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S. HRG. 107–278

LEGISLATIVE PROPOSALS RELATING TO THE

STATUTE OF LIMITATIONS ON CLAIMS AGAINST

THE UNITED STATES RELATED TO THE MANAGEMENT OF INDIAN TRIBAL TRUST FUND

ACCOUNTS

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

ON

S. 1857

TO ENCOURAGE THE NEGOTIATED SETTLEMENT OF TRIBAL CLAIMS

FEBRUARY 7, 2002

WASHINGTON, DC

(
COMMITTEE ON INDIAN AFFAIRS

DANIEL K. INOUYE, Hawaii, Chairman

BEN NIGHTHORSE CAMPBELL, Colorado, Vice Chairman

FRANK MURKOWSKI, Alaska

JOHN McCAIN, Arizona,

PETE V. DOMENICI, New Mexico

CRAIG THOMAS, Wyoming

ORRIN G. HATCH, Utah

JAMES M. INHOFE, Oklahoma

KENT CONRAD, North Dakota

HARRY REID, Nevada

DANIEL K. AKAKA, Hawaii

PAUL WELLSTONE, Minnesota

BYRON L. DORGAN, North Dakota

TIM JOHNSON, South Dakota

MARIA CANTWELL, Washington

PATRICIA M. ZELL, Majority Staff Director/Chief Counsel

PAUL MOOREHEAD, Minority Staff Director/Chief Counsel

(II)
(III)

C O N T E N T S

Page

S. 1857, text of ......................................................................................................... 4

Statements:

Armstrong, Tom, Office of the General Counsel ............................................ 14

Hogen, Phillip, associate solicitor for Indian affairs, Department of the

Interior ........................................................................................................... 21

Inouye, Hon. Daniel K., U.S. Senator from Hawaii, chairman, Committee

on Indian Affairs ........................................................................................... 1

Khoury, Mike, assistant director, Trust Department, Department of the

Interior ........................................................................................................... 14

Murkowski, Hon. Frank H., U.S. Senator from Alaska ................................ 6

Taradash, Alan, consultant, Intertribal Monitoring Association .................. 7

Tillman, Charles, chief, Osage Nation and chairman, Intertribal Monitoring Association .............................................................................................. 7

Williams, McCoy, acting director, Financial Management and Assurance,

GAO ................................................................................................................ 14

APPENDIX

Prepared statements:

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, vice chairman, Committee on Indian Affairs (with attachments) ............................. 25

Cantwell, Hon. Maria, U.S. Senator from Washington ................................. 104

Hogen, Phillip ................................................................................................... 113

Johnson, Hon. Tim, U.S. Senator from South Dakota .................................. 104

Thomas, Hon. Craig, U.S. Senator from Wyoming ........................................ 105

Tillman, Charles ............................................................................................... 105

Williams, McCoy ............................................................................................... 110

(1)

LEGISLATIVE PROPOSALS RELATING TO THE

STATUTE OF LIMITATIONS ON CLAIMS

AGAINST THE UNITED STATES RELATED TO

THE MANAGEMENT OF INDIAN TRIBAL

TRUST FUND ACCOUNTS

THURSDAY, FEBRUARY 7, 2002

U.S. SENATE, COMMITTEE ON INDIAN AFFAIRS, Washington, DC.

The committee met, pursuant to notice, at 10 a.m. in room 485,

Russell Senate Office Building, Hon. Daniel K. Inouye (chairman of

the committee) presiding.

Present: Senators Inouye, Campbell, Murkowski, Johnson, and

Thomas.

STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM

HAWAII, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

The CHAIRMAN. The committee meets this morning to receive testimony on proposals addressing the statute of limitation on claims

of tribal governments against the United States related to the management of Indian tribal trust funds.

Over the course of the last year the committee has received various proposals from representatives of tribal governments that are

concerned with the very real possibility that the United States

might assert that reports submitted to the tribes whose trust funds

are held by the Federal Government constituted notice sufficient to

commence the running of the statute of limitation against tribal

claims.

One such proposal was introduced in the Senate in the closing

days of the first session of the 107th Congress by the vice chairman

of this committee, Senator Campbell. I was pleased to serve as a

cosponsor of that measure.

For those who may not be familiar with the background of such

claims, I will take 1 moment here to review some of the more recent history. As a function of treaties and the course of dealings between the United States and Indian tribes, the United States holds

legal title to lands held in trust for individual Indians as well as

for Indian tribal governments.

The revenues derived from trust lands are also held in trust by

the United States for the benefit of individual Indians and tribal

governments. Currently, the Department of the Interior maintains

approximately 1,400 accounts of 315 Indian tribes with assets in
2

excess of $2.6 billion and over 260,000 individual Indian money

trust fund accounts with a balance of $400 million as of September

30, 2000.

Receipts are deposited to these accounts primarily from land use

agreements, royalties from natural resource depletion, enterprises

related to trust resources, judgment awards, the settlement of Indian claims, and investment income.

However, an independent audit of the trust funds for fiscal year

2000 noted that reliance cannot be placed on the balances reflected

in the trust fund accounts until tribal accounts are reconciled and/

or resolved through negotiation and settlement or until a now

pending class action lawsuit that has been brought on behalf of the

individual Indian money account holders is resolved.

The Congress first established an Indian trust fund account reconciliation requirement in the Supplemental Appropriation Act of

1987 in response to tribal concerns that the Interior Department

had not consistently provided them with statements of their account balances; that their trust fund accounts had never been reconciled and that the department planned to contract with a third

party for the management of trust fund accounts.

The original provision required that the accounts be audited and

reconciled before the department transferred the responsibility for

managing the trust funds to a third party. From 1990–95 provisions in the Appropriations Acts for the Department of the Interior

added a requirement that the accounts be reconciled to the earliest

possible date and that the department obtain an independent certification of the reconciliation work.

In 1994, the Congress required the Interior Secretary to provide

tribes with a reconciled account statement as of September 30,

1995 in the American Indian Trust Fund Management Reform Act.

From fiscal year 1992–2001, the Appropriations Acts for the Department have included an additional provision which requires

that tribal and individual Indian money accounts holders be furnished with an accounting from which the beneficiary can determine whether there has been a loss.

Recognizing that it would be unfair to allow the statute of limitations to run on claims until each account holder was provided with

an accounting, since fiscal year 1991, the Congress has included in

the Interior Appropriation Acts a provision that tolls the statute of

limitations on tribal and individual Indian claims against the

United States arising out of the department’s management of tribal

and individual Indian trust funds.

A similar provision is contained in the President’s budget request

for fiscal year 2003. Beginning in 1992, the Interior Department

did undertake work to provide for the reconciliation of tribal trust

fund accounts and, at least initially to examine whether individual

Indian money trust accounts could also be reconciled.

This work was accomplished through contractors, primarily the

Arthur Andersen firm, and the Congress appropriated over $20

million so that this important work of reconciling trust fund accounts could proceed. The Congress also called upon the General

Accounting Office [GAO] to oversee the reconciliation process.

Following the reconciliation work performed by the contractors

and supplemented by additional work on part of the Interior De-
3

partment, reports were issued to each tribal government for whom

the United States holds funds in trust.

It is these reports that are at issue, because it’s alleged that the

reports constitute notice sufficient to commence the statute of limitations running on any claims that tribal governments may have

against the United States relating to the Government’s management of trust funds.

In May 1996, GAO issued a report on the reconciliation process

concluding that, and I quote:

Interior’s reporting of the reconciliation project results was not as complete as it

could have been. Interior did not disclose in the report packages to tribes the procedures specified in the reconciliation contract that were not performed or those could

not be completed and the reasons.

For the procedures that were performed, Interior did not fully disclose scope limitations or changes in methodologies such as accounts and time periods that were

not covered and alternative source documents used.

Thus, as we will hear this morning, the reconciliation process did

not accomplish the primary objective it sought to achieve, namely

to assure the affected tribal governments that the balances in the

trust fund accounts were balances upon which they could rely.

It has now been 6 years since many of the tribal governments received the results of the reconciliation process. Faced with an assertion that the receipt of these reports commenced the running of

the statute of limitations, most prudent tribal governments would

take action to preserve their claims against the United States by

filing legal claims before the running of the statute. These actions,

if filed, and across Indian country many have been filed, hold the

potential for a multitude of adjudications by different courts with

varying and likely inconsistent results as well as exposing the

United States to unlimited liability.

So, we are here this morning to explore whether there is a will

and a way for well-intentioned people to come together and agree

on a legislative proposal that will address the statute of limitations

on tribal claims and thereby enable the parties to pursue some

other path for the resolution of these claims.

[Text of S. 1857 follows:]
4

1

107TH CONGRESS II

1ST SESSION S. 1857

To encourage the negotiated settlement of tribal claims.

IN THE SENATE OF THE UNITED STATES

DECEMBER 19 (legislative day, DECEMBER 18), 2001

Mr. CAMPBELL (for himself and Mr. INOUYE) introduced the following bill;

which was read twice and referred to the Committee on Indian Affairs

A BILL

To encourage the negotiated settlement of tribal claims.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SETTLEMENT OF TRIBAL CLAIMS.

4 (a) IN GENERAL.—Solely for purposes of providing

5 an opportunity to explore the settlement of tribal claims,

6 during fiscal year 2002, the statute of limitations shall

7 be deemed not to have run for any claim concerning losses

8 to or mismanagement of tribal trust funds.

9 (b) NO PRECLUSION OF FINDINGS.—Nothing in this

10 section precludes a court or other adjudicatory entity from

11 adjudicting a statute of limitations defense either:

12 (1) in an action filed on or after October 1,

13 2002; or
5

2

•S 1857 IS

1 (2) in any case, controversy, or other proceed2 ing pending on the date of enactment of this section

3 against the United States in which a court or adju4 dicatory entity is called on to determine whether the

5 statute of limitations on such a claim has run.

Æ
6

The CHAIRMAN. I call upon the gentleman from Alaska.

STATEMENT OF HON. FRANK H. MURKOWSKI, U.S. SENATOR

FROM ALASKA

Senator MURKOWSKI. Good morning. Chairman Inouye, I am

pleased to be here. I do support the legislation that has been proposed by both you and Senator Campbell to extend the statute of

limitations. But I think that the issue goes far deeper than this.

We have had the past two Secretaries of the Interior noted for

contempt of court. That’s certainly a bipartisan selection by the

court. So, this is not partisan. It’s a reality. The reality, in my opinion, and I have been on this committee for, well, 21 years or thereabouts. I can’t remember the exact dates. In any event, this is

something that we have been faced with.

In my opinion, the BIA is inadequate to manage these trust accounts. I don’t know how long or how many decades it’s going to

take for the Indian tribes to recognize this. This is not a lessening

of the BIA’s power. This is a function that ordinarily is done by

competent trust departments that put their credibility behind their

ability to manage trusts and do accounting work and keep track of

records.

I recall, Chairman Inouye, being at previous hearings where we

had pictures of how this stuff has been stored and there’s just absolutely no excuse for it to go on.

So I am here to simply, I guess, express my frustration. Whether

it be Secretary Norton or previous Secretary Babbitt, this process

has been going on so long, you can’t fix the blame anywhere. You

can’t fix it on an administration. The accountability obviously belongs with the BIA, but the BIA is faceless in the sense that, you

know, who caused it? Well, we don’t know. It’s BIA, but it’s the responsibility of the Secretary. Until a Secretary comes along and

says:

I am going to make an administrative decision to change it and we are going to

do it and get it done right, this committee is going to be faced with extensions and

situations like we have today.

I would encourage the members of the committee, the professional staff and the tribes and the BIA to recognize that in my

opinion we are not trying to diminish their authority. We are trying to functionally meet the responsibility associated with managing the individual trusts for the tribes so they can be properly administered.

The BIA is incapable of that. It is not a criticism of the BIA, they

are just not set up to do it. So, let us get them out of the business

before we have to go through this any more. So, thank you for the

opportunity to be with you again. I wish you well in your deliberations. I do support the legislation. Thank you.

The CHAIRMAN. As always, you are right on target.

Senator Johnson, do you have any statement you would like to

make?

Senator JOHNSON. I will submit a statement for the record.

The CHAIRMAN. Without objection the statement will be made

part of the record.

[Prepared statement of Senator Johnson appears in appendix.]
7

The CHAIRMAN. Now, it is my pleasure to call upon the chief of

the Osage Nation and chairman of the Intertribal Monitoring Association, Charles Tillman.

Chief Tillman will be accompanied by Mr. Alan Taradash, consultant to the association.

STATEMENT OF CHARLES TILLMAN, CHIEF, OSAGE NATION

AND CHAIRMAN, INTERTRIBAL MONITORING ASSOCIATION,

ACCOMPANIED BY ALAN TARADASH, ESQUIRE, CONSULTANT

TO THE INTERTRIBAL MONITORING ASSOCIATION

Mr. TILLMAN. Thank you, Chairman Inouye. It’s a privilege to be

here before the community once again and also to represent the

Intertribal Monitoring Association before this distinguished group.

Mr. Chairman, I am too frustrated with our trustee. We, the 500

and some tribes, the beneficiary of the natural resources that go

across this country, we, too, believe that the BIA is not capable of

handling that trust. When we talk about trust, Dr. Charles

Wilkerson of the University of Colorado was the speaker the other

day at Shepherdstown, WV where a task force was gathered up of

tribes. He said some very important things about trust. The trust

law appeared in 1831 under Chief Justice Marshall and the Cherokee Nation case.

Marshall understood the treaty negotiations and knew what the

tribes were asking for. That was: No. 1, disease protection against

the white race protection against trespass of their land and protection for their land. This was 171 years ago.

Here we are today asking for protection and living up to what

Congress said 171 years ago. What Congress realized, the Tribal

Trust Law is the most direct, most private and should be held at

the highest standard of all trust law. It is not a common trust law.

