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45–293 PDF 2008

S. HRG. 110–608 

INDIAN HEALTH SERVICE MANAGEMENT: LOST 

PROPERTY, WASTEFUL SPENDING, AND 

DOCUMENT FABRICATION 

HEARING 

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

JULY 31, 2008 

Printed for the use of the Committee on Indian Affairs 

( 

(II) 

COMMITTEE ON INDIAN AFFAIRS 

BYRON L. DORGAN, North Dakota, Chairman 

LISA MURKOWSKI, Alaska, Vice Chairman 

DANIEL K. INOUYE, Hawaii 

KENT CONRAD, North Dakota 

DANIEL K. AKAKA, Hawaii 

TIM JOHNSON, South Dakota 

MARIA CANTWELL, Washington 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

JOHN MCCAIN, Arizona 

TOM COBURN, M.D., Oklahoma 

JOHN BARRASSO, Wyoming 

PETE V. DOMENICI, New Mexico 

GORDON H. SMITH, Oregon 

RICHARD BURR, North Carolina 

ALLISON C. BINNEY, Majority Staff Director and Chief Counsel 

DAVID A. MULLON JR., Minority Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on July 31, 2008 ............................................................................... 1 

Statement of Senator Barrasso ............................................................................... 83 

Prepared statement .......................................................................................... 84 

Statement of Senator Dorgan ................................................................................. 1 

Statement of Senator Murkowski ........................................................................... 4 

Statement of Senator Smith ................................................................................... 6 

Statement of Senator Tester ................................................................................... 5 

WITNESSES

Kutz, Gregory D., Managing Director, Forensic Audits and Special Investigations Unit, U.S. Government Accountability Office .......................................... 6 

Prepared statement with attachments ........................................................... 8 

McSwain, Robert G., Director, Indian Health Service, U.S. Department of 

Health and Human Services; accompanied by Randy Grinnell, Deputy Director for Management Operations, and Athena Elliott, Director, Office 

of Management Services ...................................................................................... 59 

Prepared statement .......................................................................................... 62 

Verrier, Fernand R., Former Deputy Director, Office of Finance and Accounting, Indian Health Service, U.S. Department of Health and Human Services; CFO, Headquarters Indian Health Service ............................................... 66 

Prepared statement .......................................................................................... 67 

APPENDIX

Miller, Dr. Steven J., Director, IHS National Council of the Laborers International Union of North America, prepared statement .................................... 87 

Youpee, Isabelle Florence, Member, Fort Peck Sioux Tribe, prepared statement ...................................................................................................................... 89 

(1) 

INDIAN HEALTH SERVICE MANAGEMENT: 

LOST PROPERTY, WASTEFUL SPENDING, 

AND DOCUMENT FABRICATION 

THURSDAY, JULY 31, 2008 

U.S. SENATE, 

COMMITTEE ON INDIAN AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:39 a.m. in room 

562, Dirksen Senate Office Building, Hon. Byron L. Dorgan, Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. BYRON L. DORGAN, 

U.S. SENATOR FROM NORTH DAKOTA 

The CHAIRMAN. Today, the Committee is going to hold a hearing 

on a recent GAO report documenting mismanagement and lost 

property at the Indian Health Service. This Committee has held a 

number of hearings on Indian health care, which confirms a fullscale crisis, including the rationing of health care in Indian Country. These hearings highlighted the significant unmet needs in 

health care facilities, contract health dollars, and other basic services. 

Despite the documented need for health care, today the Committee will focus on the GAO report. The GAO investigation concluded that a complete lack of direction at the Indian Health Service from the top down led to millions of dollars in lost or stolen 

property, wasteful spending, and document fabrication. 

As you can see on some charts I have, charts one and two show 

the key findings of the GAO report. The report found that 5,000 

property items worth $15.8 million were reported lost or stolen. 

This was between 2004 and 2007. The report covered the Indian 

Health Service headquarters and only 7 of the 163 Indian Health 

Service units. 

[The information referred to follows:] 

2 

The losses include 1,100 information technology items at the 

headquarters. That mounts to more than one-third of the information technology equipment assigned to employees at the headquarters. GAO also identified thousands of missing property items 

controlled by the IHS. These items included tractors, all-terrain vehicles, pickup trucks, GPS systems, and even a Jaws of Life used 

by first responders in motor vehicle accidents. 


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More troubling in the course of the investigation, GAO reported 

employee document fabrication to cover up the mismanagement. 

The Indian Health Service has known about this mismanagement for some time, if I can have chart three put up. We have a 

letter here showing that Mr. McSwain felt strongly enough 11 

years ago when he was Acting Director of the Office of Management Support at the Indian Health Service to address the issue of 

unaccounted property. It took the department eight years to act on 

his concerns. In October of 2005, the Department of HHS issued a 

directive to implement a new universal information management 

system. 

[The information referred to follows:] 

I had hoped the Secretary would be here today. I invited the Secretary of Health and Human Services. He indicated he would not 

come. He has some meetings on the Hill, but apparently because 


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of that scheduling conflict, he chose not to attend. I will say to the 

Secretary, I think he should have been here, and this Committee 

will ask him again to show up at this table and answer these questions. 

It seems there is no clear understanding, to me, at the IHS headquarters of the location, condition or even the existence of significant losses of property purchased with taxpayers’ dollars. One 

thing is clear, however: Migration to the property management information system, which began or was supposed to have begun in 

2005 is clearly not functioning at the Indian Health Service. 

I understand the IHS disagrees with the characterization of case 

studies that are in the GAO report. With that said, the Service has 

agreed to 9 of the 10 recommendations. They acknowledge a severe 

issue with property management and security at the IHS, so we 

have asked Director McSwain to give us his comments today. 

This report has received a fair amount of attention in the past 

few weeks. I hope the explanations that we hear today will clear 

up some of this, but I must say that we have people dying in this 

Country because they don’t get adequate health care. All of us see 

them when we go to reservations in our Native communities. There 

is full-scale rationing going on. We run out of contract health care 

money, in some cases early in the year in tribal governments. 

I have described before my concern about the bureaucracy in the 

Bureau of Indian Affairs. I described my concern about the management in the Indian Health Service. This GAO report, I think, 

is a scathing indictment of the way things have been done at the 

Indian Health Service. 

Mr. McSwain has just recently been confirmed. He has been on 

the job a relatively short period of time. Our Committee confirmed 

his nomination, but Mr. McSwain has inherited an agency that 

has, in my judgment, very serious problems. 

I have described before circumstances where incompetent employees, rather than being dealt with as incompetent employees, 

are transferred from one area to another, so they transfer the 

incompetents, and the next group of patients is treated to the same 

incompetence and mismanagement. I tell you, it is enough to make 

you pretty depressed when you take a look at the way both the BIA 

and the Indian Health Service have been managed. 

That is not to say there aren’t some good people working in the 

system, but I am telling you, in my judgment this GAO report describes an agency in desperate need of repair, and one that is not 

doing what it should to serve the health needs of a very vulnerable 

population. 

Senator Murkowski? 

STATEMENT OF HON. LISA MURKOWSKI, 

U.S. SENATOR FROM ALASKA 

Senator MURKOWSKI. Thank you, Mr. Chairman. 

You point out the number of hearings that we have had in this 

Committee that have looked to the issue of the inadequacy of Indian Health. Just within this Congress alone, the number of hearings that we have had, the discussion on the floor about Indian 

Health Care reauthorization, and time and time again we have 

heard about the struggles that the Indian Health providers face as 

5 

they try to stretch very, very limited resources to address the increasing health care costs. 

Every year, this Committee issues its budget views and estimates letter, and we are always advocating for increases to the 

health care funding. Every year we are challenging our colleagues 

to do more to provide for Indian health care by increasing the appropriations, just a couple of weeks ago with the PEPFAR bill and 

efforts there. 

But then to receive a report like we have before us today from 

the GAO about this wasteful spending and the property mismanagement by the IHS, I mean, it truly undermines the confidence in the structures that we have been defending when we 

say, well, we need more appropriations. But if internally we have 

this level of mismanagement going on, it really causes you to wonder how we truly move forward. 

I am so disappointed that so many of the very basic shortfalls in 

property management were identified within this report. You 

would like to think that the management shortfalls that have been 

highlighted are limited just to these instances that are detailed in 

the report, but the concern that I have is that it is indicative of 

a much larger problem within the agency. 

This is not just a spotlight on just a few issues that we have 

identified and there is nothing more. I think it goes much, much 

deeper than that. 

I do understand that IHS was undergoing conversion to this new 

property management system. I understand that we may hear that 

the agency was short-staffed, but that is no excuse. It absolutely 

does not account for the fact that the taxpayers, we here in Congress, must be assured. We have to have the confidence that the 

basic procedures, that the proper procedures for management and 

accountability are in place and that they are followed. 

So I look forward to the comments this morning from you, Mr. 

McSwain. 

