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[Senate Hearing 107-278]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 107-278

LEGISLATIVE PROPOSALS RELATING TO THE STATUTE OF LIMITATIONS ON CLAIMS 
 AGAINST THE UNITED STATES RELATED TO THE MANAGEMENT OF INDIAN TRIBAL 
                          TRUST FUND ACCOUNTS

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   ON

                                S. 1857

        TO ENCOURAGE THE NEGOTIATED SETTLEMENT OF TRIBAL CLAIMS

                               __________

                            FEBRUARY 7, 2002
                             WASHINGTON, DC

                                _______

                  U.S. GOVERNMENT PRINTING OFFICE
77-685                     WASHINGTON : 2002

____________________________________________________________________________
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                      COMMITTEE ON INDIAN AFFAIRS

                   DANIEL K. INOUYE, Hawaii, Chairman

            BEN NIGHTHORSE CAMPBELL, Colorado, Vice Chairman

FRANK MURKOWSKI, Alaska              KENT CONRAD, North Dakota
JOHN McCAIN, Arizona,                HARRY REID, Nevada
PETE V. DOMENICI, New Mexico         DANIEL K. AKAKA, Hawaii
CRAIG THOMAS, Wyoming                PAUL WELLSTONE, Minnesota
ORRIN G. HATCH, Utah                 BYRON L. DORGAN, North Dakota
JAMES M. INHOFE, Oklahoma            TIM JOHNSON, South Dakota
                                     MARIA CANTWELL, Washington

        Patricia M. Zell, Majority Staff Director/Chief Counsel

         Paul Moorehead, Minority Staff Director/Chief Counsel

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page
S. 1857, text of.................................................     4
Statements:
    Armstrong, Tom, Office of the General Counsel................    14
    Hogen, Phillip, associate solicitor for Indian affairs, 
      Department of the Interior.................................    21
    Inouye, Hon. Daniel K., U.S. Senator from Hawaii, chairman, 
      Committee on Indian Affairs................................     1
    Khoury, Mike, assistant director, Trust Department, 
      Department of the Interior.................................    14
    Murkowski, Hon. Frank H., U.S. Senator from Alaska...........     6
    Taradash, Alan, consultant, Intertribal Monitoring 
      Association................................................     7
    Tillman, Charles, chief, Osage Nation and chairman, 
      Intertribal Monitoring Association.........................     7
    Williams, McCoy, acting director, Financial Management and 
      Assurance, GAO.............................................    14

                                Appendix

Prepared statements:
    Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, 
      vice chairman, Committee on Indian Affairs (with 
      attachments)...............................................    25
    Cantwell, Hon. Maria, U.S. Senator from Washington...........   104
    Hogen, Phillip...............................................   113
    Johnson, Hon. Tim, U.S. Senator from South Dakota............   104
    Thomas, Hon. Craig, U.S. Senator from Wyoming................   105
    Tillman, Charles.............................................   105
    Williams, McCoy..............................................   110

 
LEGISLATIVE PROPOSALS RELATING TO THE STATUTE OF LIMITATIONS ON CLAIMS 
 AGAINST THE UNITED STATES RELATED TO THE MANAGEMENT OF INDIAN TRIBAL 
                          TRUST FUND ACCOUNTS

                              ----------                              

                       THURSDAY, FEBRUARY 7, 2002

                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m. in room 
485, Russell Senate Office Building, Hon. Daniel K. Inouye 
(chairman of the committee) presiding.
    Present: Senators Inouye, Campbell, Murkowski, Johnson, and 
Thomas.

 STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM HAWAII, 
             CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    The Chairman. The committee meets this morning to receive 
testimony on proposals addressing the statute of limitation on 
claims of tribal governments against the United States related 
to the management of Indian tribal trust funds.
    Over the course of the last year the committee has received 
various proposals from representatives of tribal governments 
that are concerned with the very real possibility that the 
United States might assert that reports submitted to the tribes 
whose trust funds are held by the Federal Government 
constituted notice sufficient to commence the running of the 
statute of limitation against tribal claims.
    One such proposal was introduced in the Senate in the 
closing days of the first session of the 107th Congress by the 
vice chairman of this committee, Senator Campbell. I was 
pleased to serve as a cosponsor of that measure.
    For those who may not be familiar with the background of 
such claims, I will take 1 moment here to review some of the 
more recent history. As a function of treaties and the course 
of dealings between the United States and Indian tribes, the 
United States holds legal title to lands held in trust for 
individual Indians as well as for Indian tribal governments.
    The revenues derived from trust lands are also held in 
trust by the United States for the benefit of individual 
Indians and tribal governments. Currently, the Department of 
the Interior maintains approximately 1,400 accounts of 315 
Indian tribes with assets in excess of $2.6 billion and over 
260,000 individual Indian money trust fund accounts with a 
balance of $400 million as of September 30, 2000.
    Receipts are deposited to these accounts primarily from 
land use agreements, royalties from natural resource depletion, 
enterprises related to trust resources, judgment awards, the 
settlement of Indian claims, and investment income.
    However, an independent audit of the trust funds for fiscal 
year 2000 noted that reliance cannot be placed on the balances 
reflected in the trust fund accounts until tribal accounts are 
reconciled and/or resolved through negotiation and settlement 
or until a now pending class action lawsuit that has been 
brought on behalf of the individual Indian money account 
holders is resolved.
    The Congress first established an Indian trust fund account 
reconciliation requirement in the Supplemental Appropriation 
Act of 1987 in response to tribal concerns that the Interior 
Department had not consistently provided them with statements 
of their account balances; that their trust fund accounts had 
never been reconciled and that the department planned to 
contract with a third party for the management of trust fund 
accounts.
    The original provision required that the accounts be 
audited and reconciled before the department transferred the 
responsibility for managing the trust funds to a third party. 
From 1990-95 provisions in the Appropriations Acts for the 
Department of the Interior added a requirement that the 
accounts be reconciled to the earliest possible date and that 
the department obtain an independent certification of the 
reconciliation work.
    In 1994, the Congress required the Interior Secretary to 
provide tribes with a reconciled account statement as of 
September 30, 1995 in the American Indian Trust Fund Management 
Reform Act.
    From fiscal year 1992-2001, the Appropriations Acts for the 
Department have included an additional provision which requires 
that tribal and individual Indian money accounts holders be 
furnished with an accounting from which the beneficiary can 
determine whether there has been a loss.
    Recognizing that it would be unfair to allow the statute of 
limitations to run on claims until each account holder was 
provided with an accounting, since fiscal year 1991, the 
Congress has included in the Interior Appropriation Acts a 
provision that tolls the statute of limitations on tribal and 
individual Indian claims against the United States arising out 
of the department's management of tribal and individual Indian 
trust funds.
    A similar provision is contained in the President's budget 
request for fiscal year 2003. Beginning in 1992, the Interior 
Department did undertake work to provide for the reconciliation 
of tribal trust fund accounts and, at least initially to 
examine whether individual Indian money trust accounts could 
also be reconciled.
    This work was accomplished through contractors, primarily 
the Arthur Andersen firm, and the Congress appropriated over 
$20 million so that this important work of reconciling trust 
fund accounts could proceed. The Congress also called upon the 
General Accounting Office [GAO] to oversee the reconciliation 
process.
    Following the reconciliation work performed by the 
contractors and supplemented by additional work on part of the 
Interior Department, reports were issued to each tribal 
government for whom the United States holds funds in trust.
    It is these reports that are at issue, because it's alleged 
that the reports constitute notice sufficient to commence the 
statute of limitations running on any claims that tribal 
governments may have against the United States relating to the 
Government's management of trust funds.
    In May 1996, GAO issued a report on the reconciliation 
process concluding that, and I quote:

    Interior's reporting of the reconciliation project results 
was not as complete as it could have been. Interior did not 
disclose in the report packages to tribes the procedures 
specified in the reconciliation contract that were not 
performed or those could not be completed and the reasons.
    For the procedures that were performed, Interior did not 
fully disclose scope limitations or changes in methodologies 
such as accounts and time periods that were not covered and 
alternative source documents used.

    Thus, as we will hear this morning, the reconciliation 
process did not accomplish the primary objective it sought to 
achieve, namely to assure the affected tribal governments that 
the balances in the trust fund accounts were balances upon 
which they could rely.
    It has now been 6 years since many of the tribal 
governments received the results of the reconciliation process. 
Faced with an assertion that the receipt of these reports 
commenced the running of the statute of limitations, most 
prudent tribal governments would take action to preserve their 
claims against the United States by filing legal claims before 
the running of the statute. These actions, if filed, and across 
Indian country many have been filed, hold the potential for a 
multitude of adjudications by different courts with varying and 
likely inconsistent results as well as exposing the United 
States to unlimited liability.
    So, we are here this morning to explore whether there is a 
will and a way for well-intentioned people to come together and 
agree on a legislative proposal that will address the statute 
of limitations on tribal claims and thereby enable the parties 
to pursue some other path for the resolution of these claims.
    [Text of S. 1857 follows:]

    The Chairman. I call upon the gentleman from Alaska.

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

    Senator Murkowski. Good morning. Chairman Inouye, I am 
pleased to be here. I do support the legislation that has been 
proposed by both you and Senator Campbell to extend the statute 
of limitations. But I think that the issue goes far deeper than 
this.
    We have had the past two Secretaries of the Interior noted 
for contempt of court. That's certainly a bipartisan selection 
by the court. So, this is not partisan. It's a reality. The 
reality, in my opinion, and I have been on this committee for, 
well, 21 years or thereabouts. I can't remember the exact 
dates. In any event, this is something that we have been faced 
with.
    In my opinion, the BIA is inadequate to manage these trust 
accounts. I don't know how long or how many decades it's going 
to take for the Indian tribes to recognize this. This is not a 
lessening of the BIA's power. This is a function that 
ordinarily is done by competent trust departments that put 
their credibility behind their ability to manage trusts and do 
accounting work and keep track of records.
    I recall, Chairman Inouye, being at previous hearings where 
we had pictures of how this stuff has been stored and there's 
just absolutely no excuse for it to go on.
    So I am here to simply, I guess, express my frustration. 
Whether it be Secretary Norton or previous Secretary Babbitt, 
this process has been going on so long, you can't fix the blame 
anywhere. You can't fix it on an administration. The 
accountability obviously belongs with the BIA, but the BIA is 
faceless in the sense that, you know, who caused it? Well, we 
don't know. It's BIA, but it's the responsibility of the 
Secretary. Until a Secretary comes along and says:

    I am going to make an administrative decision to change it 
and we are going to do it and get it done right, this committee 
is going to be faced with extensions and situations like we 
have today.

    I would encourage the members of the committee, the 
professional staff and the tribes and the BIA to recognize that 
in my opinion we are not trying to diminish their authority. We 
are trying to functionally meet the responsibility associated 
with managing the individual trusts for the tribes so they can 
be properly administered.
    The BIA is incapable of that. It is not a criticism of the 
BIA, they are just not set up to do it. So, let us get them out 
of the business before we have to go through this any more. So, 
thank you for the opportunity to be with you again. I wish you 
well in your deliberations. I do support the legislation. Thank 
you.
    The Chairman. As always, you are right on target.
    Senator Johnson, do you have any statement you would like 
to make?
    Senator Johnson. I will submit a statement for the record.
    The Chairman. Without objection the statement will be made 
part of the record.
    [Prepared statement of Senator Johnson appears in 
appendix.]
    The Chairman. Now, it is my pleasure to call upon the chief 
of the Osage Nation and chairman of the Intertribal Monitoring 
Association, Charles Tillman.
    Chief Tillman will be accompanied by Mr. Alan Taradash, 
consultant to the association.

STATEMENT OF CHARLES TILLMAN, CHIEF, OSAGE NATION AND CHAIRMAN, 
    INTERTRIBAL MONITORING ASSOCIATION, ACCOMPANIED BY ALAN 
  TARADASH, ESQUIRE, CONSULTANT TO THE INTERTRIBAL MONITORING 
                          ASSOCIATION

