implementing a fullyIntegrated successor system-with statiHJf-the-art mapping capability-that can be 

hooked into the dient-server environment mentioned previously and deployed down to 

the agency office level. For purposes of the present cost estimation, we have 

assumed: (1) an average of four users who will access the new system within each of 

the 87 agency offices or 348 users; (2) an average of five users within each of the 12 

area offices or 60 users; (3) and an additional 11 users at various headquarters 

locations-for a total of 419 users nationwide. 

Our estimates for all costs likely to be inoorred during both 3-year and 5-year 

epochs are detailed on the attached spread sheets. Our explanation for our 

calaJiations are reported in an attachment entitled "Legend for Interpreting Office of 

Trust Fund Management Spreadsheet Detailing Systems Development/Operations 

Costs.• In sum, our estimates for the 3-year epoch is $73,m,292_ and our estimate 

for the 5-year epoch is $108,447,853. 

Finally, we emphasize that these estimates do not take into account the 

various tasks associated with consolidation of all the records oorrenUy maintained by 

the area offices, the agency offices and the federal records system. The Federal 

Records Archives -maintain 18 sites alone-which are different from the BIA locations. 

To create a cost model for the physical consolidation-as well as the electronic 

imaging and storage-where physical consolidation is undoubtedly the antecedent 

work-will require additional investigation and probably should be part of the longerterm strategic planning effort. This project should be tied to specific strategies and 

practices associated with overall dOaJment management--induding, but not limited to 

all imaging activities. 
125 

Page 5 

We appreciate the opportunity to support this Important wor11 of the Office of 

Trust Fund Management and will be happy to meet with you and your staff to review 

our findings. 

Sincerely, 

Patricia Mathis 

26- 403 0 - 96 - 5 
1'1/~TI-IIS 

& ASSOCIATES 

OVERVIEW OF COS

1. Purchase and upgrades of hardware and software for 

1,238 new PC workstations and 1124 existing workstations. 

2. Core systems development and related costs. 

3. End.user administration, general system support and 

maintenance. 

4. External profesalonal services. 

5. Data conversion and Imaging. 

8. Systems Integration and Implementation. 

7. Access by Individuals and tribes. 

GRAND TOTAL 
127 

LEGEND FOR INTERPRETING OFFICE OF TRUST FUND MANAGEMENT 

SPREAD SHEEt DETAILING SYSTEMS DEVELOPMENT/OPERATION COSTS 

A. Existing PC wortt station hard-re: In order to provide universal 

access, each end-user will need a PC or individual wor1< station at their desk. Absent 

a recent and reliable inventory of existing hardware that is suitable for this automation 

project, we can only make generalized assumptions about the quality and usefulness 

of existing equipment. Our model presumes that approximately 40% of existing 

hardware can be salvaged or upgraded to meet modem standards. Therefore, 40% of 

estimated users (2,060) means that there will be 824 surviving wor1< stations. 

B. Upgrade. Because of the aging of much this surviving equipment, 

upgrades will be necessary to provide adequate processing power to support modem 

applications. Our operative assumption is that approximately $100 will be required 

each year for each wor1< station. Minimum upgrades will require 100 MHz Pentium 

capability to support the emerging environment But anticipated upgrades will 

routinely involve memory and DASO and may also require networ1< interface cards 

and, in some instances, processors. Therefore, the cost is 824 X $100 = $82,400. 

c. Maintenance. These costs are presumed to be 6% of the total value 

cost of the wor1< stations. OTFM staff estimate the cost-per-wor1< station to be $2,500 

-a reasonable prediction based on current mar1<etplace prices. If 824 surviving wor1< 

stations are to be maintained, then their total value is estimated to be $2,060,000. 

(824 wor1< stations x $2,500 each = $2,060,000). Therefore, 6% of $2,060,000 is 

$123,600. 

D. New PC wortt station hard-re. For each end-user whose current 

hardware is not suitable, new desktop hardware must be acquired. The model 

presumes that· approximately 60% of all intemal end-users will require new wor1< 

station hardware-with an estimated need for 1,236 new stations. 

E. New PC wortt stations. If the cost of each new wor1< station is 

$2,500, then the cost for a total of 1,236 acquisitions will be $3,090,000 for Year 1. 

F. Upgrade. See "B" above for explanation of $100 per wor1< station. 

Upgrades during Year 1 are routinely offered as suites or warranties. Upgrades at 

$100 per wor1< station will be required in all years after Year 1. 

G. Maintenance. ·The model presumes 6% of the original purchase 

price of the PC wor1< station. For newly purchased machines, maintenance is usually 

not a cost fader for Year 1, since virtually all maintenance is induded as warranty 

during the first year. (There is also a trend among some manufadurers to move to 

three-year warranties, but this cannot be taken as a given. In any case, extended 

warranties often result in higher front-end cost.) Therefore, if 1,236 machines require 

annual maintenance at a cost of 6% of total cost, then annual maintenance will be 

6% of 3,090,000 or $185,400. 
128 

Page2 

H. New client PC software. OTFM staff specified 111/indows for 

Wor1<groups software at a unit cost of $35. However, we conwr with other experts 

that while the operating system software is included in the original purchase price, 

new releases of operating software are common and, at some point, incremental 

charges will be involved. We believe a more realistic cost estimate should include a 

$150 upgrade fee by Year 3. Therefore, the cost is estimated to be $43,260 in Years 

1 and 2 (based on OTFM's $35 assumption) and $185,400 in Year 3 (based on our 

$150 upgrade assumption). 

1. Wortc station software upgrade. See comments under "H" above 

for details regarding assumptions. 

J. omce Suite software. Suite software is the standard set of 

productivity tools-such as word processing, ~ad sheets and presentation tools. 

Bundled together, they provide all the basic administrative tools appropriate for most 

office actions. Sometimes they are offered as part of the hardware acquisition · 

(aHhough incorporated into the purchase price.) Sometimes these •suites• are 

purchased as a combined software offering and must be loaded into each PC on an 

individual basis. Present cost for these tools was estimated at $300 per PC wor1< 

Station, which could include deep volume and government discounts. The 1,236 new 

client PCs will each require a suite at $300 each; therefore 1,236 x $300 = $370,800. 

K. omce suite software maintenance and upgrades. We are 

assuming an upgrade and maintenance cost of 15% of the total cost of the suite 

software ($370,800). This is equal to $55,620 for each out year. 

L Documentation/Distribution. Each end user needs access to 

dOaJmentation regarding the software available at their wor1< station. Given the size 

and scope of this networ1< environment, we believe that a full set of shrink-wrapped 

dOa.lmentation for each desktop would be cost-prohibitive. Therefore, we assume 

one full shrink-wrapped set of dOaJmentation per site. Costs are estimated to be $300 

per agency office site. This is a one-time coat. The number of sites is estimated to 

be 110. Therefore, 1104 x $300 = $33,000. 

M. Host access software. End-users will need to access legacy 

systems and mainframe platfonns-e.g. LRIS and IRMS-during the transitional years. 

Software costs required to emulate mainframe applications on PC wor1< stations are 

estimated to be $100 per wor1< station per year. If the total number of end-users is 

2,060 at $100 each, then the cost will be $206,000. 
129 

Page 3 

N. LAN wlrtng. Although existing LAN configurations currently 

support existing PCs, it is reasonable to predict that any new system will require a 

comprehensive new LAN design. Costs for implementing this design are estimated to 

be $250 for each work station. More than one wire is usually installed to provide both 

voice and data transmission to the desktop. A modest installation requiring only Level 

5 unshielded twisted-pair cable, or UTP wire, the cost of the wire, wall jack, terminator 

and labor can range from $100 to $150 per station. This estimation assumes the 

installer has easy access to all offiCe and cable duds. Given the remote distribution 

of BIA facilities and varying age of office facilities, these costs are predicted to more 

likely range between $250-$300. For the purpose of this exercise, we assumed a 

cost of $250. Therefore, for 2,060 work stations, the cost Is estimated to be 

$515,000. 

0. Hubs/routers. Hubs are required to connect the work station to the 

server. Routers interconnect servers at the local work group level (local facility or 

branch) and central location (headquarters). Our assumptions here are based on 

statistics provided by OTFM: $3,000 for each hub and $2,500 for each router for a 

total cost of $5,500 for each agency office. If the cost per agency office is $5,500, 

then the cost for 87 agency offices is $478,500. In order to provide global Office of 

Trust Management communication, a 64-line two-way Chatterbox (allowing multiple 

conversations) will be required at $31 ,000 per unit; and two Cisco 7000 Routers for a 

total cost of $44,000 ($22,000 each). Thus, the total estimated cost for this element is 

$478,500 + $31,000 + $44,000=$553,500. . 

P. Communications. The remote server locations and the central 

sites must be provided telecommunications links. The most efficient technology is 

either frame relay or cell relay-both of which require 56-Kbit transmission service. 

The cost for a single 56-Kbit line is currently commercially priced at different levels by 

major carriers. Our model presumes $5,000 per year. (We have not factored into this 

equation whether or not government discounts-such as those possible under postFTS2000 awards-will be applicable in this environment) Therefore, if we presume 99 

remote sites at a cost of $5,000 each office, the annual cost will be $550,000. 

In addition, each agency office will require two voice lines (for outside 

user inquiries) and one fax line at an estimated cost of $1,500 per line per year. 

Thus, three telephone lines at $1 ,500 is $4,500 per year per site. For 87 sites, the 

total cost of telephone lines is $391,500. The area, regional and headquarters 

locations are assumed to be equipped with adequate voice and fax capabilities. 
130 

Page 4 

The telecommunications traffic at the primary location server sites is 

substantially higher because these central locations must communicate with a broader 

audience. Therefore, these Sites require a larger bandwidth capacity and share a 

larger finandal burden than the remote sites. Presuming six primary location servers 

at a cost of $47,000 per year per server for two 1.5 Mbit frame relay lines, then 

6 ~ $47,000:: $282,000. 

The combined total for these estimated communications' costs is, 

therefore: $550,000 + $391,500 + $282,000 == $1,223,500 each year. 

Q. Laser printers. Although often overlooked in creating budgets, 

experts point out that printer costs usually represent approximately 1% of total cost of 

ownership and can, in fact, exceed the costs of the servers to which they are 

attached. A useful model presumes that an average of one 8-pages-per-minute laser 

printer is needed for every eight end-users. Given 2,060 end-users, there will be a 

companion need for a minimum of 258 laser printers. At an estimated cost of $1,200 

for a medium speed printer, 258 printers will cost $309,600. 

R. Upgrade/replacement. It is important to remember that printers 

have to be replaced on a regular basis. If the total cost of the laser printers is 

$309,600 (see reference ·a· above), and the estimated annual cost to upgrade and 

replace is presumed to be 10% of the total original purchase price, then the annual 

cost beginning in Year 2 will be $30,960. 

S. Maintenance. Because even new mechanical devices break down 

and are subject to end-user abuse, printer maintenance is known to be relatively 

expensive starling in Year 1 and estimated to be 20% of the original purchase price. 

Therefore, if the total purchase price is $309,600 (see item Q above), then the annual 

cost beginning in Year 1 is $61,920. 

T. Worlt group server hardware. we anlidpate that these servers 

will be required to provide lOcal data and resource sharing for an entire agency office 

work group. In addition to laser printers, resources include plotters, DASD (expanded 

hard-disk storage capacity), and back-up hardware and software. A state-of-the-art 

local work group server-including the back-up hardware and software-is estimated to 

cost approximately $5,500. If each agency office were to receive such equipment, 

then 87 agency offices at $5,500 each would result in a cost of $478,500. 
131 

Page 5 

U. Upgrade. Servers will need to be updated over time. These 

upgrades will raquire DASD (hard disk capacity) and expanded memory. Our model 

presumes that 5% of the original purchase price will be required for upgrades in Years 

2 and 3. If the total purchase price is $478,500, then upgrades will cost $23,925 in 

each of Years 2 and 3. 