I do think that this is important to bring this up in as timely a 

manner as you have, Mr. Chairman, and I appreciate your doing 

so. Thank you. 

The CHAIRMAN. Thank you very much. 

Senator Tester? 

STATEMENT OF HON. JON TESTER, 

U.S. SENATOR FROM MONTANA 

Senator TESTER. Thank you, Mr. Chairman, and thanks for having this hearing. I want to express my appreciation for the remarks 

that you and the Ranking Member both made on this topic. 

I guess it explains a lot, after what I have seen over the last year 

and a half with IHS in the hearings we have had here and how 

the health care system in Indian Country is upside-down. I guess 

this is the way it ought to be. You know, $15.8 million for years, 

not knowing where the equipment went to. 

I guess it fits in with the pattern of what we have been hearing 

here for the last year and a half and probably a lot longer before 

that before I came onboard. 

I would just tell you this, it boils down to two things as far as 

I am concerned: flat, blatant incompetence, number one; and numVerDate Aug 31 2005 07:55 Dec 01, 2008 Jkt 045293 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 S:\DOCS\45293.TXT JACK PsN: JACKF
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ber two, a total vacuum when it comes to leadership. This isn’t like 

developing technology for battery-powered cars. There are no excuses here. 

I don’t know who is responsible. It is probably multiple folks at 

different levels. But I will tell you this, if there was this kind of 

incompetence on my farm, people wouldn’t be working there anymore, bottom line. 

GAO came forth with some recommendations, and I look forward 

to hearing how these recommendations have been implemented, 

but the bottom line as far as I am concerned is that you don’t get 

rid of incompetence like this without getting rid of the people who 

were responsible for the incompetence. 

That is all. Thank you. 

The CHAIRMAN. Senator Smith? 

STATEMENT OF HON. GORDON H. SMITH, 

U.S. SENATOR FROM OREGON 

Senator SMITH. Mr. Chairman, members of this Committee, 

thank you for moving out the two bills that were moved in the 

business part of this hearing. I appreciate that. One of them was 

my own. 

I also want to thank you, Mr. Chairman, for moving this issue 

forward in the minds of the Senate and all those who are concerned 

with Indian health. I share your concern. I appreciate this GAO report and look forward to using it as a vehicle to improve Indian 

health care. 

The CHAIRMAN. Thank you very much for your comments. 

We will now call to the witness table Director McSwain and Greg 

Kutz from the Government Accountability Office. Mr. Kutz is the 

Managing Director of Forensic Audits and Special Investigations. 

Mr. Kutz, we welcome you. 

Director McSwain, we welcome you. 

We will begin with the testimony of Mr. Greg Kutz. Mr. Kutz, 

you and your agency produced this Government report. We would 

like to hear your testimony, followed by the testimony of Mr. 

McSwain. Then we will proceed to one additional witness. 

You may proceed. 

STATEMENT OF GREGORY D. KUTZ, MANAGING DIRECTOR, 

FORENSIC AUDITS AND SPECIAL INVESTIGATIONS UNIT, U.S. 

GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. KUTZ. Mr. Chairman and members of the Committee, thank 

you for the opportunity to discuss Indian Health Service property 

and equipment. 

Today’s testimony highlights our investigation of allegations we 

received in June of 2007. The bottom line of my testimony is that 

these allegations were accurate. Specifically, IHS had millions of 

dollars of lost and stolen property, including items containing sensitive personal information. 

My testimony has two parts. First I will discuss the problems 

that we identified. And second, I will discuss the causes of these 

problems. 

First, IHS records show that from 2004 through 2007, at least 5,000 property items with an acquisition value of $15.8 million 

7 

were lost or stolen. Our own inventory work during Fiscal Year 

2008 identified similar problems. 

For example, at the Rockville, Maryland headquarters, 1,100 or 

36 percent of IT property items were lost or stolen. This is based 

on a 100 percent inventory by my staff. In addition, based on a statistical sample of IT equipment at seven field locations, we estimate that 1,200 or 17 percent of these items were also lost or stolen. 

The following cases give you a flavor for what we found. First, 

the poster board on my right shows four reports of lost or stolen 

property totaling over $1.8 million. IHS routinely writes off millions of dollars of these types of losses without holding anyone accountable. 

The next poster board shows the Montana region writing off over $700,000 of equipment because it was infested with bat dung. And 

according to a Phoenix-area executive officer and others, a yard 

sale of Government furniture and equipment was held in Nevada. 

Fliers were provided to the public advertising this event. 

We also found indications of the compromise of sensitive personal 

data. For example, a computer with Social Security numbers and 

medical information for at least 849 uranium miners was stolen 

from a New Mexico hospital. A PDA with medical information and 

patient names at an Arizona hospital was also lost. This PDA did 

not have encryption or password protection. And 17 computers that 

were not cleaned may have contained sensitive information for kids 

at a youth patient center in Arizona. 

Let me move on to my second point, the causes of these problems. First, let me point your attention to the same memo the 

Chairman described earlier, that was in 1997 and written to all 

IHS headquarters employees. As you can see, lost and stolen property has been a problem for more than a decade. However, management has not fixed the problem or held anyone accountable. The 

clear message from the top is that the status quo is acceptable. 

Although the problems we found are chronic, they are not complex. These are basic property management issues, or what I would 

refer to as property management 101. For example, we found lack 

of required annual physical inventories, property that was not 

properly bar-coded, lack of required hand receipts, and lack of required physical security. Notice that most of what we found is not 

flawed policy, but the lack of adherence to policies and procedures 

that are already in place. 

I am encouraged that the letter we received from management 

in response to our report agreed with 9 of our 10 recommendations. 

However, the tone of that letter indicated ongoing denial of the 

problems. The letter even tries to rationalize an IHS employee fabricating 116 documents to make it appear that 571 property items 

were actually not lost or stolen. 

In conclusion, nobody at IHS has been held accountable for the 

issues that we have described today, including the loss of millions 

of dollars and the compromise of sensitive data. So who then must 

pay for this problem? Unfortunately, it is the American taxpayer. 

Mr. Chairman, this ends my statement. I look forward to your 

questions. 

[The prepared statement of Mr. Kutz follows:] 

8 

PREPARED STATEMENT OF GREGORY D. KUTZ, MANAGING DIRECTOR, FORENSIC AUDITS AND SPECIAL INVESTIGATIONS UNIT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE


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The CHAIRMAN. Mr. Kutz, thank you very much. 

Director McSwain, thank you for being with us. You don’t look 

very happy today and I understand no agency will want to receive 

a report like this from the Government Accountability Office, and 

certainly this Committee is concerned, and I would say the entire 

Congress is concerned when they see a report of this type. 

You are here, let me explain again that I invited you to testify. 

I also asked the Secretary of HHS to be present today. He has decided not to be present, but this Committee will continue to seek 

his testimony as well. 

Mr. McSwain, why don’t you proceed with your statement? 

STATEMENT OF ROBERT G. MCSWAIN, DIRECTOR, INDIAN 

HEALTH SERVICE, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES; ACCOMPANIED BY RANDY GRINNELL, 

DEPUTY DIRECTOR FOR MANAGEMENT OPERATIONS, AND 

ATHENA ELLIOTT, DIRECTOR, OFFICE OF MANAGEMENT 

SERVICES 

Mr. MCSWAIN. Thank you, Mr. Chairman and members of the 

Committee. 

Good morning. I am Robert McSwain, Director of Indian Health 

Service. Today, I am accompanied by Randy Grinnell, Deputy Director for Management Operations, and Athena Elliott, Director of 

Office of Management Services. On behalf of Secretary Leavitt, we 

appreciate the opportunity to testify on the Indian Health Service’s 

Property Management Program. 

As you mentioned earlier, I did not envision that my term as Director of the Indian Health Service would begin in this fashion, but 

here we are. While the IHS does not agree with some statements 


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and allegations contained in the GAO report, IHS takes the GAO 

recommendations very seriously and concurs with 9 of the 10 GAO 

recommendations addressed in the report to strengthen the overall 

environment, to control the environment for property management, 

and has been and is now fully engaged in the ongoing process of 

updating its personal property management policies, conducting 

necessary investigations of any unaccounted property, and ensuring 

that employees are held accountable. I will speak to that in my 

closing comments. 

I must point out that IHS has already been working with the department, as was mentioned, since the early 2002 through 2005, to 

begin to improve our property management systems. In fact, even 

more so in the recent year, we were working very feverishly to prepare for the implementation of the unified financial management 

system, which is a department-wide financial system that requires 

that some of our old legacy systems in property management be 

abandoned. We have now moved on to PMIS. 

I will report to you that we have been moving inventories and 

training personnel in preparation for the full implementation. 

There are a couple of major concerns that we have with the GAO 

report, which was noted earlier, and GAO acknowledges itself various limitations to its audit investigation, some of which are listed, 

which I will talk about in a moment here. 