It should be held at its highest standard.

The moral issue has been felt since the President Nixon administration and hopefully to every administration thereafter. We have

not forgotten what Justice Marshall said, that Congress was the ultimate trust holder.

I am here today to ask Congress to flex some of its authority and

in this bill, on S. 1857, the Intertribal Monitoring Association

which I represent consists of 53 tribes or large stakeholders. It is

a sad day that we come before this committee and we also recommend, highly recommend, this bill. If it’s a possibility of this bill,

and I met with my board yesterday solely for the purpose of providing an opportunity to explore the settlement of tribal claims during

the fiscal year of 2002, the statutes of limitation shall be deemed

not to have run for any claim concerning losses or to mismanagement of tribal trust funds and resources.

Further, with regard to the reconciliation report distributed to

tribes by Arthur Andersen and the Department of the Interior in

1996, one, these reports shall not be considered to have started the

running of the statutes of limitation for any claim against the

United States or any Indian tribe regarding the management of

tribal trust funds and resources, regardless of when such claim was

filed.

No. 2, these reports shall not consider for any purpose to be an

accounting sufficient to fulfill the United States duty to account as
8

required by the American Indian Trust Fund Management Reform

Act of 1994 under other applicable law and under general principles of trust law.

No. 3, the United States is precluded from introducing these reports into evaluated and using them as rebuttal evidence and otherwise relying on them in administrative or judicial proceedings to

provide any reported conclusion of fact contained in these reports.

Senator Inouye, we do support the bill and I am here to say that

I have been here many times and I do believe in my heart this day

that I am also a frustrated person that came 1,400 miles to say

that Congress needs to make sure that these trust functions are

carried out by our trustee, the BIA, and Congress should have its

own oversight committee for this purpose and I would like to recommend that.

The Congress itself, the body itself, being the trustee should have

that committee. Who else should serve as that committee is the

Intertribal Monitoring Association because of its membership, because of its ownership and because of the purpose that it serves

and that’s to protect our asset.

I agree with Senator Murkowski. I agree that the Bureau needs

to be reformed. I do not think that we should do away with the

agency because the Native Americans across this country, that’s

the only we have to rely upon in certain matters. But it’s not

equipped or it is not geared to handle the vast functions of its responsibility right now.

Now, we can draw all the boxes and we can come up with all the

management, but we have to have the M–O–N–E Y, money, to

make those functions work. That has to be in place, Senator. If

that money is not there, you may have the best widget in the

world, but you will never produce another one without the money.

That is what I am here to tell you.

We do agree on the Senate Bill 1857 and what it says, but I also

wanted to interject those things into this is hearing. I wish we had

more time, I would tell you a lot more. But I want to pass it on

to my colleague, Alan Taradash. I am sure he has a few comments

he would like to make.

[Prepared statement of Mr. Tillman appears in appendix.]

The CHAIRMAN. May I ask a few questions now before we go to

Mr. Taradash because there is a vote pending in the Senate?

Mr. Tillman. Yes, sir.

The CHAIRMAN. GAO has advised us that in 1996 over 300 tribes

were provided with these reconciliation reports. Those who wish to

dispute the balances stated in those reports must file claims within

6 years. Otherwise they run the risk that the statute will be held

to have been expired; 6 years have now passed

Now, you are in charge of this association. Do you know how

many tribes have filed an action against the United States?

Mr. TILLMAN. I know that I can think of off the top of my head

approximately maybe 12 tribes that I do know of. That includes the

Osage. We were advised at that by the Assistant Secretary, Kevin

Gover because he told me personally that this was going to drag

on for years. He said, ‘‘The only way to do that is to take it to

court.’’
9

We filed not because of the statute of limitations, but because of

to stop the bleeding for one and to get it into the proper area of

law, which was claims court. But I also understand there are three

tribes in the northwest, or maybe four, that are filing before the

end of the month.

So, you don’t have many tribes that are filing, Senator. One reason is the lack of money. It is very expensive to get into court and

some of our smaller tribes do not have the money to bring on a

court action of this nature.

So, we represent the 53 tribes and we are beginning to find that

out, that our trustee, the United States or the BIA is doing what

it’s capable of doing and everyday is the accounting, the wrong accountability. There’s no accountability whatsoever with the BIA.

It goes on everyday and how do you stop that? Some of these

tribes have no answer for that. Some of us tribes that do have the

money have an answer to that. What I think is that when we, the

Osage Tribe, a few years ago took an assessment of our agency in

1992 and 1996, that assessment was taken by Coopers Lybrand

and that assessment told us that the BIA was operating back in

the 1960’s, the 1950’s and 1960’s.

Here we are in 2002 and how do you bring that system up to

standard? That’s the question.

The CHAIRMAN. I’ll read from the President’s budget request for

fiscal year 2003. In that request there is the following language. I

quote that:

Notwithstanding any other provision of law, the statute of limitations shall not

commence to run on any claim, including any claim in litigation pending on the date

of enactment of this act concerning losses to or mismanagement of trust funds until

the affected tribe or individual nation has been furnished with an accounting of

such funds from which the beneficiary can determine whether there has been a loss.

Mr. Taradash, you are the consultant and the expert here. In

your view, what would constitute an accounting from which a beneficiary can determine whether there has been a loss?

Mr. TARADASH. That is a very important point, Senator. I also

want to first express my gratitude to you and the members of the

committee for allowing us to present these views here. Many years

ago, approximately ten, along with the president and delegation

from the tribal council, the Hickory Apache Tribe and its auditor,

we met with you, Senator Inouye, and showed you at that time the

deficiencies in just oil and gas accounting that resulted in huge

losses in the collection of disposed of, non-renewable resources.

I remember your reaction at the time. As you sat with this huge

spreadsheet on your lap you said, ‘‘This is theft.’’ Those words

stuck with me because of the obviousness with which you grasped

the deficiencies.

Now, there has been a great deal of focus on the so- called accounting. When one looks at what the Department of Justice produces in claims by tribes in the court of Federal claims as accounting reports, they do not give you the information you need to determine what happened to your assets, both cash and non-cash assets.

The difference is this, Senator: If one gets a report that is filled

with disclaimers, such as all of the reconciliation reports produced

by Arthur Andersen, and the disclaimers, I might add, are by design so that Andersen cannot be sued by any tribe—this is what

they sought to achieve—for detrimental reliance upon any of the
10

numbers in that report, not the opening balance, not the additions

or subtractions nor the closing balance.

So, Andersen receives, by its disclaimer, insulation from accountability and we were told in meetings with the then Comptroller of

the United States, Ed Mazor, in 1992 that what he wanted were

numbers he could defend on the Hill in this exercise that Andersen

then proceeded with. He did not want a complete and accurate accounting because we discussed with him the need to account for

completely and accurately non-cash assets that become the trust

corpus of funds.

It’s ludicrous for anyone to suggest that if one accounts for the

cash that you happen to find in the bank, that that’s an adequate

accounting of one’s assets.

We even have horrible examples. There was a Kickapoo gentleman, for example, that died under a bridge a millionaire, not

known to him because the Bureau had never told him that he had

that money from valuable mineral resources. These accounting reports do not give one any information on the totality of one’s assets

and what happened to them. And we are expressly told that you

can’t rely upon them.

If it is good enough for Arthur Andersen to stand behind as a

shield against liability, then it ought to be good enough for the

tribes to make the claim that they should not be bound in any way

by those numbers, not even as notice of incompetence in the management of their money.

There is a case about 10 years vintage in the Court of Federal

Claims which precluded a tribe from getting an accounting and

going after damages because the judge in that case, with no citation to authority held that the tribal council had been complaining

to the Bureau of Indian Affairs for years about no financial reports.

Because the tribe could not show that it was, and these are the

judge’s words, ‘‘shockingly ignorant’’ of their financial affairs, that

they were going to be held to have been on notice from the time

they started complaining.

Now, no one else is provided with that sort of ludicrous standard.

When the savings and loan problems came up, nobody held the savings and loan account holders to those kinds of stratagems by the

Department of Justice and Interior. That should not be done to

tribes.

The CHAIRMAN. That was pretty clear. I will have to leave now

to vote but Senator Campbell has already voted so he will continue

the hearings.

Senator CAMPBELL [ASSUMING CHAIR]. Thank you, Mr. Chairman.

I apologize for being here a little bit late. It was my understanding

that the hearing was going to start after the vote, so I went over

and did my duty.

It’s nice to see you here, Chief Tillman, my old friend. Alan, welcome here, too. To the other witnesses who are here, I am sorry

I didn’t hear Senator Inouye’s questions.

I apologize for not being here in time to do an opening statement,

but will submit that for the record. I know that most of the witnesses recognize that this hearing, even though there are many aspects of the trust fund debacle, this basically is not about the history of the trust fund’s management or about the proposals to re-
11

form it and not about the Cobell litigation either. It’s about avoiding litigation. That is what this bill is all about. So, I know we will

try to keep directed to that.

If you have already answered the questions I am going to ask

you Alan, you might just tell me that so I don’t encumber you

again.

First of all, when the tribal lawsuits were filed, have any of your

clients filed in the belief that they must do so or lose their right

to having them filed?

Mr. TARADASH. Yes, Senator Campbell; on January 8 I filed three

cases in the Court of Federal Claims, one for the Delaware Tribe

of Oklahoma in Bartlesville, OK which is where they are located;

one for the Pueblo of Laguna in New Mexico and one for the Hickory Apache Tribe, also in New Mexico, claiming losses to and mismanagement of all of their trust assets, both cash and non-cash assets.

We have had to make those claims precisely for the reasons that

you alluded to.

Senator CAMPBELL. Do you anticipate others being filed, too, if

we don’t get an extension of the statute of limitations?

Mr. TARADASH. Absolutely. There’s a decision in the ShoshoneArapaho case of November 30 of last year in the Court of Federal

Claims that expressly determined and interpreted the meaning of

the tolling language that Congress has put into appropriations

bills, that losses to is different from mismanagement of trust funds

and thus in that case permitted those two tribes to go back to August 14, 1946 because they have never been provided an accounting

of their trust funds which include upstream, so to speak, losses

with respect to disposition or use of trust assets that should have

gone into, resulting in cash that should have gone into the trust

funds.

Obviously, the Government may appeal that case at some point

when it gets concluded, but under the umbrella of very, very good

reasoning in that case, I filed those three cases on January 8.

Senator CAMPBELL. Those cases that you did file, did you have

an opportunity to get some feedback on how those tribes would feel

about extending the statute of limitations and therefore making the

filings unnecessary?

Mr. TARADASH. Obviously, Senator, we would much prefer not to

have to litigate. It is terribly expensive. I can’t stress how expensive it’s. It’s absolutely unconscionable, and I think obscene, for the

Department of the Interior and Justice, along with the then Comptroller of the United States, to have a calculated plan to require especially little tribes that don’t have the resources to, if you don’t

like the number that Andersen is going to churn out, then you sue

us. That’s an indecent proposal and it’s an indecent strategy, which

has been implemented. There’s a need to correct that.

Senator CAMPBELL. Thank you.

Chief, did you have comments along that line?

Mr. TILLMAN. Yes; the comment I have is the haves and the

have-nots. That pretty well sums it up. The tribes that have the

money, they can file. The have-nots, they are at the mercy of whatever.
12

But the ITMA and its 53 membership and its website has made

it known that what the Government claims, that the Arthur Andersen report, as long as it’s running, when it runs out in the 6 years,

wherever the statutes are, that you need to file something.

So, our organization has put that information out, sir.

Senator CAMPBELL. Well then, let me ask you, will this bill, assuming you have had a chance to look at it, do you think that your

clients would be inclined to negotiate with the Federal Government

to settle other claims if we can’t extend the statute of limitations?

Mr. TILLMAN. The ITMA, in its board meeting as of 2 days ago,

has sat down and looked at this bill and concurrently we support

this bill wholeheartedly.

Mr. TARADASH. Senator Campbell, may I add one thing to that?

Senator CAMPBELL. Yes.

Mr. TARADASH. With respect to settlement, I would like to mention that it’s terribly important to be mindful of the judicial closure

and unintended results that occurred the last time Congress visited, in a sense, these kinds of issues when it passed the Indian

Claims Commission Act in 1946.

What Congress intended was that tribes be fully compensated,

not only for things which smacked of wrongs and legal theories recognized that law, but it added a section that’s very unique in the

annals of legislation that deal with litigation. The fair and honorable dealings clause.

Tribes were supposed to be able to come to court under the purview of that act and demonstrate that they had been dealt with

dishonorably or even just unfairly and had resulted in losses and

be compensated for it.

However, when one looks at those cases tribes lost horribly, initially because they couldn’t prove up the cases because they didn’t

have the money to hire the experts necessary to do the prove-ups.

One of the things that Senator Inouye alluded to before you arrived, Senator Campbell, was what about the desirability of entering into some kind of negotiation process.

I would like to bring to the committee’s attention the structural

problem that has a solution that if it were to be implemented I

think it would make settlement discussions very, very fruitful and

possible.

The structural problem is this: By statute the Attorney General

of the United States must defend the United States when sued. Defense of the United States with respect to all of the Department of

Justice is the only thing that has to be vindicated upon lawsuit.

There’s no statute that says the functional equivalent of a private trustee’s lawyer’s duty and that’s, if you find or are aware of

losses to or mismanagement of the trust corpus that your client,

the trustee, is responsible for, you as a lawyer have an obligation

to tell the beneficiary, the failure of which in your performance

subjects you to suit and liability for the failure to disclose. The

trustee has a similar duty.

Our trustee has no such duty. Our trustee’s lawyers have no

such duty. So, the duty that they have is to defeat those claims by

any means necessary. And the problem, Senator, comes up not just

in the Court of Claims, but in district courts throughout the country there are at least 15 cases. In the last 15 years when lawyers
13

in the Department of Justice have been sanctioned because of obstruction of justice and deceit of courts in Indian claims cases of

other cases brought by Indian tribes or allottees.