V. Maintenance. Maintenance on servers follows the same paradigms 

as those assumed for typical PC maintenance-which is 6% for all years beyond Year 

1, which is covered under warranty provisions. Therefore, 6% of $478,500 is $28,710 

each Years 2 and 3. 

W. Wort vroup server software. we presume the operating software 

will be either Novell 0 1 Windows NT, given the fact that these operating systems are 

now the common standard. Current 1995 costs are in the $600 per server range. If 

we presume $1 ,000 per server and 87 agency sites, then the cost will be $52,200. 

X. Upgrade/maintenance. Standard presumptions are that annual 

upgrade and maintenance costs related to the work group server software will be 15% 

of the original purchase price. Therefore, if the total cost is $52,200, then 15% will 

result in an annual cost of $7,830. 

Y. Primary location server hardware. Because they must support a 

larger number of users primary servers are both larger and more expensive. OTFM 

staff estimate eight servers at a cost of $49,000 each. Therefore, the total cost if 

$392,000. This allows for some back-up controllers. 

Z. Upgrades. Our model presumes a cost of 5% per year for 

hardware upgrades, primarily for memory and DASD to acx:ount for the growth of enduser files and data. Therefore, if the acquisition cost is $392,0000, then 5% is 

$19,600 each year. 

AA. Maintenance. Maintenance costs are calaJiated to be 

approximately 6% of the purchase price of $392,000. Therefore, 6% of the purchase 

price is $23, 520. 
132 

Page 6 

88. Environmental requirements. In order to maintain vital 

environmental control, certain adaptations must be made to the facility to sustain 

constant dimate conditions. Additional charges are associated with power, chilled 

water and other cooling and heating elements. While we cannot know exactly what 

environmental adaptations will be necessary-and conceivably the magnitude could be 

quite small if existing facilities are already available and adequate. We have 

nonetheless induded this element given the possibility that some structural changes 

may be necessary to support either new configurations or parallel operations during 

the transitional phase. Our model assumes the need for only one mainframe at a 

single location. Based on our limited information, we are assuming $15,000 per year. 

CC. Primary server software. Estimates are for fully configured 

software, not only base operating systems. They indude relational database 

management systems, PC interconnect software, monitors, development tools and 

wide-area network support. We assume 12% of total hardware costs of $392,000, 

which is $47,040 per year. 

DD. Upg111de. As with all software, this will need to be periodically 

upgraded. Our estimated costs are based on the standard assumption of 5% of 

purchase price for Years 2 and 3. Therefore, 5% of $47,040 is $2,352. 

EE. Maintenance. Maintenance consists of the service needed to 

diagnose and fix problems with the primary server software. This can range from 

telephone support to on-site assistance. This is estimated to be 17% of purchase 

price ($47,040) for Years 1, 2 and 3. Therefore, the cost is estimated to be $7,997. 

each year. 

FF. Trust Management/Individual Account System. This item 

encompasses a master trust and beneficiary accounting system. We assume that 

OTFM's goal is to realize a mutual fund type of system that minimizes transactions 

and disbursements, so that individual check disbursements would occur only on 

demand, rather than automatically. Informed banking and trust management experts 

tell us that since the cost of cutting a check runs around $1.50, it is obviously 

impractical to disburse checks for ten cents. Automatic monthly check disbursement 

means that the cost of each account runs doser to $5 per month, as opposed to 

$2.00 in a transaction-to-demand system. For the purpose of this model, we assume 

200,000 individual Indian accounts would ultimately survive after data dean-up at a 

monthly cost of $2.00 per account. Thus, our formula was derived as: 200,000 

(accounts) X $2 per month per account for a total of $4.8 million per year. 

Customization and training associated with implementing this system is accounted for 

in line item EEE. 
133 

Page 7 

GG. Lease Management System. The functionality encompasses in 

this item is the management of royalties received from leases on Indian lands. The 

combination of systems required to handle this task would address surface and 

subsurface leases, ownership and chain-of-ownership needs. The costs listed here 

are derived from conversations with several private sector vendors who specialize in 

this type of application. 

GG.1 Maintenance and Support. This estimate has been derived 

from interviews we conducted with vendors who provide this service. 

HH. Land Management System. The land records and ownership 

data processing system must process and validate ownership and encumbrance data 

at the time of data entry. The land records and ownership data processing system 

must store all processed data as part of the database for direct, on-line access by 

program users, dients and dient data systems. As well, this system must maintain 

data and data accessibility at the local Land titles and Recon:Js Office level. This data, 

likewise, must be accessible from a central storage facility for baCkup. 

To the greatest degree possible, the land records and the ownership 

data processing system must not be computer hardware or operating system 

dependent. The land records and ownership data processing system must also 

operate in more than one data processing environment. Additionally, the system 

must provide a standard land title and records application and user interface. And 

finally, the land records and ownership data processing system must follow all federal 

open systems and inter-operability requirements. 

One leading vendor we interviewed had a land records ownership and 

mapping software system which would appear to be ideally suited to this environment 

and, fer that reason, we were indined to accept the basic cost model described by 

that company. Assuming 4 dient work stations at each of 87 agency offices, the 

project will require software for 348 work stations at a cost of $1,000-resulting in an 

annual software cost of $348,000. We then assumed 5 dients in each of the area 

offices (12 X 5 = $60,000) and one dient in the 11 remaining sites (11 X$1 ,000) to 

reach a total cost of $419,000 for dient-related software. The software at the server 

level is calculated as $10,500 per server. Assuming 8 primary servers-each loaded 

with this software-we came up with a cost of $84,000 for server-related software. 

The total application cost is, therefore, $503,000 ($419,000 + $84,000). 

HH.1 Maintenance Support and Upgrade. These costs were dervied 

directly from vendor quotations. 

26-403 0 - 96 - 6 
134 

Page 8 

II. Primary server relational databases. Many traditional hardware 

providers also offer associated software which allows users to link certain information 

to other data in such a way as to observe the consequences of one change on other 

possible outcomes. Most likely, it will be necessary to buy at least one relational 

database management software package for the client/server environment. Research 

indicates the vendor-derived estimates are around $85,000 for Year 1 only. 

JJ. Upgrade/Maintenance. These costs are estimated to be 20% of 

the total primary location relational database cost ($85,000}. Therefore, 20% will 

result in a cost of $17,000 beyond Year 1 . . 

KK. Systems management and application development software. 

Although many vendors provide "suites• of systems management software, no single 

vendor can currently offer an all-inclusive suite of products to address every 

requirement envisioned by the OTFM. This means that, at least in the near term, 

OTFM will need to deal with several vendors and either accept the role of systems 

integrator or outsource this function entirely. Informed industry commentators point to 

major marketplace shifts underway in this arena. They caution that cost projections 

should not be construed as an implication that the technology is available to run on 

specific platforms, or that it is available to support all key downstream platforms-such 

as work-group servers and clients. In any case, these conditions forecast dependence 

on multiple vendors unless the activity is outsourced. 

LL. Upgrade/Maintenance. Because rurrent conditions require 

dependence on multiple vendors, users will likely be forced to replace software as 

vendors mature and the market becomes redefined. This will likely result in higher 

costs for software maintenance and upgrades. Thus, we have presumed a 25% 

increase for maintenance and upgrades of systems and management software, rather 

than the standard 15% due to the likely need for technology replacement. (The 

formula is, then: 25% of 352,350 = $88,088}. 

MM. End-user support labor. These costs vary widely and are difficult 

to predict, especially given the fact that no comprehensive study of end-user 

requirements, skills or training assessment has yet been made. For purposes of this 

model, labor costs include all those individuals throughout the organization who are 

required to support the end-users as they both adapt to the new technology and 

employ it on an on-going basis-including those staff necessary to provide "Help Desk" 

support, emergency maintenance, etc. We have applied the ratio of 1 support staff to 

every 50 end-users-resulting in a requirement for 41 staff. Thus, if the total number 

of end-users is 2,060, and the cost for 1 staff year is $70,000 (burdened labor rate}, 

then the annual cost for this support is $2,870,000. (Approximately 41 staff, each of 

whom will cost $70,000 each year). 
135 

Page 9 

NN. Application development labor. This cost component 

encompasses the time spent by dedicated MIS professionals managing, developing, 

maintaining and enhancing dienVserver applications for the affected operations. 

Although programming costs are installation-dependent and influenced by many 

factors, various rules-of-thumb are common-based on ratios of number of application 

developers to number of end users. In private sector studies, these ratios varied 

between a low of 25-to-1 to more ·than 2,000-to-1, depending on a range of factors. 

Available research indicates that the median ratio was about 250-to-1 . Because of the 

complex nature of the OTFM's and OTR's requirements-especially the land-based 

aspect-we have used a 200-to-1 ratio. Thus, if 2,060 end-users is the assumption, 

then 2,060- 200 = 10 dedicated application developers will be needed. Therefore, 10 

dedicated application developers at an annual cost of $90,000 each (burdened labor 

rate), will result in a cost of $900,000. 

00. Prtmary server sHe operation labor. Operations labor is the 

MIS labor necessary to operate and manage these primary server(s). Model costs 

are presumed to be 113 of the total costs of hardware and software associated with 

the primary servers. Therefore, if the total cost of the primary server site hardware 

and software is $439,000, then 113 of this is $144,883 . . 

PP. Workgroup server operation labor. These costs reflect MIS labor 

needed to support the wor1<group level servers. Using the same formula, if the total 

cost for the wor1<group hardware and software is $530,700, then the wor1<group 

operation labor cost is calculated to be $175,131 . 

QQ. Admlnlstn~tlve support labor. These costs are activities related 

to acquiring and administering the clienVserver system. These are the real, but 

hidden, costs of acquisition and administration associated with individuals outside the 

mainstream MIS organization. These include costs of purchasing, accounting and the 

IT organization itself. It also includes the study and acquisition of the hardware, 

software and external services for the clienVserver networ1<. It must also include a 

component for legal support, either as an internal legal department or outside legal 

counsel ttJat writes, reviews and negotiates contracts for hardware, software and 

related services. Budgets must also recognize costs for audits and for evaluations of 

customer satisfaction. We have assumed at least one audit per site during the 3-year 

period. And finally, new policies and practices must be defined and management and 

staff time are necessary to create, document and enforce IS policies and practices for 

the clienvserver system. 
136 

Page 10 

According to private sector surveys, a typical annual labor cost 

component is about $500 to $700 per wonc station per year. Thus, if we assume 

2,060 wonc stations and assume a mid-range cost of $600 per station, then the total 

cost will be $1,236,000 per year. 

RR. End-user training. In our experience, this important factor is often 

minimized or ignored altogether with devastating effects on the ultimate success of 

any automation program. To hope that any automation will be successful is to plan 

carefully for a comprehen~ve education and training program so that everyone who 

uses this technology will have the skills, knowledge and training necessary to benefit 

completely from all its functionality. Three components make up end-user education: 

(1) the cost per student day of educating the end user; (2) the cost per student day of 

educating the dedicated, professional , end-user support staff; and (3) the cost of 

educating the application development staff. In this model, we are assuming that the 

cost per student day for the end-user is $150. Therefore, the cost to train all users for 

one days is 309,000 and the cost to train all users for 5 days (the minimum level) 

equals $1,545,000 for Year 1. 

For Year 2 and all subsequent out years, we are presuming a need for at 

least two student days for each end-user. Thus, the annual cost in Years 2 and 

beyond will be $618,000. 

SS. End-user support training. The model presumes there will be 

41 staff members required to provide support training. Each member will require 

specialized training both in Year 1 and in subsequent years in order to deliver support 

to end-users. Most private sector models assume 18 days of training for each 

member at a rate of $365 per day. Thus, if 41 staff members cost $365 a day, then 

the cost for all members per day is $14,965. For 18 days, the total cost is $269,370. 