The report asserts that IHS did not consistently document lost 

or stolen property items and concludes that the number of currently unaccounted for items might be much higher. But I can assure you with the new HHS PMIS system, that in fact we will be 

reducing those numbers significantly in the reconciliation process. 

The report also overstates the net worth of currently accounted 

for items by not taking into consideration depreciation of those 

items. Some items referenced in the report at 15- to 35-year old. 

As you know, like our facilities that average 33 years across the 

Country, our property likewise is quite old. I think, for example, 

the comment about the property in Wyoming that was in fact infested was in fact transferred to the warehouse at zero value and 

was being held there to be disposed of by a process. 

Now, the interesting thing is, this points up another major issue 

that we wrestle with in Indian Country, is that our facilities are 

so far out in remote locations that are not available to GSA disposal sites for many of them, so we wind up either housing it or 

putting it into a location to be able to move it out. 

In this particular instance, the Billings area has engaged the Department of Defense and we will be moving property that has been 

excessed to them for their final disposition. 

Now, to highlight the report, and I think in fairness to GAO I 

must point out that several of the updates on these highlights were 

submitted late, and in some cases not acceptable to the General Accounting Office, but we will include these updates in our 60-day response. As I understand, we have 60 days from the date of the report to the middle of September to provide our progress report on 

what we are doing with the recommendations outlined in the report. 

The Alaska—I think it is so critical—the Alaska determination, 

in fact the ATVs, the tractors referred to in the GAO report as lost 

61 

and sold were identified in a 2006 Alaska border survey as transfers to communities or abandoned in place. Given the fact that 

Alaska, as Senator Murkowski said at the last hearing, is identified 

by the remoteness of the various locations. 

When we move equipment out to these remote locations, and 

they are there for a period of time until we finish the water and 

sanitation projects, for example, we literally turn them over to the 

community to continue to operate and maintain. So as a matter of 

an artifact of process, the border survey in fact shows that much 

of that equipment was in fact transferred. 

Now, I think it is also important that of the 1,097 items, the average age spans between 15 and 35 years. Two very important factors: this is really a one-time. We were building towards the ultimate complete takeover of the program by the Alaska Natives. 

They have done that, and we have—in fact, I have a note from a 

tribal leader up here that says basically that much of the equipment that was turned over to them is being used. 

It was old, but I think it is important to point out that the 86– 

121 law that enables us to build water and sanitation facilities in 

Indian Country does enable us to transfer property and equipment 

to them, to the tribe, for their operation and maintenance of their 

system. In the case of Alaska, 98 percent of the $6 million of property identified was in fact transferred in that fashion, 98 percent 

of all the equipment, and the law authorizes us to transfer that 

equipment. This accounts for about $6 million of the $15.8 million 

in the GAO report. 

The Tucson survey of the report for Jaws of Life, the fact that 

it got a lot of press as well, we have since found those five pieces, 

and in fact they were missed in one inventory. In the subsequent 

inventory, they were not available. I think the General Accounting 

Office made a look and couldn’t find them. We subsequently found 

them. We have verified that the Jaws of Life are in fact in condition, have been used, but they are now accounted for. We will provide that in our response for the 60-day inventory. 

The whole notion about fabricated documents is really an attempt by an employee to in fact provide the right form. We had actual information that tracked the property disposal. It was not in 

the right form and it was not acceptable to the General Accounting 

Office. But by creating these documents, it was referred to as fabrication. We do have evidence that tracks the actual request for 

property action. 

The yard sale, we are investigating that as well. It was brought 

to our attention by the General Accounting Office and we have 

been investigating that very heavily. I think the important part is 

the particular PCs that were referenced were actually for educational purposes, for training and use in how-to-use computerized 

equipment. There was no patient information on it, nor student information on that. 

But let me just close. I am sure you have questions on a whole 

host of issues, but let me just say that going forward, IHS is committed to strong enforcement and updating our policies. We have 

had the policies in its final throes. I want them on my desk in the 

next 60 days so that we can move forward with clear current policies. 

62 

I have recently held a conference call with the 12 area directors 

that manage the areas. I have advised them because of this particular report and my sitting here today, they are going to be held 

responsible. In fact, part of my assurance is to put a performance 

element in their performance contracts that cascades down to the 

service unit directors that will in fact hold them accountable performance-wise for accounting for and management of personal 

property. 

We will tighten up our management internal controls. We use a 

self-assessment means. I am going to ask that our staff make random visits, as the GAO has done, to our remote sites to ensure that 

they are adhering to not only receiving reports of equipment, but 

also the proper disposal reports. 

We will continue with the support of the department to fully implement UFMS and the PMIS, and I am confident that with the 

implementation of both, I look forward to a revisit, if you will, by 

the General Accounting Office at some point as they would desire, 

and that even in 60 days, I expect that our report on the status 

of our accomplishments will demonstrate significant progress, because we are doing it as we speak. 

Mr. Chairman, this concludes my summary statement. Thank 

you for this opportunity to report on the property management in 

the Indian Health Service, and I will be happy to answer any questions you might have. 

[The prepared statement of Mr. McSwain follows:] 

PREPARED STATEMENT OF ROBERT G. MCSWAIN, DIRECTOR, INDIAN HEALTH SERVICE, 

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

Mr. Chairman and Members of the Committee: 

Good Morning. I am Robert McSwain, Director of the Indian Health Service. 

Today I am accompanied by Randy Grinnell, Deputy Director of Management Operations, and Athena Elliott, Director of the Office of Management Services. We appreciate the opportunity to testify on the Indian Health Service’s property management program. 

The Indian Health Service provides health services to nearly 1.9 million American 

Indians and Alaska Natives (AI/ANs). In carrying out this responsibility, the IHS 

maintains a unique relationship with more than 560 sovereign Tribal governments 

located in the most remote and harsh environments within the United States as 

well as in modern metropolitan locations such as Anchorage and Phoenix. This geographic diversity and major health disparities offer extraordinary opportunities and 

challenges to managing and delivering health services. 

The IHS and Tribal programs provide a wide array of individual and public health 

services, including clinical, preventive, and environmental health services. In addition, medical care services are purchased from outside the IHS system through the 

Contract Health Services (CHS) program when the care is otherwise not available 

at IHS and Tribal facilities. 

The IHS is committed to its mission to raise the physical, mental, social, and spiritual health of all AI/ANs to the highest level. 

IHS appreciates the opportunity to respond to GAO’s report on IHS property management. IHS has been and remains committed to proper and accountable property 

management. To this end, IHS Headquarters and Area Offices have fully cooperated 

with GAO in the audit and investigation by providing detailed records, performing 

extensive data reconciliations upon request of the GAO, and participating in multiple and extended staff interviews. 

Overview of the IHS Inventory System 

IHS currently uses the HHS Property Management Information System (PMIS) 

to inventory personal Federal property. The PMIS was first implemented in FY 

2005, and provide tools that enable IHS to continue to improve property accountability. 

63 

Indian Tribes are authorized by Public Law 93–638, the Indian Self-Determination and Education Assistance Act, to assume control of programs administered by 

the IHS, including administrative support functions. The statute also permits IHS 

to transfer title to both real and personal Federal property associated with the operation of the contracted program to the Tribes. 

Also, Public Law 86–121, Indian Sanitation Facilities, authorizes IHS to transfer 

property to Indian Tribes in order to maintain sanitation facilities. IHS also has additional authority for providing equipment for safe water and sanitary waste disposal facilities to Tribes under the Public Law 94–437, the Indian Health Care Improvement Act, as amended. The Secretary of Health and Human Services (HHS), 

acting through the Service, also is authorized by P.L. 86–121 to provide financial 

and technical assistance to Indian Tribes and communities in the equipping of utility organizations to operate and maintain Indian sanitation facilities. 

In early FY 2005, HHS made a decision to have all HHS Operating Divisions, including IHS, utilize the Property Management Information System (PMIS). At implementation, the IHS-wide inventory was comprised of approximately 121,000 

items with an original acquisition cost of $302 million prior to assigning new and 

higher HHS accountability thresholds and assessing the value of depreciation. After 

applying the new HHS accountability thresholds under PMIS, the IHS inventory is 

comprised of approximately 49,000 accountable and sensitive items with a total 

original acquisition cost of $205 million. 

The implementation of the new HHS consolidated PMIS, including staff training, 

took an extensive amount of time and resources. Training is still ongoing and is a 

continuous process. Conducting physical inventories using the new system therefore 

lagged and many IHS Areas reverted to some legacy systems that had not been decommissioned. The process for conducting wall-to-wall physical inventories became 

more challenging due to the volume of equipment and property, and the time and 

effort required to undertake such a process. 

The new HHS logistics management policy mandates that all accountable and 

sensitive property, but not all Government equipment, be tagged with a Government 

decal. Accountable property is any item with an acquisition cost of $5,000 or more. 