    Mr. Tillman. Thank you, Chairman Inouye. It's a privilege 
to be here before the community once again and also to 
represent the Intertribal Monitoring Association before this 
distinguished group.
    Mr. Chairman, I am too frustrated with our trustee. We, the 
500 and some tribes, the beneficiary of the natural resources 
that go across this country, we, too, believe that the BIA is 
not capable of handling that trust. When we talk about trust, 
Dr. Charles Wilkerson of the University of Colorado was the 
speaker the other day at Shepherdstown, WV where a task force 
was gathered up of tribes. He said some very important things 
about trust. The trust law appeared in 1831 under Chief Justice 
Marshall and the Cherokee Nation case.
    Marshall understood the treaty negotiations and knew what 
the tribes were asking for. That was: No. 1, disease protection 
against the white race protection against trespass of their 
land and protection for their land. This was 171 years ago.
    Here we are today asking for protection and living up to 
what Congress said 171 years ago. What Congress realized, the 
Tribal Trust Law is the most direct, most private and should be 
held at the highest standard of all trust law. It is not a 
common trust law. It should be held at its highest standard.
    The moral issue has been felt since the President Nixon 
administration and hopefully to every administration 
thereafter. We have not forgotten what Justice Marshall said, 
that Congress was the ultimate trust holder.
    I am here today to ask Congress to flex some of its 
authority and in this bill, on S. 1857, the Intertribal 
Monitoring Association which I represent consists of 53 tribes 
or large stakeholders. It is a sad day that we come before this 
committee and we also recommend, highly recommend, this bill. 
If it's a possibility of this bill, and I met with my board 
yesterday solely for the purpose of providing an opportunity to 
explore the settlement of tribal claims during the fiscal year 
of 2002, the statutes of limitation shall be deemed not to have 
run for any claim concerning losses or to mismanagement of 
tribal trust funds and resources.
    Further, with regard to the reconciliation report 
distributed to tribes by Arthur Andersen and the Department of 
the Interior in 1996, one, these reports shall not be 
considered to have started the running of the statutes of 
limitation for any claim against the United States or any 
Indian tribe regarding the management of tribal trust funds and 
resources, regardless of when such claim was filed.
    No. 2, these reports shall not consider for any purpose to 
be an accounting sufficient to fulfill the United States duty 
to account as required by the American Indian Trust Fund 
Management Reform Act of 1994 under other applicable law and 
under general principles of trust law.
    No. 3, the United States is precluded from introducing 
these reports into evaluated and using them as rebuttal 
evidence and otherwise relying on them in administrative or 
judicial proceedings to provide any reported conclusion of fact 
contained in these reports.
    Senator Inouye, we do support the bill and I am here to say 
that I have been here many times and I do believe in my heart 
this day that I am also a frustrated person that came 1,400 
miles to say that Congress needs to make sure that these trust 
functions are carried out by our trustee, the BIA, and Congress 
should have its own oversight committee for this purpose and I 
would like to recommend that.
    The Congress itself, the body itself, being the trustee 
should have that committee. Who else should serve as that 
committee is the Intertribal Monitoring Association because of 
its membership, because of its ownership and because of the 
purpose that it serves and that's to protect our asset.
    I agree with Senator Murkowski. I agree that the Bureau 
needs to be reformed. I do not think that we should do away 
with the agency because the Native Americans across this 
country, that's the only we have to rely upon in certain 
matters. But it's not equipped or it is not geared to handle 
the vast functions of its responsibility right now.
    Now, we can draw all the boxes and we can come up with all 
the management, but we have to have the M-O-N-E Y, money, to 
make those functions work. That has to be in place, Senator. If 
that money is not there, you may have the best widget in the 
world, but you will never produce another one without the 
money. That is what I am here to tell you.
    We do agree on the Senate Bill 1857 and what it says, but I 
also wanted to interject those things into this is hearing. I 
wish we had more time, I would tell you a lot more. But I want 
to pass it on to my colleague, Alan Taradash. I am sure he has 
a few comments he would like to make.
    [Prepared statement of Mr. Tillman appears in appendix.]
    The Chairman. May I ask a few questions now before we go to 
Mr. Taradash because there is a vote pending in the Senate?
    Mr. Tillman. Yes, sir.
    The Chairman. GAO has advised us that in 1996 over 300 
tribes were provided with these reconciliation reports. Those 
who wish to dispute the balances stated in those reports must 
file claims within 6 years. Otherwise they run the risk that 
the statute will be held to have been expired; 6 years have now 
passed
    Now, you are in charge of this association. Do you know how 
many tribes have filed an action against the United States?
    Mr. Tillman. I know that I can think of off the top of my 
head approximately maybe 12 tribes that I do know of. That 
includes the Osage. We were advised at that by the Assistant 
Secretary, Kevin Gover because he told me personally that this 
was going to drag on for years. He said, ``The only way to do 
that is to take it to court.''
    We filed not because of the statute of limitations, but 
because of to stop the bleeding for one and to get it into the 
proper area of law, which was claims court. But I also 
understand there are three tribes in the northwest, or maybe 
four, that are filing before the end of the month.
    So, you don't have many tribes that are filing, Senator. 
One reason is the lack of money. It is very expensive to get 
into court and some of our smaller tribes do not have the money 
to bring on a court action of this nature.
    So, we represent the 53 tribes and we are beginning to find 
that out, that our trustee, the United States or the BIA is 
doing what it's capable of doing and everyday is the 
accounting, the wrong accountability. There's no accountability 
whatsoever with the BIA.
    It goes on everyday and how do you stop that? Some of these 
tribes have no answer for that. Some of us tribes that do have 
the money have an answer to that. What I think is that when we, 
the Osage Tribe, a few years ago took an assessment of our 
agency in 1992 and 1996, that assessment was taken by Coopers 
Lybrand and that assessment told us that the BIA was operating 
back in the 1960's, the 1950's and 1960's.
    Here we are in 2002 and how do you bring that system up to 
standard? That's the question.
    The Chairman. I'll read from the President's budget request 
for fiscal year 2003. In that request there is the following 
language. I quote that:

    Notwithstanding any other provision of law, the statute of 
limitations shall not commence to run on any claim, including 
any claim in litigation pending on the date of enactment of 
this act concerning losses to or mismanagement of trust funds 
until the affected tribe or individual nation has been 
furnished with an accounting of such funds from which the 
beneficiary can determine whether there has been a loss.

    Mr. Taradash, you are the consultant and the expert here. 
In your view, what would constitute an accounting from which a 
beneficiary can determine whether there has been a loss?
    Mr. Taradash. That is a very important point, Senator. I 
also want to first express my gratitude to you and the members 
of the committee for allowing us to present these views here. 
Many years ago, approximately ten, along with the president and 
delegation from the tribal council, the Hickory Apache Tribe 
and its auditor, we met with you, Senator Inouye, and showed 
you at that time the deficiencies in just oil and gas 
accounting that resulted in huge losses in the collection of 
disposed of, non-renewable resources.
    I remember your reaction at the time. As you sat with this 
huge spreadsheet on your lap you said, ``This is theft.'' Those 
words stuck with me because of the obviousness with which you 
grasped the deficiencies.
    Now, there has been a great deal of focus on the so- called 
accounting. When one looks at what the Department of Justice 
produces in claims by tribes in the court of Federal claims as 
accounting reports, they do not give you the information you 
need to determine what happened to your assets, both cash and 
non-cash assets.
    The difference is this, Senator: If one gets a report that 
is filled with disclaimers, such as all of the reconciliation 
reports produced by Arthur Andersen, and the disclaimers, I 
might add, are by design so that Andersen cannot be sued by any 
tribe--this is what they sought to achieve--for detrimental 
reliance upon any of the numbers in that report, not the 
opening balance, not the additions or subtractions nor the 
closing balance.
    So, Andersen receives, by its disclaimer, insulation from 
accountability and we were told in meetings with the then 
Comptroller of the United States, Ed Mazor, in 1992 that what 
he wanted were numbers he could defend on the Hill in this 
exercise that Andersen then proceeded with. He did not want a 
complete and accurate accounting because we discussed with him 
the need to account for completely and accurately non-cash 
assets that become the trust corpus of funds.
    It's ludicrous for anyone to suggest that if one accounts 
for the cash that you happen to find in the bank, that that's 
an adequate accounting of one's assets.
    We even have horrible examples. There was a Kickapoo 
gentleman, for example, that died under a bridge a millionaire, 
not known to him because the Bureau had never told him that he 
had that money from valuable mineral resources. These 
accounting reports do not give one any information on the 
totality of one's assets and what happened to them. And we are 
expressly told that you can't rely upon them.
    If it is good enough for Arthur Andersen to stand behind as 
a shield against liability, then it ought to be good enough for 
the tribes to make the claim that they should not be bound in 
any way by those numbers, not even as notice of incompetence in 
the management of their money.
    There is a case about 10 years vintage in the Court of 
Federal Claims which precluded a tribe from getting an 
accounting and going after damages because the judge in that 
case, with no citation to authority held that the tribal 
council had been complaining to the Bureau of Indian Affairs 
for years about no financial reports.
    Because the tribe could not show that it was, and these are 
the judge's words, ``shockingly ignorant'' of their financial 
affairs, that they were going to be held to have been on notice 
from the time they started complaining.
    Now, no one else is provided with that sort of ludicrous 
standard. When the savings and loan problems came up, nobody 
held the savings and loan account holders to those kinds of 
stratagems by the Department of Justice and Interior. That 
should not be done to tribes.
    The Chairman. That was pretty clear. I will have to leave 
now to vote but Senator Campbell has already voted so he will 
continue the hearings.
    Senator Campbell [assuming Chair]. Thank you, Mr. Chairman. 
I apologize for being here a little bit late. It was my 
understanding that the hearing was going to start after the 
vote, so I went over and did my duty.
    It's nice to see you here, Chief Tillman, my old friend. 
Alan, welcome here, too. To the other witnesses who are here, I 
am sorry I didn't hear Senator Inouye's questions.
    I apologize for not being here in time to do an opening 
statement, but will submit that for the record. I know that 
most of the witnesses recognize that this hearing, even though 
there are many aspects of the trust fund debacle, this 
basically is not about the history of the trust fund's 
management or about the proposals to reform it and not about 
the Cobell litigation either. It's about avoiding litigation. 
That is what this bill is all about. So, I know we will try to 
keep directed to that.
    If you have already answered the questions I am going to 
ask you Alan, you might just tell me that so I don't encumber 
you again.
    First of all, when the tribal lawsuits were filed, have any 
of your clients filed in the belief that they must do so or 
lose their right to having them filed?
    Mr. Taradash. Yes, Senator Campbell; on January 8 I filed 
three cases in the Court of Federal Claims, one for the 
Delaware Tribe of Oklahoma in Bartlesville, OK which is where 
they are located; one for the Pueblo of Laguna in New Mexico 
and one for the Hickory Apache Tribe, also in New Mexico, 
claiming losses to and mismanagement of all of their trust 
assets, both cash and non-cash assets.
    We have had to make those claims precisely for the reasons 
that you alluded to.
    Senator Campbell. Do you anticipate others being filed, 
too, if we don't get an extension of the statute of 
limitations?
    Mr. Taradash. Absolutely. There's a decision in the 
Shoshone-Arapaho case of November 30 of last year in the Court 
of Federal Claims that expressly determined and interpreted the 
meaning of the tolling language that Congress has put into 
appropriations bills, that losses to is different from 
mismanagement of trust funds and thus in that case permitted 
those two tribes to go back to August 14, 1946 because they 
have never been provided an accounting of their trust funds 
which include upstream, so to speak, losses with respect to 
disposition or use of trust assets that should have gone into, 
resulting in cash that should have gone into the trust funds.
    Obviously, the Government may appeal that case at some 
point when it gets concluded, but under the umbrella of very, 
very good reasoning in that case, I filed those three cases on 
January 8.
    Senator Campbell. Those cases that you did file, did you 
have an opportunity to get some feedback on how those tribes 
would feel about extending the statute of limitations and 
therefore making the filings unnecessary?
    Mr. Taradash. Obviously, Senator, we would much prefer not 
to have to litigate. It is terribly expensive. I can't stress 
how expensive it's. It's absolutely unconscionable, and I think 
obscene, for the Department of the Interior and Justice, along 
with the then Comptroller of the United States, to have a 
calculated plan to require especially little tribes that don't 
have the resources to, if you don't like the number that 
Andersen is going to churn out, then you sue us. That's an 
indecent proposal and it's an indecent strategy, which has been 
implemented. There's a need to correct that.
    Senator Campbell. Thank you.
    Chief, did you have comments along that line?
    Mr. Tillman. Yes; the comment I have is the haves and the 
have-nots. That pretty well sums it up. The tribes that have 
the money, they can file. The have-nots, they are at the mercy 
of whatever.
    But the ITMA and its 53 membership and its website has made 
it known that what the Government claims, that the Arthur 
Andersen report, as long as it's running, when it runs out in 
the 6 years, wherever the statutes are, that you need to file 
something.
    So, our organization has put that information out, sir.
    Senator Campbell. Well then, let me ask you, will this 
bill, assuming you have had a chance to look at it, do you 
think that your clients would be inclined to negotiate with the 
Federal Government to settle other claims if we can't extend 
the statute of limitations?
    Mr. Tillman. The ITMA, in its board meeting as of 2 days 
ago, has sat down and looked at this bill and concurrently we 
support this bill wholeheartedly.
    Mr. Taradash. Senator Campbell, may I add one thing to 
that?
    Senator Campbell. Yes.
    Mr. Taradash. With respect to settlement, I would like to 
mention that it's terribly important to be mindful of the 
judicial closure and unintended results that occurred the last 
time Congress visited, in a sense, these kinds of issues when 
it passed the Indian Claims Commission Act in 1946.
    What Congress intended was that tribes be fully 
compensated, not only for things which smacked of wrongs and 
legal theories recognized that law, but it added a section 
that's very unique in the annals of legislation that deal with 
litigation. The fair and honorable dealings clause.
    Tribes were supposed to be able to come to court under the 
purview of that act and demonstrate that they had been dealt 
with dishonorably or even just unfairly and had resulted in 
losses and be compensated for it.
    However, when one looks at those cases tribes lost 
horribly, initially because they couldn't prove up the cases 
because they didn't have the money to hire the experts 
necessary to do the prove-ups. One of the things that Senator 
Inouye alluded to before you arrived, Senator Campbell, was 
what about the desirability of entering into some kind of 
negotiation process.
    I would like to bring to the committee's attention the 
structural problem that has a solution that if it were to be 
implemented I think it would make settlement discussions very, 
very fruitful and possible.
    The structural problem is this: By statute the Attorney 
General of the United States must defend the United States when 
sued. Defense of the United States with respect to all of the 
Department of Justice is the only thing that has to be 
vindicated upon lawsuit.
    There's no statute that says the functional equivalent of a 
private trustee's lawyer's duty and that's, if you find or are 
aware of losses to or mismanagement of the trust corpus that 
your client, the trustee, is responsible for, you as a lawyer 
have an obligation to tell the beneficiary, the failure of 
which in your performance subjects you to suit and liability 
for the failure to disclose. The trustee has a similar duty.
    Our trustee has no such duty. Our trustee's lawyers have no 
such duty. So, the duty that they have is to defeat those 
claims by any means necessary. And the problem, Senator, comes 
up not just in the Court of Claims, but in district courts 
throughout the country there are at least 15 cases. In the last 
15 years when lawyers in the Department of Justice have been 
sanctioned because of obstruction of justice and deceit of 
courts in Indian claims cases of other cases brought by Indian 
tribes or allottees.
    The reason is, they go to the extreme to defend because 
they have no legal duty to disclose. If Congress were to fix 
that and provide that same kind of vindication of honor and 
duty that a private trustee and a private trustee's lawyer has, 
then there would be remedies for the brief that are far more 
direct.
    More importantly, there are very, very good people at 
Justice and Interior that work very hard. They need to have the 
right incentive to do the job correctly. They don't have it 
because by statute they have a different mandate.
    Senator Campbell. Well, we have dealt with this trust fund 
problem for a number of years. I am not an attorney and I can 
tell you that the more we get into it, the more complicated it 
gets for me.
    I think most Americans, other than people who have a pretty 
strong background in the law, would be completely confused. 
Maybe we even confused it more in 1991 when we refined the 
definition of ``accounting'' and began using the phrase, ``An 
accounting of such funds from which the beneficiary can 
determine whether there has been a loss.''
    Did we make it worse?
    [Mr. Taradash nods his head in the affirmative].
    Senator Campbell. We did. That is the way we do it around 
here, unfortunately. A lot of times, in an effort to try to 
correct things we end up making things worse.
    Well, let me go on and ask Senator Thomas if he has any 
questions of you before we move on.
    Senator Thomas. Thank you, Senator. I share your 
frustration sometimes and I wanted to come primarily to listen 
to the witnesses because this is an issue that has hung on and 
it needs to be resolved and we need to find a way to come to 
that resolution.
    I have a short statement for the record.
    Senator Campbell. Okay. Without objection that will be 
included in the record.
    [Prepared statement of Senator Thomas appears in the 
appendix.]
    Senator Campbell. We have also, before we go on to the next 
panel, some comments here that I was asked to read in the 
record for the benefit of the General Accounting Office [GAO].
    We have called upon the GAO to appear before the committee 
today not in relation to the most recent work of the GAO which 
has related to the efforts of the previous administration to 
implement the TAAMs system, but because of the GAO's work in 
overseeing the department's efforts to reconciliation tribal 
trust fund accounts in the early 1990's.
    At that time the GAO followed the work of the two 
contractors hired by the Interior Department including the work 
conducted by Arthur Andersen. However, we should understand 
that the GAO did not evaluate each of the reports that were 
sent to the tribal governments for their sufficiency or 
content, nor have we asked the GAO to appear before the 
committee to comment on any of those legislative proposals.
    We do appreciate your being here. We will go on to the GAO 
witness, which is McCoy Williams.