TT. Application development support training. All of the 

professionals who develop this Software must be trained and re-trained on a regular 

basis. Our model assumes 10 application developers and the cost to train each of 

them for one day is estimated to be $320. Thirty (30) days of training must be 

allocated for each developer. Therefore, the cost to train 10 developers for 30 deys 

is $96,000. 
137 

Page 11 

UU. External professional services. External professional services 

from industry consuHing groups will be required to provide expertise in particular 

dienUserver areas. OTFM must first plan for expertise to support necessary business 

process re-engineering efforts, so that the aitical work of nKiefining how business will 

be conducted is fully integrated into the planning and design of the new automated 

systems. · 

Because dienUserver environments are just now emerging, many 

organizations do not have all the requisite skills to implement such proj(icts and 

professional services will be required to augment in-house skills, especially in the early 

years. The amount of professional services required can vary dramatically, depending 

on the environment, but a private sector rule-of-thumb assumes costs to be $1,000 

per work station or $2,060,000 per year (2,060 users x $1,000). Our initial 

discussions with industry experts predict that introductory training costs alone in this 

environment could be enormous. As OTFM moves toward greater self-reliance, this 

cost can be expected to be reduced in the out years. 

It is also important to note that no comprehensive review of end-user 

requirements has ever been conducted. Before system needs can be translated into 

actual requirements, a complete review of the needs of both internal and external 

users must be conducted. This will require site visits to most of the major agency 

offices and a substantial sampling of external users to ensure that the feature 

functionality of the envisioned systems will respond to the business needs of both the 

internal and external users. Such reviews are routinely and most appropriately 

conducted by unbiased third parties who can bring a fresh look to the situation and 

who have no partiaJiar allegiance to any one solution or to any existing organization. 

Such an engagement usually requires the services of a team of highly-trained, 

professional technology analysts working intensely for a period of nine-to-twelve 

months and costs routinely range from $1,000,000 to $3,000,000 for such an 

engagement. Despite the cost, this is an absolutely essential component, for without 

it, the project will be developed without having really understood and documented the 

actual needs of the users. For this model, we have assumed a mid-range cost of 

$1,500,000 for Year 1. 

Thus, for Year 1 professional costs should be expected to reach 

$3,560,000 ($1,500,000 + $2,060,000) for Year 1 and $2,060,000 each year 

thereafter. 
138 

Page 12 

VV. End-user supplies and faciiHies. Other expenses must be 

incurred in this category. They include such items as paper and toner for printers, 

media, diskettes, special equipment, mousepads, small files boxes for floppy disks, 

special furniture, fixtures, stands for paper, heat, light, air conditioning and power 

necessary to drive the desktop. Professional surveys i.ndicate that the amounts spent 

for facilities average $150 per WOf1( station per year. Thus, for 2,060 users, the 

annual cost will be $309,000. 

WW. Transportation. Costs must be incurred to ship and move PCs 

and related equipment. Although the initial shipping of new equipment will be 

conSiderable during Year 1, equipment will need to be replaced and related supplies 

will continue to be transported to end-users throughout the cycle of the automation 

program. Thus, this model assumes a cost of $20 per work station for each year, or 

$41 ,200 each year. 

XX. Travel. 'M"Iile this is a highly variable cost, it is important to keep 

in mind that OTFM sites are highly dispersed and the unique requirements of the 

external user community will almost surely require substantial travel during the initial 

development period. If each were visited a minimum of 5 days during the first year, 

then a total of 520 travel days would be required. At an estimated cost of $300 per 

travel then, then the annual cost would be $156,000. {This estimate is conservative 

and presumes that both originating and terminating cities for travel would be within the 

same geographical region. It would be virtually impossible, for instance, to make a 

three-day round-trip from Washington, D. C. to Billings, Montana for $900!) 

DATA CONVERSION AC!lVITIES: 

YY. liM Data conver$lon. Although OTFM statr estimate this first year 

cost to be $250,000, based on their formula that presumes 10 people would work 500 

hours at a cost of $50 per hour, this estimate presumes that this awesome task could 

be completed in twelve and a half weeks-a goal we believe to be extraordinarily 

optimistic. Private sector experts always warn that data conversion costs are routinely 

under~stimated and always result in shocking over-runs. Given the well-known 

problems with the current data, we recommend a formula that assumes the task will 

require closer to 1,000 hours or 25 work weeks. Thus, we estimate this cost to be 

$500,000 (10 x $50 x 1,000 hours). 
139 

Page 13 

zz. Lease-related data conversion. Data here consists primarily of 

the tenns of a lease, the land involved and the lessees. It can also indude appraisal 

infonnation, bond and compliance data, modification data, payment infonnation, and 

remancs. · Land desaiptions represent the land being leased and relate directly to the 

ownership file. The liM special deposit acoount number, into which collections are 

made, can be induded in this file. The payment data can be maintained by the user, 

but is not automatically updated by the billing or collection processes. These accounts 

are not near so troublesome as the liM files-with problems such as wrong addresses, 

missing data elements, etc.-therefore we believe that OTFM's estimate of 10 people 

for 500 hours for a period of $50 per hour is supportable. Therefore, the cost is 

estimated to be $250,\lOO. · 

AAA. Ownership data conversion. These data contain land 

desaiptions and the current owners of the land. Ownership is represented by 

fractional interest in a per tract basis. The owner 10 number in this file does not 

always match the 10 number in the people file, or the acoount number in the liM file. 

OTFM staff estimate that the task of reconciling and correcting these inconsistencies 

will require 20 people wor1dng for 680 hours at a cost of $50 per hour. Absent no 

reason to doubt this, we have incorporated this assumption into the model. Thus, 20 

people at $50 per hour for 680 hours is $680,000. 

BBB. People data conversion. These .data indude infonnation about 

those Indians who are considered to be part of the official enrollment They also 

indude infonnation about data cr1tical in detennining who qualifies for judgement and 

per capita payments, such as enrollment date, birth date, and blood quantums. Other 

data indudes alias and main names for the individuals. OTFM estimates a need for 

1 0 people wol1dng for 680 hours at a rate of $50 per hour. Thus, the conversion costs 

are estimated to be 10 x 680 x $50= $340,000. 

CCC. LRIS data conversion. The land records infonnation system 

(LRIS), tracks individual Indian land ownership. It tracks physical ownership rather 

than monetary ownership and is the equivalent of the county courthouse in 

mainstream America. Currently, there are no _automated links between LRIS and 

IRMSIIIM, even though they are procedurally interdependent. Also. OTFM staff have 

voiced complaints that LRIS is often not available for trust asset management due to 

han:fware problems or communications problems or back-logs in land liUe and 

beneficial ownership detenninations. 
140 

Page 14 

These estimates have been among the most difficuH to make. The IT 

staff at BIA report that last year's estimates for this task were projected to range 

between $1,500,000 and $2,000,000. OTFM's current projection is for $1,000,00 for 

data conversion for LRIS. However, it is important to bear in mind the tremendous 

problems inherent in this conversion process. Cleaning up these data files will require 

data entry of all CUFF records (records that are literally still paper-bound in staff desk 

drawers in many instances) and will require matching existing information in tha 

database to actual title records, as well as to owner information contained in other 

data bases. For these reasons, we believe a much larger cost will be incurred and we 

estimate it to be at least $1,500,000. 

DOD. Imaging data conversion. Costs must be incurred in the 

process of imaging tiUe and ownership documents. These tasks will necessarily be 

performed by an outside contractor, given the highly specialized requirements of the 

task. This will involve !revelling to all agency and area locations and imaging 

appropriate title and ownership documents. OTFM estimated the cost to be 

$1,000,000. Again, we believe this to be a highly conservative estimate given the 

potential problems associated with addressing ·the fractionated interest problems and 

the fad that finding a suitable vendor may not be easy. We therefore believe a more 

realistic projection to be $2,000,000. 

EEE. Systems Integration and Implementation. This item reflects 

costs associated with integrating OTFM (BIA) diverse software applications, 

wstomizing vendor software to meet OTFM unique requirements, and !reining endusers on specialized software systems-separate and apart from WAN-related 

products. Vl/hile ditriwH to predict in abstract terms-before a full systems 

requirements study has been concluded-these costs should not be under-estimated. 

Well-established vendors tell us that the costs could range between $3-$9 million, 

depending on many factors. For the purposes of this model, we have assumed $6 

million-one sixth of which is allocated for support of tribel access. $5 million is 

reflected in this category and the remaining $1 million is included in Item FFF. 

FFF. Access by Individuals and tribes. If we assume universal 

access by all tribes-approximately 30D-to OTFM's trust and asset management 

system, this would constitute a roughly 15% increase in the total number of end-users, 

assuming that each tribe has only one dient wor1t station accessing OTFM's 

databases. Using this percentage, this would add $5,854,440 ovar the first 3-year 

period. 

Total number of encl.....,. 

End·Uier IUpport al8ff 

AppllceUon development aupport 

Tolal number or Agendas 

Tolal number of Area olldes 

Tolal Reglon8IIHQ!olhef 

Total SICa Ollie" 

2,010 

4t 

to 

87 

12 

It 

tto 
Matht."esoclatH 

con-tlol 

I A 

I 8 

I c 

D 

E 

F 

0 

H 

I 

J 

K 

l 

M 

I H 

I 0 

I p 

I Q 

I R 

I s 

T 

l u 

I v 

I 

ITEM 

··-··· No. existino client PC worl<stotlons 

Existing client PC worl<statlons upgrade s 

Existing client PC worl<slatlons maintenance s Sub-toto! S 

No. new client PC -statlono 

New client PC wOO<stallon cost s New client PC wOO<slatlon upgrade s New client PC wOO<stallon maintenance s Sub-total S 

New Client PC wOO<atatlon aollwere: WfWG s Worl<stalion ooftware upgrade s Office suite toftware s Olllce suite aoftwale mntc./UI>Cifldaa s Oocumenlatlon/Distrtbutlon s Hosl access aoftware s Sub-total $ -------

LANwlrlno s Hubslroulera s Communications s Sub-total S 

Laser printers s Laser prinler uoaradelrealoce s Laser printer maintenanCe s Sub-total S 

Wort< amuo server hardWare s Worl< Q<OIJD server u011rade s Worl< arOUD aerver m .. ntenence s Sub-total S 

Sub-total 

Yaort . --· . 

824 

82,400 s 

t23,800 s 201,000 $ 

1,236 $ 

3,090,000 s 

s 

s 

3,010,000 s 

43260 s 

s 370 800 s 

s ... 33.000 s 

208,000 s 

113,ot0 s 

515000 s 553500 s 

1,223 500 s 

2,212,000 s 

309600 s 

s 81 ,920 s 

371,120 s 

478 500 

s 

s 

478,100 s 

s 

Yur

. --·

2

1

3

1,2

1,2

___ 
bthl - xlet _ _ _ 

Conftck. .1 

ITEM 

··- ··· Year1 

y Primary server hardware s 392,000 s z UDQrade s s M Maintenance s s BB Envlronmenlals s 15,000 s Sub-total S 407,000 s 

I cc Primary server software s ~7.040 s 

I DO Upgrade s s 

I EE Maintenance s 7,997 s Sub-total S 55,037 s 

FF Trusl Managementllndv. Acct. System s ~ 800 000 s GO Lease Management/Accts. Receivable System s 900,000 s GO. I Malnlenance/SUIJI)Ort and Upgrades s HH land Managemenl System s 503,000 

HH.I Malnlenance/SuPI>OII and Upgrades - '· s Sub-total S 8,203,000 s 

II Pnmarv server ROB s 85000 

JJ UDQrade/malnlenance s s 10( Svs. mgml. and BPDIIcaiJon dev. SW and lools s 352 350 $ 

LL UDaradelmalnlenance s $ 

Sub-total S 437,350 s 

Sub-total 

s 

s Sub-total I S 
Math . ... ocla .. _ 

Cont. del 

ITEM Yoor1 

rtlabo< s 1,236,000 

Sub-total! S 1,236,000 

r RR End· user training s 1 5-45,000 s 

I 55 End-user support tralnlna s 269,370 s 

TT AID suooort t~ $ 96,000 $ 

Sub-total $ 1,910,370 s 

$ 3,560,000 

Sub-total! S 3,560,000 

w End-user suDOiiesllacilitles $ 309,000 s 

WoN Transoortatlon s 41,200 s 

I XX Travel s 165,000 s 

Sub-total ..! - 515,200 s --- -- ---- ----

Data Conven1lon (assumes convs!Sion Is done by contractor) 

yy liM s 500,000 s 

zz Lease s 250,000 s 

MA Ownenlhlp $ 680,000 s 

888 People s 340,000 s 

CCC LRIS s 1,500,000 s 

Sub-total $ 3,270,000 s -

DOD llmaalng s 2,000,000 

Sub-total $ 2,000,000 

ration/Implementation Costs s 2,500,000 

Sub-total $ 2,500,000 

Access by Individual Indians end Tribes $ 5,85-4,440 s 

Sub-total $ 5,85-4,440 $ 

Yoor2 

1,23

1,23

61

7

1

70

--

30

4

16

51

---

I GRAND TOTALS! s 39,181,69!JI - 18,45
I 

I 

j 

144 
.bthll ...... .:lattt 

c .. ...... 

v .. r1 Year2 

.. 