Sensitive property is an item identified to be tracked with an acquisition cost between $500 and $4,999 that requires stricter inventory control. Property items meeting the new, higher dollar threshold or the sensitive items criteria are affixed with 

a barcode tag and entered into the PMIS. The PMIS includes a depreciation expense 

feature which will adjust the book value of the IHS inventory when it has been fully 

implemented, a feature which was unavailable in the legacy property system. As of 

2007, a physical inventory was completed for 100 percent of accountable/sensitive 

property in 5 of the 14 accountable areas throughout the IHS, including IHS Head 

Quarters (HQ). An additional 5 accountable areas completed partial inventories (50– 

90 percent of accountable/sensitive property) and the remaining 4 accountable areas 

examined 15 percent or less of their accountable/sensitive property. By the end of 

FY 2008, a physical inventory of 100 percent of accountable and sensitive property 

will be conducted in 14 accountable areas throughout the IHS. 

Response to GAO Report 

IHS worked extensively with the GAO to provide detailed information regarding 

the agency’s property management system. Their review was conducted at a time 

IHS was fully engaged in a transition from one outdated system to a newer, more 

efficient PMIS. As such, not all concerns cited by GAO in their report are current 

or defensible. GAO itself acknowledges various limitations to its audit and investigation, some of which are listed below. These limitations seriously undercut and 

are not reflected in GAO’s conclusions. 

• The report asserts that IHS did not consistently document ‘‘lost or stolen’’ property items and concludes that the number of currently unaccounted for items 

might actually be higher than GAO has identified. In fact, the ongoing process 

of reconciling the prior property management system to the new PMIS will reduce the number of currently unaccounted for items as the reconciliation progresses. 

• The report also overstates the net worth of currently unaccounted for items by 

not taking into consideration the depreciation value of these items. Some items 

referenced in the report are 15 to 35 years old, and yet are assigned their original acquisition cost. For example, some of the large, non-IT items of inventory, 

such as all terrain vehicles (ATVs) are valued at the original acquisition cost 

despite the fact that the actual equipment was acquired between 1974 and 

1999, well past their useful life expectancy of 8 years. 

64 

While IHS met with GAO on multiple occasions to discuss specific situations addressed in the report, GAO has persisted in defending some inaccurate situations 

described below. 

Alaska Tribal Self-Determination Award 

The ATVs and tractors referred to in the GAO report as ‘‘lost or stolen,’’ were 

identified on the 2006 Alaska Report of Survey as ‘‘transferred’’ or ‘‘abandoned in 

place’’. Some of the large construction equipment in the extremely isolated locations 

in Alaska has to be flown in, or shipped by barge. The acquisition dates of these 

1,197 items span 15–35 years. The useful life and actual ‘‘value’’ of these items were 

taken into consideration by the Board of Survey and the Determining Authority’s 

final decision to remove the items from the inventory records for the Alaska Area. 

At the time of the transfer of IHS property to the Alaska Tribal compact in 2000, 

personal property in use in Alaska reflected a non-depreciated value of approxi- mately $13 million, of which approximately $7 million was transferred to the Alaska 

Tribal compact under the new agreement/award. IHS–Alaska Tribal health officials 

jointly researched and reconciled the inventory and wrote off the remaining $6 million of this original amount representing 1,197 items in a single Report of Survey 

in 2006. The Report of Survey clearly stated that most of the written off items were 

disposed of either by (1) transfer to local Tribal communities; (2) transfer to a local 

Air Force Base; or (3) ‘‘abandoned’’ on an IHS construction site due to the extraordinary expense associated with the removal of the equipment, leaving 68 items valued at a non-depreciated value of $177,000 unaccounted for. 

Tucson Report of Survey and ‘‘Jaws of Life’’ 

All of the Jaws of Life extrication equipment which the GAO report characterizes 

as ‘‘lost or stolen’’ has been accounted for by Tucson Area in early May 2008. The 

Jaws of Life extrication equipment had been stored in a Rescue Truck and the inventory team missed locating the items on their earlier attempts when conducting 

the physical inventory. The Tucson Area property staff is in the final stages of completing the 2008 physical inventory which includes reconciling any differences between the physical inventory and the property records. The initial work on the 2008 

reconciliation process has resulted in locating and accounting for many of the items 

listed on the 2006 draft Report of Survey, however, the report does not reflect this. 

Allegation of Misrepresentations Made by IHS Property Staff 

The GAO report continues to categorize IHS HQ inventory items that have been 

accounted for by the IHS inventory as ‘‘lost or stolen.’’ When the GAO investigation 

commenced in August 2007, IHS property staff were in the process of reconciling 

the April 2007 physical inventory of IHS HQ property with additional information, 

including a follow up on-site inspection by IHS staff and independent verification 

of returned property by the Federal warehouse. While the initial IHS April 2007 inventory results indicated that 1,180 items were listed but not located on site, and 

over 500 items were on site but not listed on the HQ inventory, subsequent research 

of alternate records determined that the property had been properly disposed or accounted for. Independent verification with the Federal warehouse in 2007 confirmed 

that 498 items had in fact been properly disposed of as turn-ins to the warehouse. 

Additionally, in a subsequent inspection by IHS staff in late 2007, 222 items were 

found on site in IHS HQ that had been missed in the initial physical inventory 

taken in April 2007. The entire reconciliation process was completed in January 

2008 and updated information was provided at that time to the GAO, but GAO’s 

report does not appear to have considered this additional information. 

GAO’s Allegation of Fabricated Documents 

In January 2008, an IHS property staff member, in an effort to ensure GAO received needed information in an acceptable form, generated blank disposal records 

and recorded the disposal information that was provided from the HHS Federal 

warehouse onto ‘‘Request for Property Action’’ forms commonly referred to as HHS 

22 forms. An HHS 22 form is used to document property transfers, turn-ins, and 

disposition instructions. This form is also used to document new receipts when other 

source documents are not available. When these ‘‘HHS 22s’’ were provided to GAO, 

they reflected a current date of January 2008 and were clearly presented as having 

been created for purposes of establishing the requested audit trail using independent warehouse verification. Although they were not backdated or otherwise falsified, GAO accused the property staff person of ‘‘fabricating disposal records.’’ No 

one in IHS conveyed to GAO that these documents were anything but newly generated documents. The staff person who generated the HHS–22s after the fact, created them for the purpose of recording otherwise verified information for the review 

of the GAO, but there was no intent to deceive or mislead the investigators. 

65 

Allegation of ‘‘Wasteful’’ Purchases 

In 2007, IHS Headquarters initiated a procurement strategy to increase the cost 

efficiency of the replacement of computer technology used by all its employees. The 

useful life of many desktop computers and smaller portable devices is 3–5 years. By 

buying in bulk to meet needs in advance and making those purchases once a year, 

IHS can take advantage of significant price discounts, and reduce critical down time 

of vital IT tools. Only the numbers of desktops exceeding their useful life are replaced in the annual bulk purchase. A very few additional computers must be purchased for emergent needs arising during the year, such as new employees or to replace faulty equipment. IHS also uses those few additional computers, pending deployment to individual staff, for IT training purposes of all staff at both the Albuquerque and Rockville Headquarters locations. The 25 on-hand ‘‘spare computers’’ 

noted in the report as ‘‘excess’’ and examples of ‘‘wasteful’’ purchases, represents 

roughly 6 percent of the total number of desktops deployed at IHS Headquarters, 

which is an acceptable level of inventory to meet these needs. 

GAO alleges that IHS has assigned 10 computers to each employee in IHS Headquarters. This calculation appears to have been made by GAO by taking the total 

preliminary and unreconciled inventory (3,155 items) in April 2007 (which included 

items later verified to have been properly disposed) and divided the total by the 

number of IHS employees at HQ (about 300). If one uses the final reconciled number for the 2007 HQ inventory, approximately 1,500, the ratio is closer to about 5 

items per employee. 

‘‘Yard Sale’’ 

We are initiating an investigation into the allegation that a yard sale was conducted to dispose of surplus computers and other property. We appreciate the matter being brought to our attention by the GAO. In the meantime, we have verified 

that these computers were used for educational purposes at the Desert Vision Youth 

Wellness Center, and were not used in a clinical setting in which the computers 

would more likely be used to store sensitive data. 

HHS Response to GAO Recommendations 

IHS concurs with nine of the ten GAO recommendations addressed in the report 

to strengthen overall control environment for property management and has been, 

and is now, fully engaged in the ongoing process of updating its personal property 

management policies, conducting necessary investigations of any unaccounted property and ensuring that employees are held accountable as appropriate throughout 

the Report of Survey process. IHS is committed to strong enforcement of standing 

agency policies designed to ensure accurate and timely inventories of accountable 

personal property throughout the entire agency with official certification by property 

management staff. This includes enforcement of policies requiring proper use, control, maintenance and protection of federal government property and continued use 

of barcodes to identify and control all accountable and sensitive government property. 