    STATEMENT OF McCOY WILLIAMS, ACTING DIRECTOR, FINANCIAL 
  MANAGEMENT AND ASSURANCE, GAO, ACCOMPANIED BY MIKE KHOURY, 
    ASSISTANT DIRECTOR, TRUST DEPARTMENT, DEPARTMENT OF THE 
     INTERIOR AND TOM ARMSTRONG, OFFICE OF GENERAL COUNSEL

    Senator Campbell. Mr. Williams, welcome to the committee. 
You may proceed at your leisure.
    Mr. Williams. Mr. Chairman and members of the committee, 
thank you for the opportunity to be here today to summarize 
observations from our past work regarding Indian travel trust 
fund accounts.
    I am accompanied by Mike Khoury who is the assistant 
director responsible for our trust work at the Department of 
the Interior and Tom Armstrong who is from our Office of 
General Counsel.
    As has been stated in the opening remarks and in other 
comments this morning, in a June 1993 letter to this committee 
we noted that the Appropriations Act for the Department of the 
Interior had for many years contained a provision that told the 
statute of limitations on claims for losses to or mismanagement 
of tribal trust funds until the tribe had been furnished with 
an accounting of its funds from which to try to determine 
whether there had been a loss.
    We also noted that the parties envisioned that such an 
accounting would result from Interior' then ongoing 
reconciliation and audit of the tribe for trust fund accounts 
which the Congress had mandated.
    At that time we expressed our view that until there was a 
mutually acceptable basis for determining account balances and 
any associated losses, it would be premature to allow the 
statute of limitations to run. We observed that holding the 
statute of limitations until reconciliation and audit of an 
account with this completed or until some mutually acceptable 
agreement was reached as to the account balance had two overall 
purposes.
    First, it provided all interested parties, including 
account holders, Interior and the Congress, an opportunity to 
examine and evaluate all pertinent account information.
    Second, it permitted interested parties to resolve all 
claims arising from Interior's management of the accounts 
rather than address the specific claims in a piecemeal fashion. 
To fulfill reconciliation requirements established by the 
Congress first in the Supplemental Appropriations Act of 1987, 
Interior contracted with two major independent public 
accounting firms. One to reconcile the trust accounts and the 
other to do an independent certification to indicate that the 
reconciliation resulted in the most complete reconciliation 
possible.
    Interior's Indian trust fund account reconciliation project 
was completed in January 1996. During the reconciliation 
project, Interior spent about $21 million for contract costs 
over a 5-year period in a massive effort to locate supporting 
documentation and reconstruct historical trust transactions as 
well as to perform other reconciliation procedures in its 
attempt to validate tribal account balances.
    In January 1996, Interior began providing to each tribe a 
report package containing the tribe's reconciliation results. 
During a February 1996 meeting at which Interior officials and 
the reconciliation contractor summarized the reconciliation 
project results, tribes raised questions about the adequacy and 
reliability of the reconciliation results.
    In May 1996, we reported on shortcomings of Interior's 
reconciliation project, including procedures that were not 
completed due to missing records, systems limitations, time and 
cost constraints.
    In May 1997, we reported to this committee that as of May 
6, 1997, Interior had provided reconciliation reports to 310 
tribes; 51 of those tribes had disputed the reconciliation 
results and 41 had accepted the results. Of the remaining 218 
tribes, 47 had requested more time to consider the result and 
171 had not responded to the reconciliation results.
    In summary, although Interior made a massive attempt to 
reconcile tribal accounts during this reconciliation project, 
missing records and systems limitations made a full 
reconciliation impossible.
    Mr. Chairman, I would be glad to respond to any questions 
that you may have at this time.
    Senator Campbell. Did your colleagues have any comments? 
While Senator Inouye is getting reseated, let me ask you a 
couple of questions. On the certification of audits in 1990, 
Congress required an independent certification that the Arthur 
Andersen reconciliations were the most accurate possible. Did 
that certification occur?
    Mr. Williams. No.
    Senator Campbell. It did not?
    Mr. Williams. It did not occur.
    Senator Campbell. Why not?
    Mr. Williams. There were procedures that were not 
performed. There were steps that they were unable to perform. I 
guess the bottomline is just that all of the procedures that 
were needed to give a full account were not complete.
    Senator Campbell. They were not fulfilled. The GAO has 
concerns about the Department of the Interior's process, the 
reconciliation process. Did the BIA follow the GAO's 
recommendations for informing tribes about the limited scope of 
the reconciliation reports and the changes that GAO believed 
were necessary in the reconciliation process?
    Mr. Williams. We recommended that the tribes be provided 
full disclosure about the areas. A full disclosure of that 
information was not provided.
    Senator Campbell. And you have no way of knowing if those 
concerns were then passed on to the tribes?
    Mr. Williams. No.
    Senator Campbell. Senator Inouye, did you have questions? I 
will turn it back to you.
    The Chairman. [presiding] Needless to say, this is a very 
complicated matter. In my opening statement I quoted from the 
GAO. Do you believe that a tribe receiving a reconciliation 
report would be more likely to question its accuracy if each 
report had fully described the limitations I quoted in the 
GAO's, May 1996 report?
    Mr. Williams. If I had known of the limitations then I 
would have scrutinized the accuracy of the reports very 
carefully. Now, each tribe's interest may vary based on the 
circumstances. For example, some tribes may not have certain 
type of leases and shortcomings in that area may not be of a 
concern to me. But given the fact that there were limitations, 
I would have given it much scrutiny.
    The Chairman. In the May 1996 GAO report the following also 
is stated:

    GAO suggested that substantial changes in the scope of 
procedures as a result of contract modifications and issue 
papers be explained in the report package transmitted to 
tribes.
    BIA considered providing issue papers to tribes on compact 
discs, however, the reconciliation project manager told us that 
due to cost considerations BIA considered instead that these 
issue papers be made available to tribes at the OTFM in 
Albuquerque or that tribes could request copies of specific 
documents by mail.

    Would it be fair to say that the process ultimately 
followed by the BIA in making this information available was 
less certain to bring home to them an awareness of the 
deficiencies of the reports than were the alternatives GAO had 
proposed?
    Mr. Williams. We believed in 1996, as well as today that if 
the tribes had received full information about the process and 
the shortcomings in the reconciliation process, then they would 
have been in the best position possible to make an informed 
decision.
    The Chairman. In a June 1993 letter to this committee GAO 
sugested that tolling the statute until a reconciliation and 
audit of each account is completed or until some mutually 
acceptable agreement is reached as to the account balance 
serves two overall purposes. Can you describe those purposes?
    Mr. Williams. Yes; as I included in my statement, we 
basically stated that first it provides all interested parties, 
account holders, BIA and the Congress an opportunity to examine 
and evaluate all pertinent account information.
    Second, it permits parties to attempt to resolve all claims 
arising from BIA's management of the accounts, taking into 
consideration the practical limitations on the scope of the 
reconciliation such as the loss of critical records rather than 
addressing specific claims on a piecemeal fashion.
    The Chairman. Can you explain why GAO believed that until 
there was a mutually acceptable basis for determining account 
balances and associated losses it would be premature for 
Congress to delete the Interior Department Act language tolling 
the statute?
    Mr. Williams. In a 1993 letter GAO stated:

    The thrust of our position has been that the government, to 
fulfill its fiduciary responsibilities, must provide account 
holders a full accounting

    The Chairman. Would the GAO still recommend that Congress 
continue to toll the statute until the tribal accounts are 
reconciled and/or resolved through negotiation and settlement?
    Mr. Williams. I will let me Armstrong talk to that one, our 
attorney.
    Mr. Armstrong. Mr. Chairman, as you recognized in your 
opening statement, we have not done any work recently that 
would relate to that question. But I think we would suggest to 
the committee that if you feel that a tribe would be 
disadvantaged by an argument that a reconciliation report 
provided the tribe started the running of the statute of 
limitations and if you think that giving the parties more time 
to discuss this, to negotiate, possibly to come to settlement 
by giving them more time, you could avoid expensive litigation, 
I think we would suggest that you toll the running of the 
statute of limitations.
    The Chairman. From what you know of the situation as of 
this moment, would you recommend that?
    Mr. Armstrong. From what I heard this morning--
unfortunately, I have to apologize--I haven't been involved in 
this area for 4 or 5 years now. I was brought here because I 
was involved in the area back in the early 1990's when we were 
monitoring the reconciliation effort.
    But from what I heard here this morning, you have Chief 
Tillman advising you that there are a number of tribes who are 
concerned and Mr. Taradash also advising you that there are a 
number of tribes who are concerned that they need to go to 
court in order to preserve their right to file a claim against 
the United States.
    And you heard Mr. Taradash testify that that is a very 
expensive proposition.
    The Chairman. Thank you. The committee understands that GAO 
did not review the individual reconciliation report packages 
that Interior sent to the tribes but you did review the 
prototype report package.
    Based on this review, does GAO believe that the reports are 
accurate and reliable and do they provide tribal accountholders 
and tribal governments with a full accounting of their trust 
funds?
    Mr. Williams. GAO has found that a number of reconciliation 
procedures called for by the original contract between the 
Department of the Interior and the independent professional 
auditor were either not performed or not completed as 
originally envisioned which could affect the reliability of the 
account statements.
    In addition, the prototype report package did not explain 
to the Indian tribes the numerous changes in reconciliation 
scope and methodologies or extent to which reconciliation 
packages a fair and complete accounting.
    The Chairman. Finally, if I may ask, what are the most 
significant limitations and shortcomings in the scope of 
methodology of BIA's reconciliation report?
    Mr. Williams. A couple of the most important points are the 
ones that I pointed out earlier and that would be the missing 
documentation and the inability to reconcile the systems.
    The Chairman. In other words, am I correct to conclude from 
your responses that this committee should proceed with what we 
are trying to do?
    Mr. Williams. Yes.
    The Chairman. Thank you very much, Mr. Williams.
    Senator Thomas.
    Senator Thomas. Well, thank you, Mr. Chairman. I am clearly 
not as up on the details as you two gentlemen are. Let me just 
ask you some general questions. Is there in your opinion the 
possibility a satisfactory reconciliation through audits?
    Mr. Williams. Two thoughts here: The audit would be a 
separate component from a reconciliation. You could do an 
audit, but you would need the reconciliation if you wanted to 
get a full accounting. As long as you have missing 
documentation and you can't reconcile these various areas, then 
your audit is not going to give you what you are trying to 
achieve in the end result and that's to be able to determine 
what those exact balances should be for those accounts.
    Senator Thomas. What do you have to do to accomplish that?
    Mr. Williams. As long as you have those missing documents, 
that will be difficult. We have recommended in the past that 
the Congress should consider some type of negotiated 
settlement. So, you would have to look at some of the other 
options in our previous testimonies and statements. We have 
made some of those and I think we would still be making those 
same ones today.
    Senator Thomas. So, getting together the information you 
think is available will only get you part of the way and then 
you have to negotiate?
    Mr. Williams. You have to negotiate the rest of the way, 
that's exactly right, because if you have missing documentation 
and there's no way that you are going to find that 
documentation, then it's going to be nearly impossible to do a 
complete reconciliation.
    Senator Thomas. If you have 1 year extension, what are you 
going to do in that year? What are you going to do differently? 
This has been going on for a very long time. What is the 
solution? What is the remedy?
    Mr. Williams. Yes; I must admit, I have testified and 
reported on various agencies that have had long-standing 
accounting problems, but I think this one kind of sets the 
record for its long standing is concerned.
    You have to work in a diligent manner to see how many of 
the records can you actually locate and based on that, then you 
had to begin from that point in trying to come up with some 
solution. That is the only way that you can do this. You make 
every effort possible to find all of the records that you 
possibly can and you do as good of a reconciliation as you 
possibly can. It's at that point in time when you make the call 
that:

    This is all we can find. We have done everything that we 
possibly can and we have to come up with some solution to this 
problem through some negotiate.