The reason is, they go to the extreme to defend because they

have no legal duty to disclose. If Congress were to fix that and provide that same kind of vindication of honor and duty that a private

trustee and a private trustee’s lawyer has, then there would be

remedies for the brief that are far more direct.

More importantly, there are very, very good people at Justice and

Interior that work very hard. They need to have the right incentive

to do the job correctly. They don’t have it because by statute they

have a different mandate.

Senator CAMPBELL. Well, we have dealt with this trust fund

problem for a number of years. I am not an attorney and I can tell

you that the more we get into it, the more complicated it gets for

me.

I think most Americans, other than people who have a pretty

strong background in the law, would be completely confused.

Maybe we even confused it more in 1991 when we refined the definition of ‘‘accounting’’ and began using the phrase, ‘‘An accounting

of such funds from which the beneficiary can determine whether

there has been a loss.’’

Did we make it worse?

[Mr. Taradash nods his head in the affirmative].

Senator CAMPBELL. We did. That is the way we do it around

here, unfortunately. A lot of times, in an effort to try to correct

things we end up making things worse.

Well, let me go on and ask Senator Thomas if he has any questions of you before we move on.

Senator THOMAS. Thank you, Senator. I share your frustration

sometimes and I wanted to come primarily to listen to the witnesses because this is an issue that has hung on and it needs to

be resolved and we need to find a way to come to that resolution.

I have a short statement for the record.

Senator CAMPBELL. Okay. Without objection that will be included

in the record.

[Prepared statement of Senator Thomas appears in the appendix.]

Senator CAMPBELL. We have also, before we go on to the next

panel, some comments here that I was asked to read in the record

for the benefit of the General Accounting Office [GAO].

We have called upon the GAO to appear before the committee

today not in relation to the most recent work of the GAO which has

related to the efforts of the previous administration to implement

the TAAMs system, but because of the GAO’s work in overseeing

the department’s efforts to reconciliation tribal trust fund accounts

in the early 1990’s.

At that time the GAO followed the work of the two contractors

hired by the Interior Department including the work conducted by

Arthur Andersen. However, we should understand that the GAO

did not evaluate each of the reports that were sent to the tribal

governments for their sufficiency or content, nor have we asked the

GAO to appear before the committee to comment on any of those

legislative proposals.
14

We do appreciate your being here. We will go on to the GAO witness, which is McCoy Williams.

STATEMENT OF McCOY WILLIAMS, ACTING DIRECTOR, FINANCIAL MANAGEMENT AND ASSURANCE, GAO, ACCOMPANIED

BY MIKE KHOURY, ASSISTANT DIRECTOR, TRUST DEPARTMENT, DEPARTMENT OF THE INTERIOR AND TOM ARMSTRONG, OFFICE OF GENERAL COUNSEL

Senator CAMPBELL. Mr. Williams, welcome to the committee. You

may proceed at your leisure.

Mr. WILLIAMS. Mr. Chairman and members of the committee,

thank you for the opportunity to be here today to summarize observations from our past work regarding Indian travel trust fund accounts.

I am accompanied by Mike Khoury who is the assistant director

responsible for our trust work at the Department of the Interior

and Tom Armstrong who is from our Office of General Counsel.

As has been stated in the opening remarks and in other comments this morning, in a June 1993 letter to this committee we

noted that the Appropriations Act for the Department of the Interior had for many years contained a provision that told the statute

of limitations on claims for losses to or mismanagement of tribal

trust funds until the tribe had been furnished with an accounting

of its funds from which to try to determine whether there had been

a loss.

We also noted that the parties envisioned that such an accounting would result from Interior’ then ongoing reconciliation and

audit of the tribe for trust fund accounts which the Congress had

mandated.

At that time we expressed our view that until there was a mutually acceptable basis for determining account balances and any associated losses, it would be premature to allow the statute of limitations to run. We observed that holding the statute of limitations

until reconciliation and audit of an account with this completed or

until some mutually acceptable agreement was reached as to the

account balance had two overall purposes.

First, it provided all interested parties, including account holders, Interior and the Congress, an opportunity to examine and

evaluate all pertinent account information.

Second, it permitted interested parties to resolve all claims arising from Interior’s management of the accounts rather than address the specific claims in a piecemeal fashion. To fulfill reconciliation requirements established by the Congress first in the Supplemental Appropriations Act of 1987, Interior contracted with two

major independent public accounting firms. One to reconcile the

trust accounts and the other to do an independent certification to

indicate that the reconciliation resulted in the most complete reconciliation possible.

Interior’s Indian trust fund account reconciliation project was

completed in January 1996. During the reconciliation project, Interior spent about $21 million for contract costs over a 5-year period

in a massive effort to locate supporting documentation and reconstruct historical trust transactions as well as to perform other rec-
15

onciliation procedures in its attempt to validate tribal account balances.

In January 1996, Interior began providing to each tribe a report

package containing the tribe’s reconciliation results. During a February 1996 meeting at which Interior officials and the reconciliation contractor summarized the reconciliation project results,

tribes raised questions about the adequacy and reliability of the

reconciliation results.

In May 1996, we reported on shortcomings of Interior’s reconciliation project, including procedures that were not completed due to

missing records, systems limitations, time and cost constraints.

In May 1997, we reported to this committee that as of May 6,

1997, Interior had provided reconciliation reports to 310 tribes; 51

of those tribes had disputed the reconciliation results and 41 had

accepted the results. Of the remaining 218 tribes, 47 had requested

more time to consider the result and 171 had not responded to the

reconciliation results.

In summary, although Interior made a massive attempt to reconcile tribal accounts during this reconciliation project, missing

records and systems limitations made a full reconciliation impossible.

Mr. Chairman, I would be glad to respond to any questions that

you may have at this time.

Senator CAMPBELL. Did your colleagues have any comments?

While Senator Inouye is getting reseated, let me ask you a couple

of questions. On the certification of audits in 1990, Congress required an independent certification that the Arthur Andersen reconciliations were the most accurate possible. Did that certification

occur?

Mr. WILLIAMS. No.

Senator CAMPBELL. It did not?

Mr. WILLIAMS. It did not occur.

Senator CAMPBELL. Why not?

Mr. WILLIAMS. There were procedures that were not performed.

There were steps that they were unable to perform. I guess the

bottomline is just that all of the procedures that were needed to

give a full account were not complete.

Senator CAMPBELL. They were not fulfilled. The GAO has concerns about the Department of the Interior’s process, the reconciliation process. Did the BIA follow the GAO’s recommendations for

informing tribes about the limited scope of the reconciliation reports and the changes that GAO believed were necessary in the

reconciliation process?

Mr. WILLIAMS. We recommended that the tribes be provided full

disclosure about the areas. A full disclosure of that information was

not provided.

Senator CAMPBELL. And you have no way of knowing if those

concerns were then passed on to the tribes?

Mr. WILLIAMS. No.

Senator CAMPBELL. Senator Inouye, did you have questions? I

will turn it back to you.

The CHAIRMAN. [presiding] Needless to say, this is a very complicated matter. In my opening statement I quoted from the GAO.

Do you believe that a tribe receiving a reconciliation report would
16

be more likely to question its accuracy if each report had fully described the limitations I quoted in the GAO’s, May 1996 report?

Mr. WILLIAMS. If I had known of the limitations then I would

have scrutinized the accuracy of the reports very carefully. Now,

each tribe’s interest may vary based on the circumstances. For example, some tribes may not have certain type of leases and shortcomings in that area may not be of a concern to me. But given the

fact that there were limitations, I would have given it much scrutiny.

The CHAIRMAN. In the May 1996 GAO report the following also

is stated:

GAO suggested that substantial changes in the scope of procedures as a result

of contract modifications and issue papers be explained in the report package transmitted to tribes.

BIA considered providing issue papers to tribes on compact discs, however, the

reconciliation project manager told us that due to cost considerations BIA considered

instead that these issue papers be made available to tribes at the OTFM in Albuquerque or that tribes could request copies of specific documents by mail.

Would it be fair to say that the process ultimately followed by

the BIA in making this information available was less certain to

bring home to them an awareness of the deficiencies of the reports

than were the alternatives GAO had proposed?

Mr. WILLIAMS. We believed in 1996, as well as today that if the

tribes had received full information about the process and the

shortcomings in the reconciliation process, then they would have

been in the best position possible to make an informed decision.

The CHAIRMAN. In a June 1993 letter to this committee GAO

sugested that tolling the statute until a reconciliation and audit of

each account is completed or until some mutually acceptable agreement is reached as to the account balance serves two overall purposes. Can you describe those purposes?

Mr. WILLIAMS. Yes; as I included in my statement, we basically

stated that first it provides all interested parties, account holders,

BIA and the Congress an opportunity to examine and evaluate all

pertinent account information.

Second, it permits parties to attempt to resolve all claims arising

from BIA’s management of the accounts, taking into consideration

the practical limitations on the scope of the reconciliation such as

the loss of critical records rather than addressing specific claims on

a piecemeal fashion.

The CHAIRMAN. Can you explain why GAO believed that until

there was a mutually acceptable basis for determining account balances and associated losses it would be premature for Congress to

delete the Interior Department Act language tolling the statute?

Mr. WILLIAMS. In a 1993 letter GAO stated:

The thrust of our position has been that the government, to fulfill its fiduciary

responsibilities, must provide account holders a full accounting

The CHAIRMAN. Would the GAO still recommend that Congress

continue to toll the statute until the tribal accounts are reconciled

and/or resolved through negotiation and settlement?

Mr. WILLIAMS. I will let me Armstrong talk to that one, our attorney.

Mr. ARMSTRONG. Mr. Chairman, as you recognized in your opening statement, we have not done any work recently that would relate to that question. But I think we would suggest to the commit-
17

tee that if you feel that a tribe would be disadvantaged by an argument that a reconciliation report provided the tribe started the

running of the statute of limitations and if you think that giving

the parties more time to discuss this, to negotiate, possibly to come

to settlement by giving them more time, you could avoid expensive

litigation, I think we would suggest that you toll the running of the

statute of limitations.

The CHAIRMAN. From what you know of the situation as of this

moment, would you recommend that?

Mr. ARMSTRONG. From what I heard this morning—unfortunately, I have to apologize—I haven’t been involved in this area for

4 or 5 years now. I was brought here because I was involved in the

area back in the early 1990’s when we were monitoring the reconciliation effort.

But from what I heard here this morning, you have Chief Tillman advising you that there are a number of tribes who are concerned and Mr. Taradash also advising you that there are a number of tribes who are concerned that they need to go to court in

order to preserve their right to file a claim against the United

States.

And you heard Mr. Taradash testify that that is a very expensive

proposition.

The CHAIRMAN. Thank you. The committee understands that

GAO did not review the individual reconciliation report packages

that Interior sent to the tribes but you did review the prototype report package.

Based on this review, does GAO believe that the reports are accurate and reliable and do they provide tribal accountholders and

tribal governments with a full accounting of their trust funds?

Mr. WILLIAMS. GAO has found that a number of reconciliation

procedures called for by the original contract between the Department of the Interior and the independent professional auditor were

either not performed or not completed as originally envisioned

which could affect the reliability of the account statements.

In addition, the prototype report package did not explain to the

Indian tribes the numerous changes in reconciliation scope and

methodologies or extent to which reconciliation packages a fair and

complete accounting.

The CHAIRMAN. Finally, if I may ask, what are the most significant limitations and shortcomings in the scope of methodology of

BIA’s reconciliation report?

Mr. WILLIAMS. A couple of the most important points are the

ones that I pointed out earlier and that would be the missing documentation and the inability to reconcile the systems.

The CHAIRMAN. In other words, am I correct to conclude from

your responses that this committee should proceed with what we

are trying to do?

Mr. WILLIAMS. Yes.

The CHAIRMAN. Thank you very much, Mr. Williams.

Senator Thomas.

Senator THOMAS. Well, thank you, Mr. Chairman. I am clearly

not as up on the details as you two gentlemen are. Let me just ask

you some general questions. Is there in your opinion the possibility

a satisfactory reconciliation through audits?
18

Mr. WILLIAMS. Two thoughts here: The audit would be a separate

component from a reconciliation. You could do an audit, but you

would need the reconciliation if you wanted to get a full accounting.

As long as you have missing documentation and you can’t reconcile

these various areas, then your audit is not going to give you what

you are trying to achieve in the end result and that’s to be able

to determine what those exact balances should be for those accounts.

Senator THOMAS. What do you have to do to accomplish that?

Mr. WILLIAMS. As long as you have those missing documents,

that will be difficult. We have recommended in the past that the

Congress should consider some type of negotiated settlement. So,

you would have to look at some of the other options in our previous

testimonies and statements. We have made some of those and I

think we would still be making those same ones today.

Senator THOMAS. So, getting together the information you think

is available will only get you part of the way and then you have

to negotiate?

Mr. WILLIAMS. You have to negotiate the rest of the way, that’s

exactly right, because if you have missing documentation and

there’s no way that you are going to find that documentation, then

it’s going to be nearly impossible to do a complete reconciliation.

Senator THOMAS. If you have 1 year extension, what are you

going to do in that year? What are you going to do differently? This

has been going on for a very long time. What is the solution? What

is the remedy?

Mr. WILLIAMS. Yes; I must admit, I have testified and reported

on various agencies that have had long-standing accounting problems, but I think this one kind of sets the record for its long standing is concerned.

You have to work in a diligent manner to see how many of the

records can you actually locate and based on that, then you had to

begin from that point in trying to come up with some solution. That

is the only way that you can do this. You make every effort possible

to find all of the records that you possibly can and you do as good

of a reconciliation as you possibly can. It’s at that point in time

when you make the call that:

This is all we can find. We have done everything that we possibly can and we

have to come up with some solution to this problem through some negotiate.