Mr. Chairman, this concludes my statement. Thank you for this opportunity to 

report on the property management program in the Indian Health Service, serving 

American Indians and Alaska Natives. We will be happy to answer any questions 

that you may have. 

The CHAIRMAN. Mr. McSwain, thank you very much for your testimony. We all have a number of questions, of course, for you and 

Mr. Kutz. Before we get to those, I am going to ask Mr. Fernand 

Verrier, who is with us, he is one of three people who worked in 

the agency. Would you come forward to the witness table? You are 

going to give a short testimony. 

You were Deputy Director of the Office of Finance and Accounting, and Chief Financial Officer for the headquarters, Indian 

Health Service, in Rockville, Maryland until March of 2008. If I 

might stipulate, you have in your testimony a substantial amount 

of information about your service in the Navy, the Far East, your 

direct commission, your service in Operation Desert Shield and Enduring Freedom and so on; one year at CENTCOM; one year at the 

U.S. Embassy in Yemen. 

66 

Let me stipulate, if I might for all of us, all of that information 

about your service to our Country and thank you for it, and ask 

if you would begin on page two of your information and describe. 

You say on page two, ‘‘I would like to share my personal experience.’’ 

Your description here is of a rather small area in the IHS, but 

I think you provide it as descriptive of what you think happens at 

the IHS with respect to inventory. If you would start there and go 

to the end, that way we will have on record your impression as 

someone who worked in those offices, then we will go to questions. 

Mr. Verrier, thank you. 

STATEMENT OF FERNAND R. VERRIER, FORMER DEPUTY 

DIRECTOR, OFFICE OF FINANCE AND ACCOUNTING, INDIAN 

HEALTH SERVICE, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES; CFO, HEADQUARTERS INDIAN HEALTH 

SERVICE 

Mr. VERRIER. Thank you. As you stated, I would like to share my 

personal experience with the property management problems at 

IHS. 

In the fall of 2007, the IHS Property Book Office submitted a request to our office requesting that we conduct a complete inventory 

of our computer equipment. Mr. Tommy Thompson, who was my 

direct boss at the time, directed me to perform this inventory. He 

said that was my responsibility. 

Having not been there a long time, I asked a secretary to conduct 

the inventory. Out of the approximately 100 items, she could not 

locate approximately 20 items in our assigned office. Hearing this, 

I decided to conduct the inventory myself to determine the discrepancy. I did conduct the inventory and found the same discrepancy. 

I then contacted the Property Book Office and asked them to 

come and conduct an independent inventory to verify ours. They 

performed the same inventory and came up with the same results. 

I then sent an e-mail to our staff, which is approximately 35 individuals, and asked them if they knew of the possibility of where 

these missing items could be located. Their response came and we 

located one laptop computer and one desktop computer that was located in the individuals’ homes. 

I asked for documentation that permitted these individuals to remove the Federal Government property and take it home. Their response was, we do not do that around here. My response was, effective immediately, you will do this. 

I then contacted the Property Book Office and informed them of 

the location of the two missing items. The Property Book Office 

told me that they would prepare a new property book reflecting 

what they had found. My response was, okay. However, what are 

you going to do about the missing items? Their response was, we 

are going to write them off. My response was, what? You are going 

to write them off without conducting an investigation? And their 

response was, no, we write things off as we have always done. My 

response was, I can’t believe this. 

At this point, I contacted the Property Book Officer and informed 

him of what was going on. He told me he would check into it. I 

would estimate that the value of the property that was missing, the 

67 

18 items still missing, is approximately $18,000 to $20,000. If this 

is what is found in a small office at the headquarters of approximately 35 individuals, what would you expect in the other offices 

throughout the agency? 

I am very grateful to have the honor and opportunity to address 

the Committee and to assist in the effort to help implement property control management within HHS. Proper property management control will allow IHS to allocate its funding wisely and frugally in providing medical care for our Native American and Alaskan natives which the funding is for. 

At this time, I will answer any questions you have. 

[The prepared statement of Mr. Verrier follows:] 

PREPARED STATEMENT OF FERNAND R. VERRIER, FORMER DEPUTY DIRECTOR, OFFICE

OF FINANCE AND ACCOUNTING, INDIAN HEALTH SERVICE, U.S. DEPARTMENT OF

HEALTH AND HUMAN SERVICES; CFO, HEADQUARTERS INDIAN HEALTH SERVICE

Thank you, Chairman Dorgan and Members of the Committee, for taking the time 

to hear my testimony in regards to the blatant fraud, waste, and abuse of property 

throughout Indian Health Service (IHS). 

My name is Fernand R. Verrier. Until March 6, 2008, I was the Deputy Director 

of the Office of Finance and Accounting (OFA) and Chief Financial Officer (CFO) 

for Headquarters, Indian Health Service in Rockville, Maryland. 

I have served in the Federal Government since 1976, starting as a GS–9 Auditor 

and working until my forced retirement on the 6th of March 2008, due to a hostile 

and stressful work environment. My final position was at the GS–15 grade. I have 

served in the Federal Government as an Auditor, Supervisory Accountant, Budget 

Analyst, Supervisory Budget Analyst, Supervisory Accountant, Supervisory Auditor, 

Financial Manager, Financial Advisor, Auditor, Senior Auditor, and Deputy Director 

(Supervisory Accountant). 

I have also served in the Navy from 1962 to 1966 in the Far East. In 1977, I received a Direct Commission as a 1st Lieutenant in the Army Reserves and served 

on Active Duty during the following periods: Just Cause/Promote Liberty, Panama, 

December 1989 to September 1990; Desert Shield/Storm in Saudi Arabia, Kuwait, 

and Iraq, December 1990 to May 1991; and Operation Enduring Freedom in Bosnia 

from May 1996 to December 1996. After 9/11, I was once again called to Active Duty 

and served 1 year at Headquarters, Central Command, and 1 year at the U.S. Embassy, Yemen until my retirement at age 60. 

My responsibility at IHS as Deputy Director of the Office of Finance and Accounting and CFO was to serve as the Principal Deputy Director to the office Director. 

This means that I fully shared in the responsibility to exercise broad authority for 

development, presentation, and justification of the IHS budget, and for the allocation and management of financial resources available to IHS executives on financial 

management matters. I also had responsibility for implementation the provisions of 

the Chief Financial Officers Act of 1990 and the Government Management Reform 

Act of 1994. I applied supervisory responsibilities and managed the daily operations 

of the office; supervised and provided direction to subordinate staff either directly 

or through subordinate supervisors; served as principal advisor to the CFO on accounting principles, standards, practices, and functions and chief financial operating 

official requirements; and interpreted and provided direction for the development 

and execution of policies, guidelines, manual issuance, circulars, and other directives. 

As Deputy Director, I reported to Mr. Tommy Thompson, Director of the Office 

of Finance and Accounting, who reported to Ms. Phyllis Eddy, Deputy Director for 

Management Operations, who reported to Dr. Charles W. Grim, Director of Indian 

Health Service. 

I would like to share my personal experience with property problems at IHS. 

In the fall of 2007, the IHS Property Book Office submitted a request to my office 

requesting that we conduct a complete inventory of all our computer equipment. Mr. 

Thompson, Director, informed me that as the Deputy Director, it would be my responsibility. 

I asked our secretary to conduct this inventory. Out of approximately 100 items, 

she could not locate about 20 assigned to the OFA. Hearing this, I decided to conduct the inventory myself and found the same discrepancies. I then contacted the 

Property Book Office and asked if they could send someone to conduct and indeVerDate Aug 31 2005 07:55 Dec 01, 2008 Jkt 045293 PO 00000 Frm 00071 Fmt 6633 Sfmt 6621 S:\DOCS\45293.TXT JACK PsN: JACKF
68 

pendent inventory to verify ours. They performed the same inventory and came up 

with the same results. I then sent an e-mail to all our staff (approx. 35 individuals 

at the time) and asked whether anyone knew of the possible location of the missing 

items. The responses allowed us to locate one laptop and one desktop computer 

which individuals had at their homes. 

I asked for the documentation that permitted these individuals to remove federal 

government property and take it home. Their response was, ‘‘we do not do this 

around here.’’ My response was, ‘‘effective immediately we will begin doing this.’’ 

I then re-contacted the Property Book Office and informed them that we had located two of the missing items. 

The Property Book Office told me they would prepare a new Property Book reflecting what we had found. 

My response was, ‘‘O.K., however, what are you going to do about the items that 

are still missing?’’ Their response was, ‘‘We are going to write it off.’’ My response 

to that was: ‘‘WHAT? Are you not going to conduct an investigation about the missing items?’’ And their response was, ‘‘NO, we just write it off as we have always 

done.’’ My response was, ‘‘I can’t believe this! ’’ 

At this point I contacted the Property Book Officer and informed him of what was 

going on. He told me that he would look into it. 

I would estimate that the value of the approximately 18 items that were still missing was between $18,000 and $20,000. 