    Senator Thomas. The accumulation of all the possible 
records has not been accomplished. Is that what you are saying?
    Mr. Williams. If there was some missing documentation you 
would never be able to do a complete reconciliation of all of 
the transactions.
    Senator Thomas. You are saying you can't do it all, but you 
can get together what is available. Has that been done?
    Mr. Williams. Yes; based on what we saw in 1996, we thought 
they couldn't go any further.
    Senator Thomas. So the accounting part is completed?
    Mr. Williams. Well, that's basically why that particular 
point in time we stated that there should be some negotiation 
to try to come to some settlement. Yes, I think as far as 
looking for the records, the accounting part, I guess you could 
say would be complete.
    Senator Thomas. Thank you.
    Mr. Williams. But it wasn't a complete accounting of the--
--
    Senator Thomas. Well, now that was my question. Has the 
accounting part, the reconciliation or the accounting for the 
records available, has that been completed?
    Mr. Williams. They have done as much as they can with the 
documents, but an accounting has not been completed of the 
activities.
    Senator Thomas. In 5 years you have not been able to do the 
accounting on the documents that are there?
    Mr. Williams. Yes; of the documents that are there that 
they have looked at, they have done an accounting for those.
    Senator Thomas. It is very confusing. You are talking about 
what you can get and what you can't get. Of what you can get, 
has that been accounted? Has that been added up? Is that there?
    Mr. Williams. Yes.
    Mr. Armstrong. Being involved in GAO's work back in the 
early 1990's, I think where we were in 1996 when we reported to 
this committee was that the work that the Interior Department 
and their contractors had done to that date was deficient 
because they were missing documents.
    We felt the Government was spending good money but not 
getting much bang for the buck, that it would be impossible, 
given the missing records, to prepare a complete accounting. 
So, we recommended to this committee a settlement proposal, 
legislation----
    Senator Thomas. So the documents are there, all the 
documents you think that are ever going to be there are there? 
Now you are dealing with an abstract.
    Mr. Armstrong. I am not sure that all the documents are 
there.
    Senator Thomas. Well, that's what you said.
    Mr. Armstrong. I'm sorry?
    Senator Thomas. You just got through saying that the 
accounting of the documents that were available was completed.
    Mr. Armstrong. But remember, too, that we were concerned 
with the limitations that the Interior Department had imposed 
on its contractor and looking for documents and in looking at 
documents.
    Senator Thomas. Then the answer is perhaps there are more 
documents that have not been looked at.
    Mr. Armstrong. Perhaps there are, yeah.
    Senator Thomas. That is what I am trying to find out.
    Mr. Armstrong. We were not in a position. We weren't in a 
position. We didn't go looking for documents. We were just 
monitoring the process. So, we are not in a position to say 
that there are in fact more documents there. But what we were 
saying was that there were other steps that could be taken to 
see if there were more documents there.
    Senator Campbell. One last question: Since the missing 
documents have created such a problem with getting a clearer 
account, this bill as you probably know, extends the statute of 
limitations for one year. But considering how complicated it 
has been, would you recommend that it be 2 years or 5 years or 
some other timeframe?
    Mr. Armstrong. You know, back in 1993 when we did recommend 
a tolling of the statute of limitations, our point was let's 
maintain the status quo to give the parties time to work this 
out. Mr. Thomas' point is well taken, I think, and your point, 
Mr. Campbell, is well taken, how much are we going to be able 
to accomplish in 1 year?
    I think the committee needs to look at that very closely 
because you may find yourselves back here in another year 
considering legislation to toll the running of the statute of 
limitations another year or another two years.
    Our point, our advice to you is that based on the work we 
did back in the early 1990's, the early to mid 1990's, was that 
if you think that a tribe is disadvantaged by an argument and 
having to deal with an argument that a reconciliation report 
that the tribe received would start the running of the statute 
of limitations and if you think that giving the parties more 
time even by simply tolling the running of the statute of 
limitations, if you think by giving the parties more time you 
could avoid expensive litigation, Mr. Taradash just testified 
as to the expense of litigation. Then we would encourage you to 
consider very seriously tolling the running of the statute of 
limitations.
    Senator Campbell. Well, my concern, of course, is if tribes 
feel in the next 8 or 9 months as we get close to that year 
end, if this passes, which I assume it will, that they will 
still feel they will have to have a rush to judgment. I don't 
know but there still seem to be documents out there that many 
people believe are going to surface that have not yet. So, it 
might be wise to extend this timeframe.
    Mr. Armstrong. Mr. Campbell, I think that's a fair 
observation. I mean, part of the reasoning behind the 
settlement proposal, the legislation that we proposed back in 
1995 or 1996 to this committee was as we had crafted that 
proposal it would give all of the parties a better opportunity 
to come up with and to present to the mediators and arbitrators 
any evidence, any documentation that they might have that would 
be useful to the settlement of their claims.
    I think that your point is well taken that you could find 
yourselves back here in another 8 or 9 months dealing with 
legislation to extend the statute of limitations another year 
or for another period of time.
    Senator Campbell. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you very much. Just for clarification, 
because we are speaking of documents that are not available, 
lost or destroyed, et cetera, are we speaking of records that 
were held by the BIA in the 12 regions and since they were 
handled manually, were there some that were misplaced or lost?
    Second, there was an incidence where records were 
contaminated by deer mice droppings causing Hantavirus and 
therefore these records were not made available.
    Third, a mysterious fire in the archives in Suitland, MD, 
destroyed some of the documents.
    Fourth, some of the records were destroyed at the 
instruction of the Treasury and Justice Departments. Finally, 
some of the records were not located because the Arthur 
Andersen firm applied a model which excluded certain documents 
from review.
    Is that what we are talking about?
    Mr. Williams. Yes; that is correct.
    The Chairman. So, you cannot fault Indian governments for 
the loss?
    Mr. Williams. No; we did not.
    The Chairman. I thank you very much, sir.
    Mr. Williams. Thank you.
    The Chairman. I appreciate your testimony. You have been 
very helpful.
    Mr. Williams. Thank you.
    The Chairman. Now, our final witness, the associate 
solicitor for Indian Affairs, Department of the Interior, 
Philip Hogen.

   STATEMENT OF PHILIP HOGEN, ASSOCIATE SOLICITOR FOR INDIAN 
      AFFAIRS, DEPARTMENT OF THE INTERIOR, WASHINGTON, DC

    The Chairman. Welcome, sir.
    Mr. Hogen. Good morning, Mr. Chairman, Senator Campbell, 
Senator Thomas. I am Philip Hogen, the associate solicitor for 
Indian affairs with the Department of the Interior.
    I am an Oglala Sioux from South Dakota and I have been on 
the job since late October so I have some catching up to do.
    The Department of the Interior is on board with what the 
proposed legislation intends to do: Extend the statute of 
limitations as has been discussed here.
    It is a very complicated, frustrating issue with which we 
are faced. It is very expensive to litigate these cases. All 
would be better served if we might settle them and resolve 
them. I think it's obvious from what has just been said we are 
never going to find every last piece of paper to answer 
everyone's questions and consequently settlement would better 
address that situation than trying to sort it out in the 
courts.
    With respect to what the committee intends to do, we have 
suggested some language that we think might better capture what 
the committee intends to do. That is, just extend the statute 
of limitations rather than get into these issues such as, what 
is the significance of these reconciliations which we have been 
discussing and the accountings and so forth.
    We think that those issues are better handled in these 
negotiations that would occur during the period of time during 
which this statute might be extended.
    The Department of the Interior today has devoted more time 
and attention and energy and focus to the issue of trust reform 
and trust accounts than I think ever before in its history. 
Yesterday over on the House side Secretary Norton testified 
with respect to trust reform. She told the committee that she 
has been devoting approximately 60 percent of her time to these 
trust reform issues; that trust reform is receiving not only 
more attention from her and from the department's leadership 
than any other issue in the department, but also more than all 
of the other issues in the department.
    That is unfortunate with respect to those other issues, but 
nevertheless, it is because of the significance of this issue, 
because we have been at it so frustratingly long with so little 
success and frankly because the Cobell litigation has captured 
necessarily the attention of the department in this regard.
    We are focused on it over there. We are doing historical 
accounting. We are proposing some reorganizational changes; we 
are consulting with tribal leadership. Last weekend the 
Secretary spent all weekend with a tribal task force discussing 
this very issue.
    So far nothing is carved in stone. Nothing is cast in 
concrete. We want to set up a mechanism that will solve the 
problems of the past and make it work in the future.
    We will be better equipped as we move down this road to 
sort these things and address these issues with these new 
mechanisms, with these new systems. We have learned that some 
of the things in the pipeline so to speak, the TAAMS program, 
things that we have talked about, were perhaps ill-designed or 
now we know that they were ill-designed.
    With the benefit of this restructuring we should be able to 
not only come up with better numbers but have a better sense of 
the big picture and I think thereby be able to successfully be 
able to negotiate settlements with the tribes.
    Certainly there will be things that we won't agree on. But 
right now, as has been observed, when the statute of 
limitations kicks in there's an obligation for the United 
States to assert that as a defense.
    We believe the committee is on the right track here by 
suggesting that that be tolled. We suggest that the language 
set forth in my written testimony would crisply and simply 
capture this and we urge you to do that as you move in this 
direction.
    I would be happy to respond to attempt to respond to 
questions you might have in this regard.
    The Chairman. Well, I appreciate your candor and your 
response. From the Secretary's statement, it's obvious that the 
process is inadequate. The staffing is inadequate. It isn't 
possible to focus upon the problem.
    Do you have any suggestions as to what this Congress can be 
doing legislatively to assist and expedite this process because 
it is not fair to Indian Country to have this dangling and 
having them wait another decade or two before we can come up 
with any sort of resolution.
    Do you have any suggestions? I don't expect you to have 
them at this moment, but if you do, we would appreciate it if 
you could share them with us. I would like to look them over.
    Mr. Hogen. Well, we certainly will be happy to send that to 
you, Mr. Chairman. I would also, I guess, say in the same 
breath, the President's budget that recently was sent this way 
contains a big shot there that would be devoted to these very 
problems.
    As that comes before you, we ask that you look 
sympathetically to those requests.
    Senator Campbell. Mr. Hogen, I know you haven't been in 
that position in all the years we have dealt with this problem, 
but I want to tell you: All we have heard over and over is:

    If we had new systems, if we had more money, if we had more 
computers, if we could revise the process, if we had increased 
staffing, whatever, we could fix it.

    But in my view the Bureau has simply dropped the ball over 
and over and over. After hearing the GAO's testimony, I am even 
more convinced of it. They are all just forms of passing the 
buck to me. I don't think that is satisfying anybody that is 
involved in litigation now or in future litigation to try to 
get fairness out of this government for what should have been 
done a long time ago.
    Everybody knows Indian people across this country have been 
cheated out of their money, that the Government has cheated 
them out of their money. I want to tell you, if it was mine in 
the private world and a bank did that to me, I would be raising 
a lot more hell than they are raising with the Government. They 
have had a lot of patience. But I think they are running out of 
patience.
    I have to tell you that as I understand your testimony this 
bill should be redrafted to cover the tribes that have already 
filed claims. That's not what this bill is about. It's to try 
to provide an atmosphere where they could get some negotiated 
settlement so they wouldn't be forced to file more and more 
claims, which is in no one's best interest.
    We are trying to provide assurance to them that we are 
going to get to the bottom of this and we are going to fix it 
without prolonged litigation and fighting it out in court. That 
is what this bill is all about.
    Would you like to comment on that?
    Mr. Hogen. Yes, I would, Senator; if that's the way you 
understood what I have suggested, I apologize because that's 
not what I intended to convey. We do not want to merely limit 
the application of an extension of the statute of limitations 
to the several tribes that have currently filed their claims or 
perhaps will file it before enactment of this legislation, 
which we hope is very soon.
    We have nine, I believe, cases that have been filed, some 
in the Court of Federal Claims, some in U.S. District Court. We 
know that in the pipeline are probably dozens, if not hundreds 
of other cases. We would want this to apply to all of them and 
those that have filed, and that is why we said what we said, so 
we could go to the court and say, ``We seek a stay so that we 
may continue these negotiations.''
    So, I certainly did not mean to narrow or limit that and I 
share your frustration.
    Senator Campbell. Well, part of my frustration, I guess, is 
that the faces keep changing over there and the problem keeps 
going on. I just think that tribes' patience is wearing thin 
and they are very justified in their patience wearing thin, 
too.
    I have no further questions, Mr. Chairman. I would ask 
unanimous consent to include my formal statement for the 
record, if you would, and also submit the attached letter from 
the GAO dated August 30, 2001, for the record.
    The Chairman. I can assure you that your statement and the 
letter from GAO will be made part of the record.
    [Prepared statement of Senator Campbell appears in 
appendix.]
    The Chairman. Mr. Hogen, sitting there you must have felt 
the frustration of Indian country. There is an atmosphere of 
uncertainty and a lack of credibility on the part of the 
Department. Until we can resolve these things and bring about 
certainty and credibility, it may be fair to say that you 
should be anticipating about 300 suits being filed in various 
courts throughout this land. That will not help the situation.
    As Vice Chairman, Cochairman Campbell has indicated, time 
is running out. So, I hope we can get together, not just 
Congress and the department, but more importantly, the 
beneficiaries and come up with a solution that all of us can 
accept.
    With that I thank you very much.
    Senator Thomas, do you have any questions?
    Senator Thomas. I have no further questions, thank you.
    The Chairman. We are in recess.
    [Whereupon at 11:18 a.m., the committee recessed, to 
reconvene at the call of the Chair.]

=======================================================================

                            A P P E N D I X

                              ----------                              

              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.
                    U.S. General Accounting Office,
                                    Washington, DC, August 30, 2001
Hon. Ben Nighthorse Campbell,
Vice Chairman,
Committee on Indian Affairs,
U.S. Senate, Washington, DC.