I s c s 

0 No. ,_ client PC -'<stations 1236 

E New dienl PC -'<station cool $ 3 090 000 s s 

• New dlont PC -'<stl1lon upgrode s s 123600 I 

0 New cfient PC--molntanonco s s 185400 $ 

Sub-total S 3,010,000 $ 311',000 $ 

H New Client PC -'<station software: WfNG s 43 2110 I $ 

I Woo1<stl1lon ooftwore -- s s s I 0t11os lulte ooftwore $ 370800 s I 

• Olfioe ouHe software mntc.tuoarodes s s 55 620 s l OocumentatloniDitlributton s 33000 $ s .. Hoet eccesaaoftw8nt s 208000 $ s Sub.fOtal S 113,0t0 $ 11,120 $ 

N 

0 

Q lllser printero I l09ll00 s s s s 30960 I 

I 81 920 s 81 920 s SUb-total I 311,120 s 12,110 $ 

I 478 500 

u s s 23 925 s v s s 28 710 s Sub-total S 478,100 s 12,131 s 

w 52200 

X 

Yeerl 

12380

185,40

JOt,OOO 

185 40

5562

241,02

3096

61 92

12,18

23 92

28 71

12,13
--M•ttl·- 'ocl•te:--

COftftdenf 

ITEM 

y Primary server hardware 

z Upgrade 

M Maintenance 

88 Envlronmentals 

cc IPrimart aerver software 

DO IU-ade 

EE !Maintenance 

s 

s 

s 

s Sub-tout S 

Sub.total 

FF Trust ManaQemenVlndv. Acct. Systems s GO lease Manaaement Svsiems s 00.1 Maintenance/Suooon and Uoarades 

HH Land Manaoement System s HH.t Malntenance/SUDOOrt and Uoarades 

Sub-tout S 

" Primary_ server ROB s JJ Upgrade/maintenance s 

•• SJS. mgmt. and aoollcotlon de¥. SW and tools s 

ll Upgrode/mmlenanoo s Sub-tout S 

... . NN ntlabo< s Sub-tout S 

00 

pp rations labor 

Sub·total 

Ya1r 1 ·-. Yelr 2 ·--·- 392,000 s s s 19600 s s 23 520 s 15000 s 15000 s 407,000 s 11,120 s 

47.040 47.040 

2,352 

7.997 7.997 

11,0~7 17,31t 

4 800 000 s 4 BOO 000 s 900000 s 100000 s s 63000 s 503 000 

s 50 300 s 1,20~,000 I 013 ~00 I 

85 000 s s s 17 000 s 352 350 s s s 88088 s U7,350 s 101,081 I 

2 870 000 

900000 

3,770,000 

y, 

...... 

19,600 

23.520 

15,000 

51,120 

47.040 

2.352 

7.997 

17,311 

• 600 000 

100000 

63000 

50300 

1,013,300 

17 000 

88,088 

105,011 

14-4 883 
Math ' <11te 

Conftden•'! . , 

Yeu 1 Year 2 

QQ !Administrative suooort tabor s 1 236,000 s 1 236,000 s Sub-total S 1,238,000 s 1,231,000 s 

•• s 1 5<15000 s 618.000 s ss s 269,370 s 74.825 s TT s 96,000 s 16.000 s .Sub-1o1al S 1,110,370 s 701,125 s 

uu !External professional services s 3 560 000 I 2 060000 s Sub-to1al S 3,510,000 I 2,010,000 s 

309000 309 000 

41200 

165000 

Sub-lo1all S 111,200 

Data Conversion (es.sumiU convef3i0n IS aone D conrractor) 

yy liM s 500 000 • • u lease I 250000 • • MA Owners/liD s 680000 • • 

••• PoOOie s 340000 • • CCC LRIS s 1 500000 s s Sub-to1al S 3,270,000 s s 

ooo llmaoina s 2000000 

Sub4o1al I 2,000,000 

EEE !System lntegrattonn lementation Costs s 2 500000 s 2 500 000 s Sub-lo1al S 2,100,000 I 2,500,000 s 

FFF !Access by Individual Indians and Tribes 

Sub4otol 

Year 3 

123600

1,235,000 

618.000 

74 825 

16000 

701,825 

2,060000 

2,010,000 

309000 

41 200 

I GRAND TOTALS( I 41,171,8311 s h,IOS,401 Is 18,190,101 
148 

Union Calendar No. 

104THCONGRESS H R 3828 2D SESSION 

• • 

[Report No. 104-

To amend the Indian Child Welfare Act of 1978, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 16, 1996 

Mr. YouKG of Alaska (for himself, l\lr. MILLER of California, and Mr. RICIIARDSOK) introduced the follo\\~ng bill; which was referred to the Committee on Resources 

September , 1996 

Committed to the Committee of the \\nole House on the State of the Union 

and ordered to be printed 

A BILL 

To amend the Indian Child Welfare Act of 1978, and for 

other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; REFERENCES. 

4 (a) SnORT TITLE.-This Act may be cited as the 

5 "Indian Child Welfare Act Amendments of 1996". 
149 

2 

1 (b) REFERE:-rCES.-\Vhenever in this Act an amend2 ment or repeal is expressed in terms of an amendment 

3 to or repeal of a section or other provision, the reference 

4 shall be considered to be made to a section or other provi5 sion of the Indian Child Welfare Act of 1978 (25 U.S.C. 

6 1901 et seq.). 

7 SEC. 2. EXCLUSIVE JURISDICTION. 

8 Section lOl(a) (25 U.S.C. 1911(a)) is amended9 (1) by inserting "(1)" after "(a)"; and 

10 (2) by striking the last sentence and inserting 

11 the follovving: 

12 "(2) An Indian tribe shall retain exclusive jurisdiction 

13 over any child custody proceeding that involves an Indian 

14 child, not\vithstanding any subsequent change in the resi15 dence or domicile of the Indian child, in any case in which 

16 the Indian child17 "(A) resides or is domiciled within the rcserva18 tion of the Indian tribe and is made a ward of a 

19 tribal court of that Indian tribe; or 

20 "(B) after a transfer of jurisdiction is carried 

21 out under subsection (b), becomes a ward of a tribal 

22 court of that Indian tribe.". 

23 SEC. 3. INTERVENTION IN STATE COURT PROCEEDINGS. 

24 Section 101(c) (25 U.S.C. 19ll(c)) is amended by 

25 striking " In any State court proceeding" and inserting 
150 

3 

1 "Except as provided in section 103(e), in any State court 

2 proceeding". 

3 SEC. 4. VOLUNTARY TERMINATION OF PARENTAL RIGHTS. 

4 Section 103(a) (25 U.S.C. 1913(a)) is amended5 ( 1) by inserting " ( 1)" before "Where"; 

6 (2) by striking "foster care placement" and in7 serting "foster care or preadoptive or adoptive place8 ment"; 

9 (3) by striking "judge's certificate that the 

10 terms" and inserting the following: "judge's certifi11 cate that12 "(A) the terms"; 

13 ( 4) by striking "or Indian custodian." and m14 serting "or Indian custodian; and"; 

15 (5) by inserting after subparagraph (A), as des16 ignated by paragraph (3) of this subsection, the fol17 lmving new subparagraph: 

18 "(B) any attorney or public or private agency 

19 that facilitates the voluntary termination of parental 

20 rights or preadoptive or adoptive placement has in21 formed the natural parents of the placement options 

22 'vith respect to the child involved, has informed 

23 those parents of the applicable provisions of this 

24 Act, and has certified that the natural parents 'vill 
151 

4 

1 be notified within 10 days of any change m the 

2 adoptive placement."; 

3 ( 6) by striking "The court shall also certify" 

4 and inserting the following: 

5 "(2) The court shall also certify"; 

6 (7) by striking "Any consent gwen prwr to," 

7 and inserting the following: 

8 "(3) Any consent given prior to,"; and 

9 (8) by adding at the end the follo-wing new 

10 paragraph: 

11 "( 4) An Indian custodian who has the legal authority 

12 to consent to an adoptive placement shall be treated as 

13 a parent for the purposes of the notice and consent to 

14 adoption provisions of this Act.". 

15 SEC. 5. WITHDRAWAL OF CONSENT. 

16 Section 103(b) (25 U.S.C. 1913(b)) is amended17 ( 1) by inserting " ( 1)" before "Any"; and 

18 (2) by adding at the end the following new 

19 paragraphs: 

20 "(2) Except as provided in paragraph ( 4), a consent 

21 to adoption of an Indian child or voluntary termination 

22 of parental rights to an Indian child may be revoked, only 

23 if24 "(A) no final decree of adoption has been en25 tered; and 
152 

5 

"(B)(i) the adoptive placement specified by the 

2 parent terminates; or 

3 "(ii) the revocation occurs before the later of 

4 the end of5 "(I) the 180-day period beginning on the 

6 date on which the Indian child's tribe receives 

7 written notice of the adoptive placement pro8 vided in accordance vvith the requirements of 

9 subsections (c) and (d); or 

10 "(II) the 30-day period beginning on the 

11 date on which the parent who revokes consent 

12 receives notice of the commencement of the 

13 adoption proceeding that includes an expla14 nation of the revocation period specified in this 

15 subclause. 

16 "(3) 'fhe Indian child with respect to whom a revoca17 tion under paragraph (2) is made shall be returned to the 

18 parent who revokes consent immediately upon an effective 

19 revocation under that paragraph. 

20 "(4) Subject to paragraph (6), if, by the end of the 

21 applicable period determined under subclause (I) or (II) 

22 of paragraph (2)(B)(ii), a consent to adoption or voluntary 

23 termination of parental rights has not been revoked, be24 ginning after that date, a parent may revoke such a con25 sent only-
153 

6 

1 "(A) pursuant to applicable State law; or 

2 "(B) if the parent of the Indian child involved 

3 petitions a court of competent jurisdiction, and the 

4 court finds that the consent to adoption or voluntary 

5 termination of parental rights was obtained through 

6 fraud or duress. 

7 "(5)(A) Subject to paragraph (6), if a consent to 

8 adoption or voluntary termination of parental rights is re9 voked under paragraph (4)(B), 'vi.th respect to the Indian 

10 child involved11 "(i) in a manner consistent vvith paragraph (3), 

12 the child shall be returned immediately to the parent 

13 who revokes consent; and 

14 "(ii) if a final decree of adoption has been en15 tered, that final decree shall be vacated. 

16 "(6) Except as otherwise provided under applicable 

17 State law, no adoption that has been in effect for a period 

18 longer than or equal to 2 years may be invalidated under 

19 this subsection.". 

20 SEC. 6. NOTICE TO INDIAN TRIBES. 

21 Section 103(c) (25 U.S.C. 1913(c)) IS amended to 

22 read as follows: 

23 ~ "(c)(l) A party that seeks the voluntarv placement . 