Now you are probably asking how this relates to the GAO report, ‘‘IHS Mismanagement Led to Millions of Dollars in Lost or Stolen Property.’’ Well, I say to 

you, that this is proof beyond a doubt that IHS has a very large problem in regards 

to property management. If this is what was found in a small Headquarters office 

of only approximately 35 individuals, what would you expect in the other offices and 

throughout the agency? 

I am very grateful to have had the honor and opportunity to address this Committee and to assist its efforts to help implement proper property management control within IHS. Proper property management control will allow IHS to allocate its 

funding wisely and frugally in providing medical care for our Native American and 

Alaskan natives. 

At this time, I am happy to answer any of your questions, if you have any. 

The CHAIRMAN. Mr. Verrier, thank you very much for your 

thoughts about your observations in the Indian Health Service. 

Mr. McSwain, Director McSwain, 11 years ago you wrote a 

memorandum, that is March 12, 1997, in which you said, look, we 

have had people stealing laptops around here, and we have a big 

problem. I assume back in 1997, 11 years ago, you were not Director, obviously. You were in the Indian Health Service raising a 

question about a problem you saw. I assume back then, just looking 

at that memorandum, you thought something serious was going on. 

When equipment gets stolen, that is a big problem, right? 

And so you raised the question and the need to do something 

about it. Eleven years later, we are sitting here in a Committee 

hearing room with a GAO report saying this thing is a complete 

mess. 

And your testimony, I must say, seems all too defensive of the 

existing system. For example, I read the report last night in full. 

I had read summaries before. But the report, for example, describes 

efforts by individuals in the Indian Health Service to fabricate documents to the Government Accountability Office. That is a very serious charge. You know, it seems to me that you have people fabricating information, that borders on criminal and you want to find 

out who would do that and get rid of them instantly. 

So tell me your response to the allegation of fabrication of documents? 

Mr. MCSWAIN. First of all, Mr. Chairman, as I mentioned, it was 

not necessary to even write those documents because we had the 

backup information that would attest to the disposal of the propVerDate Aug 31 2005 07:55 Dec 01, 2008 Jkt 045293 PO 00000 Frm 00072 Fmt 6633 Sfmt 6601 S:\DOCS\45293.TXT JACK PsN: JACKF
69 

erty. But let me just say that this particular matter has been referred to the Office of Inspector General for their inquiry and investigation as well. So this matter is in fact under the IG’s, I believe if the GAO didn’t refer them, we certainly have referred the 

matter to the IG for their look. 

The CHAIRMAN. But do you think it happened? If I were in your 

position and somebody did an audit or an investigation of my agency and they said, ‘‘IHS made a concerted effort to obstruct our 

work’’—that is very strong language from the GAO; I don’t know 

that I have ever heard that language of a Federal agency—‘‘a concerted effort to obstruct our work.’’ And then a misrepresentation, 

by the IHS Director over property items, and then fabricating receiving reports by the IHS property specialist. 

If I were in that chair, I would be furious if you had half a notion 

that any of that was true, and I would damn well find out as quickly as I could. Your impression is, well, we are directing this to the 

IG. 

Mr. MCSWAIN. As any kind of behavior of that type, we are dutybound to refer them to the IG and we have done that. What I am 

saying is, and quite frankly the particular employee that attempted 

to—the interesting thing about this particular event was, yes, there 

were receiving reports that were filled out and they were dated the 

day they gave it to the, which was three months later than it was 

actually received. So the real fault there is the fact that a receiving 

report was not prepared as the policy requires upon receipt. 

With the employee feeling that this form, this HHS–22, which is 

a form that literally manages and moves property around the system from acquisition to ultimate disposal was not there, their attempt to simply create one based upon documents that we already 

had that were not in that form, I question the fullness of ‘‘fabrication.’’ He may have prepared a form, but it is borderline. 

It is not like he completely backdated the document to the date 

of receipt. That would be fabrication, in my opinion, but not simply 

preparing the report and signing on today’s date, and providing it 

to the GAO as requested is, in my view, not quite the same level 

of fabrication as completely going back and redoing the report and 

representing it as performed in accordance with the policy. But 

that is just my opinion, but the fact is that it did occur, so it has 

been referred to the IG for further investigation. 

Mr. KUTZ. Mr. Chairman, could I address that? 

The CHAIRMAN. Yes. 

Mr. KUTZ. I don’t have an opinion. I have facts. He is talking 

about two different matters. If you look at the board up there, that 

is one of the 116 documents that were fabricated, showing that 571 

items have been transferred. Notice that there are no actual signatures on there. One of the individuals whose name was blocked out 

at the bottom did not even work there at the time that this transfer supposedly took place. We spoke to both people whose names 

are blacked out and they said that those documents did not exist. 

The worst situation that shows this as a fabrication, some of the 

items that supposedly were transferred before April, 2007, which is 

what those documents say, we found in our physical inventory after 

that date, clearly showing that these are fraud and fabricated documents. 

70 

Mr. McSwain might not be aware of all the facts, but those are 

the facts. 

The second case is a separate case, where we asked for three receiving reports, and that was a little bit different. The document 

wasn’t fabricated. We were given a document that showed no signatures and no one had actually received the items. We got a second document the day we asked for it with a signature that day. 

So we have two copies of the same document, one with signatures 

on it and a date in December of 2007, and the other one with no 

signatures. So that is a separate incident from the 116 documents 

that were fabricated. 

The CHAIRMAN. I will come back to that, but the report suggests 

that you can’t locate a Caterpillar tractor? You know, the description of the property—a pickup truck, van trailers, heavy equipment 

lost or stolen. Is there a Caterpillar tractor gone? 

Mr. KUTZ. It could very well be. It could be an inventory issue. 

It could be that something is gone. There are issues. I have read 

police reports of stolen vehicles. Other things may be just accounting issues. 

The CHAIRMAN. And so, we hear about bat dung and yard sales 

and all of these issues. It seems to me, Director McSwain, that this 

is a mess, and they have only looked at seven of the 163—— 

Mr. KUTZ. One-hundred-and-sixty-three, I believe. 

The Chairman.—seven of the 163 service areas around the Country. I wonder what we would be talking about here if all 163 were 

surveyed. Do you agree that we have a huge mess on our hands, 

Director McSwain? 

Mr. MCSWAIN. I would not go as far as perhaps the GAO is going 

with their generalization, because a large amount of our equipment 

is in the hospitals. It is in the facilities. It is my belief that the accountability of equipment within those hospitals and health stations and health centers, what we are really talking about here is 

the disposal. 

Much of what we are talking about is equipment that has completed its useful life and now is being processed out, either 

excessed in the case of the contaminated bat dung equipment, 

which was at zero value, was not being used, was no longer in the 

facility, even though it was health care equipment, it was so outdated that it was in fact moved out. That is one example. 

Of course, in Alaska where the tractors and backhoes and the 

like that get flown out for projects up there, we have had conversations certainly with the native corporations, and they are fully 

aware of the fact that that equipment is in those locations and in 

many cases being used. 

There is a term of art that we use, which is abandon in place, 

meaning that—and the requirements are that is it going to cost 

more to transport that piece of equipment back to a central place, 

or leave it in place. 

So it is complicated. I wouldn’t characterize it as a mess, but I 

certainly hear you. 

The CHAIRMAN. But Director McSwain, your statement just now 

is at odds with your own admonition 11 years ago about property 

being stolen, with Mr. Verrier’s experience of we have missing 

71 

property, what do we do? We write it off. We don’t investigate. We 

write it off. 

How much of that missing property was stolen? And you are telling us about a tractor that might have been airlifted in Alaska. We 

are talking past each other, I think. We have a GAO—the fact is 

that GAO is our own creation. They do work on our behalf. They 

have issued a report I think that is a scathing report, and you say 

today, you say that this system, inventory information management system is fully operational, and yet then you also say you are 

still migrating data and training staff. How can you have a system 

fully implemented if you are still migrating data and training staff? 

Your approach here today is to suggest, you know what, the GAO 

probably doesn’t quite understand it all. But you understood it 11 

years ago. I am frankly surprised, Director McSwain. I would be 

furious, if I were you. I would be furious about having to answer 

for this staggering incompetence. 

Mr. MCSWAIN. Let me assure you that 11 years ago, I certainly 

had a perception and I knew there were some things, there were 

reports being given to me, and I took action then. Fast forward to 

the current, I can assure you that I will make the changes that are 

necessary to bring accountability for this particular piece, as well 

as accountability in other parts of our system, as well as we have 

done with accountability for health care performance. 

The CHAIRMAN. But do you still have the people working for 

you—I assume the answer is yes—who attempted to obstruct the 

work of the GAO? Who provided false information to the GAO? 

They have given us a list of things here—fabricated reports, 

backdated. Do you still have those folks working for you? Because 

you seem to be here today explaining what they did and the reason 

they did it. I don’t think there is an explanation for that. Are those 

folks still working there? 