Senator THOMAS. The accumulation of all the possible records

has not been accomplished. Is that what you are saying?

Mr. WILLIAMS. If there was some missing documentation you

would never be able to do a complete reconciliation of all of the

transactions.

Senator THOMAS. You are saying you can’t do it all, but you can

get together what is available. Has that been done?

Mr. WILLIAMS. Yes; based on what we saw in 1996, we thought

they couldn’t go any further.

Senator THOMAS. So the accounting part is completed?

Mr. WILLIAMS. Well, that’s basically why that particular point in

time we stated that there should be some negotiation to try to come

to some settlement. Yes, I think as far as looking for the records,

the accounting part, I guess you could say would be complete.

Senator THOMAS. Thank you.
19

Mr. WILLIAMS. But it wasn’t a complete accounting of the—— Senator THOMAS. Well, now that was my question. Has the accounting part, the reconciliation or the accounting for the records

available, has that been completed?

Mr. WILLIAMS. They have done as much as they can with the

documents, but an accounting has not been completed of the activities.

Senator THOMAS. In 5 years you have not been able to do the accounting on the documents that are there?

Mr. WILLIAMS. Yes; of the documents that are there that they

have looked at, they have done an accounting for those.

Senator THOMAS. It is very confusing. You are talking about

what you can get and what you can’t get. Of what you can get, has

that been accounted? Has that been added up? Is that there?

Mr. WILLIAMS. Yes.

Mr. ARMSTRONG. Being involved in GAO’s work back in the early

1990’s, I think where we were in 1996 when we reported to this

committee was that the work that the Interior Department and

their contractors had done to that date was deficient because they

were missing documents.

We felt the Government was spending good money but not getting much bang for the buck, that it would be impossible, given the

missing records, to prepare a complete accounting. So, we recommended to this committee a settlement proposal, legislation——

Senator THOMAS. So the documents are there, all the documents

you think that are ever going to be there are there? Now you are

dealing with an abstract.

Mr. ARMSTRONG. I am not sure that all the documents are there.

Senator THOMAS. Well, that’s what you said.

Mr. ARMSTRONG. I’m sorry?

Senator THOMAS. You just got through saying that the accounting of the documents that were available was completed.

Mr. ARMSTRONG. But remember, too, that we were concerned

with the limitations that the Interior Department had imposed on

its contractor and looking for documents and in looking at documents.

Senator THOMAS. Then the answer is perhaps there are more

documents that have not been looked at.

Mr. ARMSTRONG. Perhaps there are, yeah.

Senator THOMAS. That is what I am trying to find out.

Mr. ARMSTRONG. We were not in a position. We weren’t in a position. We didn’t go looking for documents. We were just monitoring

the process. So, we are not in a position to say that there are in

fact more documents there. But what we were saying was that

there were other steps that could be taken to see if there were

more documents there.

Senator CAMPBELL. One last question: Since the missing documents have created such a problem with getting a clearer account,

this bill as you probably know, extends the statute of limitations

for one year. But considering how complicated it has been, would

you recommend that it be 2 years or 5 years or some other timeframe?

Mr. ARMSTRONG. You know, back in 1993 when we did recommend a tolling of the statute of limitations, our point was let’s
20

maintain the status quo to give the parties time to work this out.

Mr. Thomas’ point is well taken, I think, and your point, Mr.

Campbell, is well taken, how much are we going to be able to accomplish in 1 year?

I think the committee needs to look at that very closely because

you may find yourselves back here in another year considering legislation to toll the running of the statute of limitations another

year or another two years.

Our point, our advice to you is that based on the work we did

back in the early 1990’s, the early to mid 1990’s, was that if you

think that a tribe is disadvantaged by an argument and having to

deal with an argument that a reconciliation report that the tribe

received would start the running of the statute of limitations and

if you think that giving the parties more time even by simply tolling the running of the statute of limitations, if you think by giving

the parties more time you could avoid expensive litigation, Mr.

Taradash just testified as to the expense of litigation. Then we

would encourage you to consider very seriously tolling the running

of the statute of limitations.

Senator CAMPBELL. Well, my concern, of course, is if tribes feel

in the next 8 or 9 months as we get close to that year end, if this

passes, which I assume it will, that they will still feel they will

have to have a rush to judgment. I don’t know but there still seem

to be documents out there that many people believe are going to

surface that have not yet. So, it might be wise to extend this timeframe.

Mr. ARMSTRONG. Mr. Campbell, I think that’s a fair observation.

I mean, part of the reasoning behind the settlement proposal, the

legislation that we proposed back in 1995 or 1996 to this committee

was as we had crafted that proposal it would give all of the parties

a better opportunity to come up with and to present to the mediators and arbitrators any evidence, any documentation that they

might have that would be useful to the settlement of their claims.

I think that your point is well taken that you could find yourselves back here in another 8 or 9 months dealing with legislation

to extend the statute of limitations another year or for another period of time.

Senator CAMPBELL. Thank you. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much. Just for clarification, because we are speaking of documents that are not available, lost or

destroyed, et cetera, are we speaking of records that were held by

the BIA in the 12 regions and since they were handled manually,

were there some that were misplaced or lost?

Second, there was an incidence where records were contaminated

by deer mice droppings causing Hantavirus and therefore these

records were not made available.

Third, a mysterious fire in the archives in Suitland, MD, destroyed some of the documents.

Fourth, some of the records were destroyed at the instruction of

the Treasury and Justice Departments. Finally, some of the records

were not located because the Arthur Andersen firm applied a model

which excluded certain documents from review.

Is that what we are talking about?

Mr. WILLIAMS. Yes; that is correct.
21

The CHAIRMAN. So, you cannot fault Indian governments for the

loss?

Mr. WILLIAMS. No; we did not.

The CHAIRMAN. I thank you very much, sir.

Mr. WILLIAMS. Thank you.

The CHAIRMAN. I appreciate your testimony. You have been very

helpful.

Mr. WILLIAMS. Thank you.

The CHAIRMAN. Now, our final witness, the associate solicitor for

Indian Affairs, Department of the Interior, Philip Hogen.

STATEMENT OF PHILIP HOGEN, ASSOCIATE SOLICITOR FOR

INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR, WASHINGTON, DC

The CHAIRMAN. Welcome, sir.

Mr. HOGEN. Good morning, Mr. Chairman, Senator Campbell,

Senator Thomas. I am Philip Hogen, the associate solicitor for Indian affairs with the Department of the Interior.

I am an Oglala Sioux from South Dakota and I have been on the

job since late October so I have some catching up to do.

The Department of the Interior is on board with what the proposed legislation intends to do: Extend the statute of limitations as

has been discussed here.

It is a very complicated, frustrating issue with which we are

faced. It is very expensive to litigate these cases. All would be better served if we might settle them and resolve them. I think it’s

obvious from what has just been said we are never going to find

every last piece of paper to answer everyone’s questions and consequently settlement would better address that situation than trying to sort it out in the courts.

With respect to what the committee intends to do, we have suggested some language that we think might better capture what the

committee intends to do. That is, just extend the statute of limitations rather than get into these issues such as, what is the significance of these reconciliations which we have been discussing and

the accountings and so forth.

We think that those issues are better handled in these negotiations that would occur during the period of time during which this

statute might be extended.

The Department of the Interior today has devoted more time and

attention and energy and focus to the issue of trust reform and

trust accounts than I think ever before in its history. Yesterday

over on the House side Secretary Norton testified with respect to

trust reform. She told the committee that she has been devoting

approximately 60 percent of her time to these trust reform issues;

that trust reform is receiving not only more attention from her and

from the department’s leadership than any other issue in the department, but also more than all of the other issues in the department.

That is unfortunate with respect to those other issues, but nevertheless, it is because of the significance of this issue, because we

have been at it so frustratingly long with so little success and

frankly because the Cobell litigation has captured necessarily the

attention of the department in this regard.
22

We are focused on it over there. We are doing historical accounting. We are proposing some reorganizational changes; we are consulting with tribal leadership. Last weekend the Secretary spent

all weekend with a tribal task force discussing this very issue.

So far nothing is carved in stone. Nothing is cast in concrete. We

want to set up a mechanism that will solve the problems of the

past and make it work in the future.

We will be better equipped as we move down this road to sort

these things and address these issues with these new mechanisms,

with these new systems. We have learned that some of the things

in the pipeline so to speak, the TAAMS program, things that we

have talked about, were perhaps ill-designed or now we know that

they were ill-designed.

With the benefit of this restructuring we should be able to not

only come up with better numbers but have a better sense of the

big picture and I think thereby be able to successfully be able to

negotiate settlements with the tribes.

Certainly there will be things that we won’t agree on. But right

now, as has been observed, when the statute of limitations kicks

in there’s an obligation for the United States to assert that as a

defense.

We believe the committee is on the right track here by suggesting that that be tolled. We suggest that the language set forth in

my written testimony would crisply and simply capture this and we

urge you to do that as you move in this direction.

I would be happy to respond to attempt to respond to questions

you might have in this regard.

The CHAIRMAN. Well, I appreciate your candor and your response. From the Secretary’s statement, it’s obvious that the process is inadequate. The staffing is inadequate. It isn’t possible to

focus upon the problem.

Do you have any suggestions as to what this Congress can be

doing legislatively to assist and expedite this process because it is

not fair to Indian Country to have this dangling and having them

wait another decade or two before we can come up with any sort

of resolution.

Do you have any suggestions? I don’t expect you to have them

at this moment, but if you do, we would appreciate it if you could

share them with us. I would like to look them over.

Mr. HOGEN. Well, we certainly will be happy to send that to you,

Mr. Chairman. I would also, I guess, say in the same breath, the

President’s budget that recently was sent this way contains a big

shot there that would be devoted to these very problems.

As that comes before you, we ask that you look sympathetically

to those requests.

Senator CAMPBELL. Mr. Hogen, I know you haven’t been in that

position in all the years we have dealt with this problem, but I

want to tell you: All we have heard over and over is:

If we had new systems, if we had more money, if we had more computers, if we

could revise the process, if we had increased staffing, whatever, we could fix it.

But in my view the Bureau has simply dropped the ball over and

over and over. After hearing the GAO’s testimony, I am even more

convinced of it. They are all just forms of passing the buck to me.

I don’t think that is satisfying anybody that is involved in litigation
23

now or in future litigation to try to get fairness out of this government for what should have been done a long time ago.

Everybody knows Indian people across this country have been

cheated out of their money, that the Government has cheated them

out of their money. I want to tell you, if it was mine in the private

world and a bank did that to me, I would be raising a lot more hell

than they are raising with the Government. They have had a lot

of patience. But I think they are running out of patience.

I have to tell you that as I understand your testimony this bill

should be redrafted to cover the tribes that have already filed

claims. That’s not what this bill is about. It’s to try to provide an

atmosphere where they could get some negotiated settlement so

they wouldn’t be forced to file more and more claims, which is in

no one’s best interest.

We are trying to provide assurance to them that we are going to

get to the bottom of this and we are going to fix it without prolonged litigation and fighting it out in court. That is what this bill

is all about.

Would you like to comment on that?

Mr. HOGEN. Yes, I would, Senator; if that’s the way you understood what I have suggested, I apologize because that’s not what

I intended to convey. We do not want to merely limit the application of an extension of the statute of limitations to the several

tribes that have currently filed their claims or perhaps will file it

before enactment of this legislation, which we hope is very soon.

We have nine, I believe, cases that have been filed, some in the

Court of Federal Claims, some in U.S. District Court. We know

that in the pipeline are probably dozens, if not hundreds of other

cases. We would want this to apply to all of them and those that

have filed, and that is why we said what we said, so we could go

to the court and say, ‘‘We seek a stay so that we may continue

these negotiations.’’

So, I certainly did not mean to narrow or limit that and I share

your frustration.

Senator CAMPBELL. Well, part of my frustration, I guess, is that

the faces keep changing over there and the problem keeps going on.

I just think that tribes’ patience is wearing thin and they are very

justified in their patience wearing thin, too.

I have no further questions, Mr. Chairman. I would ask unanimous consent to include my formal statement for the record, if you

would, and also submit the attached letter from the GAO dated August 30, 2001, for the record.

The CHAIRMAN. I can assure you that your statement and the letter from GAO will be made part of the record.

[Prepared statement of Senator Campbell appears in appendix.]

The CHAIRMAN. Mr. Hogen, sitting there you must have felt the

frustration of Indian country. There is an atmosphere of uncertainty and a lack of credibility on the part of the Department. Until

we can resolve these things and bring about certainty and credibility, it may be fair to say that you should be anticipating about 300

suits being filed in various courts throughout this land. That will

not help the situation.

As Vice Chairman, Cochairman Campbell has indicated, time is

running out. So, I hope we can get together, not just Congress and
24

the department, but more importantly, the beneficiaries and come

up with a solution that all of us can accept.

With that I thank you very much.

Senator Thomas, do you have any questions?

Senator THOMAS. I have no further questions, thank you.

The CHAIRMAN. We are in recess.

[Whereupon at 11:18 a.m., the committee recessed, to reconvene

at the call of the Chair.]
(25)

APPENDIX

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR FROM

COLORADO, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

Good Morning. Thank you Mr. Chairman for holding this hearing. It is worth

stressing, it seems to me, that this hearing is not about the history of trust funds

management. It is not about proposals to reform trust management. And it is not

about the Cobell litigation.

It is about avoiding litigation which I think is in everyone’s interest.

In the 1980’s Congress directed the Department of the Interior to reconcile tribal

trust accounts; required an independent certification to ensure the reconciliation

was complete; and provided that the statute of limitations would not be triggered

until the account holder received an accounting.

In January 1996, the Department of the Interior provided a report to each tribe.

When the tribes received and reviewed the reports concerns were raised, concerns

about their accuracy and reliability.