24 of an Indian child or the voluntary termination of the pa25 rental rights of a parent of an Indian child shall provide 
154 

7 

1 written notice of the placement or proceeding to the Indian 

2 child's tribe. A notice under this subsection shall be sent 

3 by registered mail (return receipt requested) to the Indian 

4 child's tribe, not later than the applicable date specified 

5 in paragraph (2) or (3). 

6 "(2)(A) Except as provided in paragraph (3), notice 

7 shall be provided under paragraph (1) in each of the fol8 lowing cases: 

9 "(i) Not later than 100 days after any foster 

10 care placement of an Indian child occurs. 

11 "(ii) Not later than 5 days after any 

12 preadoptive or adoptive placement of an Indian 

13 child. 

14 "(iii) Not later than 10 days after the com15 mencement of any proceeding for a termination of 

16 parental rights to an Indian child. 

17 "(iv) Not later than 10 days after the com18 mencement of any adoption proceeding concerning 

19 an Indian child. 

20 "(B) A notice described in subparagraph (A)(ii) may 

21 be provided before the birth of an Indian child if a party 

22 referred to in paragraph (1) contemplates a specific adop23 tive or preadoptive placement. 

24 "(3) If, after the expiration of the applicable period 

25 specified in paragraph (2), a party referred to in para-
155 

8 

1 gTaph (1) discovers that the child involved may be an In2 dian child3 "(A) the party shall provide notice under para4 graph (1) not later than 10 days after the discovery; 

5 and 

6 "(B) any applicable time limit specified in sub7 section (e) shall apply to the notice provided under 

8 subparagraph (A) only if the party referred to in 

9 paragraph (1) has, on or before commencement of 

10 the placement made reasonable inquiry concerning 

11 whether the child involved may be an Indian child.". 

12 SEC. 7. CONTENT OF NOTICE. 

13 Section 103(d) (25 U.S.C. 1913(d)) is amended to 

14 read as follows: 

15 "(d) Each written notice provided under subsection 

16 (c) shall contain the following: 

17 " ( 1) The name of the Indian child involved, and 

18 the actual or anticipated date and place of birth of 

19 the Indian child. 

20 "(2) A list containing the name, address, date 

21 of birth, and (if applicable) the maiden name of each 

22 Indian parent and grandparent of the Indian child, 

23 if24 "(A) known after inquiry of-
156 

9 

"(i) the birth parent placing the child 

2 or relinquishing parental rights; and 

3 "(ii) the other birth parent (if avail4 able); or 

5 "(B) otherwise ascertainable through other 

6 reasonable inquiry. 

7 "(3) A list containing the name and address of 

8 each known extended family member (if any), that 

9 has priority in placement under section 105. 

10 "( 4) A statement of the reasons why the child 

11 involved may be an Indian child. 

12 "(5) The names and addresses of the parties in13 volved in any applicable proceeding in a State court. 

14 "(6)(A) The name and address of the State 

15 court in which a proceeding referred to in paragraph 

16 ( 5) is pending, or will be filed; and 

17 "(B) the date and time of any related court 

18 proceeding that is scheduled as of the date on which 

19 the notice is provided under this subsection. 

20 "(7) If any, the tribal affiliation of the prospec21 tive adoptive parents. 

22 " ( 8) The name and address of any public or 

23 private social service agency or adoption agency in24 volved. 
157 

10 

1 "(9) An identification of any Indian tribe with 

2 respect to which the Indian child or parent may be 

3 a member. 

4 "(10) A statement that each Indian tribe iden5 tified under paragraph (9) may have the right to in6 tervene in the proceeding referred to in paragraph 

7 (5). 

8 " ( 11) An inquiry concerning whether the Indian 

9 tribe that receives notice under subsection (c) in10 tends to intervene under subsection (e) or waive any 

11 such right to intervention. 

12 "(12) A statement that, if the Indian tribe that 

13 receives notice under subsection (c) fails to respond 

14 in accordance with subsection (e) by the applicable 

15 date specified in that subsection, the right of that 

16 Indian tribe to intervene in the proceeding involved 

17 shall be considered to have been waived by that In18 dian tribe.". 

19 SEC. 8. INTERVENTION BY INDIAN TRmE. 

20 Section 103 (25 U.S.C. 1913) is amended by adding 

21 at the end the following new subsections: 

22 "(e)(1) 'I'he Indian child's tribe shall have the right 

23 to intervene at any time in a voluntary child custody pro24 ceeding in a State court only if-
158 

11 

1 "(A) in the case of a voluntary proceeding to 

2 terminate parental rights, the Indian tribe filed a 

3 notice of intent to intervene or a written objection 

4 to the termination, not later than 30 days after reS ceiving notice that was provided in accordance with 

6 the requirements of subsections (c) and (d); or 

7 "(B) in the case of a voluntary adoption pro8 ceeding, the Indian tribe filed a notice of intent to 

9 intervene or a written objection to the adoptive 

10 placement, not later than the later of11 "(i) 90 days after receiving notice of the 

12 adoptive placement that was provided in accord13 ance ·with the requirements of subsections (c) 

14 and (d); or 

15 "(ii) 30 days after receiving a notice of the 

16 voluntary adoption proceeding that was pro1 7 vided in accordance ·with the requirements of 

18 subsections (c) and (d). 

19 "(2)(A) Except as provided in subparagraph (B), the 

20 Indian child's tribe shall have the right to intervene at 

21 any time in a voluntary child custody proceeding in a State 

22 court in any case in which the Indian tribe did not receive 

23 written notice provided in accordance with the require24 ments of subsections (c) and (d). 
159 

12 

1 "(B) An Indian tribe may not intervene in any vol2 untary child custody proceeding in a State court if the 

3 Indian tribe gives written notice to the State court or any 

4 party involved of5 "(i) the intent of the Indian tribe not to inter6 vene in the proceeding; or 

7 "(ii) the determination by the Indian tribe 

8 that9 "(I) the child involved is not a member of, 

10 or is not eligible for membership in, the Indian 

11 tribe; or 

12 "(II) neither parent of the child is a mem13 ber of the Indian tribe. 

14 "(3) If an Indian tribe files a motion for intervention 

15 m a State court under this subsection, the Indian tribe 

16 shall submit to the court, at the same time as the Indian 

17 tribe files that motion, a certification that includes a state18 ment that documents, wi.th respect to the Indian child in19 volved, the membership or eligibility for membership of 

20 that Indian child in the Indian tribe under applicable trib21 allaw. 

22 "(f) Any act or failure to act of an Indian tribe under 

23 su~ction (e) shall not24 "(1) affect any placement preference or other 

25 right of any individual under this Act; 
160 

13 

1 "(2) preclude the Indian tribe of the Indian 

2 child that is the subject of an action taken by the 

3 Indian tribe under subsection (e) from intervening in 

4 a proceeding concerning that Indian child if a pro5 posed adoptive placement of that Indian child is 

6 changed after that action is taken; or 

7 " ( 3) except as specifically provided m sub8 section (c), affect the applicability of this Act. 

9 "(g) Notwithstanding any other provision of law, no 

10 proceeding for a voluntary termination of parental rights 

11 or adoption of an Indian child may be conducted under 

12 applicable State law before the date that is 30 days after 

13 the Indian child's tribe receives notice of that proceeding 

14 that was provided in accordance "\-\<-ith the requirements of 

15 subsections (c) and (d). 

16 "(h) Notwithstanding any other provision of law (in17 eluding any State law)-

18 "(1) a court may approve, as part of an adop19 tion decree of an Indian child, an agreement that 

20 states that a birth parent, an extended family mem21 her, or the Indian child's tribe shall have an enforce22 able right of visitation or continued contact with the 

23 Indian child after the entry of a final decree of 

24 adoption; and 
161 

14 

1 "(2) the failure to comply with any provision of 

2 a court order concerning the continued visitation or 

3 contact referred to in paragraph (1) shall not be 

4 considered to be grounds for setting aside a final de5 crec of adoption.". 

6 SEC. 9. FRAUDULENT REPRESENTATION. 

7 Title I of the Indian Child Welfare Act of 1978 is 

8 amended by adding at the end the following new section: 

9 "SEC.114. FRAUDULENT REPRESENTATION. 

10 "(a) Ix GENERAL.-With respect to any proceeding 

11 subject to this Act involving an Indian child or a child 

12 who may be considered to be an Indian child for purposes 

13 of this Act, a person, other than a birth parent of the 

14 child, shall, upon conviction, be subject to a criminal sanc15 tion under subsection (b) if that person16 " ( 1) knowingly and willfully falsifies, conceals, 

17 or covers up by any trick, scheme, or device, a mate18 rial fact concerning whether, for purposes of this 

19 Act20 "(A) a child is an Indian child; or 

21 "(B) a parent is an Indian; or 

22 "(2)(A) makes any false, fictitious, or fraudu23 lent statement, omission, or representation; or 

24 "(B) falsifies a \Hittcn document knowing that 

25 the document contains a false, fictitious, or fraudu-
162 

15 

1 lent statement or entry relating to a material fact 

2 described in paragraph ( 1). 

3 "(b) CRnnNAL SANCTIOXS.-The criminal sanctions 

4 for a violation referred to in subsection (a) are as follows: 

5 " ( 1) For an initial violation, a person shall be 

6 fined in accordance with section 3571 of title 18, 

7 United States Code, or imprisoned not more than 1 

8 year, or both. 

9 "(2) For any subsequent violation, a person 

10 shall be fined in accordance >vith section 3571 of 

11 title 18, United States Code, or imprisoned not more 

12 than 5 years, or both.". 
163 

Union Calendar No. 

104TH CONGRESS H R 2 71 0 2D SESSIOI\" • • 

[Report No. 104-

To provide for the conveyance of certain land in the State of California 

to the Hoopa Valley Tribe. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 5, 1995 

Mr. RIGGS introduced the following bill; which was referred to the Committee 

on Resources 

SEPTE~IBER ' 1996 

Reported \'iith an amendment, committed to the Committee of the Whole 

House on the State of the Union and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

A BILL 

To provide for the conveyance of certain land in the State 

of California to the Hoopa Valley Tribe. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION !. 8H()RT mi.& 

4 -'Fhls Aei; ~be ffietl ftS the "Hoopa ¥alley Resef'Va 

5 ~ ~ BoundB:l:"'J GoPPeetion ~ 
164 

2 

1 BEG. 2.-I.AND T&" ... 1lr,ISFE& ro &ESI!;JWATION, 

2 W fN GENERAL. i\::ll f'i.gM; title; tttffi: interest 6f 'the 

3 United States in tttffi: .re 'the lttttt:le described in subsection 

4 W sftttH hereafter be lteM in Wst ey 'the United States 

5 fer 'the benefit 6f 'the ~ ¥alley !Fflbe tttffi: sftttH be pttPt 

6 6f 'the ~ ¥alley Resef'Vation. 

7 f!:,1 hums DESCRiBED. The l:ftnt:le PefeFred te in 

8 subsection W fH'e these portions 6f Towfiships 'l- N6rtft 

9 tttffi: -8 ~ Ranges -!3- East tttffi: -& Ettst; Humboldt Merffi.-

10 iftft; California, witffin ft boundary beginning ftt ft ~ 

11 6ft 'the current ffflU'th boundary 6f 'the ~ ¥alley Inffitffi 

12 Resef'Vation, marked tttffi: identified fig ~ IL'l.R. N&.-

13 8-!l 6ft 'the Pfftt 6f 'the ~ ¥ttHey Inffitffi Rese¥Yation 

14 pPCpttPed frem tt Hekl ffiH"<'ey eendueted by G:LF,. Bisset; :Au15 gastus ~ Smith tttffi: &-A:- Robinson, Deputy Su¥YCyors, 

16 approved by 'the Surveyor Generttl, H: Prtttt, Mftreft ±-8, 

17 ~ tttffi: extending frem sttid ~ 6ft ft bettf'ing m fi8rlft 

18 ~ dewees ~ minutes CftSt; until intersecting wi:tft ft line 

19 beginning ftt ft Fifit marked fig~ H .V.R. N&.- 6!2. 6ft 

20 sttid SUf'\"ey tttffi: extending 6ft tt bearing m ffflU'th M tle21 grees e.-9 minutes CftSt; comprising ¥4± ttereS mere er 

22 ~ 

23 BEG. 3. SumrEY, 

24 -The SeePeta-ry 6f 'the IntePior, ftCting thPough 'the Bu25 i'CftU 6f ~ Management, sftftH SUf'\"ey tttffi: m:onmnent 

26 tftftt portien m 'the beufidary m 'the ~ ¥ttHey ReSCf'Vfi 
165 

3 

tieR established by the addition 6flttttds ~ by seetioH 

2 g.,. 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the "Hoopa Valley ResenJa5 tion South Boundary Adjustment Act". 