Mr. MCSWAIN. Yes. 

The CHAIRMAN. By what justification does that occur? 

Mr. MCSWAIN. I think, Mr. Chairman, we have had this conversation before. As employees, at least in the executive branch, 

they have rights. We will certainly deal with them, but they also 

have rights as permanent employees. But we will deal with them 

appropriately. 

The CHAIRMAN. Mr. Kutz, the work that was done here describes 

a system that is in chaos. Is that a fair description? And you heard 

Mr. Verrier’s comments, and you described that the audit commenced as a result of whistleblowers. Whistleblowers are not very 

well thought of by agencies, as you know. 

You started your testimony saying that the whistleblower allegations about inventory mismanagement were documented as accurate by the GAO. Is that correct? 

Mr. KUTZ. That is correct. 

The CHAIRMAN. Give me your impression of this entire system, 

and also answer for me, if you would, is it conceivable that the Indian Health Service could not have a fully operational system of 

property management in this period of time? 

Mr. KUTZ. No, it is not. 

The CHAIRMAN. If they don’t have training staff trained, and are 

still migrating data? 

72 

Mr. KUTZ. No. I think they are migrating the system, but this 

is a problem of people, process and system. As I mentioned in the 

opening statement, one of the things you have is a management 

culture here that has kind of allowed this to happen over at least 

13 years, because the memo there says there have been problems 

for two years. So really, the problems at least go back to 1995. 

So you have the overall control environment issue. And then, as 

I said, the rest of it is property management 101. You have pretty 

good policies in place, but people aren’t following them, and when 

they don’t follow them, they are not held accountable. That is really where the culture needs to change. 

So it isn’t really rewriting all the policies. Property is required 

to be bar-coded. Hand receipts are given, which means like if a 

computer is given to me, there is some accountability for it. They 

know I have it. It is in my room, and that kind of thing. They don’t 

use that at headquarters, for example, and other places, so basic 

policies that need to be followed. So it is going to take time to 

change the culture to fix a problem like this. 

The CHAIRMAN. I have additional questions, but let me call on 

Senator Murkowski. 

Senator MURKOWSKI. Thank you, Mr. Chairman. 

You know, you mentioned the policies in place, and your opinion 

that the policies are probably adequate. It really comes down to enforcement and the accountability aspect of it. 

Mr. McSwain, you mentioned that as a consequence of what we 

are dealing with, this GAO report, that you are moving to update 

the policies, was the terminology that you used. And you are going 

to put protocols in place, send folks out for random visits to kind 

of do your own internal audit there. 

I am concerned that we probably do have the policies out there. 

I can’t believe that we could have known to the level that we knew 

back in 1997 or whether it was 1995—obviously a good decade 

ago—that internally there were some property management issues 

that needed to be addressed. 

I can’t believe that we would not adopt and address policies at 

that point in time. I have to believe that the policies are there. I 

am very concerned about the lack of enforcement, and that is what 

it seems that we have in front of us today. 

That is what leads me to believe, based on what I have heard 

described today, the background from the GAO report, that you 

really do have a situation of chaos, of chaotic management, of management that simply does not work. 

I will tell you, I don’t know how else to describe my reaction 

other than saddened, that as a consequence of this, what we are 

going to be doing now in order to address the audit and the very 

obvious and glaring problems within the system, we are going to 

be spending money to send people out to make sure that we are 

doing what we need to be doing in terms of the bean-counting, and 

it is not going to get out to the hospitals. It is not going to get out 

to provide for those who have had their health care rationed, as we 

talk about. 

So in an effort to address this need, we are going to have to take 

some of these very scarce resource dollars that we all agree is a big 

part of our problem here, and we are going to have to direct them 

73 

to kind of the accounting end of it. When we are dealing with the 

accounting end of it, as important as it is, it is not getting more 

health care to those who need it within the system. So I am just 

kind of shocked at how we deal with some of the management 

issues. 

Let me ask you just in terms of the new system that you have 

now moved to, Mr. McSwain. We have gone through this conversion, or it is maybe still in the process, as the Chairman has suggested. And maybe, maybe not, this conversion has contributed to 

some of the difficulty in conducting annual audits, although I have 

to suggest that if it goes back as long as we are talking about, it 

is not just the conversion issue that we can point to. 

But with this new property management system, are we doing 

anything different in terms of the system itself, that will ensure 

that we don’t have the problems? Or again, does it really all come 

down to whether or not we are enforcing the policies and protocols 

that we already have in place? I am trying to understand how we 

move forward from here. 

Mr. MCSWAIN. Thank you, Senator. As you were speaking, I was 

thinking about the same sort of balancing dilemma that we face, 

that service unit directors face every day out in the service units. 

I could just see them saying, do I hire a nurse or do I hire a property person? Do I dedicate resources over here or over there? If I 

am sitting there and if I have a backlog of patients, I can kind of 

guess where their decision is going to be. They are going to hire 

the nurse. They are going to hire the doctor. They are going to hire 

the health care professionals to carry out the mission. 

What I believe, and I firmly believe this, is that my experience 

of being around the Indian Health Service a number of years, we 

have had a number of property systems. We had something called 

the NECOP system, which is a non-expended control operating program, for years. It was a stand-alone. Areas did it. There was some 

data that was moved around, but it really wasn’t a system. It was, 

for all intents and purposes, a spread sheet kind of a system that 

accounted for inventories. Then we moved forward to some later 

versions of online kinds of equipment—again, systems that were 

not integrated. 

This time, we have a system that is integrated as a part of the 

unified financial management system that has entry points 

throughout the Indian Health Service, and throughout the department, for that matter. 

So that ability to have the inputs, if you will, at the very local 

level is a system-wide application. That, coupled with—and I am 

not suggesting that we are going to go out and do queries and visits to every site—but it will tell us where the problems are and 

where we must go, so that we are not taking money away from patient care at the national level to provide these on-site reviews. 

We are going to be doing that balance. So we start looking for 

a system that will tell us what is going on, much like we do with 

health care, the provision of health care. We look at the data and 

it tells us where we need to focus our efforts. We know from our 

process of GPRA outcomes which parts of the Country, through 

trend analysis, where we need to deploy resources, where we need 

74 

to make decisions. I am just taking that model and moving it to 

the management side. 

Senator MURKOWSKI. Let me ask you, Mr. Kutz, if you think that 

this new management system is going to make a difference. You 

have been looking at it. 

Mr. KUTZ. Yes, we haven’t looked at the system necessarily, but 

I don’t think it is an issue of software or hardware. Let’s just use 

an example of bar-coding. You can have the greatest system in the 

world, but if people don’t bar-code equipment and enter it into the 

system when it is purchased, it doesn’t make any difference. We 

have found many, many items across the Country that weren’t barcoded, that weren’t in the system. You know, the $15.8 million and other items we have seen were 

things that were in the system that couldn’t be found. There was 

a whole host of things that weren’t in the system that weren’t barcoded, and things like that, which gets into beyond an accounting 

issue. If you look in the system and you see the stuff isn’t there, 

you might actually ask Congress for money to buy some more. And 

then that doesn’t go to health care either. So it is more than an 

accounting issue in that respect. 

Senator MURKOWSKI. Let me ask you, on the issue that Mr. 

McSwain brought up with the items in Alaska, some of the heavy 

equipment. I just wanted to clearly understand, ANTHC was the 

Alaska Native Tribal Health Consortium. It is not your understanding that they were at fault or had been involved in any way 

in anything inappropriate, I guess? 

Mr. KUTZ. No, from the documents we saw and the people we spoke to, there was $13 million involved. Seven million of it was 

inventoried and the tribal group accepted it. The $6 million was 

put on one of these reports of survey because it couldn’t be found, 

is what we understand from the people we talked to and the documents we saw. So no, that never made it to the tribe, because they 

weren’t going to accept it, because no one could find it. 

Now, the other issue that came up that was interesting was just 

abandoning property. I don’t know if that creates environmental 

issues, it is your State, so I am not sure if you would be pleased 

having property abandoned. 

Senator MURKOWSKI. But your audit didn’t show those assets as 

abandoned in place? They didn’t register anywhere, is what you are 

saying? 

Mr. KUTZ. They were on a report of survey in six or seven different categories. And a report of survey typically means that items 

are not found, they are damaged or they are stolen or whatever the 

case may be. Whereas the other $7 million that was involved was 

transferred and accepted. So that is why the $6 million is in question. There were no documents that we saw showing that the items 

were found and had been transferred. 

Senator MURKOWSKI. What about Mr. McSwain’s comment about 

the fact that so much of what we are dealing with when the inventory is old? We have had plenty of opportunity to talk about the 

inadequacy of facilities. I have every reason to believe that we 

probably have an awful lot of equipment out there that has, its 

value truly has depreciated to the point. How much of an issue was 

that in your findings? 