    Dear Mr. Vice Chairman: This letter responds to your request that 
we summarize observations from our past work regarding the Department 
of the Interior's Indian trust fund account reconciliation project, 
which was completed in January 1996. From 1992 through 1997 we 
monitored and reported on various aspects of Interior's planning, 
execution, and reporting of results for the reconciliation project. 
Enclosure II to this letter is a list of GAO products on various 
aspects of Interior's Indian trust fund reconciliation project.
    The Indian trust funds are of two types: tribal trust funds and 
Individual Indian Moneys (IIM) trust funds. An independent public 
accounting firm (IPA) audit of the trust funds for fiscal year 2000 
showed a total of about $2.6 billion in approximately 1,400 separate 
tribal accounts for about 315 tribes, and about $400 million in 
approximately 260,000 IIM accounts as of September 30, 2000. Receipts 
are deposited to these accounts primarily from land use agreements, 
royalties on natural resource depletion, enterprises related to trust 
resources, judgment awards, settlement of Indian claims, and investment 
income, according to the IPA's audit report. The audit report noted 
that reliance cannot be placed on the balances reflected in the trust 
fund accounts until many tribal accounts are reconciled and/or resolved 
through negotiation and settlement and the IIM class action litigation 
is resolved.
    The Congress first established an Indian trust fund account 
reconciliation requirement in the Supplemental Appropriations Act, 
1987, in response to tribes' concerns that Interior had not 
consistently provided them with statements on their account balances, 
their trust fund accounts had never been reconciled, and Interior had 
planned to contract with a third party for management of trust fund 
accounts. The original provision required that the accounts be audited 
and reconciled before the Bureau of Indian Affairs (BIA) transferred 
funds to a third party. A provision in Interior's fiscal year 1990 
appropriations act added a requirement that the accounts be reconciled 
to the earliest possible date and that Interior obtain an independent 
certification of the reconciliation work. A description of the history 
of the reconciliation requirements, which continued to be included in 
Interior's appropriations acts through fiscal year 1995, is included as 
enclosure I\1\ to this letter. In 1994, the Congress, through the 
American Indian Trust Fund Management Reform Act of 1994 (Pub. L. 103-
412, October 25, 1994; 108 Stat. 4239), required the Secretary of the 
Interior to provide tribes with reconciled account statements as of 
September 30, 1995.
---------------------------------------------------------------------------
    \1\ Enclosure I also describes a related provision tolling the 
statute of limitations for certain types of Indian trust fund claims.
---------------------------------------------------------------------------
    To fulfill these requirements, Interior contracted with two major 
IPA's, one to reconcile the trust accounts and the other to do an 
independent certification that the reconciliation resulted in the most 
complete reconciliation possible. Following a preliminary assessment in 
March 1992 by Interior's reconciliation contractor, Interior decided to 
have the contractor reconcile the tribal accounts for fiscal years 1973 
through 1992 and omit accounts for individual Indians from the 
reconciliation project due to the potential lack of supporting 
documents and the cost and level of effort that would be needed to 
include them in the project. Subsequent to this decision, Interior had 
BIA reconcile the tribal accounts for fiscal years 1993 through 1995 to 
comply with the 1994 act's requirement that Interior provide tribes 
with reconciled account statements as of September 30, 1995.
    During the reconciliation project, Interior spent about $21 million 
for contract costs over a 5-year period in a massive effort to locate 
supporting documentation and reconstruct historical trust fund 
transactions, as well as to perform other reconciliation procedures, so 
that tribal account balances could be validated. In January 1996, 
Interior provided to each tribe a report package containing the tribe's 
reconciliation results, including unreconciled account statements with 
schedules of proposed adjustments based on reconciliation project 
results for each year covered by the reconciliation, and a transmittal 
letter that described the information provided. During a February 1996 
meeting at which Interior officials and the reconciliation contractor 
summarized the reconciliation results, tribes raised questions; about 
the adequacy and reliability of the reconciliation results. We also, 
reported shortcomings of Interior's reconciliation project.\2\
---------------------------------------------------------------------------
    \2\ Financial Management: BIA's Tribal Trust Fund Account 
Reconciliation Results (GAO/AIMD-96-63, May 3, 1996).
---------------------------------------------------------------------------
    As we previously reported, the reconciliation project's 
shortcomings consisted of procedures that were not completed due to 
missing records, system limitations, or time and cost considerations as 
well as inadequate information in Interior's reports to tribes on the 
project's results. These are detailed in the following paragraphs.
    Basic (Noninvestment) Transaction Reconciliation Procedure: The 
basic transaction reconciliation segment of the project included 
tracing 251,432 noninvestment transactions that had been recorded in 
the general ledger to source documents such as deposit tickets and 
disbursement vouchers. The total value of these receipt and 
disbursement transactions was $17.7 billion. Due to missing records, 
32,901 of the transactions, with a total value of $2.4 billion (14 
percent of the total value of the transactions), could not be 
reconciled. In addition to the limitation related to the unreconciled 
transactions, this segment focused only on transactions that had 
already been recorded in the general ledger, and no reconciliation 
procedure was performed to address the completeness of the general 
ledger itself.
    Investment Transaction Reconciliation Procedure: The reconciliation 
contractor also did individual testing of $21.3 billion, or 16 percent, 
of the recorded investment transactions. However, to achieve 
efficiencies, Interior and the contractor substituted a review of 
tribal account investment yields for individual transaction testing for 
the remaining investment transactions.
    Fill the Gap (Leases) Procedure: Another segment of the project 
reconciled collections for certain tribes with a sample of lease 
documents and timber sales contracts. Initially, the contractor was to 
review all leases greater than $5,000 and a test sample of 100 
additional leases of less than $5,000 on a cross section of tribes. The 
reconciliation contractor identified 6,446 surface leases with annual 
collections of over $5,000. However, due to time constraints for 
completing the reconciliation, only 692 leases--10.7 percent of the 
leases originally identified for testing--were tested. In addition, 
because of missing records, a number of leases, and sample test months 
for timber contracts, were substituted for those in the original 
sample.
    Systems Reconciliation Procedures: The systems reconciliation was 
to include reconciling (1) information in the trust fund investment 
system to the General Ledger in the Finance System, (2) the tribal 
general ledger in the Finance System to U.S. Treasury records, and (3) 
the Integrated Records Management System (IRMS) subsidiary records to 
the Finance System general ledger. The latter two reconciliations could 
not be performed or completed due to time and funding limitations, 
according to Interior officials.
    Tribal IIM and Special Deposit Accounts Reconciliation Procedure: 
Interior maintained some IIM accounts for tribes in the IRMS accounting 
system. It also used Special Deposit accounts primarily as clearing 
accounts for funds received that had not been distributed to account 
holders because the account owners had not been identified. Due to 
missing records and the lack of an audit trail through IRMS, tribal 
transactions could not be efficiently isolated from individual Indian 
transactions. Because of this, tribal IIM accounts maintained in IRMS 
were not reconciled to source documents, and Special Deposit accounts 
were not reconciled with source documents that moved funds to tribes' 
general ledger accounts, as had been planned.
    Fill the Gap (Minerals Management Service) Reconciliation 
Procedure: Interior's Minerals Management Service (MMS) collects and 
accounts for oil and gas royalties on Indian leases. The reconciliation 
project was to include some procedures to trace collections from the 
leases, through MMS, to the general ledger maintained by BIA. However, 
because MMS retained records for only 6 years, records for most of the 
20-year reconciliation period were not available, and alternative 
procedures at MMS were not performed due to time constraints.
    Certification Procedure: Interior's fiscal year 1990 appropriations 
act required a separate, independent certification that the accounts 
had been reconciled and audited to the earliest possible date and that 
the results were the most complete reconciliation possible. However, 
BIA's certification contract required that the certification contractor 
ensure only that the reconciliation effort was performed in accordance 
with the reconciliation contract and no independent assessment of 
completeness was required. In addition, because of cost and time 
constraints, the certification contract was terminated before the 
certification contractor completed its verification that the procedures 
in the reconciliation contract were performed. The certification 
contractor issued a status letter, which communicated preliminary 
results. However, because the certification work was performed while 
the reconciliation was in process and the certification procedures were 
not completed, the usefulness of the status letter is limited.
    Individual Indian Accounts Reconciliation Procedures: As previously 
mentioned, accounts for individual Indians were excluded from the 
reconciliation project due to the potential lack of supporting 
documents and the cost and level of effort that would be needed to 
include them in the project.
    Reporting of Reconciliation Project Results: Interior's reporting 
of the reconciliation project results was not as complete as it could 
have been. Interior did not disclose in the report packages to tribes 
the procedures specified in the reconciliation contract that were not 
performed, or those that could not be completed, and the reasons. For 
the procedures that were performed, Interior did not fully disclose 
scope limitations or changes in methodologies, such as accounts and 
time periods that were not covered and alternative source documents 
used.
    To summarize, although Interior made a massive attempt to reconcile 
tribal accounts during its reconciliation project, missing records and 
systems limitations made a full reconciliation impossible. In addition, 
due to cost considerations and the potential lack of supporting 
documentation, reconciliations for individual Indian accounts were not 
performed.
    If we can be of further assistance, please phone me on (202) 512-
9508.

            Sincerely yours,
                                   Linda M. Calbom,Director, Financial 
                                       Management and Assurance

Enclosures
                                 ______
                                 
Enclosure I

SELECTED INDIAN TRUST FUNDS PROVISIONS CONTAINED IN APPROPRIATIONS ACTS

Appropriations Act Provisions for Audit and Reconciliation Requirements 
    for Tribal and Individual Indian Trust Funds

    In Supplemental Appropriations Act, 1987, the Congress established 
a requirement that tribal and individual Indian trust funds be audited 
and reconciled prior to the Bureau of Indian Affairs' (BIA) contracting 
with third parties for the management of Indian trust fund accounts. 
Pub. L. 100-71, 101 Stat. 391, 416 (1987). Similar provisions were 
included in the Department of the Interior's appropriations acts 
through fiscal year 1995. The provision in the 1987 Supplemental 
Appropriations Act stated:

        The Bureau of Indian Affairs shall not transfer funds under a 
        contract with any third party for the management of tribal or 
        individual Indian trust funds until the funds held in trust for 
        such tribe or individual have been audited and reconciled and 
        the tribe or individual has been provided with an accounting of 
        such funds, and the appropriate Committees of the Congress and 
        the tribes have been consulted with as to the terms of the 
        proposed contract or agreement.

    Pub. L. 100-71, 101 Stat. 391,416 (1987).
    Interior's fiscal year 1988 and 1989 appropriations acts included 
the same requirement, albeit with a slight difference in language:

        Provided further, That none of the funds in this act shall be 
        used by Bureau of Indian Affairs to transfer funds under a 
        contract with any third party for the management of tribal or 
        individual Indian trust funds until the funds held in trust for 
        such tribe or individual have been audited and reconciled, and 
        the tribe or individual has, been provided with an accounting 
        of such funds, and the appropriate Committees of Congress and 
        the tribes have been consulted with as to the terms of the 
        proposed contract or agreement. (emphasis added).

    Pub. L. 100-202, 101 Stat. 1329 (1987); Pub. L. 100-446, 102 Stat. 
1774 (1988).
    From fiscal year 1990 through fiscal year 1995, Interior's 
appropriations acts added a requirement that the funds be reconciled to 
the earliest possible date and an independent party certify the 
reconciliation of the funds held in trust. See, for example, Pub. L. 
101-121, 103 Stat. 701 (1989)(``until the funds held in trust for such 
tribe or individual have been audited and reconciled to the earliest 
possible date, the results of such reconciliation have been certified 
by an independent party as the most complete reconciliation of such 
funds possible. . .''). See also B-236146, March 20, 1990 
(certification must be performed by a party independent of the party 
performing the reconciliation).

Tolling of Statute of Limitations on Tribal and Individual Indian 
    Claims Against the United States for Management of Trust Funds

    Since fiscal year 1991, the Department of the Interior's 
appropriations acts have included a provision that tolls the statute of 
limitations on tribal and individual Indian claims against the United 
States arising from BIA's management of tribal and individual Indian 
trust funds. The provision in the fiscal year 1991 appropriations act 
stated:

        Provided further, That notwithstanding any other provision of 
        law, the statute of limitations shall not commence to run on 
        any claim concerning losses to or mismanagement of trust funds, 
        until the affected tribe or individual Indian has been 
        furnished with the accounting of such funds.

    Pub. L. 101-512, 104 Stat. 1915 (1990).
    From fiscal years 1992 through 2001, Interior's appropriations acts 
have included the provision tolling the statute of limitations and 
added language requiring that the tribe or individual Indian be 
furnished an accounting ``from which the beneficiary can determine 
whether there has been a loss . . .'' See, for example, Pub. L. 102-
154, 105 stat. 990 (1991).