6 SEC. 2. LAND TRANSFER TO RESERVATION. 

7 (a) IN GENERAL-All right, title, and ·interest of the 

8 United States in and to the lands described in subsection 

9 (b) shall hereafter be held in trust by the United States for 

10 the benefit of the Hoopa Valley Tribe and slwll be part of 

11 the Hoopa Valley Reservation. 

12 (b) LANDS DESCRIBED.-'17w lands referred to in sub13 section (a) are those portions of Townships 7 North and 

14 8 North, Ranges 5 East and 6 East, Httmboldt Meridian, 

15 California, within a boundary beginning at a point on the 

16 current south boundary of the Iloopa Valley Indian Res17 ervat·ion, marked and identified as "Post H. V.R. No. 8" on 

18 the Plaf of the Hoopa Valley Indian Reservation prepar.:d 

19 from . a field survey conducted by C. T. Bissel, Augustus ':'. 

20 Smith and C.A. Robinson, Deputy Su1'Veyors, approved by 

21 the Surveyor General, H. Pratt, March 18, 1892, and ex22 tending from said point on a bearing of north 72 degrees 

23 30 minutes east, until intersecting with a line beginning 

24 at a point marked as "Post H. V.R. No. 3" on said survey 

26-403 0 - 96 - 7 
166 

4 

1 and extending on a bearing of south 15 degrees 59 minutes 

2 east, comprising 2, 641 acres more or less. 

3 (c) BOUNDARY ADJUSTMENT.-The boundary of the 

4 Six Rivers National Forest shall be adjusted to exclude the 

5 lands to be held in trust for the benefit of the Hoopa Valley 

6 Tribe pursuant to this section. 

7 SEC. 3. SURVEY. 

8 The Secretary of the Interior, acting through the Bu9 reau of Land Management, shall survey and monument 

10 that portion of the boundary of the Hoopa Valley Reserva11 tion established by the addition of lands made by section 

12 2. 
167 

Union Calendar No. 

104TH CONGRESS H R 3640 2D SESSION • • 

[Report No. 104-

To provide for the settlement of issues and claims related to the trust 

lands of the Torres-1\'lartinez Desert Cahuilla Indians, and for other purposes. 

IN 'l'HE HOUSE OF REPRESENTA'riVES 

J U:\E 13, 1996 

Mr. BONO (for himself, Mr. HUNTER, lVlr. BROW~ of California, Mr. 

CALVERT, and Mr. BURTON of Indiana) introduced the following bill; 

which was referred to the Committee on Resources 

SEPTDIHER ' 1996 

Reported with an amendment, committed to the Committee of the Whole 

Hou se on the State of the Union and ordered to be printed 

[Strike out all after the enacting claugc and ingcrt the part printed in italic] 

[For text. of introduced bill, sec copy of bill as introduced on June 13, 1996 ] 

A BILL 

To provide for the settlement of issues and claims related 

to the trust lands of the Torres-lVIartinez Desert Cahuilla 

Indians, and for other purposes. 

Be it enacted by_ the Senate and House of Representa2 tives of the United States of America in Congress assembled, 
168 

2 

1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the "Torres-Martinez Desert 

3 Cahuilla Indians Claims Settlement Act". 

4 SEC. 2. CONGRESSIONAL FINDINGS AND PURPOSE. 

5 (a) FINDINGS.-The Congress finds and declares that: 

6 (1) In 1876, the Torres-Martinez Indian Res7 ervation was created, reserving a single, 640-acre sec8 tion of land in the Coachella Valley, California, north 

9 of the Salton Sink. The Reservation was expanded in 

10 1891 by Executive Orde1~ pursuant to the Mission Inll dian Relief Act of 1891, adding about 12,000 acres to 

12 the original 640-acre reservation. 

13 (2) Between 1905 and 1907, flood waters of the 

14 Colorado River filled the Salton Sink, creating the 

15 Salton Sea, inundating approximately 2,000 acres of 

16 the 1891 reservation lands. 

17 (3) In 1909 an additional 12,000 acres of land, 

18 9, 000 of which were then submerged under the Salton 

19 Sea, were added to the reservation under a Secretar20 ial Order issued pursuant to a 1907 amendment of 

21 the Mission Indian Relief Act. Due to receding water 

22 levels in the Salton Sea through the process of evapo23 ration, at the time of the 1909 enlargement of the res24 ervation, there were some expectations tlwt the Salton 

25 Sea woitld recede within a period of 25 years. 
169 

3 

1 ( 4) Through the present day, the majority of the 

2 lands added to the reservation in 1909 remain inun3 dated due in pari to the flowage of natural runoff and 

4 drainage water from the irrigation systems of the Im5 peTial, Coachella, and Mexicali Valleys into the 

6 Salton Sea. 

7 (5) In addition to those lands that are inun8 dated, there are also tribal and individual Indian 

9 lands located on the perimeter of the Salton Sea that 

10 m·e not currenUy irrigable due to lack of proper 

11 drainage. 

12 (6) In 1982, the United States brought an action 

13 in trespass entitled "United States of America, in its 

14 own Tight and on belwlf of Tm·res-Martinez Band of 

15 Mission Indians and the Allottees therein v. The Im16 perial Irrigation District and Coachella Valley Water 

17 Dish"ict ", Case No. 82-1 790 ]( (M) (hereafter in this 

18 section referred to as the "U.S. Suit") on behalf of the 

19 Torr·es-Marlinez Indian Tribe and affected Indian 

20 allottees against the two water districts seeking dam21 ages related to the inundation of tribal- and allottee22 owned lands and injunctive relief to prevent future 

23 disCharge of water on such lands. 

24 (7) On August 20, 1992, the Federal District 

25 Courl for the Southern District of California entered 
170 

4 

a judgment in the U.S. Suit requiring the Coachella 

2 Valley Water District to pay $212,908.41 in past and 

3 future damages and the ImpeTial Irrigation District 

4 to pay $2,795, 6.94.33 in past and futuTe damages in 

5 lieu of the United States' request for a peTmanent in6 junction against continued flooding of the submerged 

7 lands. 

8 (8) 'Phe United States, the Coachella Valley 

9 Water District, and the Imperial Irrigation District 

10 have filed notices of appeal with the United States 

11 Court of Appeals for the Ninth Circuit from the dis12 trict court's judgment in the U.S. Suit (Numbers 93-

13 55389, 93-55398, and .93-55402), and the Tribe has 

14 filed a notice of appeal from the district court's denial 

15 of its motion to intervene as a matter of right (No. 

16 92-5512.9). 

17 {9) The Court of Appeals for the Ninth Circuit 

18 has stayed further action on tlw appeals pending the 

19 outcome of settlement negotiations. 

20 {10) In 1991, tlw Tribe brought its own lawsuit, 

21 TorTes-Martinez Desert Cahuilla Indians, et al., v. 

22 ImpeTial Irrigation District, et al., Case No. 91-1670 

23 J (LSP) (henajter in this section referred to as the 

24 "Indian Suit") in the United States District Court, 

25 Soutlwrn District of California, against the two water 
171 

5 

districts, and amended the complaint to include as a 

2 plaintiff, llfary Resvaloso, in her own right, and as 

3 class representative of all other affected Indian allot4 ment owners. 

5 (11) The Indian Suit has been stayed by the Dis6 trict Court to facilitate settlement negotiations. 

7 (b) PURPOSE.-The purpose of this Act is to facilitate 

8 and implement the settlement agreement negotiated and ex9 ecuted by the parties to the U.S. Suit and Indian Suit for 

10 the purpose of resolving their conflicting claims to their mull tual satisfaction and in the public interest. 

12 SEC. 3. DEFINITIONS. 

13 For the purposes of this Act: 

14 (1) The term "Tribe" means the Torres-Martinez 

15 Desert Cahuilla Indians, a federally recognized In16 dian tribe with a reservation located in Riverside and 

17 Imperial Counties, California. 

18 (2) The term "allottees" means those individual 

19 Tribe members, their successors, heirs, and assigns, 

20 who have individual ownership of allotted Indian 

21 trust lands within the Torres-Martinez Indian Res22 ervation. 

23 (3) The tenn "Salton Sea" means the inland 

24 body of water located in Riverside and Imperial 

25 counties which serves as a drainage reservoir for 
172 

6 

1 water from pt·ecipitation, natural nmoff, irrigation 

2 return flows, wastewatm~ floods, and other inflow 

3 from within its watershed area. 

4 (4) The term "Settlement Agreement" means the 

5 Agreement of Compromise and Settlement Concerning 

6 Claims to Lands of the United States Within and on 

7 the Perimeter of the Salton Sea Drainage Reservoir 

8 Held in Tntst for the Torres-Martinez Indians exe9 cuted on June 18, 1996. 

10 (5) The term "Secretary" means the Secretary of 

11 the Interior. 

12 (6) The term "permanent flowage easement" 

13 means the perpetual right by the water districts to 

14 use the desct·ibed lands in the Salton Sink within and 

15 below the minus 220-foot contour as a drainage res16 ervoir to receive and store watet· from their t·espective 

17 water and drainage systems, including flood wate1~ 

18 return flows from irrigation, tail wate1~ leach water, 

19 operational spills and any other water which over20 flows and floods such lands, originating from lands 

21 within such water districts. 

22 SEC. 4. RATIFICATION OF SETTLEMENT AGREEMENT. 

23 ·--r'he United States hereby approves, ratifies, and con24 firms the Settlement Agreement. 
173 

7 

SEC. 5. SETTLEMENT FUNDS. 

2 (a) ESTABLISHMENT OF TRIBAL AND ALLOTTEES SET3 TLEMENT TRUST FUNDS ACCOUNTS.-

4 (1) IN GENERAL- There are established in the 

5 Treasury of the United States three settlement trust 

6 fund accounts to be known as the "Torres-Marlinez 

7 Settlement Trust Funds Accmmt", the "'l'orres-Mar8 tinez Allottees Settlenl-ent Account I", and the 

9 "Torres-JIIlm-tinez Allottees Settlement Account II", re10 spectively. 

11 (2) AVAJLABILITY.-Amounts held in the Torres12 Martinez Settlement T111st Funds Account, the 

13 To1-res-Madinez Allottees Settlement Account I, and 

14 the Torres-Madinez Allottees Settlement Account II 

15 shall be available to the Secretary for distribution to 

16 the Tt'ibe and affected allottees in accordance with 

17 subsection (c). 

18 (b) CONTRIBUTIONS TO TilE SETTLEMENT TRUST 

19 FUNDS.-

20 (1) IN GENERAL.-Amounts paid to the Sec21 retary for deposit into the trust fund accounts estab22 lished by subsection (a) shall be allocated among and 

23 deposited in the trust accounts in the amounts deter24 mined by the tribal-allottee allocation provisions of 

25 the Settlement Agreement. 
174 

8 

(2) CASH PAYJIENTS BY COACHELLA VALLEY 

2 WATER DIS'l'RIC'l'.-Within the time, in the manner, 

3 and upon the conditions specified in the Settlement 

4 Agreement, the Coachella Valley Water District shall 

5 pay the sum of $337,908.41 to the United States for 

6 the benefit of the Tribe and any affected allottees. 