In May 1996, the GAO issued a report also raising concerns. If these reports constitute ‘‘accountings’’ then the statute of limitations will be considered ‘‘running’’

and out of a sense of caution many tribes will feel compelled to file suit to protect

their claims.

Many tribes have already filed suit, as you know Mr. Chairman.

What we are interested in, and what the Chairman and I have been working on

for some time now, is trying to provide a ‘‘cooling off period’’ in which the United

States and the tribes have a chance to settle potential claims arising out of this reconciliation process.

I very much believe that a wave of lawsuits against the United States will serve

no good purpose and will further alienate the parties.

Mr. Chairman, since 1996 the United States has been embroiled in litigation for

Individual Indian Money [IIM] accounts in the case of Cobell v. Babbit [and now

Cobell v. Norton].

I believe this committee can play a role in guiding the parties to a just settlement

of all trust claims.

I also believe that legislation along the lines of S. 1857 could encourage settlement and discourage protracted and expensive litigation.

I know this Mr. Chairman: Without assurances to the tribes that their claims will

not be barred, we will see an avalanche of lawsuits and that doesn’t help anyone—

other than the lawyers.

I ask unanimous consent to include in the Hearing Record a letter dated August

30, 2001, from the GAO that summarizes its concerns about the reconciliation process, and with that I look forward to hearing from our witnesses this morning.

Thank you Mr. Chairman.
26

1 Enclosure I also describes a related provision tolling the statute of limitations for certain

types of Indian trust fund claims.

U.S. GENERAL ACCOUNTING OFFICE,

Washington, DC, August 30, 2001

Hon. BEN NIGHTHORSE CAMPBELL,

Vice Chairman,

Committee on Indian Affairs,

U.S. Senate, Washington, DC.

DEAR MR. VICE CHAIRMAN: This letter responds to your request that we summarize observations from our past work regarding the Department of the Interior’s Indian trust fund account reconciliation project, which was completed in January

1996. From 1992 through 1997 we monitored and reported on various aspects of Interior’s planning, execution, and reporting of results for the reconciliation project.

Enclosure II to this letter is a list of GAO products on various aspects of Interior’s

Indian trust fund reconciliation project.

The Indian trust funds are of two types: tribal trust funds and Individual Indian

Moneys (IIM) trust funds. An independent public accounting firm (IPA) audit of the

trust funds for fiscal year 2000 showed a total of about $2.6 billion in approximately

1,400 separate tribal accounts for about 315 tribes, and about $400 million in approximately 260,000 IIM accounts as of September 30, 2000. Receipts are deposited

to these accounts primarily from land use agreements, royalties on natural resource

depletion, enterprises related to trust resources, judgment awards, settlement of Indian claims, and investment income, according to the IPA’s audit report. The audit

report noted that reliance cannot be placed on the balances reflected in the trust

fund accounts until many tribal accounts are reconciled and/or resolved through negotiation and settlement and the IIM class action litigation is resolved.

The Congress first established an Indian trust fund account reconciliation requirement in the Supplemental Appropriations Act, 1987, in response to tribes’ concerns

that Interior had not consistently provided them with statements on their account

balances, their trust fund accounts had never been reconciled, and Interior had

planned to contract with a third party for management of trust fund accounts. The

original provision required that the accounts be audited and reconciled before the

Bureau of Indian Affairs (BIA) transferred funds to a third party. A provision in

Interior’s fiscal year 1990 appropriations act added a requirement that the accounts

be reconciled to the earliest possible date and that Interior obtain an independent

certification of the reconciliation work. A description of the history of the reconciliation requirements, which continued to be included in Interior’s appropriations acts

through fiscal year 1995, is included as enclosure I1 to this letter. In 1994, the Congress, through the American Indian Trust Fund Management Reform Act of 1994

(Pub. L. 103–412, October 25, 1994; 108 Stat. 4239), required the Secretary of the

Interior to provide tribes with reconciled account statements as of September 30,

1995.

To fulfill these requirements, Interior contracted with two major IPA’s, one to reconcile the trust accounts and the other to do an independent certification that the

reconciliation resulted in the most complete reconciliation possible. Following a preliminary assessment in March 1992 by Interior’s reconciliation contractor, Interior

decided to have the contractor reconcile the tribal accounts for fiscal years 1973

through 1992 and omit accounts for individual Indians from the reconciliation

project due to the potential lack of supporting documents and the cost and level of

effort that would be needed to include them in the project. Subsequent to this decision, Interior had BIA reconcile the tribal accounts for fiscal years 1993 through

1995 to comply with the 1994 act’s requirement that Interior provide tribes with

reconciled account statements as of September 30, 1995.

During the reconciliation project, Interior spent about $21 million for contract

costs over a 5-year period in a massive effort to locate supporting documentation

and reconstruct historical trust fund transactions, as well as to perform other reconciliation procedures, so that tribal account balances could be validated. In January 1996, Interior provided to each tribe a report package containing the tribe’s reconciliation results, including unreconciled account statements with schedules of proposed adjustments based on reconciliation project results for each year covered by

the reconciliation, and a transmittal letter that described the information provided.

During a February 1996 meeting at which Interior officials and the reconciliation

contractor summarized the reconciliation results, tribes raised questions; about the
27

2Financial Management: BIA’s Tribal Trust Fund Account Reconciliation Results (GAO/

AIMD–96–63, May 3, 1996).

adequacy and reliability of the reconciliation results. We also, reported shortcomings

of Interior’s reconciliation project.2

As we previously reported, the reconciliation project’s shortcomings consisted of

procedures that were not completed due to missing records, system limitations, or

time and cost considerations as well as inadequate information in Interior’s reports

to tribes on the project’s results. These are detailed in the following paragraphs.

Basic (Noninvestment) Transaction Reconciliation Procedure: The basic

transaction reconciliation segment of the project included tracing 251,432 noninvestment transactions that had been recorded in the general ledger to source documents

such as deposit tickets and disbursement vouchers. The total value of these receipt

and disbursement transactions was $17.7 billion. Due to missing records, 32,901 of

the transactions, with a total value of $2.4 billion (14 percent of the total value of

the transactions), could not be reconciled. In addition to the limitation related to the

unreconciled transactions, this segment focused only on transactions that had already been recorded in the general ledger, and no reconciliation procedure was performed to address the completeness of the general ledger itself.

Investment Transaction Reconciliation Procedure: The reconciliation contractor also did individual testing of $21.3 billion, or 16 percent, of the recorded investment transactions. However, to achieve efficiencies, Interior and the contractor

substituted a review of tribal account investment yields for individual transaction

testing for the remaining investment transactions.

Fill the Gap (Leases) Procedure: Another segment of the project reconciled collections for certain tribes with a sample of lease documents and timber sales contracts. Initially, the contractor was to review all leases greater than $5,000 and a

test sample of 100 additional leases of less than $5,000 on a cross section of tribes.

The reconciliation contractor identified 6,446 surface leases with annual collections

of over $5,000. However, due to time constraints for completing the reconciliation,

only 692 leases—10.7 percent of the leases originally identified for testing—were tested. In addition, because of missing records, a number of leases, and sample test

months for timber contracts, were substituted for those in the original sample.

Systems Reconciliation Procedures: The systems reconciliation was to include

reconciling (1) information in the trust fund investment system to the General Ledger in the Finance System, (2) the tribal general ledger in the Finance System to

U.S. Treasury records, and (3) the Integrated Records Management System (IRMS)

subsidiary records to the Finance System general ledger. The latter two reconciliations could not be performed or completed due to time and funding limitations, according to Interior officials.

Tribal IIM and Special Deposit Accounts Reconciliation Procedure: Interior maintained some IIM accounts for tribes in the IRMS accounting system. It also

used Special Deposit accounts primarily as clearing accounts for funds received that

had not been distributed to account holders because the account owners had not

been identified. Due to missing records and the lack of an audit trail through IRMS,

tribal transactions could not be efficiently isolated from individual Indian transactions. Because of this, tribal IIM accounts maintained in IRMS were not reconciled to source documents, and Special Deposit accounts were not reconciled with

source documents that moved funds to tribes’ general ledger accounts, as had been

planned.

Fill the Gap (Minerals Management Service) Reconciliation Procedure:

Interior’s Minerals Management Service (MMS) collects and accounts for oil and gas

royalties on Indian leases. The reconciliation project was to include some procedures

to trace collections from the leases, through MMS, to the general ledger maintained

by BIA. However, because MMS retained records for only 6 years, records for most

of the 20-year reconciliation period were not available, and alternative procedures

at MMS were not performed due to time constraints.

Certification Procedure: Interior’s fiscal year 1990 appropriations act required

a separate, independent certification that the accounts had been reconciled and audited to the earliest possible date and that the results were the most complete reconciliation possible. However, BIA’s certification contract required that the certification contractor ensure only that the reconciliation effort was performed in accordance with the reconciliation contract and no independent assessment of completeness was required. In addition, because of cost and time constraints, the certification

contract was terminated before the certification contractor completed its verification

that the procedures in the reconciliation contract were performed. The certification

contractor issued a status letter, which communicated preliminary results. However,

because the certification work was performed while the reconciliation was in process
28

and the certification procedures were not completed, the usefulness of the status letter is limited.

Individual Indian Accounts Reconciliation Procedures: As previously mentioned, accounts for individual Indians were excluded from the reconciliation project

due to the potential lack of supporting documents and the cost and level of effort

that would be needed to include them in the project.

Reporting of Reconciliation Project Results: Interior’s reporting of the reconciliation project results was not as complete as it could have been. Interior did

not disclose in the report packages to tribes the procedures specified in the reconciliation contract that were not performed, or those that could not be completed, and

the reasons. For the procedures that were performed, Interior did not fully disclose

scope limitations or changes in methodologies, such as accounts and time periods

that were not covered and alternative source documents used.

To summarize, although Interior made a massive attempt to reconcile tribal accounts during its reconciliation project, missing records and systems limitations

made a full reconciliation impossible. In addition, due to cost considerations and the

potential lack of supporting documentation, reconciliations for individual Indian accounts were not performed.

If we can be of further assistance, please phone me on (202) 512–9508.

Sincerely yours,

LINDA M. CALBOM,Director, Financial

Management and Assurance

Enclosures

Enclosure I

SELECTED INDIAN TRUST FUNDS PROVISIONS CONTAINED IN

APPROPRIATIONS ACTS

Appropriations Act Provisions for Audit and Reconciliation Requirements

for Tribal and Individual Indian Trust Funds

In Supplemental Appropriations Act, 1987, the Congress established a requirement that tribal and individual Indian trust funds be audited and reconciled prior

to the Bureau of Indian Affairs’ (BIA) contracting with third parties for the management of Indian trust fund accounts. Pub. L. 100–71, 101 Stat. 391, 416 (1987). Similar provisions were included in the Department of the Interior’s appropriations acts

through fiscal year 1995. The provision in the 1987 Supplemental Appropriations

Act stated:

The Bureau of Indian Affairs shall not transfer funds under a contract with any

third party for the management of tribal or individual Indian trust funds until

the funds held in trust for such tribe or individual have been audited and reconciled and the tribe or individual has been provided with an accounting of such

funds, and the appropriate Committees of the Congress and the tribes have

been consulted with as to the terms of the proposed contract or agreement.

Pub. L. 100–71, 101 Stat. 391,416 (1987).

Interior’s fiscal year 1988 and 1989 appropriations acts included the same requirement, albeit with a slight difference in language:

Provided further, That none of the funds in this act shall be used by Bureau

of Indian Affairs to transfer funds under a contract with any third party for the

management of tribal or individual Indian trust funds until the funds held in

trust for such tribe or individual have been audited and reconciled, and the

tribe or individual has, been provided with an accounting of such funds, and the

appropriate Committees of Congress and the tribes have been consulted with

as to the terms of the proposed contract or agreement. (emphasis added).

Pub. L. 100–202, 101 Stat. 1329 (1987); Pub. L. 100–446, 102 Stat. 1774 (1988).

From fiscal year 1990 through fiscal year 1995, Interior’s appropriations acts

added a requirement that the funds be reconciled to the earliest possible date and

an independent party certify the reconciliation of the funds held in trust. See, for

example, Pub. L. 101–121, 103 Stat. 701 (1989)(‘‘until the funds held in trust for

such tribe or individual have been audited and reconciled to the earliest possible

date, the results of such reconciliation have been certified by an independent party

as the most complete reconciliation of such funds possible. . .’’). See also B–236146,

March 20, 1990 (certification must be performed by a party independent of the party

performing the reconciliation).
29

Tolling of Statute of Limitations on Tribal and Individual Indian Claims

Against the United States for Management of Trust Funds

Since fiscal year 1991, the Department of the Interior’s appropriations acts have

included a provision that tolls the statute of limitations on tribal and individual Indian claims against the United States arising from BIA’s management of tribal and

individual Indian trust funds. The provision in the fiscal year 1991 appropriations

act stated:

Provided further, That notwithstanding any other provision of law, the statute

of limitations shall not commence to run on any claim concerning losses to or

mismanagement of trust funds, until the affected tribe or individual Indian has

been furnished with the accounting of such funds.

Pub. L. 101–512, 104 Stat. 1915 (1990).

From fiscal years 1992 through 2001, Interior’s appropriations acts have included

the provision tolling the statute of limitations and added language requiring that

the tribe or individual Indian be furnished an accounting ‘‘from which the beneficiary can determine whether there has been a loss . . .’’ See, for example, Pub. L.

102–154, 105 stat. 990 (1991).

Enclosure II

RELATED GAO PRODUCTS

Indian Trust Funds: Tribal Account Holders’ Responses to Reconciliation Results

(GAO/AIMD–97–102R, May 23, 1997).

Responses to Questions from June 11, 1996 Hearing (GAO/AIMD–96–125R, June

24, 1996).