Enclosure II

                          Related GAO Products

    Indian Trust Funds: Tribal Account Holders' Responses to 
Reconciliation Results (GAO/AIMD-97-102R, May 23, 1997).
    Responses to Questions from June 11, 1996 Hearing (GAO/AIMD-96-
125R, June 24, 1996).
    Financial Management: Interior's Management of the Indian Trust 
Funds (GAO/T-AIMD-96-111, June 18, 1996).
    Financial Management: Interior's Efforts to Reconcile Indian Trust 
Fund Accounts and Implement Management Improvements (GAO/T-AIMD-96-104, 
June 11, 1996).
    Financial Management: BIA's Tribal Trust Fund Account 
Reconciliation Results (GAO)/AIMD-96-63, May 3, 1996).
    Financial Management: Indian Trust Fund Accounts Cannot Be Fully 
Reconciled (GAO/T-AIMD-95-94, March 8, 1995).
    Responses to Questions From September 26, 1994, Hearing (GAO/AIMD-
95-33R, December 2, 1994).
    Financial Management: Focused Leadership and Comprehensive Planning 
Can Improve Interior's Management of Indian Trust Funds (GAO/T-AIMD-94-
195, September 26, 1994).
    Financial Management: Focused Leadership and Comprehensive Planning 
Can Improve Interior's Management of Indian Trust Funds (GAO/AIMD-94-
185, September 22, 1994).
    Response to Questions on Two Recommendations in April 12, 1994, 
Testimony (GAO/AIMD-94-138R, June 10, 1994).
    Letter on BIA Trust Fund Reconciliations (GAO/AIMD-94-110R, April 
25, 1994).
    Financial Management: Status of BIA's Efforts to Reconcile Indian 
Trust Fund Accounts and Implement Management Improvements (GAO/T-AIMD-
94-99, April 12, 1994).
    Financial Management: BIA's Management of the Indian Trust Funds 
(GAO/T-AIMD-93-4, September 27, 1993).
    Indian Trust Funds: Tribal Account Holders' Responses to 
Reconciliation Results (GAO/AIMD-97-102R, May 23, 1997).
    Responses to Questions from June 11, 1996 Hearing (GAO/AIMD-96-
125R, June 24, 1996).
    Financial Management: Interior's Management of the Indian Trust 
Funds (GAO/T-AIMD-96-111, June 18, 1996).
    Financial Management: Interior's Efforts to Reconcile Indian Trust 
Fund Accounts and Implement Management Improvements (GAO/T-AIMD-96-104, 
June 11, 1996).
    Financial Management: BIA's Tribal Trust Fund Account 
Reconciliation Results (GAO/AIMD-96-63, May 3, 1996).
    Financial Management: Indian Trust Fund Accounts Cannot Be Fully 
Reconciled (GAO/T-AIMD-95-94, March 8, 1995).
    Responses to Questions From September 26, 1994, Hearing (GAO/AIMD-
95-33R, December 2, 1994).
    Financial Management: Focused Leadership and Comprehensive Planning 
Can Improve Interior Management of Indian Trust Funds (GAO/T-AIMD-94-
195, September 26, 1994).
    Financial Management: Focused Leadership and Comprehensive Planning 
Can Improve Interior's Management of Indian Trust Funds (GAO/AIMD-94-
185, September 22, 1994).
    Response to Questions on Two Recommendations in April 12, 1994, 
Testimony (GAO/AIMD-94-138R, June 10, 1994).
    Letter on BIA Trust Fund Reconciliations (GAO/AIMD-94-110R, April 
25, 1994).
    Financial Management: Status of BIA's Efforts to Reconcile Indian 
Trust Fund Accounts and Implement Management Improvements (GAO/T-AIMD-
94-99, April 12, 1994).
    Financial Management: BIA's Management of the Indian Trust Funds 
(GAO/T-AIMD-934, September 27, 1993).
    Response to Request for Views on Freeze of the Statute of 
Limitations on Claims Against the States Arising From BIA Management of 
Tribal and Individual Trust Funds (GAO/AFMD-93-84R, June 4, 1993).
    Financial Management: BIA Has Made Limited Progress in Reconciling 
Trust Accounts and Developing a Strategic Plan (GAO/AFMD-92-38, June 
18, 1992).

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                                 ______
                                 

Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington

    Mr. Chairman, I am pleased that we have this opportunity to hear 
from the witnesses testifying today to help us determine whether 
legislation would be an appropriate and desired course of action to 
address the statute of limitations that may have been triggered by 
reports of tribes' trust accounts released in 1996.
    Mr. Chairman, I have serious concerns about the management of both 
tribally held and individual Indian trust accounts. The Federal 
Government has a legal responsibility to maintain these accounts 
accurately, and I believe that account holders should be able to hold 
the Government accountable if this is not done.
    In 1987, Congress first mandated that the Department of the 
Interior audit and reconcile trust fund accounts and provide these 
statements to account holders. Since fiscal year 1992, the 
appropriations acts for the Department have included requirements that 
tribes and individuals with trust accounts be provided with reconciled 
accounting statements, and, in 1994, Congress reiterated the need to 
give tribes this information with the passage of the Trust Fund 
Management Reform Act. This law required the Secretary of the Interior 
to supply tribes with reconciled account statements as of September 30, 
1995.
    Interior contracted with one public accounting firm in order to 
reconcile trust accounts and a second firm to verify that the 
reconciliation was as thorough as possible. In January 1996, each tribe 
was given a report of its account. However, tribes and the U.S. General 
Accounting Office have concerns that the 1996 reports may not provide 
reliable or sufficiently thorough information about the accounts. As a 
result, tribes cannot rest assured that these reports accurately 
represent the actual value in their accounts, and tribes may not have 
the necessary information to make informed decisions regarding whether 
accounts have been mismanaged and, if so, to take legal action.
    Because of the doubts surrounding the sufficiency of these reports, 
it is uncertain whether the reports actually triggered the 6-year 
statute of limitations for tribes to file claims against the United 
States. However, the committee has been advised that the Department of 
Justice believes that the reports did do so. Several tribes have 
already filed claims because the statute of limitations, if it began to 
run, expired last month or will expire in the very near future.
    If the Government is providing tribes with inaccurate or incomplete 
reports of their accounts, then these reports should not work to limit 
tribes' recourse toward holding the Government responsible for trust 
fund mismanagement. Moreover, it is likely in the best interests of 
tribes and the Government alike to extend the statute of limitations 
specifically to allow more time to explore how these claims might be 
settled out of court. Bringing hundreds of cases before the courts 
would cost tribes and the government dearly in time and resources.
    In the final days of the last session of Congress, my distinguished 
colleagues Senators Campbell and Inouye introduced a measure to 
encourage the negotiated settlement of tribal claims. This bill would 
extend the statute of limitations on claims against the United States 
relating to trust fund account mismanagement through fiscal year 2002. 
I am very interested in the views of today's witnesses and my 
colleagues on the committee regarding how this legislation might help 
efforts to resolve trust fund mismanagement.
    Indeed, the daunting task of rectifying trust fund mismanagement 
will require the diligent participation, patience, and wisdom of the 
Department of the Interior, the Native American community, the courts, 
and Congress. We are meeting today to discuss only one facet of this 
complex problem, but I am interested in what Congress can do to see 
that the problem is addressed with consistency, efficiency, and most 
importantly, justice.
                                 ______
                                 

 Prepared Statement of Hon. Tim Johnson, U.S. Senator from South Dakota

    Chairman Inouye, Vice Chairman Campbell, and other members of the 
committee, the issue of trust fund mismanagement is one of the most 
urgent problems we are faced with in Indian country. Of all the 
extraordinary circumstances we find in Indian country, and especially 
in South Dakota, I do not think there is any more complex, more 
difficult and more shocking issues then the circumstances we have 
surrounding trust fund mismanagement.
    This problem has persisted literally for generations, and continues 
today. Administrations of both political parties have been inadequate 
in their response, and the level of direction and the resources 
provided by Congress over past decades has also been sadly inadequate. 
The Federal Government, by law, is to be the trustee for Native 
American people. When the Trust Fund Management Act of 1994 was passed, 
I was hopeful that this accounting situation would at last be remedied. 
Unfortunately, this has not been the case.
    During my service in the House of Representatives, I was appointed 
to the Congressional Task Force on Indian Trust Fund Management, to 
review and study the management and reconciliation of funds 
administered by the Department of the Interior's Office of Trust Fund 
Management. Those meetings were informative but far from productive, as 
many years and millions of dollars later, this problem still persists.
    A few years ago, this committee directly saw the reverence the 
Department of the Interior held for the records of this Nation's First 
Americans. Records were heaped into piles with trash, appliances, and 
cleaning supplies interspersed with the trust records of Native 
Americans. Other records were burned, flooded, and infested with 
colonies of rodents. All of this gives great concern to the Native 
people in my State and across the country.
    I am convinced that there is no way for the Federal Government, 
regardless of political party, to be able to account for every last 
record that was lost. However, we should not simply throw up our hands 
and say ``oh well.'' This does not adhere to the trust responsibility 
of the Federal Government on behalf of the American Indians and Alaska 
Natives of this Great Land. We need to do better.
    We need to address the millions of dollars that will never be 
accounted for, and we need to come to a solution where those Native 
Americans who are owed money are paid money. Some of these account 
holders are of the poorest of the poor. Some of these account holders 
solely rely on these payments as their only source of income. We need 
to end the practice of treating our First Americans as Third Class 
citizens.
    Mr. Chairman, I thank you for holding this first in a series of 
hearings on this important issue. I look forward to working with my 
colleagues of this committee, as well as tribal leaders to come to a 
viable solution to this problem. I look forward to hearing the 
testimony of the witnesses we have here today.
                                 ______
                                 

   Prepared Statement of Hon. Craig Thomas, U.S. Senator from Wyoming

    Thank you, Mr. Chairman. Let me begin by saying it is important for 
this committee to remain interested and involved with Indian trust 
management issues. Throughout my time in Congress and as a member of 
this committee, I have been involved with efforts to remedy the 
existing problems with the current management system. It continues to 
be my hope that we can develop a dependable system.
    As we are all aware, the Cobell v. Norton litigation has prompted 
an intense re-evaluation of our Government's trust responsibility. 
Consequently, Secretary Norton has put forth a proposal to restructure 
the Bureau of Indian Affairs [BIA], thereby creating a new agency 
solely charged with managing Indian trust accounts. I understand this 
proposal has been met with opposition throughout areas in Indian 
country. I also understand the tribes' frustration with the 
Department's consultation process. However, I strongly believe that we 
must not lose focus in our efforts to resolve this long-standing 
problem and move forward to establish an accountable system of trust 
management.
    The Department of the Interior is not the only agency to bear the 
burden of finding a solution or addressing the problem. Each branch of 
our Government continues to shape the future outcome of Indian trust 
management. We are here today to discuss one of the many issues 
surrounding trust reform. The history of mismanagement must be 
eradicated and replaced with a renewed commitment to providing a fair, 
accountable system. I look forward to working with my colleagues as we 
proceed in this difficult task.
    Thank you, Mr. Chairman, I look forward to hearing from our 
witnesses.
                                 ______
                                 

    Prepared Statement of Charles Tillman, Chief, Osage Nation and 
              Chairman, InterTribal Monitoring Association

    Mr. Chairman, Mr. Vice Chairman, and members of the committee, this 
written testimony is submitted to supplement the oral testimony given 
on behalf of the InterTribal Monitoring Association on Indian Trust 
Funds by Charles Tillman, Chairman of the ITMA Board of Directors and 
Chief of the Osage Tribal Council. ITMA is an unincorporated 
association of 53 federally recognized Indian tribes committed to 
monitoring the Indian trust fund and asset management and reform 
efforts of the U.S. Department of the Interior. The Association was 
formed in 1990 to provide a coherent voice from Indian country on 
Indian trust issues and to inform its member tribes of developments and 
setbacks in the attempts to reform a deficient system.
    The dilemma faced by tribes today was created by the issuance of 
reports to each tribe by Arthur Andersen LLP in 1996 purporting to 
``reconcile'' tribal trust accounts for the fiscal years 1973-92. For 
the reasons stated below, those reports cannot be considered adequate 
accountings, as required by law, of the beneficiaries' trusts by their 
trustee, the United States. And yet, tribes are justifiably concerned 
that the Department of Justice would raise a statute of limitations 
defense based on the issuance of those reports. Given that the 6-year 
statute of limitations would run this year if such an argument by 
Justice were accepted, tribes must either file suit now or risk that a 
remedy might be unavailable in the Federal courts. As discussed below, 
it is neither in the interest of tribes or the United States to force 
tribes to file suit at this time.
    The Association will not belabor the tortured history of the United 
States' mismanagement of tribal trust funds and resources. The 
committee is well aware that the Department of the Interior has failed 
its Indian beneficiaries for decades by mismanaging their land, their 
natural resources, and their funds. As a House committee concluded in 
1992:
        [s]cores of reports over the years by the Interior Department's 
        inspector general, the U.S. General Accounting Office, the 
        Office of Management and Budget, and others have documented 
        significant, habitual problems in BIA's ability to fully and 
        accurately account for trust fund moneys, to properly discharge 
        its fiduciary responsibilities, and to prudently manage the 
        trust funds.
``Misplaced Trust: The BIA's Mismanagement of the Indian Trust Fund,'' 
    H.R. Rep. 102-499, at 2 (1992). The House Committee further 
    resoundingly condemned BIA's ongoing obdurate refusal to implement 
    the needed reform:
        The committee is particularly troubled by BIA's efforts-
        undertaken only grudgingly--to implement repeated congressional 
        directives designed to provide a full and accurate accounting 
        of the individual and tribal account funds. In short, the BIA 
        has repeatedly failed to take resolute corrective action to 
        reform its longstanding financial management problems. The 
        Bureau has repeatedly ignored directives to undertake needed 
        management reform measures. As a result of this dismal history 
        of inaction and incompetence, there is no assurance that the 
        Bureau actually desires to, or will, make any substantial 
        advancement toward rectifying the basic financial management 
        failures brought to their attention.
Id. at 2-3, 5. The intervening 9 years have proven the House committee 
    to be prophetic. We are no closer to a ``full and accurate 
    accounting'' of the tribal trust than we were then.