7 (3) CASH PAYMENTS BY IMPERIAL IRRIGATION 

8 DISTRICT.-Within the time, in the manner, and 

9 upon the conditions specified in the Settlement Agree1 0 ment, the Imperial Irrigation District shall pay the 

11 sum of $3,670,694.33 to the United States for the ben12 efit of the Tribe and any affected allottees. 

13 ( 4) CASII PAYJIENTS BY THE UNITED STATES.-

14 Within the time and upon the conditions specified in 

15 the Settlement Agreement, the United States shall pay 

16 into the three separate tribal and allottee trust fund 

17 accounts the total sum of $10,200,000, of which 

18 sum19 (A) $4,200,000 shall be provided from mon20 eys appropriated by Congress under section 1304 

21 of title 31, United States Code, the conditions of 

22 which are deemed to have been met, including 

23 those of section 2414 of title 28, United States 

24 Code; and 
175 

9 

1 (B) $6,000,000 shall be provided from mon2 eys appropriated by Congress for this specific 

3 purpose to the Secretary. 

4 (5) ADDITIONAL PAYJI1ENTS.-In the event that 

5 any of the sums described in paragraphs (2) or (3) 

6 are not timely paid by the Coachella Valley Water 

7 District or the Imperial Irrigation District, as the 

8 case may be, the delinquent payor shall pay an addi9 tional sum equal to 10 percent interest annually on 

10 the amount outstanding daily, compounded yearly on 

11 December 31 of each respective year, until all out12 standing amounts due have been paid in full. 

13 (6) SEVERALLY LIABLE FOR PAYMENTS.-The 

14 Coachella Valley Water District, the Imperial I rriga15 tion District, and the United States shall each be sev16 erally liable, but not jointly liable, for its respective 

17 obligation to rnake the payments specified by this sub18 section. 

19 (c) An21UNISTRATION OF SETTLEMENT TRUST 

20 FUNDS.-The Secretary shall administer and distribute 

21 funds held in the Torres-ll1artinez Settlement Trust Funds 

22 Account, the Torres-Martinez Allottees Settlement Account 

23 I, and-t-ft13 Torres-kimiinez Allottees Settlement Account II 

24 in accordance with the terms and conditions of the Settle25 ment Agreement. 
176 

10 

1 SEC. 6. TRUST LAND ACQUISITION AND STATUS. 

2 (a) ACQUISITION AND PLACEMENT OF LANDS INTO 

3 TRUST.-

4 (1) IN GENERAL.-The Secretary shall convey 

5 into trust status lands purchased or otherwise ac6 quired by the Tribe within the areas described in 

7 paragraphs (2) and (3) in an amount not to exceed 

8 11,800 acres in accordance with the terms, conditions, 

9 criteria, and procedures set forth in the Settlement 

10 Agreement and this Act. Subject to such terms, condi11 tions, criteria, and procedures, all lands purchased or 

12 otherwise acquired by the Tribe and conveyed into 

13 trust status for the benefit of the Tribe pursuant to 

14 the Settlement Agreement and this Act shall be con15 sidered as if such lands were so acquired in trust sta16 tus in 1909 except as (i) to water rights as provided 

17 in subsection (c), and (ii) to valid rights existing at 

18 the time of acquisition pursuant to this Act. 

19 (2) PRIMARY ACQUISITION AREA.- (A) The pri20 mary area within which lands may be acquired pur21 suant to paragraph (1) are those certain lands located 

22 in the Primary Acquisition Area, as defined in the 

23 Settlement Agreement. The amount of acreage that 

24 may be acquired from S1tch area is 11,800 acres less 

25 the number of acres acquired and conveyed into trust 

26 by reason of paragraph (3). 
177 

11 

{B) Lands may not be acquired undeT this para2 graph if by majority vote of the governing body of the 

3 city within whose inc01porated boundaries (as such 

4 boundaries exist on the date of the Settlement AgTee5 ment) objects to the Tribe's request to convey such 

6 lands into t1'Ust and notifies the Secretary of such ob7 jection in writing within 60 days of Teceiving a copy 

8 of the Tribe's request in accordance with the Settle9 ment Agreement. 

10 (3) SECONDARY ACQUISITION AREA.-

11 (A) Not more than 640 acres of land may 

12 be acquired pursuant to paragraph (1) from 

13 tlwse certain lands located in the Secondary Ac14 quisition Area, as defined in the Settlement 

15 Agreement. 

16 (B) Lands r·eferred to in subparagraph (A) 

17 may not be acquired pursuant to paragraph {1) 

18 if by majority vote19 (i) the goveTning body of the city whose 

20 incorporated boundaries the subject lands 

21 are situated within, or 

22 (ii) the governing body of RiveTside 

23 County, California, in the event that such 

24 lands are located within an unincorporated 

25 area, 
178 

12 

formally objects to the Tribe's request to convey 

2 the subject lands into trust and notifies the Sec3 retary of such objection in writing within 60 

4 days of receiving a copy of the Tribe's request in 

5 accordance with the Settlement Agreement. 

6 (b) RESTRICTIONS ON GAMING.-The Tribe shall have 

7 the right to conduct gaming on only one site within the 

8 lands acquired pursuant to subsection (a)(l) as more par9 ticularly provided in the Settlement Agreement. 

10 (c) WATER RIGIITS.-Alllands acquired by the Tribe 

11 under subsection (a) shallr12 (1) be subject to all valid water rights existing 

13 at the time of tribal acquisition, including (but not 

14 limited to) all rights under any permit or license is15 sued under the laws of the State of California to com16 mence an appropriation of water, to appropriate 

17 water, or to increase the amount of water appro18 priated; 

19 (2) be subject to the paramount rights of any 

20 person who at any time recharges or stores water in 

21 a ground water basin to recapture or recover the re22 charged or stored water or to authorize others to re23 wpture or recover the recharged or stored water; and 
179 

13 

1 (3) continue to enjoy all valid water rights ap2 purtenant to the land existing immediately prior to 

3 the time of tribal acquisition. 

4 SEC. 7. PERMANENT FLOWAGE EASEMENTS. 

5 (a) COlv'VEYANCE OF EASEMEN'l' '1'0 COACHELLA VAL6 LEY WATER DISTRICT.-

7 (1) TRIBAL IN'l'EREST.-The United States, in 

8 its capacity as trustee for the Tribe, as well as for 

9 any affected Indian allotment owners, and their suc1 0 cessors and assigns, and the T1·ibe in its own right 

11 and that of its successors and assigns, shall convey to 

12 the Coachella Valley Water District a permanent 

13 flowage easement as to all Indian trust lands (ap14 proximately 11,800 acres) located within and below 

15 the minus 220-foot contour of the Salton Sink, in ac16 cordance with the terms and conditions of the Settle-

! 7 ment Agreement. 

18 (2) UNITED STATES INTEREST.-The United 

19 States, in its own right shall, notwithstanding any 

20 prior or present reservation or withdmwal of land of 

21 any kind, convey to Coachella Valley Water District 

22 a pennanent flowage easement as to all Fedeml lands 

23 (approximately 110,000 acres) located within and 

24 below the minus 220-foot contour of the Salton Sink, 
180 

14 

tn accordance with the terms and conditions of the 

2 Settlement Agreement. 

3 (b) CONVEYA1vCE OF EASEMENT TO IMPERIAL IRRIGA4 TION DISTRICT.-

5 (1) TRIBAL INTEREST.-17te United States, in 

6 its capacity as trustee for the Tribe, as well as for 

7 any affected Indian allotment owners, and their suc8 cessors and assigns, and the Tribe in its own right 

9 and tlwt of its successors and assigns, shall grant and 

10 convey to the Imperial Irrigation District a perma11 nent flowage easement as to all Indian trust lands 

12 (approximately 11,800 acres) located within and 

13 below the minus 220-foot contou1· of the Salton Sink, 

14 in accordance with the terms and conditions of the 

15 Settlement Agreement. 

16 (2) UNITED STATES.-17te United States, in its 

17 own right shall, notwithstanding any prior or present 

18 reservation or withdrawal of land of any kind, grant 

19 and convey to the Imperial Irrigation District a per20 manent flowage easement as to all Federal lands ( ap21 proximately 110,000 acres) located within and below 

22 the minus 220-foot contour of the Salton Sink, in ac23 cordance with the terms and conditions of the Settle24 ment Agreement. 
181 

15 

1 SEC. 8. SATISFACTION OF CLAIMS, WAIVERS, AND 

2 RELEASES. 

3 (a) SATISFACTmv OF CLAIMS.-The benefits available 

4 to the Tribe and the allottees under the terms and condi5 tions of the Settlement Agreement and the provisions of this 

6 Act shall constitute full and complete satisfaction of the 

7 claims by the Tribe and the allottees arising from or related 

8 to the inundation and lack of drainage of tribal and allottee 

9 lands described in section 2 of this Act and further defined 

10 in the Settlement Agreement. 

11 (b) APPROVAL OF WAIVERS AND RELEASES.-T/w 

12 United States hereby approves and confirms the releases 

13 and waivers required by the Settlement Agreement and this 

14 Act. 

15 SEC. 9. MISCELLANEOUS PROVISIONS. 

16 (a) ELIGIBILITY FOR BENEFITS.- Nothing in this Act 

17 or the Settlement Agreement shall affect the eligibility of 

18 the Tribe or its members for any Federal program or dimin19 ish the trust responsibility of the United States to the Tribe 

20 and its members. 

21 (b) ELIGIBILITY FOR OTHER SERVICES NOT AF22 FECTED.-No payment pursuant to this Act shall result in 

23 the reduniion or denial of any Federal sen;ices or programs 

24 to the Tribe or to members of the Tribe, to which they are 

25 entitled or eligible because of their status as a federally rec26 ognized Indian tribe or member of the Tribe. 
182 

16 

1 (c) PRESERVATION OF EXISTING RIGHTS.-Except as 

2 provided in this Act or the Settlement Agreement, any right 

3 to which the Tribe is entitled under existing law shall not 

4 be affected or diminished. 

5 (d) AMENDMENT OF SETTLEMEl\'T AGREEMENT.-The 

6 Settlement Agreement may be amended from time to time 

7 in accordance with its terms and conditions. 

8 SEC. 10. AUTHORIZATION OF APPROPRIATIONS. 

9 There are authorized to be appropriated such sums as 

10 are necessary to carry out this Act. 

11 SEC. 11. EFFECTIVE DATE. 

12 (a) IN GENERAL.-Except as provided by subsection 

13 (b), this Act shall take effect on the date of enactment of 

14 this Act. 

15 (b) EXCEPTION.-Sections 4, 5, 6, 7, and 8 shall take 

16 effect on the date on which the Secretary of the Interior 

17 detenn·ines the following conditions have been met: 

18 (1) 17w Tribe agrees to tlw Settlement Agreement 

19 and tlw provisions of this Act and executes the re20 leases and waivers required by the Settlement Agree21 tnent and this Act. 

22 (2) 17w Coaclwlla Valley Water District agrees to 

23 tlw Settlement Agreement and to tlw provisions of this 

24 Act. 
183 

17 

(3) The Imperial Irrigation District agrees to the 

2 Settlement Agreement and to the provisions of this 

3 Act. 
184 

Union Calendar No. 

104TH CONGRESS H R 2512 2D SESSION 

• • 

[Report No. 104-

To provide for certain benefits of the Missouri River basin Pick-Sloan project 

to the Crow Creek Sioux Tribe, and for other purposes. 

IN THE HOUSE OF REPRESENTA'riVES 

OCTOBER 19, 1995 

Mr. JOH:\"SON of South Dakota introduced the following bill; which was 

referred to the Committee on Resources 

SEPTE:\!BER ' 1996 

Reported \\~th amendments, committed to the Committee of the \Vhole House 

on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on October 19, 1995) 

A BILL 

To provide for certain benefits of the Missouri River basin 

Pick-Sloan project to the Crow Creek Sioux Tribe, and 

for other purposes. 