Financial Management: Interior’s Management of the Indian Trust Funds (GAO/

T–AIMD–96–111, June 18, 1996).

Financial Management: Interior’s Efforts to Reconcile Indian Trust Fund Accounts

and Implement Management Improvements (GAO/T–AIMD–96–104, June 11, 1996).

Financial Management: BIA’s Tribal Trust Fund Account Reconciliation Results

(GAO)/AIMD–96–63, May 3, 1996).

Financial Management: Indian Trust Fund Accounts Cannot Be Fully Reconciled

(GAO/T–AIMD–95–94, March 8, 1995).

Responses to Questions From September 26, 1994, Hearing (GAO/AIMD–95–33R,

December 2, 1994).

Financial Management: Focused Leadership and Comprehensive Planning Can

Improve Interior’s Management of Indian Trust Funds (GAO/T–AIMD–94–195, September 26, 1994).

Financial Management: Focused Leadership and Comprehensive Planning Can

Improve Interior’s Management of Indian Trust Funds (GAO/AIMD–94–185, September 22, 1994).

Response to Questions on Two Recommendations in April 12, 1994, Testimony

(GAO/AIMD–94–138R, June 10, 1994).

Letter on BIA Trust Fund Reconciliations (GAO/AIMD–94–110R, April 25, 1994).

Financial Management: Status of BIA’s Efforts to Reconcile Indian Trust Fund Accounts and Implement Management Improvements (GAO/T–AIMD–94–99, April 12,

1994).

Financial Management: BIA’s Management of the Indian Trust Funds (GAO/T–

AIMD–93–4, September 27, 1993).

Indian Trust Funds: Tribal Account Holders’ Responses to Reconciliation Results

(GAO/AIMD–97–102R, May 23, 1997).

Responses to Questions from June 11, 1996 Hearing (GAO/AIMD–96–125R, June

24, 1996).

Financial Management: Interior’s Management of the Indian Trust Funds (GAO/

T–AIMD–96–111, June 18, 1996).

Financial Management: Interior’s Efforts to Reconcile Indian Trust Fund Accounts

and Implement Management Improvements (GAO/T–AIMD–96–104, June 11, 1996).

Financial Management: BIA’s Tribal Trust Fund Account Reconciliation Results

(GAO/AIMD–96–63, May 3, 1996).

Financial Management: Indian Trust Fund Accounts Cannot Be Fully Reconciled

(GAO/T–AIMD–95–94, March 8, 1995).

Responses to Questions From September 26, 1994, Hearing (GAO/AIMD–95–33R,

December 2, 1994).

Financial Management: Focused Leadership and Comprehensive Planning Can

Improve Interior Management of Indian Trust Funds (GAO/T–AIMD–94–195, September 26, 1994).
30

Financial Management: Focused Leadership and Comprehensive Planning Can

Improve Interior’s Management of Indian Trust Funds (GAO/AIMD–94–185, September 22, 1994).

Response to Questions on Two Recommendations in April 12, 1994, Testimony

(GAO/AIMD–94–138R, June 10, 1994).

Letter on BIA Trust Fund Reconciliations (GAO/AIMD–94–110R, April 25, 1994).

Financial Management: Status of BIA’s Efforts to Reconcile Indian Trust Fund Accounts and Implement Management Improvements (GAO/T–AIMD–94–99, April 12,

1994).

Financial Management: BIA’s Management of the Indian Trust Funds (GAO/T–

AIMD–934, September 27, 1993).

Response to Request for Views on Freeze of the Statute of Limitations on Claims

Against the States Arising From BIA Management of Tribal and Individual Trust

Funds (GAO/AFMD–93–84R, June 4, 1993).

Financial Management: BIA Has Made Limited Progress in Reconciling Trust Accounts and Developing a Strategic Plan (GAO/AFMD–92–38, June 18, 1992).
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PREPARED STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON

Mr. Chairman, I am pleased that we have this opportunity to hear from the witnesses testifying today to help us determine whether legislation would be an appropriate and desired course of action to address the statute of limitations that may

have been triggered by reports of tribes’ trust accounts released in 1996.

Mr. Chairman, I have serious concerns about the management of both tribally

held and individual Indian trust accounts. The Federal Government has a legal responsibility to maintain these accounts accurately, and I believe that account holders should be able to hold the Government accountable if this is not done.

In 1987, Congress first mandated that the Department of the Interior audit and

reconcile trust fund accounts and provide these statements to account holders. Since

fiscal year 1992, the appropriations acts for the Department have included requirements that tribes and individuals with trust accounts be provided with reconciled

accounting statements, and, in 1994, Congress reiterated the need to give tribes this

information with the passage of the Trust Fund Management Reform Act. This law

required the Secretary of the Interior to supply tribes with reconciled account statements as of September 30, 1995.

Interior contracted with one public accounting firm in order to reconcile trust accounts and a second firm to verify that the reconciliation was as thorough as possible. In January 1996, each tribe was given a report of its account. However, tribes

and the U.S. General Accounting Office have concerns that the 1996 reports may

not provide reliable or sufficiently thorough information about the accounts. As a

result, tribes cannot rest assured that these reports accurately represent the actual

value in their accounts, and tribes may not have the necessary information to make

informed decisions regarding whether accounts have been mismanaged and, if so,

to take legal action.

Because of the doubts surrounding the sufficiency of these reports, it is uncertain

whether the reports actually triggered the 6-year statute of limitations for tribes to

file claims against the United States. However, the committee has been advised that

the Department of Justice believes that the reports did do so. Several tribes have

already filed claims because the statute of limitations, if it began to run, expired

last month or will expire in the very near future.

If the Government is providing tribes with inaccurate or incomplete reports of

their accounts, then these reports should not work to limit tribes’ recourse toward

holding the Government responsible for trust fund mismanagement. Moreover, it is

likely in the best interests of tribes and the Government alike to extend the statute

of limitations specifically to allow more time to explore how these claims might be

settled out of court. Bringing hundreds of cases before the courts would cost tribes

and the government dearly in time and resources.

In the final days of the last session of Congress, my distinguished colleagues Senators Campbell and Inouye introduced a measure to encourage the negotiated settlement of tribal claims. This bill would extend the statute of limitations on claims

against the United States relating to trust fund account mismanagement through

fiscal year 2002. I am very interested in the views of today’s witnesses and my colleagues on the committee regarding how this legislation might help efforts to resolve

trust fund mismanagement.

Indeed, the daunting task of rectifying trust fund mismanagement will require

the diligent participation, patience, and wisdom of the Department of the Interior,

the Native American community, the courts, and Congress. We are meeting today

to discuss only one facet of this complex problem, but I am interested in what Congress can do to see that the problem is addressed with consistency, efficiency, and

most importantly, justice.

PREPARED STATEMENT OF HON. TIM JOHNSON, U.S. SENATOR FROM SOUTH DAKOTA

Chairman Inouye, Vice Chairman Campbell, and other members of the committee,

the issue of trust fund mismanagement is one of the most urgent problems we are

faced with in Indian country. Of all the extraordinary circumstances we find in Indian country, and especially in South Dakota, I do not think there is any more complex, more difficult and more shocking issues then the circumstances we have surrounding trust fund mismanagement.

This problem has persisted literally for generations, and continues today. Administrations of both political parties have been inadequate in their response, and the

level of direction and the resources provided by Congress over past decades has also

been sadly inadequate. The Federal Government, by law, is to be the trustee for Native American people. When the Trust Fund Management Act of 1994 was passed,
105

I was hopeful that this accounting situation would at last be remedied. Unfortunately, this has not been the case.

During my service in the House of Representatives, I was appointed to the Congressional Task Force on Indian Trust Fund Management, to review and study the

management and reconciliation of funds administered by the Department of the Interior’s Office of Trust Fund Management. Those meetings were informative but far

from productive, as many years and millions of dollars later, this problem still persists.

A few years ago, this committee directly saw the reverence the Department of the

Interior held for the records of this Nation’s First Americans. Records were heaped

into piles with trash, appliances, and cleaning supplies interspersed with the trust

records of Native Americans. Other records were burned, flooded, and infested with

colonies of rodents. All of this gives great concern to the Native people in my State

and across the country.

I am convinced that there is no way for the Federal Government, regardless of

political party, to be able to account for every last record that was lost. However,

we should not simply throw up our hands and say ‘‘oh well.’’ This does not adhere

to the trust responsibility of the Federal Government on behalf of the American Indians and Alaska Natives of this Great Land. We need to do better.

We need to address the millions of dollars that will never be accounted for, and

we need to come to a solution where those Native Americans who are owed money

are paid money. Some of these account holders are of the poorest of the poor. Some

of these account holders solely rely on these payments as their only source of income. We need to end the practice of treating our First Americans as Third Class

citizens.

Mr. Chairman, I thank you for holding this first in a series of hearings on this

important issue. I look forward to working with my colleagues of this committee,

as well as tribal leaders to come to a viable solution to this problem. I look forward

to hearing the testimony of the witnesses we have here today.

PREPARED STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR FROM WYOMING

Thank you, Mr. Chairman. Let me begin by saying it is important for this committee to remain interested and involved with Indian trust management issues.

Throughout my time in Congress and as a member of this committee, I have been

involved with efforts to remedy the existing problems with the current management

system. It continues to be my hope that we can develop a dependable system.

As we are all aware, the Cobell v. Norton litigation has prompted an intense reevaluation of our Government’s trust responsibility. Consequently, Secretary Norton

has put forth a proposal to restructure the Bureau of Indian Affairs [BIA], thereby

creating a new agency solely charged with managing Indian trust accounts. I understand this proposal has been met with opposition throughout areas in Indian country. I also understand the tribes’ frustration with the Department’s consultation

process. However, I strongly believe that we must not lose focus in our efforts to

resolve this long-standing problem and move forward to establish an accountable

system of trust management.

The Department of the Interior is not the only agency to bear the burden of finding a solution or addressing the problem. Each branch of our Government continues

to shape the future outcome of Indian trust management. We are here today to discuss one of the many issues surrounding trust reform. The history of mismanagement must be eradicated and replaced with a renewed commitment to providing a

fair, accountable system. I look forward to working with my colleagues as we proceed in this difficult task.

Thank you, Mr. Chairman, I look forward to hearing from our witnesses.

PREPARED STATEMENT OF CHARLES TILLMAN, CHIEF, OSAGE NATION AND CHAIRMAN,

INTERTRIBAL MONITORING ASSOCIATION

Mr. Chairman, Mr. Vice Chairman, and members of the committee, this written

testimony is submitted to supplement the oral testimony given on behalf of the

InterTribal Monitoring Association on Indian Trust Funds by Charles Tillman,

Chairman of the ITMA Board of Directors and Chief of the Osage Tribal Council.

ITMA is an unincorporated association of 53 federally recognized Indian tribes committed to monitoring the Indian trust fund and asset management and reform efforts of the U.S. Department of the Interior. The Association was formed in 1990

to provide a coherent voice from Indian country on Indian trust issues and to inform
106

1See Act of December 22, 1987, Pub. L. No. 100–202 and Act of September 27, 1988, Pub.

L. No. 100–446 (requiring the Bureau of Indian Affairs (‘‘BIA’’) to audit and reconcile tribal trust

funds, and to provide tribes with an accounting of such funds; Act of October 23, 1989, Pub.

L. No. 101–121, Act of November 5, 1990, Pub. L. No. 101–512, and Act of November 13, 1991,

Pub. L. No. 102–154 (requiring the BIA to audit, reconcile, and certify through an independent

party the results of the reconciliation of tribal trust funds as the most complete reconciliation

of such funds possible, and to provide tribes with an accounting of such funds).

its member tribes of developments and setbacks in the attempts to reform a deficient system.

The dilemma faced by tribes today was created by the issuance of reports to each

tribe by Arthur Andersen LLP in 1996 purporting to ‘‘reconcile’’ tribal trust accounts

for the fiscal years 1973–92. For the reasons stated below, those reports cannot be

considered adequate accountings, as required by law, of the beneficiaries’ trusts by

their trustee, the United States. And yet, tribes are justifiably concerned that the

Department of Justice would raise a statute of limitations defense based on the

issuance of those reports. Given that the 6-year statute of limitations would run this

year if such an argument by Justice were accepted, tribes must either file suit now

or risk that a remedy might be unavailable in the Federal courts. As discussed

below, it is neither in the interest of tribes or the United States to force tribes to

file suit at this time.

The Association will not belabor the tortured history of the United States’ mismanagement of tribal trust funds and resources. The committee is well aware that

the Department of the Interior has failed its Indian beneficiaries for decades by mismanaging their land, their natural resources, and their funds. As a House committee concluded in 1992:

[s]cores of reports over the years by the Interior Department’s inspector general,

the U.S. General Accounting Office, the Office of Management and Budget, and

others have documented significant, habitual problems in BIA’s ability to fully

and accurately account for trust fund moneys, to properly discharge its fiduciary

responsibilities, and to prudently manage the trust funds. ‘‘Misplaced Trust: The BIA’s Mismanagement of the Indian Trust Fund,’’ H.R. Rep.

102–499, at 2 (1992). The House Committee further resoundingly condemned

BIA’s ongoing obdurate refusal to implement the needed reform:

The committee is particularly troubled by BIA’s efforts-undertaken only grudgingly—to implement repeated congressional directives designed to provide a full

and accurate accounting of the individual and tribal account funds. In short, the

BIA has repeatedly failed to take resolute corrective action to reform its longstanding financial management problems. The Bureau has repeatedly ignored

directives to undertake needed management reform measures. As a result of

this dismal history of inaction and incompetence, there is no assurance that the

Bureau actually desires to, or will, make any substantial advancement toward

rectifying the basic financial management failures brought to their attention.

Id. at 2–3, 5. The intervening 9 years have proven the House committee to be prophetic. We are no closer to a ‘‘full and accurate accounting’’ of the tribal trust than

we were then.