The Arthur Andersen Reports

    The directives mentioned in the House Report included numerous 
mandates from Congress that the BIA and the Department provide tribes 
with an accurate accounting of their trust funds and assets.\1\
---------------------------------------------------------------------------
    \1\ See Act of December 22, 1987, Pub. L. No. 100-202 and Act of 
September 27, 1988, Pub. L. No. 100-446 (requiring the Bureau of Indian 
Affairs (``BIA'') to audit and reconcile tribal trust funds, and to 
provide tribes with an accounting of such funds; Act of October 23, 
1989, Pub. L. No. 101-121, Act of November 5, 1990, Pub. L. No. 101-
512, and Act of November 13, 1991, Pub. L. No. 102-154 (requiring the 
BIA to audit, reconcile, and certify through an independent party the 
results of the reconciliation of tribal trust funds as the most 
complete reconciliation of such funds possible, and to provide tribes 
with an accounting of such funds).
---------------------------------------------------------------------------
    The current dilemma faced by tribes arises from the Department's 
response to those mandates. In 1991, the Department contracted with 
Arthur Andersen LLP to conduct a so-called ``reconciliation'' of tribal 
trust accounts. The original charge to Arthur Andersen was that it was 
to ``reconcile[ the accounts] as accurately as possible back to the 
earliest date practicable, using available accounting records and 
transaction data.'' After 5 years, roughly $20 million in fees, and 31 
contract modifications, Andersen submitted a report to each tribe 
regarding it purported trust fund balances.
    The Andersen project was fatally flawed for a number of reasons. 
Andersen itself acknowledged the deficiencies in each report. It stated 
that each report did ``not constitute an audit made in accordance with 
generally accepted auditing standards.'' Therefore, Andersen did not 
express an opinion on the accuracy of any of its findings. As Andersen 
stated in each report:
        The congressional mandate for the Bureau Tribal Trust Funds 
        Reconciliation Project [Reconciliation Project] requires an 
        accounting to each tribe for each of their trust accounts. The 
        primary objective of the Reconciliation Project, as stated in 
        the contract, is to reconstruct historical transactions, to the 
        extent practicable, for all years for which records are 
        available for all tribal trust accounts managed by the Bureau. 
        Phase I of the Reconciliation Project substantiated that not 
        all records would be available for a full accounting of such 
        funds. Due to the unavailability of some records, the scope of 
        the Reconciliation Project is designed to provide reasonable 
        assurance as to the accuracy of each tribal trust account 
        balance. The agreed-upon procedures performed, as required by 
        the contract, represent the Bureau's standard of 
        reasonableness.
[Emphasis added.] Most tribes agree that the reconciliation project did 
    not provide any ``reasonable assurance'' regarding their account 
    balances, in part for the reasons summarized below. But this 
    statement by Andersen is particularly relevant to the issue 
    currently before the committee because Andersen concedes expressly 
    that, although Congress required an accounting, a full accounting 
    was not possible. Instead, the Bureau substituted its own 
    ``standard of reasonableness'' for the accounting required by 
    Congress and by trust law.
    Many of the reports' deficiencies are obvious from the ``agreed-
upon procedures'' that guided Andersen's work.\2\ Only a few of the 
deficiencies are discussed here to give the committee some 
understanding of the incomplete nature of the project and to underscore 
the fact that the reports cannot be considered an accounting that would 
trigger the statute of limitations for tribal claims.
---------------------------------------------------------------------------
    \2\ Of course, only the Department and Andersen ``agreed upon'' 
those procedures. The beneficiaries had no role in determining how 
their trust funds and assets would be analyzed.
---------------------------------------------------------------------------
    Because of the limited availability of electronic data, Andersen 
only looked at records from 1972 forward. Losses to the tribal trust 
prior to that date were not analyzed in any way. This means that there 
is simply no way to know whether the beginning balance used by Andersen 
bears any resemblance to the amount that should have been in any given 
tribal account in 1972.
    Another significant deficiency involves investment of tribal trust 
funds. Andersen--with the consent of the Department--did little 
substantive analysis of the investment of each tribe's trust funds. 
Instead, Andersen conducted an ``Interest Yield Analysis'' for each 
tribe. This ``agreed-upon'' procedure involved calculating each tribe's 
investment yield for each year. Andersen then derived a ``benchmark 
rate'' for all tribes based on the total return for all tribes in any 
given year. If the investment return on a given tribal account was 
within 2 percent below or 5 percent above the so-called benchmark, 
Andersen did nothing else.
    Several flaws in this procedure are worth highlighting. First, the 
``benchmark'' rate was derived not from some external source but from 
tribal trust accounts themselves. Thus, systemic problems in trust fund 
management could not be identified because they were simply included in 
the average against which individual tribal accounts were measured. If 
better returns were available generally--either through different 
investment strategies or through better procedures--Andersen's 
procedure could not have identified the losses. Second, the margin of 
deviation allowed by Andersen from that flawed benchmark is 
considerable. A tribe that consistently received almost 2 percent less 
than the benchmark would have earned less than two-thirds of the 
interest over a 20-year period that a tribe that received the benchmark 
return each year would have earned.
    Perhaps the most egregious failing in the Andersen project was that 
Andersen was not charged with analyzing the Department's management of 
the underlying trust assets that generate the majority of trust funds 
in the first place. Without attention to the underlying trust assets, 
there can be no analysis of what the true balances should be. For 
example, natural gas producers leasing Indian lands have routinely 
underreported their production of gas from leased Indian lands by 20 to 
40 percent, but the MMS has only recently--and even then sporadically--
begun auditing production with any degree of care. Mismanagement of 
other trust resources has resulted in similar losses. And yet, with the 
exception of five ``Fill-the-Gap'' tribes, no attempt was made to sure 
that adequate rents, royalties, and other income was being collected in 
exchange for use or purchase of tribal resources.
    For these reasons, and others too detailed to explore here, it 
would be dishonorable and legally impermissible for the United States 
to construe the Arthur Andersen reports as fulfilling its legal 
obligation to the tribes to account for tribal trust funds and assets.

The Annual Appropriations Language

    Congress has recognized the legal interrelationship between an 
accounting and the statute of limitations. In each Interior 
appropriations act passed since 1990, Congress has stated in this or 
similar language, ``notwithstanding any other provision of law, the 
statute of limitations shall not commence to run on any claim 
concerning losses to or mismanagement of trust funds until the affected 
tribe or individual Indian has been furnished with the accounting of 
such funds.'' See, e.g., Pub. L. 101-512, 104 Stat. 1915, 1930 (1990).
    ITMA believes that this language, which has appeared unchanged 
before and after issuance of the Andersen reports, would assist tribes 
in defeating any statute of limitations defense raised by the 
Department of Justice. But tribal leaders cannot be expected to risk 
the claims of their tribes based on language that does not make it 
clear that the Andersen reports were not the ``accounting'' Congress 
directed and that has been mentioned in each appropriations bill.

The Importance of Trust ``Resources'' or ``Assets''

    The importance of tribal trust resources, or assets, was mentioned 
in the discussion of the Andersen report above. ITMA wishes to stress 
the importance of mismanagement of those underlying resources to the 
committee. If the goal of Congress and the United States is to make 
tribes whole for the losses tribes have suffered because of breaches of 
trust by the Department, mismanagement of the underlying land, 
minerals, oil, gas, timber, and other resources must be examined and 
quantified. If tribes--and individual Indians--are not able to recover 
for that mismanagement, whether through a comprehensive settlement or 
tribe-by-tribe litigation, one of the greatest thefts in history will 
have been countenanced by the United States.
    Time after time, tribes have litigated and won substantial 
judgments or settlements because of the United States' failure to 
fulfill its duties as trustee of Indian lands. For example, in 
Confederated Tribes of the Warm Springs Reservation v. United States, 
248 F.3d 1365, 1371, 1375 (Fed. Cir. 2001), the Federal Circuit 
required a determination of damages regarding several categories of 
BIA's failure to manage tribal timber resources in a manner that 
obtained the greatest appropriate revenue for the tribal beneficiaries. 
In Jicarilla Apache Tribe v. Andrus, 687 F.2d 1324, 1331 (10th Cir. 
1982), the Tenth Circuit found that the Secretary of the Interior did 
not even intend to comply with the regulatory notice requirements for 
offering tribal mineral leases, and indeed failed to comply with those 
requirements. Just 4 years later, the Tenth Circuit held that the 
Department had again breached its fiduciary duties to the same tribe by 
failing to correctly interpret the royalty terms in leases and 
regulations, by failing to ensure that lessees complied with lease 
terms, and by failing to insure the protection of leased lands. See 
Jicarilla Apache Tribe v. Supron Energy Corp., 728 F.2d 1555, 1565 
(10th Cir. 1984) (Seymour, J. concurring & dissenting), adopted as 
majority opinion as modified, 782 F.2d 855 (1986) (en banc), 
supplemented, 793 F.2d 1171 (1986), cert. denied, 479 U.S. 970 (1986).
    The Tenth Circuit also has found that the Secretary 
``uncontrovertedly'' breached trust duties to a tribe by failing to 
examine all relevant factors before approving a communization agreement 
for mineral development. See Cheyenne-Arapaho Tribes of Oklahoma v. 
United States, 966 F.2d 583, 590 (10th Cir. 1992), cert. denied, 507 
U.S. 1003 (1993). More recently, the Federal Circuit flatly rejected 
the Government's contention that a balancing of national interests 
excuses the Secretary's flagrant breach of fiduciary duties by 
suppressing and concealing an administrative appeal decision to favor a 
mineral lessee to the detriment of the relevant tribe. See Navajo 
Nation v. United States, 263 F.2d 1325, 1332 (Fed. Cir. 2001).
    Given the documented failure of the United States to fulfill its 
duties regarding management of tribal resources, any comprehensive 
settlement of the tribal trust debacle must include the damages arising 
from that mismanagement. If a settlement is not forthcoming, tribes 
must be able to litigate those issues. In the meantime, tribes should 
not be forced to file suit simply because of concerns relating to their 
resource claims and the statute of limitations.

The Need for Legislation

    The Department of Justice is infamous in Indian country for raising 
every possible defense to Indian claims in litigation. Whether 
considered dishonorable attempts to avoid the United States' fiduciary 
obligations or vigorous advocacy in defense of its client, those 
historical tactics lead to the very real concern that the Government's 
lawyers will attempt to construe the Arthur Andersen reports as 
accountings that would trigger the statute of limitations. If tribes 
are to avoid the cost and risk of litigating that issue, they must 
either file suit immediately or Congress must act.\3\
---------------------------------------------------------------------------
    \3\ There is some uncertainty as to precisely what date might be 
regarded as beginning the running of the statute of limitations were 
the Andersen reports considered to be ``accountings.'' Summary reports 
were issued in January 1996. More detailed reports were issued to at 
least some tribes in February 1996. Exit conferences with tribes were 
held throughout that year.
---------------------------------------------------------------------------
    Because tribes should not be expected to shoulder the burden for 
the United States' failures and because a flood of litigation is in 
neither the tribes' nor the United States' interests, ITMA urges 
Congress to Act. Since the Andersen reports were issued, tribes (and 
Congress) have received a series of promises from the Department that 
the trust system would be reformed. Presumably, any reform would also 
include efforts to rectify the effects of past mismanagement. But as 
tribes have waited anxiously, each successive reform effort has 
stalled.
    ITMA believes that a comprehensive settlement would be in the best 
interests of tribes and the United States. But thus far, the Department 
has failed to show any willingness to develop a process that could lead 
to such a settlement. Regardless, it seems certain that no meaningful 
settlement could be reached in a matter of months-the necessary 
analysis (probably including modeling) would require a significantly 
longer period. If tribes are to continue to wait for a tenable 
settlement plan, they must be assured that they are not foregoing their 
rights in court in the meantime.

Comments on S. 1857

    ITMA is grateful for the support of the Vice Chairman, who 
introduced S. 1857 in the closing days of the last session in an 
attempt to resolve this problem; the Chairman, who cosponsored that 
bill; and other members of both houses of Congress who have already 
recognized the importance of the issue before the committee. It is 
hoped that today's hearing will lead to the passage of legislation that 
will resolve the Hobbesian choice faced by tribes.
    With the qualifications discussed below, ITMA supports S. 1857 as 
currently drafted. It would provide tribes with some additional months 
in which to file suit or to secure the passage of additional 
legislation further extending the statute of limitations. If S. 1857 is 
to go forward in its current form, however, ITMA believes that the 
legislation would be much more effective if section 1(a) were amended 
to read:
        (a) IN GENERAL.-Solely for purposes of providing an opportunity 
        to explore the settlement of tribal claims, during fiscal year 
        2002, the statute of limitations shall be deemed not to have 
        run for any claim concerning losses to or mismanagement of 
        tribal trust funds and resources. Further, with regard to the 
        reconciliation reports distributed to tribes by Arthur Andersen 
        and the Department of the Interior in 1996:
        (i) Those reports shall not be considered to have started the 
        running of the statute of limitations for any claim against the 
        United States by an Indian tribe regarding the management of 
        tribal trust funds and resources, regardless of when such claim 
        is filed; and (ii) Those reports shall not be considered for 
        any purpose to be an accounting sufficient to fulfill the 
        United States' duty to account as required by the American 
        Indian Trust Fund Management Reform Act of 1994, under other 
        applicable law, or under general principles of trust law.
        (iii) The United States is precluded from introducing those 
        reports into evidence, from using them as rebuttal evidence, or 
        otherwise relying on them in any administrative or judicial 
        proceeding to prove any purported conclusion or fact contained 
        in those reports.
    With such an amendment, ITMA would enthusiastically support passage 
of S. 1857.
    Since the pressures of the final days of a session are no longer 
present, ITMA respectfully suggests that the committee might also 
consider revisiting the basic goals of the legislation. If the 
committee is willing to explore a more comprehensive solution to the 
current problem, ITMA would propose that an amended bill specifically 
include the following in addition to the amendments discussed above:
        Specific language stating that the statute of limitations 
        defense shall be deemed not to have run for any claim 
        concerning losses to or mismanagement of tribal trust funds and 
        resources through the end of fiscal year 2007.
        Comment: It would waste the resources of both Congress and the 
        tribes to require annual legislation regarding the statute of 
        limitations issue. Five years is a reasonable period for the 
        Department, if it proceeds in good faith, to develop a fair 
        settlement structure in conjunction with tribes. In the 
        meantime, tribes should not have to be concerned that they will 
        surrender legal rights by pursuing a good faith settlement. 
        Note: tribal trust ``resources'' are included for the reasons 
        stated above.
        Specific language mandating that the Department attempt in good 
        faith to negotiate a full and fair settlement regarding losses 
        resulting from mismanagement of tribal trust funds and 
        resources by the end of fiscal year 2007.
        Comment: Generally, see above. Tribes have seen no sincere 
        attempt by the Department to develop a comprehensive 
        settlement. Without a mandate from Congress to do so, it is 
        very likely that ITMA will be before this Committee again in 5 
        years and that many tribes will be forced to file suit.
        Specific language creating a right to reasonable attorneys' 
        fees and costs (including expert costs) for any successful 
        tribal claim relating to mismanagement of trust funds and 
        resources:
        (1) in which judgment is entered after the end of fiscal year 
        2003, if suit was filed before the enactment of this 
        legislation, or
        (2) in all suits filed after the end of fiscal year 2007.
        Comment: Such a provision would encourage timely resolution, 
        hopefully through settlement, of such suits that are currently 
        pending. It would also provide a strong incentive for the 
        Department to comply with the mandate that a comprehensive 
        settlement acceptable to tribes and to Congress be reached 
        within a 5-year period by imposing a penalty, tribes' 
        litigation costs, if tribes must ultimately litigate their 
        claims. The two-tier structure is intended to discourage tribes 
        from filing suit after enactment of this legislation and before 
        the settlement period ends.
    As laudable as S. 1857 is, now is the time for Congress to consider 
how the trust fund debacle can be resolved fairly and finally within a 
reasonable period of time. ITMA would welcome the opportunity to work 
with the Committee on an amendment, or separate legislation, 
incorporating these additional concepts.