1 _...]}J it enacted by the Senate and House of Representa2 tives ofthe United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 

185 

2 

2 This Act may be cited as the "Crow Creek Sioux Tribe 

3 Infrastructure Development Trust Fund Act of 1996". 

4 SEC. 2. FINDINGS. 

5 (a) FINDINGS.-The Congress finds that6 (1) the Congress approved the Pick-Sloan JJ!is7 souri River basin pmgmm by passing the Act of De8 cember 22, 1.944, commonly known as the "Flood 

9 Control Act of 1944" (58 Stat. 887, chapter 665; 33 

10 U.S.C. 701-1 et seq.)-

11 (A) to promote the general economic devel12 opment of the United States; 

13 (B) to provide f01· irrigation above Sioux 

14 City, Iowa; 

15 (C) to protect urban and ntral areas from 

16 devastating floods of the ~1 issouri River~· and 

17 (D) for other purposes; 

18 (2) the Fort Randall and Big Bend pmjects are 

19 major components of the Pick-Sloan program, and 

20 contribute to the national economy by generating a 

21 substantial amount of hydropower and impounding a 

22 substantial quantity of wate1~ 

23 (3) the Fort Randall and Big Bend projects over24 lie the western boundary of the Cmw Creek Indian 

25 Reservation, having inundated the fertile, wooded bot26 tom lands of the Tribe along the Missouri River that 
186 

3 

constituted the most productive agricultural and pas2 toral lands of the Crow Creek Sioux Tribe and the 

3 homeland of the members of the Tribe; 

4 ( 4) Public Law 85-916 (72 Stat. 1766 et seq.) 

5 authorized the acquisition of 9,418 acres of Indian 

6 land on the Crow Creek Indian Reservation for the 

7 Fort Randall project and Public Law 87-735 (76 

8 Stat. 704 et seq.) authorized the acquisition of 6,179 

9 acres of Indian land on Crow Creek for the Big Bend 

1 0 project; 

11 (5) Public Law 87- 735 (76 Stat. 704 et seq.) 

12 provided for the mitigation of the effects of the Fort 

13 Randall and Big Bend projects on the Crow Creek In14 dian Reservation, by directing the Secretary of the 

15 Army to16 (A) replace, relocate, or reconstruct-

!? (i) any existing essential governmental 

18 and agency facilities on the reservation, in19 eluding schools, hospitals, offices of the Pub20 lie Health Service and the Bureau of In21 dian Affairs, service buildings, and em22 ployee quarters; and 

23 (ii) roads, bridges, and incidental mat24 ter-s or facilities in connection with such fa25 cilities; 
187 

4 

(B) provide for a townsite adequate fo1· 50 

2 homes, including streets and utilities (including 

3 water, sewage, and electricity), taking into ac4 count the reasonable future growth of the townS site; and 

6 (C) provide for a community center con7 taining space and facilities for community gath8 erings, tribal offices, tribal council chamber, of9 fi ces of the Bureau of Indian Affairs, offices and 

10 quarters of the Public Health Service, and a 

11 combination gymnasium and auditorium; 

12 (6) the requirements under Public L aw 87- 735 

13 (76 Stat. 704 et seq.) with respect to the mitigation 

14 of the effects of the Fort Randall and Big Bend 

15 projects on the Crow Creek Indian Reservation have 

16 not been fulfilled; 

17 (7) although the national economy has benefited 

18 from the Fort Randall and Big Bend projects, the 

19 economy on the Crow Creek Indian Reservation re20 mains underdeveloped, in part as a consequence of the 

21 failure of the Federal Government to fulfill the obliga22 tions of the Federal Government under the laws re23 femd to in paragraph ( 4); 

24 (8) the economic and social development and cul25 tural preservation of the Crow Creek Sioux Tribe will 
188 

5 

be enhanced by increased tribal parlicipation in the 

2 benefits of the Fori Randall and Big Bend compo3 nents of the Pick-Sloan program; and 

4 (9) the Crow Creek Sioux Tribe is entitled to adS ditional benefits of the Pick-Sloan Missouri River 

6 basin program. 

7 SEC. 3. DEFINITIONS. 

8 For the purposes of this Act, the following definitions 

9 shall apply: 

10 (1) FUND.-The term "Fund" means the Crow 

11 Creek Sioux Tribe Infrastructure Development Trust 

12 Fund established under section 4(a). 

13 (2) PLAN.- The term "plan" means the plan for 

14 socioeconomic recovery and cultural preservation pre15 pared under section 5. 

16 (3) PROGRMI.-The term "Program" means the 

17 power program of the Pick-Sloan Missouri River 

18 basin program, administered by the Western Area 

19 Power Administration. 

20 (4) SECRETARY.-The term "Secretary" means 

21 the Secretary of the Interior. 

22 (5) TRIBE.-The term "Tribe" means the Crow 

23 Creek Sioux Tribe of Indians, a band of the Great 

24 Sioux Nation recognized by the United States of 

25 America. 
189 

6 

SEC. 4. ESTABLISHMENT OF CROW CREEK SIOUX TRIBE IN2 FRASTRUCTURE DEVELOPMENT TRUST FUND. 

3 (a) CROW CREEK SIOUX TRIBE INPRASTRUCTURE DE4 VELOPMENT TRUST FUND.-There is established in the 

5 Treasury of the United States a fund to be known as the 

6 "Crow Creek Sioux Tribe Infrastructure Development Trust 

7 Fund". 

8 (b) FUNDING.-Beginning with fiscal year 1997, and 

9 for each fiscal year thereafter, until such time as the aggre1 0 gate of the amounts deposited in the Fund is equal to 

11 $27,500,000, the Secretmy of the Treasury shall deposit 

12 into the Fund an amount equal to 25 percent of the receipts 

13 from the deposits to the Treasury of the United States for 

14 the preceding fiscal year from the Program. 

15 (c) Ilv1'ES1'MENTS.-The Secretmy of the Treasury 

16 shall invest the amounts deposited under subsection (b) only 

17 in interest-bearing obligations of the United States or in 

18 obligations guaranteed as to both principal and interest by 

19 the United States. 

20 (d) PAYMENT OF INTEREST TO TRIBE.-

21 (1) ESTABLISHMENT OF ACCOUNT AND TRANS22 FER OF' INTEREST.-The Secretary of the Treasury 

23 shall, in accordance with this subsection, transfer any 

24 interest that accnws on amounts deposited under sub25 section (b) into a separate account established by the 
190 

7 

1 Secretary of the Treasury m the Treasury of the 

2 United States. 

3 (2) PAYMENTS.-

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

(A) IN GENERAL.-Beginning with the fiscal year immediately following the fiscal year 

during which the aggregate of the amounts deposited in the Fund is equal to the amount specified in subsection (b), and for each fiscal year 

thereafter, all amounts transferred under paragraph (1) shall be available, without fiscal year 

limitation, to the Secretary of the Interior for 

use in accordance with subparagraph (C). 

(B) WITHDRAWAL AND TRAlvSFER OF 

FUNDS.-F'or each fiscal year specified in subparagraph (A), the Secretary of the Treasury 

shall withdraw amounts from the account established under such paragraph and transfer such 

amounts to the Secretary of the Interior for use 

in accordance with subparagraph (C). The Secretary of the Treasu171 may only withdraw funds 

from the account for the purpose specified in this 

paragraph. 

(C) PAYMENTS TO TRIBE.-The Secretary of 

the Interior shall use the amo·unts transferred 
191 

8 

under subparagmph (B) only for the purpose of 

2 making payments to the 'l'ribe. 

3 (D) USE OF PAYMENTS BY TRIBE.-The 

4 Tribe shall use the payments made under subS paragraph (C) only for carrying out projects and 

6 programs pursuant to the plan prepared under 

7 section 5. 

8 (3) PIWHIBITION ON PER CAPITA PAYMENTS.-

9 No portion of any payment made under this sub1 0 section may be distributed to any member of the Tribe 

11 on a per capita basis. 

12 (e) TRANSFERS AND WITHDRAWALS.-Except as pro13 vided in subsection (d)(l), the Secretary of the Treasury 

14 may not transfer or withdraw any amount deposited under 

15 subsection (b). 

16 SEC. 5. PLAN FOR SOCIOECONOMIC RECOVERY AND CULl? TURAL PRESERVATION. 

18 (a) PLAN.-

19 (1) IN GENERAL.-The Tribe shall, not later 

20 than 2 years after the date of enactment of this Act, 

21 prepare a plan for the use of the payments made to 

22 the Tribe under section 4(d)(2). In developing the 

23 plan, the Tribe shall consult with the Secretary of the 

24 Interior and the Secretary of Health and Human 

25 Services. 
192 

9 

1 (2) REQUIREMENTS FOR PLAN COMPONENTS.-

2 The plan slwll, with respect to each component of the 

3 plan4 (A) identify the costs and benefits of tlwt 

5 component; and 

6 (B) provide plans for that component. 

7 (b) CONTENT OF PLAN.-The plan slwll include the 

8 following programs and components: 

9 (1) EDUCATIONAL FACILITY.-The plan slwll 

10 provide for an educational facility to be located on 

11 the Crow Creek Indian Reservation. 

12 (2) COMPREHENSIVE INPATIENT AND OUT13 PATIENT HEALTH CARE FACILITY.-The plan slwll 

14 provide for a comprehensive inpatient and outpatient 

15 health care facility to provide essential services tlwt 

16 the Secretary of Health and Human Se1"Vices, in con17 sultation with the individuals and ent·ities referred to 

18 in subsection (a)(1), determines to be19 (A) needed; and 

20 (B) unavailable through existing facilities of 

21 the Indian Health Service on the Crow Creek In22 dian Reservation at the time of the determina23 tion. 

24 (3) WATER SYSTEM.-The plan slwll provide for 

25 the construction, operation, and maintenance of a 
193 

10 

municipal, rural, and industrial water system for the 

2 Crow Creek Indian Reservation. 

3 (4) RECREATIONAL FACILITIES.-The plan shall 

4 provide for recreational facilities suitable for highS density recreation at Lake Sharpe at Big Bend Dam 

6 and at other locations on the Crow Creek Indian Res7 ervation in South Dakota. 

8 (5) OTHER PROJECTS AND PROGRA111S.-The 

9 plan shall provide for such other projects and pro1 0 grams for the educational, social welfare, economic 

11 development, and cultural preservation of the Tribe as 

12 the Tribe considers to be appropriate. 

13 SEC. 6. AUTHORIZATION OF APPROPRIATIONS. 

14 There are authorized to be appropriated such funds as 

15 may be necessary to carry out this Act, including such 

16 funds as may be necessary to cover the administrative ex17 penses of the Crow Creek Sioux Tribe Infrastructure Devel18 opment Trust Fund established under section 4. 

19 SEC. 7. EFFECT OF PAYMENTS TO TRIBE. 

20 (a) IN GENERAL.-No payment made to the Tribe pur21 suant to this Act shall result in the reduction or denial of 

22 any service or program to which, pursuant to Federal 

23 law-
194 

11 

1 (1) the Tribe is otherwise entitled because of the 

2 status of the Tribe as a federally recognized Indian 

3 tribe; or 

4 (2) any individual who is a member of the Tribe 

5 is entitled because of the status of the individual as 

6 a member of the Tribe. 

7 (b) EXEMPTIONS; STATUTORY CONSTRUCTION.-

8 (1) POWER RATES.-No payment made pursuant 

9 to this Act shall affect Pick-Sloan Missouri River 

10 basin power rates. 

11 (2) STATUTORY CONSTRUCTION.- l•lothing in this 

12 Act may be constt·ued as diminishing or affecting13 (A) any 1·ight of the Tribe that is not other14 wise addressed in this Act; or 

15 (B) any treaty obligation of the United 

16 States. 

Amend the title so as to read: "A bill to provide for 

certain benefits of the Pick-Sloan Missouri River basin 

program to the Crow Creek Sioux Tribe, and for other 

purposes.". 

0 

ISBN 0 - 16-053430-5 

90000 

9 80160 534300