The Arthur Andersen Reports

The directives mentioned in the House Report included numerous mandates from

Congress that the BIA and the Department provide tribes with an accurate accounting of their trust funds and assets.1

The current dilemma faced by tribes arises from the Department’s response to

those mandates. In 1991, the Department contracted with Arthur Andersen LLP to

conduct a so-called ‘‘reconciliation’’ of tribal trust accounts. The original charge to

Arthur Andersen was that it was to ‘‘reconcile[ the accounts] as accurately as possible back to the earliest date practicable, using available accounting records and

transaction data.’’ After 5 years, roughly $20 million in fees, and 31 contract modifications, Andersen submitted a report to each tribe regarding it purported trust

fund balances.

The Andersen project was fatally flawed for a number of reasons. Andersen itself

acknowledged the deficiencies in each report. It stated that each report did ‘‘not constitute an audit made in accordance with generally accepted auditing standards.’’ Therefore, Andersen did not express an opinion on the accuracy of any of its findings. As Andersen stated in each report:

The congressional mandate for the Bureau Tribal Trust Funds Reconciliation

Project [Reconciliation Project] requires an accounting to each tribe for each of

their trust accounts. The primary objective of the Reconciliation Project, as stated in the contract, is to reconstruct historical transactions, to the extent practicable, for all years for which records are available for all tribal trust accounts
107

2Of course, only the Department and Andersen ‘‘agreed upon’’ those procedures. The beneficiaries had no role in determining how their trust funds and assets would be analyzed.

managed by the Bureau. Phase I of the Reconciliation Project substantiated

that not all records would be available for a full accounting of such funds. Due

to the unavailability of some records, the scope of the Reconciliation Project is

designed to provide reasonable assurance as to the accuracy of each tribal trust

account balance. The agreed-upon procedures performed, as required by the contract, represent the Bureau’s standard of reasonableness.

[Emphasis added.] Most tribes agree that the reconciliation project did not provide

any ‘‘reasonable assurance’’ regarding their account balances, in part for the reasons summarized below. But this statement by Andersen is particularly relevant

to the issue currently before the committee because Andersen concedes expressly

that, although Congress required an accounting, a full accounting was not possible. Instead, the Bureau substituted its own ‘‘standard of reasonableness’’ for the

accounting required by Congress and by trust law.

Many of the reports’ deficiencies are obvious from the ‘‘agreed-upon procedures’’

that guided Andersen’s work.2 Only a few of the deficiencies are discussed here to

give the committee some understanding of the incomplete nature of the project and

to underscore the fact that the reports cannot be considered an accounting that

would trigger the statute of limitations for tribal claims.

Because of the limited availability of electronic data, Andersen only looked at

records from 1972 forward. Losses to the tribal trust prior to that date were not

analyzed in any way. This means that there is simply no way to know whether the

beginning balance used by Andersen bears any resemblance to the amount that

should have been in any given tribal account in 1972.

Another significant deficiency involves investment of tribal trust funds. Andersen—with the consent of the Department—did little substantive analysis of the investment of each tribe’s trust funds. Instead, Andersen conducted an ‘‘Interest Yield

Analysis’’ for each tribe. This ‘‘agreed-upon’’ procedure involved calculating each

tribe’s investment yield for each year. Andersen then derived a ‘‘benchmark rate’’

for all tribes based on the total return for all tribes in any given year. If the investment return on a given tribal account was within 2 percent below or 5 percent above

the so-called benchmark, Andersen did nothing else.

Several flaws in this procedure are worth highlighting. First, the ‘‘benchmark’’

rate was derived not from some external source but from tribal trust accounts themselves. Thus, systemic problems in trust fund management could not be identified

because they were simply included in the average against which individual tribal

accounts were measured. If better returns were available generally—either through

different investment strategies or through better procedures—Andersen’s procedure

could not have identified the losses. Second, the margin of deviation allowed by Andersen from that flawed benchmark is considerable. A tribe that consistently received almost 2 percent less than the benchmark would have earned less than twothirds of the interest over a 20-year period that a tribe that received the benchmark

return each year would have earned.

Perhaps the most egregious failing in the Andersen project was that Andersen

was not charged with analyzing the Department’s management of the underlying

trust assets that generate the majority of trust funds in the first place. Without attention to the underlying trust assets, there can be no analysis of what the true balances should be. For example, natural gas producers leasing Indian lands have routinely underreported their production of gas from leased Indian lands by 20 to 40

percent, but the MMS has only recently—and even then sporadically—begun auditing production with any degree of care. Mismanagement of other trust resources has

resulted in similar losses. And yet, with the exception of five ‘‘Fill-the-Gap’’ tribes,

no attempt was made to sure that adequate rents, royalties, and other income was

being collected in exchange for use or purchase of tribal resources.

For these reasons, and others too detailed to explore here, it would be dishonorable and legally impermissible for the United States to construe the Arthur Andersen reports as fulfilling its legal obligation to the tribes to account for tribal trust

funds and assets.

The Annual Appropriations Language

Congress has recognized the legal interrelationship between an accounting and

the statute of limitations. In each Interior appropriations act passed since 1990,

Congress has stated in this or similar language, ‘‘notwithstanding any other provision of law, the statute of limitations shall not commence to run on any claim concerning losses to or mismanagement of trust funds until the affected tribe or indi-
108

3There is some uncertainty as to precisely what date might be regarded as beginning the running of the statute of limitations were the Andersen reports considered to be ‘‘accountings.’’

Summary reports were issued in January 1996. More detailed reports were issued to at least

some tribes in February 1996. Exit conferences with tribes were held throughout that year.

vidual Indian has been furnished with the accounting of such funds.’’ See, e.g., Pub.

L. 101–512, 104 Stat. 1915, 1930 (1990).

ITMA believes that this language, which has appeared unchanged before and

after issuance of the Andersen reports, would assist tribes in defeating any statute

of limitations defense raised by the Department of Justice. But tribal leaders cannot

be expected to risk the claims of their tribes based on language that does not make

it clear that the Andersen reports were not the ‘‘accounting’’ Congress directed and

that has been mentioned in each appropriations bill.

The Importance of Trust ‘‘Resources’’ or ‘‘Assets’’

The importance of tribal trust resources, or assets, was mentioned in the discussion of the Andersen report above. ITMA wishes to stress the importance of mismanagement of those underlying resources to the committee. If the goal of Congress

and the United States is to make tribes whole for the losses tribes have suffered

because of breaches of trust by the Department, mismanagement of the underlying

land, minerals, oil, gas, timber, and other resources must be examined and quantified. If tribes—and individual Indians—are not able to recover for that mismanagement, whether through a comprehensive settlement or tribe-by-tribe litigation, one of the greatest thefts in history will have been countenanced by the United

States.

Time after time, tribes have litigated and won substantial judgments or settlements because of the United States’ failure to fulfill its duties as trustee of Indian

lands. For example, in Confederated Tribes of the Warm Springs Reservation v.

United States, 248 F.3d 1365, 1371, 1375 (Fed. Cir. 2001), the Federal Circuit required a determination of damages regarding several categories of BIA’s failure to

manage tribal timber resources in a manner that obtained the greatest appropriate

revenue for the tribal beneficiaries. In Jicarilla Apache Tribe v. Andrus, 687 F.2d

1324, 1331 (10th Cir. 1982), the Tenth Circuit found that the Secretary of the Interior did not even intend to comply with the regulatory notice requirements for offering tribal mineral leases, and indeed failed to comply with those requirements. Just

4 years later, the Tenth Circuit held that the Department had again breached its

fiduciary duties to the same tribe by failing to correctly interpret the royalty terms

in leases and regulations, by failing to ensure that lessees complied with lease

terms, and by failing to insure the protection of leased lands. See Jicarilla Apache

Tribe v. Supron Energy Corp., 728 F.2d 1555, 1565 (10th Cir. 1984) (Seymour, J.

concurring & dissenting), adopted as majority opinion as modified, 782 F.2d 855

(1986) (en banc), supplemented, 793 F.2d 1171 (1986), cert. denied, 479 U.S. 970

(1986).

The Tenth Circuit also has found that the Secretary ‘‘uncontrovertedly’’ breached

trust duties to a tribe by failing to examine all relevant factors before approving a

communization agreement for mineral development. See Cheyenne-Arapaho Tribes

of Oklahoma v. United States, 966 F.2d 583, 590 (10th Cir. 1992), cert. denied, 507

U.S. 1003 (1993). More recently, the Federal Circuit flatly rejected the Government’s

contention that a balancing of national interests excuses the Secretary’s flagrant

breach of fiduciary duties by suppressing and concealing an administrative appeal

decision to favor a mineral lessee to the detriment of the relevant tribe. See Navajo

Nation v. United States, 263 F.2d 1325, 1332 (Fed. Cir. 2001).

Given the documented failure of the United States to fulfill its duties regarding

management of tribal resources, any comprehensive settlement of the tribal trust

debacle must include the damages arising from that mismanagement. If a settlement is not forthcoming, tribes must be able to litigate those issues. In the meantime, tribes should not be forced to file suit simply because of concerns relating to

their resource claims and the statute of limitations.

The Need for Legislation

The Department of Justice is infamous in Indian country for raising every possible defense to Indian claims in litigation. Whether considered dishonorable attempts to avoid the United States’ fiduciary obligations or vigorous advocacy in defense of its client, those historical tactics lead to the very real concern that the Government’s lawyers will attempt to construe the Arthur Andersen reports as accountings that would trigger the statute of limitations. If tribes are to avoid the cost and

risk of litigating that issue, they must either file suit immediately or Congress must

act.3
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Because tribes should not be expected to shoulder the burden for the United

States’ failures and because a flood of litigation is in neither the tribes’ nor the

United States’ interests, ITMA urges Congress to Act. Since the Andersen reports

were issued, tribes (and Congress) have received a series of promises from the Department that the trust system would be reformed. Presumably, any reform would

also include efforts to rectify the effects of past mismanagement. But as tribes have

waited anxiously, each successive reform effort has stalled.

ITMA believes that a comprehensive settlement would be in the best interests of

tribes and the United States. But thus far, the Department has failed to show any

willingness to develop a process that could lead to such a settlement. Regardless,

it seems certain that no meaningful settlement could be reached in a matter of

months-the necessary analysis (probably including modeling) would require a significantly longer period. If tribes are to continue to wait for a tenable settlement

plan, they must be assured that they are not foregoing their rights in court in the

meantime.

Comments on S. 1857

ITMA is grateful for the support of the Vice Chairman, who introduced S. 1857

in the closing days of the last session in an attempt to resolve this problem; the

Chairman, who cosponsored that bill; and other members of both houses of Congress

who have already recognized the importance of the issue before the committee. It

is hoped that today’s hearing will lead to the passage of legislation that will resolve

the Hobbesian choice faced by tribes.

With the qualifications discussed below, ITMA supports S. 1857 as currently

drafted. It would provide tribes with some additional months in which to file suit

or to secure the passage of additional legislation further extending the statute of

limitations. If S. 1857 is to go forward in its current form, however, ITMA believes

that the legislation would be much more effective if section 1(a) were amended to

read:

(a) IN GENERAL.-Solely for purposes of providing an opportunity to explore the

settlement of tribal claims, during fiscal year 2002, the statute of limitations

shall be deemed not to have run for any claim concerning losses to or mismanagement of tribal trust funds and resources. Further, with regard to

the reconciliation reports distributed to tribes by Arthur Andersen and

the Department of the Interior in 1996:

(i) Those reports shall not be considered to have started the running of the statute of limitations for any claim against the United States by an Indian tribe

regarding the management of tribal trust funds and resources, regardless of

when such claim is filed; and (ii) Those reports shall not be considered for any

purpose to be an accounting sufficient to fulfill the United States’ duty to account as required by the American Indian Trust Fund Management Reform Act

of 1994, under other applicable law, or under general principles of trust law.

(iii) The United States is precluded from introducing those reports into evidence, from using them as rebuttal evidence, or otherwise relying on them in

any administrative or judicial proceeding to prove any purported conclusion or

fact contained in those reports.

With such an amendment, ITMA would enthusiastically support passage of S.

1857.

Since the pressures of the final days of a session are no longer present, ITMA respectfully suggests that the committee might also consider revisiting the basic goals

of the legislation. If the committee is willing to explore a more comprehensive solution to the current problem, ITMA would propose that an amended bill specifically

include the following in addition to the amendments discussed above:

Specific language stating that the statute of limitations defense shall be deemed

not to have run for any claim concerning losses to or mismanagement of tribal

trust funds and resources through the end of fiscal year 2007.

Comment: It would waste the resources of both Congress and the tribes to require

annual legislation regarding the statute of limitations issue. Five years is a reasonable period for the Department, if it proceeds in good faith, to develop a fair

settlement structure in conjunction with tribes. In the meantime, tribes should

not have to be concerned that they will surrender legal rights by pursuing a good

faith settlement. Note: tribal trust ‘‘resources’’ are included for the reasons stated

above.

Specific language mandating that the Department attempt in good faith to negotiate a full and fair settlement regarding losses resulting from mismanagement of tribal trust funds and resources by the end of fiscal year 2007.

Comment: Generally, see above. Tribes have seen no sincere attempt by the Department to develop a comprehensive settlement. Without a mandate from Con-
110

gress to do so, it is very likely that ITMA will be before this Committee again

in 5 years and that many tribes will be forced to file suit.

Specific language creating a right to reasonable attorneys’ fees and costs (including expert costs) for any successful tribal claim relating to mismanagement

of trust funds and resources:

(1) in which judgment is entered after the end of fiscal year 2003, if suit was

filed before the enactment of this legislation, or

(2) in all suits filed after the end of fiscal year 2007.