Conclusion

    The statute of limitations issue relating to the Andersen reports 
of vital importance to tribes, and ITMA is grateful for the opportunity 
to testify and to enter these written comments in the record. Whether 
the Committee opts for an interim measure or a bill intended to reach 
the broader issues of Indian trust reform and past mismanagement, ITMA 
urges the Committee to move forward to ensure that the dilemma faced by 
tribes does not force them into litigation unnecessarily.
                                 ______
                                 

   Prepared Statement of McCoy Williams, Acting Director, Financial 
                     Management and Assurance, GAO

    I am pleased to be here today to summarize observations from our 
past work regarding Indian tribal trust fund accounts.
    In a June 1993 letter to this committee, we noted that the 
appropriations acts for the Department of the Interior had for many 
years contained a provision that tolled the statute of limitations on 
claims for losses to, or mismanagement of, tribal trust funds until the 
tribe had been furnished with an accounting of its funds from which the 
tribe could determine whether there had been a loss. We also noted that 
the parties envisioned that such an accounting would result from 
Interior's then-ongoing reconciliation and audit of the tribal trust 
fund accounts, which the Congress had mandated.
    At that time, we expressed our view that until there was a mutually 
acceptable basis for determining account balances and any associated 
losses, it would be premature to allow the statute of limitations to 
run. We observed that tolling the statute of limitations until 
reconciliation and audit of an account was completed, or until some 
mutually acceptable agreement was reached as to the account balance, 
had two overall purposes. First, it provided all interested parties, 
including accountholders, Interior, and the Congress, an opportunity to 
examine and evaluate all pertinent account information. Second, it 
permitted interested parties to attempt to resolve all claims arising 
from Interior's management of the accounts rather than addressing 
specific claims in a piecemeal fashion.
    The Congress first established an Indian trust fund account 
reconciliation requirement in the Supplemental Appropriations Act of 
1987. The requirement was in response to tribes' concerns that Interior 
had not consistently provided them with statements on their account 
balances, their trust fund accounts had never been reconciled, and 
Interior planned to contract with a third party for management of trust 
fund accounts.
    The original provision required that the accounts be audited and 
reconciled before the Bureau of Indian Affairs [BIA] transferred funds 
to one-third party. A provision in Interior's fiscal year 1990 
appropriations act added a requirement that the accounts be reconciled 
to the earliest possible date and that Interior obtain an independent 
certification of the reconciliation work. In 1994, the Congress, 
through the American Indian Trust Fund Management Reform Act of 1994 
(Pub. L. 103-412, 108 Stat. 4239; Oct. 25, 1994), required the 
Secretary of the Interior to provide tribes with reconciled account 
statements as of September 30, 1995.
    To fulfill these requirements, Interior contracted with two major 
independent public accounting firms, one to reconcile the trust 
accounts and the other to do an independent certification to indicate 
that the reconciliation resulted in the most complete reconciliation 
possible. Following a preliminary assessment in March 1992 by 
Interior's reconciliation contractor, Interior decided to have the 
contractor reconcile the tribal accounts for fiscal years 1973 through 
1992. Subsequent to this decision, Interior had BIA reconcile the 
tribal accounts for fiscal years 1993 through 1995 to comply with the 
1994 act's requirement that Interior provide tribes with reconciled 
account statements as of September 30, 1995.
    Interior's Indian trust fund account reconciliation project was 
completed in January 1996. During the reconciliation project, Interior 
spent about $21 million for contract costs over a 5-year period in a 
massive effort to locate supporting documentation and reconstruct 
historical trust transactions, as well as to perform other 
reconciliation procedures, in its attempt to validate tribal account 
balances. In January 1996, Interior began providing to each tribe a 
report package containing the tribe's reconciliation results. Each 
package included unreconciled account statements with schedules of 
proposed adjustments based on reconciliation project results for each 
year covered by the reconciliation, and a transmittal letter that 
described the information provided.
    During a February 1996 meeting at which Interior officials and the 
reconciliation contractor summarized the reconciliation project 
results, tribes raised questions about the adequacy and reliability of 
the reconciliations results. In May 1996, we reported on shortcomings 
of Interior's reconciliation project.\1\ The shortcomings consisted of 
procedures that were not completed due to missing records, systems 
limitations, or time and cost considerations. Attachment I to my 
statement describes the major shortcomings presented in our 1996 
report.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    From 1992 through 1997, we monitored and reported on various 
aspects of Interior's planning, execution, and reporting of results for 
the reconciliation project. In May 1997, we reported\2\ to this 
committee that as of May 6, 1997, Interior had provided reconciliation 
reports to 310 tribes, 51 of those tribes had disputed the 
reconciliation results, and 41 had accepted the results. Of the 
remaining 218 tribes, 47 had requested more time to consider the 
results, and 171 had not responded to the reconciliation results. 
Attachment II is a list of GAO products issued between 1992 and 1997 on 
various aspects of Interior's Indian trust fund reconciliation project.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    In summary, although Interior made a massive attempt to reconcile 
tribal accounts during its reconciliation project, missing records and 
systems limitations made a full reconciliation impossible.
    I would be pleased to respond to any questions that you or other 
members of the committee may have.

Attachment I

                  RECONCILIATION PROJECT SHORTCOMINGS

    Basic (Noninvestment) Transaction Reconciliation Procedure: The 
basic transaction reconciliation segment of the project included 
tracing 251,432 noninvestment transactions that had been recorded in 
the general ledger to source documents such as deposit tickets and 
disbursement vouchers. The total value of these receipt and 
disbursement transactions was $17.7 billion. Due to missing records, 
32,901 of the transactions, with a total value of $2.4 billion (14 
percent of the total value of the transactions), could not be 
reconciled. In addition to the limitation related to the unreconciled 
transactions, this segment focused only on transactions that had 
already been recorded in the general ledger, and no reconciliation 
procedure was performed to address the completeness of the general 
ledger itself.
    Investment Transaction Reconciliation Procedure: The reconciliation 
contractor also did individual testing of $21.3 billion, or 16 percent, 
of the recorded investment transactions. However, to achieve 
efficiencies, Interior and the contractor substituted a review of 
tribal account investment yields for individual transaction testing for 
the remaining investment transactions.
    Fill the Gap (Leases) Procedure: Another segment of the project 
reconciled collections for certain tribes with a sample of lease 
documents and timber sales contracts. Initially, the contractor was to 
review all leases greater than $5,000 and a test sample of 100 
additional leases of less than $5,000 on a cross section of tribes. The 
reconciliation contractor identified 6,446 surface leases with annual 
collections of over $5,000. However, due to time constraints for 
completing the reconciliation, only 692 leases--10.7 percent of the 
leases originally identified for testing--were tested. In addition, 
because of missing records, a number of leases, and sample test months 
for timber contracts, were substituted for those in the original 
sample.
    Systems Reconciliation Procedures: The systems reconciliation was 
to include reconciling (1) information in the trust fund investment 
system to the General Ledger in the Finance System, (2) the tribal 
general ledger in the Finance System to U.S. Treasury records, and (3) 
the Integrated Records Management System [IRMS] subsidiary records to 
the Finance System general ledger. The latter two reconciliations could 
not be performed or completed due to time and funding limitations, 
according to Interior officials.
    Tribal IIM and Special Deposit Accounts Reconciliation Procedure: 
Interior maintained some IIM accounts for tribes in the IRMS accounting 
system. It also used Special Deposit accounts primarily as clearing 
accounts for funds received that had not been distributed to account 
holders because the account owners had not been identified. Due to 
missing records and the lack of an audit trail through IRMS, tribal 
transactions could not be efficiently isolated from individual Indian 
transactions. Because of this, tribal IIM accounts maintained in IRMS 
were not reconciled to source documents, and Special Deposit accounts 
were not reconciled with source documents that moved funds to tribes' 
general ledger accounts, as had been planned.
    Fill the Gap (Minerals Management Service) Reconciliation 
Procedure: Interior's Minerals Management Service [MMS] collects and 
accounts for oil and gas royalties on Indian leases. The reconciliation 
project was to include some procedures to trace collections from the 
leases, through MMS, to the general ledger maintained by BIA. However, 
because MMS retained records for only 6 years, records for most of the 
20-year reconciliation period were not available, and alternative 
procedures at MMS were not performed due to time constraints.
    Certification Procedure: Interior's fiscal year 1990 appropriations 
act required a separate, independent certification that the accounts 
had been reconciled and audited to the earliest possible date and that 
the results were the most complete reconciliation possible. However, 
BIA's certification contract required that the certification contractor 
ensure only that the reconciliation effort was performed in accordance 
with the reconciliation contract and no independent assessment of 
completeness was required. In addition, because of cost and time 
constraints, the certification contract was terminated before the 
certification contractor completed its verification that the procedures 
in the reconciliation contract were performed. The certification 
contractor issued a status letter, which communicated preliminary 
results. However, because the certification work was performed while 
the reconciliation was in process and the certification procedures were 
not completed, the usefulness of the status letter is limited.
    Individual Indian Accounts Reconciliation Procedures: Accounts for 
individual Indians were excluded from the reconciliation project due to 
the potential lack of supporting documents and the cost and level of 
effort that would be needed to include them in the project.

Attachment II

                          RELATED GAO PRODUCTS

    Indian Trust Funds: Tribal Account Holders' Responses to 
Reconciliation Results. GAO/AIMD-97-102R. Washington, DC: May 23, 1997.
    Responses to Questions from June 11, 1996, Hearing. GAO/AIMD-96-
125R. Washington, DC: June 24, 1996.
    Financial Management: Interior's Management of the Indian Trust 
Funds. GAO/T-AIMD-96-111. Washington, DC: June 18, 1996.
    Financial Management: Interior's Efforts to Reconcile Indian Trust 
Fund Accounts and Implement Management Improvements. GAO/T-AIMD-96-104. 
Washington, DC: June 11, 1996.
    Financial Management: BIA's Tribal Trust Fund Account 
Reconciliation Results. GAO/AIMD-96-63. Washington, DC: May 3, 1996.
    Financial Management: Indian Trust Fund Accounts Cannot Be Fully 
Reconciled. GAO/T-AIMD-95-94. Washington, DC: March 8, 1995.
    Responses to Questions from September 26, 1994, Hearing. GAO/AIMD-
95-33R. Washington, DC: December 2, 1994.
    Financial Management: Focused Leadership and Comprehensive Planning 
Can Improve Interior's Management of Indian Trust Funds. GAO/T-AIMD-94-
195. Washington, DC: September 26, 1994.
    Financial Management: Focused Leadership and Comprehensive Planning 
Can Improve Interior's Management of Indian Trust Funds. GAO/AIMD-94-
185. Washington, DC: September 22, 1994.
    Response to Questions on Two Recommendations in April 12, 1994, 
Testimony. GAO/AIMD-94-138R. Washington, DC: June 10, 1994.
    Letter on BIA Trust Fund Reconciliations. GAO/AIMD-94-110R. 
Washington, DC: April 25, 1994.
    Financial Management: Status of BIA's Efforts to Reconcile Indian 
Trust Fund Accounts and Implement Management Improvements. GAO/T-AIMD-
94-99. Washington, DC: April 12, 1994.
    Financial Management: BIA's Management of the Indian Trust Funds. 
GAO/T-AIMD-93-4. Washington, DC: September 27, 1993.
    Response to Request for Views on Freeze of the Statute of 
Limitations on Claims against the United States Arising from BIA 
Management of Tribal and Individual Trust Funds. GAO/AFMD-93-84R. 
Washington, DC: June 4, 1993.
    Financial Management: BIA Has Made Limited Progress in Reconciling 
Trust Accounts and Developing a Strategic Plan. GAO/AFMD-92-38. 
Washington, DC: June 18, 1992.
                                 ______
                                 

 Prepared Statement of Phillip Hogen, Associate Solicitor, Division of 
               Indian Affairs, Department of the Interior

    Good morning, Mr. Chairman and members of the committee. My name is 
Phil Hogen. I am the associate solicitor for Indian affairs at the 
Department of the Interior. Thank you for the opportunity to present 
the Department of the Interior's views on S. 1857, an act ``To 
Encourage the Settlement of Tribal Claims.''
    The Department supports the intent of S. 1857, although we suggest 
clarifying changes in order to make the language of the bill consistent 
with the intent. S. 1857 attempts to establish a date certain on which 
the statute of limitations would commence to run on claims concerning 
alleged losses to or mismanagement of tribal trust funds. The bill 
seeks to provide the tribes and the Government with additional time to 
address and determine a process to encourage and facilitate the 
resolution of tribal trust fund mismanagement claims based on the 
results of the Arthur Andersen reconciliation reports that were 
provided to the tribes in 1996. The proposed legislation would also 
provide tribes that have already filed litigation with a sufficient 
basis to obtain a stay of their pending claims, until the tribes and 
the Department have had further opportunity to engage in attempts to 
resolve those claims, before resorting to what will almost certainly be 
expensive and burdensome litigation for both sides. We support this 
approach, but recommended the following changes:
    With respect to subsection (a), we recommend that the language be 
amended to state as follows:
    (a) IN GENERAL--Solely for purposes of providing an opportunity to 
explore the settlement of tribal claims, the statute of limitations 
shall be tolled through September 30, 2003, for any claim not already 
time-barred concerning losses to or mismanagement of tribal trust 
funds.
    This recommended change would obviate the need for the language 
currently found in subsection (b) of the bill. As such, we recommend 
that subsection (b) be deleted.
    Once again, I would like to thank you the opportunity to testify on 
this legislation. I would be pleased to answer any questions you may 
have.

                               
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