Comment: Such a provision would encourage timely resolution, hopefully

through settlement, of such suits that are currently pending. It would also provide a strong incentive for the Department to comply with the mandate that a

comprehensive settlement acceptable to tribes and to Congress be reached within

a 5-year period by imposing a penalty, tribes’ litigation costs, if tribes must ultimately litigate their claims. The two-tier structure is intended to discourage

tribes from filing suit after enactment of this legislation and before the settlement

period ends.

As laudable as S. 1857 is, now is the time for Congress to consider how the trust

fund debacle can be resolved fairly and finally within a reasonable period of time.

ITMA would welcome the opportunity to work with the Committee on an amendment, or separate legislation, incorporating these additional concepts.

Conclusion

The statute of limitations issue relating to the Andersen reports of vital importance to tribes, and ITMA is grateful for the opportunity to testify and to enter

these written comments in the record. Whether the Committee opts for an interim

measure or a bill intended to reach the broader issues of Indian trust reform and

past mismanagement, ITMA urges the Committee to move forward to ensure that

the dilemma faced by tribes does not force them into litigation unnecessarily.

PREPARED STATEMENT OF MCCOY WILLIAMS, ACTING DIRECTOR, FINANCIAL

MANAGEMENT AND ASSURANCE, GAO

I am pleased to be here today to summarize observations from our past work regarding Indian tribal trust fund accounts.

In a June 1993 letter to this committee, we noted that the appropriations acts

for the Department of the Interior had for many years contained a provision that

tolled the statute of limitations on claims for losses to, or mismanagement of, tribal

trust funds until the tribe had been furnished with an accounting of its funds from

which the tribe could determine whether there had been a loss. We also noted that

the parties envisioned that such an accounting would result from Interior’s then-ongoing reconciliation and audit of the tribal trust fund accounts, which the Congress

had mandated.

At that time, we expressed our view that until there was a mutually acceptable

basis for determining account balances and any associated losses, it would be premature to allow the statute of limitations to run. We observed that tolling the statute of limitations until reconciliation and audit of an account was completed, or

until some mutually acceptable agreement was reached as to the account balance,

had two overall purposes. First, it provided all interested parties, including

accountholders, Interior, and the Congress, an opportunity to examine and evaluate

all pertinent account information. Second, it permitted interested parties to attempt

to resolve all claims arising from Interior’s management of the accounts rather than

addressing specific claims in a piecemeal fashion.

The Congress first established an Indian trust fund account reconciliation requirement in the Supplemental Appropriations Act of 1987. The requirement was in response to tribes’ concerns that Interior had not consistently provided them with

statements on their account balances, their trust fund accounts had never been reconciled, and Interior planned to contract with a third party for management of trust

fund accounts.

The original provision required that the accounts be audited and reconciled before

the Bureau of Indian Affairs [BIA] transferred funds to one-third party. A provision

in Interior’s fiscal year 1990 appropriations act added a requirement that the accounts be reconciled to the earliest possible date and that Interior obtain an independent certification of the reconciliation work. In 1994, the Congress, through the

American Indian Trust Fund Management Reform Act of 1994 (Pub. L. 103–412,

108 Stat. 4239; Oct. 25, 1994), required the Secretary of the Interior to provide

tribes with reconciled account statements as of September 30, 1995.

To fulfill these requirements, Interior contracted with two major independent public accounting firms, one to reconcile the trust accounts and the other to do an inde-
111

1 U.S. General Accounting Office, Financial Management: BIA’s Tribal Trust Fund Account

Reconciliation Results. GAO/AIMD–96–63. Washington, DC: May 3, 1996. 2 U.S. General Accounting Office, Indian Trust Funds: Tribal Account Holders’ Responses to

Reconciliation Results. GAO/AIMD–97–102R. Washington, DC: May 23, 1997.

pendent certification to indicate that the reconciliation resulted in the most complete reconciliation possible. Following a preliminary assessment in March 1992 by

Interior’s reconciliation contractor, Interior decided to have the contractor reconcile

the tribal accounts for fiscal years 1973 through 1992. Subsequent to this decision,

Interior had BIA reconcile the tribal accounts for fiscal years 1993 through 1995 to

comply with the 1994 act’s requirement that Interior provide tribes with reconciled

account statements as of September 30, 1995.

Interior’s Indian trust fund account reconciliation project was completed in Janu- ary 1996. During the reconciliation project, Interior spent about $21 million for contract costs over a 5-year period in a massive effort to locate supporting documentation and reconstruct historical trust transactions, as well as to perform other reconciliation procedures, in its attempt to validate tribal account balances. In January

1996, Interior began providing to each tribe a report package containing the tribe’s reconciliation results. Each package included unreconciled account statements with

schedules of proposed adjustments based on reconciliation project results for each

year covered by the reconciliation, and a transmittal letter that described the information provided.

During a February 1996 meeting at which Interior officials and the reconciliation

contractor summarized the reconciliation project results, tribes raised questions

about the adequacy and reliability of the reconciliations results. In May 1996, we

reported on shortcomings of Interior’s reconciliation project.1 The shortcomings consisted of procedures that were not completed due to missing records, systems limitations, or time and cost considerations. Attachment I to my statement describes the

major shortcomings presented in our 1996 report.

From 1992 through 1997, we monitored and reported on various aspects of Interior’s planning, execution, and reporting of results for the reconciliation project. In

May 1997, we reported2 to this committee that as of May 6, 1997, Interior had provided reconciliation reports to 310 tribes, 51 of those tribes had disputed the reconciliation results, and 41 had accepted the results. Of the remaining 218 tribes,

47 had requested more time to consider the results, and 171 had not responded to

the reconciliation results. Attachment II is a list of GAO products issued between

1992 and 1997 on various aspects of Interior’s Indian trust fund reconciliation

project.

In summary, although Interior made a massive attempt to reconcile tribal accounts during its reconciliation project, missing records and systems limitations

made a full reconciliation impossible.

I would be pleased to respond to any questions that you or other members of the

committee may have.

Attachment I

RECONCILIATION PROJECT SHORTCOMINGS

Basic (Noninvestment) Transaction Reconciliation Procedure: The basic

transaction reconciliation segment of the project included tracing 251,432 noninvestment transactions that had been recorded in the general ledger to source documents

such as deposit tickets and disbursement vouchers. The total value of these receipt

and disbursement transactions was $17.7 billion. Due to missing records, 32,901 of

the transactions, with a total value of $2.4 billion (14 percent of the total value of

the transactions), could not be reconciled. In addition to the limitation related to the

unreconciled transactions, this segment focused only on transactions that had already been recorded in the general ledger, and no reconciliation procedure was performed to address the completeness of the general ledger itself.

Investment Transaction Reconciliation Procedure: The reconciliation contractor also did individual testing of $21.3 billion, or 16 percent, of the recorded investment transactions. However, to achieve efficiencies, Interior and the contractor

substituted a review of tribal account investment yields for individual transaction

testing for the remaining investment transactions.

Fill the Gap (Leases) Procedure: Another segment of the project reconciled collections for certain tribes with a sample of lease documents and timber sales contracts. Initially, the contractor was to review all leases greater than $5,000 and a

test sample of 100 additional leases of less than $5,000 on a cross section of tribes.

The reconciliation contractor identified 6,446 surface leases with annual collections
112

of over $5,000. However, due to time constraints for completing the reconciliation,

only 692 leases—10.7 percent of the leases originally identified for testing—were tested. In addition, because of missing records, a number of leases, and sample test

months for timber contracts, were substituted for those in the original sample.

Systems Reconciliation Procedures: The systems reconciliation was to include

reconciling (1) information in the trust fund investment system to the General Ledger in the Finance System, (2) the tribal general ledger in the Finance System to

U.S. Treasury records, and (3) the Integrated Records Management System [IRMS]

subsidiary records to the Finance System general ledger. The latter two reconciliations could not be performed or completed due to time and funding limitations, according to Interior officials.

Tribal IIM and Special Deposit Accounts Reconciliation Procedure: Interior maintained some IIM accounts for tribes in the IRMS accounting system. It also

used Special Deposit accounts primarily as clearing accounts for funds received that

had not been distributed to account holders because the account owners had not

been identified. Due to missing records and the lack of an audit trail through IRMS,

tribal transactions could not be efficiently isolated from individual Indian transactions. Because of this, tribal IIM accounts maintained in IRMS were not reconciled to source documents, and Special Deposit accounts were not reconciled with

source documents that moved funds to tribes’ general ledger accounts, as had been

planned.

Fill the Gap (Minerals Management Service) Reconciliation Procedure:

Interior’s Minerals Management Service [MMS] collects and accounts for oil and gas

royalties on Indian leases. The reconciliation project was to include some procedures

to trace collections from the leases, through MMS, to the general ledger maintained

by BIA. However, because MMS retained records for only 6 years, records for most

of the 20-year reconciliation period were not available, and alternative procedures

at MMS were not performed due to time constraints.

Certification Procedure: Interior’s fiscal year 1990 appropriations act required

a separate, independent certification that the accounts had been reconciled and audited to the earliest possible date and that the results were the most complete reconciliation possible. However, BIA’s certification contract required that the certification contractor ensure only that the reconciliation effort was performed in accordance with the reconciliation contract and no independent assessment of completeness was required. In addition, because of cost and time constraints, the certification

contract was terminated before the certification contractor completed its verification

that the procedures in the reconciliation contract were performed. The certification

contractor issued a status letter, which communicated preliminary results. However,

because the certification work was performed while the reconciliation was in process

and the certification procedures were not completed, the usefulness of the status letter is limited.

Individual Indian Accounts Reconciliation Procedures: Accounts for individual Indians were excluded from the reconciliation project due to the potential

lack of supporting documents and the cost and level of effort that would be needed

to include them in the project.

Attachment II

RELATED GAO PRODUCTS

Indian Trust Funds: Tribal Account Holders’ Responses to Reconciliation Results.

GAO/AIMD–97–102R. Washington, DC: May 23, 1997.

Responses to Questions from June 11, 1996, Hearing. GAO/AIMD–96–125R. Washington, DC: June 24, 1996.

Financial Management: Interior’s Management of the Indian Trust Funds. GAO/

T-AIMD–96–111. Washington, DC: June 18, 1996.

Financial Management: Interior’s Efforts to Reconcile Indian Trust Fund Accounts

and Implement Management Improvements. GAO/T–AIMD–96–104. Washington,

DC: June 11, 1996.

Financial Management: BIA’s Tribal Trust Fund Account Reconciliation Results.

GAO/AIMD–96–63. Washington, DC: May 3, 1996.

Financial Management: Indian Trust Fund Accounts Cannot Be Fully Reconciled.

GAO/T–AIMD–95–94. Washington, DC: March 8, 1995.

Responses to Questions from September 26, 1994, Hearing. GAO/AIMD–95–33R.

Washington, DC: December 2, 1994.

Financial Management: Focused Leadership and Comprehensive Planning Can

Improve Interior’s Management of Indian Trust Funds. GAO/T–AIMD–94–195.

Washington, DC: September 26, 1994.
113

Financial Management: Focused Leadership and Comprehensive Planning Can

Improve Interior’s Management of Indian Trust Funds. GAO/AIMD–94–185. Washington, DC: September 22, 1994.

Response to Questions on Two Recommendations in April 12, 1994, Testimony.

GAO/AIMD–94–138R. Washington, DC: June 10, 1994.

Letter on BIA Trust Fund Reconciliations. GAO/AIMD–94–110R. Washington, DC:

April 25, 1994.

Financial Management: Status of BIA’s Efforts to Reconcile Indian Trust Fund Accounts and Implement Management Improvements. GAO/T–AIMD–94–99. Washington, DC: April 12, 1994.

Financial Management: BIA’s Management of the Indian Trust Funds. GAO/T–

AIMD–93–4. Washington, DC: September 27, 1993.

Response to Request for Views on Freeze of the Statute of Limitations on Claims

against the United States Arising from BIA Management of Tribal and Individual

Trust Funds. GAO/AFMD–93–84R. Washington, DC: June 4, 1993.

Financial Management: BIA Has Made Limited Progress in Reconciling Trust Accounts and Developing a Strategic Plan. GAO/AFMD–92–38. Washington, DC: June

18, 1992.

PREPARED STATEMENT OF PHILLIP HOGEN, ASSOCIATE SOLICITOR, DIVISION OF

INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR

Good morning, Mr. Chairman and members of the committee. My name is Phil

Hogen. I am the associate solicitor for Indian affairs at the Department of the Interior. Thank you for the opportunity to present the Department of the Interior’s

views on S. 1857, an act ‘‘To Encourage the Settlement of Tribal Claims.’’

The Department supports the intent of S. 1857, although we suggest clarifying

changes in order to make the language of the bill consistent with the intent. S. 1857

attempts to establish a date certain on which the statute of limitations would commence to run on claims concerning alleged losses to or mismanagement of tribal

trust funds. The bill seeks to provide the tribes and the Government with additional

time to address and determine a process to encourage and facilitate the resolution

of tribal trust fund mismanagement claims based on the results of the Arthur Andersen reconciliation reports that were provided to the tribes in 1996. The proposed

legislation would also provide tribes that have already filed litigation with a sufficient basis to obtain a stay of their pending claims, until the tribes and the Department have had further opportunity to engage in attempts to resolve those claims,

before resorting to what will almost certainly be expensive and burdensome litigation for both sides. We support this approach, but recommended the following

changes:

With respect to subsection (a), we recommend that the language be amended to

state as follows:

(a) IN GENERAL—Solely for purposes of providing an opportunity to explore the

settlement of tribal claims, the statute of limitations shall be tolled through September 30, 2003, for any claim not already time-barred concerning losses to or mismanagement of tribal trust funds.

This recommended change would obviate the need for the language currently

found in subsection (b) of the bill. As such, we recommend that subsection (b) be

deleted.

Once again, I would like to thank you the opportunity to testify on this legislation.

I would be pleased to answer any questions you may have.

Æ