75 

Mr. KUTZ. Certainly some of it is old and things that have no 

value. Now, if they were still in service and they were lost, they 

would still need to be replaced. However, we did identify brand 

new items that were gone, also. For example, as of April 2007, 64 

at least of the items that were missing at headquarters were in the 

system as new computers. There were 10 Dell computers bought 

last summer that were in the system that we could not find. So it 

wasn’t just old junk. Some of it was old junk, certainly. But other 

things were new, usable items that were gone and couldn’t be accounted for. 

Senator MURKOWSKI. Mr. Chairman, I will defer to some of my 

colleagues at this point. 

The CHAIRMAN. Senator Tester. 

Senator TESTER. Thank you, Mr. Chairman. 

Where to begin? Let’s start with what Senator Murkowski was 

talking about. You had some kind of a document, this is for Mr. 

Kutz, a document that has inventory it, and you try to find where 

that inventory is and when you can’t find that inventory—— 

Mr. KUTZ. The record was PMIS, the property management information system, and the subsidiary records. So from that information we would do physical inventories both from the records to 

the floor and then from the floor back to the records. That is where 

you find things that aren’t bar-coded and aren’t in the system. 

Senator TESTER. So it is tough to lose a backhoe or a D8 Cat, 

even in a place as big as Alaska. So what is going on, Mr. 

McSwain? Are the documents not being filled out when you abandon something in place, or when you turn it over to a tribe or whatever happens to it? Are not those documents being filled out to 

show what the final resting place for a piece of equipment might 

be? 

Mr. MCSWAIN. Well, bear in mind that this is part of the 86–121 

program and we do buy equipment and the like, and we do actually 

transfer it to the community when they take over the system. So 

we don’t operate and maintain, so—— 

Senator TESTER. So why isn’t that reflected on your inventory 

list? Why is that equipment still on a list that the GAO would get 

and try to determine where it is at? 

Mr. MCSWAIN. It goes to the very point I was trying to make earlier, is that the whole process of moving the ownership of equipment, either, in this case the $6 million of equipment shown on the 

report of survey for Alaska was in fact distributed to military bases 

and to communities and the like. And it was indicated, at least on 

the report as I read, and I like, I don’t know whether GAO made 

a trip up there, but I have flown around Alaska and know how remote those locations are. That is important, Alaska is somewhat 

different. We don’t have the same kinds of heavy equipment in the 

lower 48. 

But let me just say that when you buy a piece of equipment and 

move it out there, it takes several years to complete its work, then 

we will say, look, we will just leave it there and turn it over to the 

community to use. 

Senator TESTER. Why isn’t that reflected in the documents? 

Mr. MCSWAIN. We need to move it off, and that was the report 

of survey, was to move it off of our inventory. 

76 

Senator TESTER. Then why isn’t it? 

Mr. MCSWAIN. That is the question that the General Accounting 

Office is raising, that we didn’t do that. That was incorrect. But the 

fact is—— 

Senator TESTER. So are they right, did you do it or didn’t you do 

it? 

Mr. MCSWAIN. We did do it. We did pull it off inventory. It was 

our report of survey that they are looking at. 

Mr. KUTZ. The only difference is, the reports of survey I am talking about typically document lost, stolen or damaged property. He 

is representing it has been transferred. There was no evidence we 

found that it was properly found and transferred. It could have 

been, but the records didn’t indicate that. 

Senator TESTER. Which is exactly my point. The records have to 

be clear. Why aren’t they clear? 

Mr. MCSWAIN. Well, the issue is that in the 86–121 program, we 

have various agreements we make with Indian communities when 

we are building a system for them, and we transfer it to them. And 

we generally will include in that document, it also includes the following equipment for purposes of operation and maintenance. We 

did not do that. 

Senator TESTER. Okay, thank you. 

You had talked to the Chairman about the fact that employees 

have certain rights when it comes to screwing up. And you said, 

we are dealing with it, or something to that effect. What exactly 

are you doing? 

Mr. MCSWAIN. Well, first of all, we are doing, certainly a review 

of the conduct. There are two kinds of ways to deal with employees, 

either through performance or conduct. In this case, we are looking 

at conduct, and was that conduct enough to move to disciplinary 

action. That is what we are doing. 

Senator TESTER. Okay, and Mr. Verrier, you talked about 20 percent of the equipment, when you did your audit, being gone. What 

year, what was the time frame for that? 

Mr. VERRIER. That was in the fall of 2007, I believe. 

Senator TESTER. Fall of 2007. Okay, Mr. Kutz, is it the same facility, was it the same outfit? 

Mr. KUTZ. It is at headquarters, we did a 100 percent inventory 

of headquarters in late 2007 into early 2008. 

Senator TESTER. So are we inventorying the same equipment, 

and you found 36 percent gone and Mr. Verrier found 20 percent 

gone? Is it basically the same equipment? 

Mr. VERRIER. That was just in my office of the—— 

Senator TESTER. Okay, so it was a bigger spectrum. 

Mr. KUTZ. We looked at all 3,000 plus pieces of equipment. 

Senator TESTER. Thank you very much. When you get the reports, computers do depreciate fairly rapidly, is that reflected on 

the reports you get, Mr. Kutz? 

Mr. KUTZ. Their old system did not have the ability, one of the 

new features of the PMIS system is that it has depreciation. So one 

of the reasons we used acquisition costs is that is all there was. 

There wasn’t depreciation information. 

Senator TESTER. Okay, so I am just curious, did you allow for, 

when you found the bat manure on the computers in Montana, did 

77 

you allow for any sort of depreciation, or did you not know when 

they were new? 

Mr. KUTZ. The only records involved were what the acquisition 

costs were. There was nothing on the report of survey that showed 

the date of acquisition of any of that property. There were things 

like treadmills from hospitals. Most of it was hospital equipment, 

actually, the bat dung incident. We don’t know how old it was, because no records were available to show. 

Senator TESTER. Sounds good. The computer that is missing from 

the New Mexico hospital, that you talked about, Mr. Kutz, the computer that was missing from the New Mexico Hospital, Mr. 

McSwain, was that turned over to the police? 

Mr. MCSWAIN. Yes, it was. In fact, it was reported to the Navajo 

police because it was on the Navajo reservation. 

Senator TESTER. And was there anything ever—I mean, what 

happened? 

Mr. MCSWAIN. It took a while to get a police report from them 

before we actually went through the process. I have a whole, if you 

would like to know the whole detail of a series of events—— 

Senator TESTER. Did they find out who stole it? 

Mr. MCSWAIN. It was stolen and it was reported, and we reported it up to the department because of the fact that it had personal information identification information. 

Senator TESTER. Did they find out who stole it? 

Mr. MCSWAIN. They are still investigating it. In fact, as of just 

last week, the area indicated that they are still, they believe they 

have a line on who took it, and so we are still waiting for that to 

occur. 

Mr. KUTZ. Senator, if I could just add, I read the police report 

on that also. There were no signs of break-in on that, so it was potentially inside. 

Senator TESTER. An inside job. 

Mr. KUTZ. Yes. 

Senator TESTER. Okay. 

Mr. McSwain, you talked about a new computer system that you 

implemented, at least that is what I thought I heard you say, a 

new computer system you have implemented to take care of a lot 

of the GAO’s concerns. Is that correct? 

Mr. MCSWAIN. It takes care of the accounting part of it. I think 

that—— 

Senator TESTER. Well, the accounting part of it seems to be a 

pretty big part. 

Mr. MCSWAIN. The accounting part of it is, but the most important thing I see here, and this is something that has surfaced with 

this whole process, and that is looking at boards of survey reports 

from around the Country. I have not looked at them in the past 

and I am looking at them now. Clearly, the ability—where those 

decisions are made, because boards of surveys take place when you 

have done one inventory year one, and year two you have an inventory and you reconcile between what happened to all the equipment that was on the year one inventory to year two—additions, 

deletions, losses. And so the system will record the first inventory 

and the second. 

78 

Now, bear in mind, I should by the fact that there are threshold 

values that the system will not capture. 

Senator TESTER. Is this the new system you are talking about? 

Mr. MCSWAIN. The new system will not—in fact, the department’s policies on whether or not certain threshold levels, and I 

won’t get into all those details. 

Senator TESTER. Can you tell me what that threshold level is? 

Mr. MCSWAIN. Well, the threshold level currently is $5,000. 

Senator TESTER. So it would not capture a piece of equipment that is less than $5,000? 

Mr. MCSWAIN. If it is sensitive equipment under $5,000 it will 

capture it. 

Senator TESTER. But if it not sensitive, it won’t capture it. So if 

I have a laptop for educational purposes, it won’t be on the books? 

Mr. MCSWAIN. That qualifies as a sensitive piece equipment so 

it will capture it. 

Mr. KUTZ. Many agencies do that, Senator. They will use a 

$5,000 threshold for financial statement reporting purposes, but 

they will keep track of property that has personal information and 

things like that. That is what Indian Health Service’s policy is. 

Senator TESTER. Okay. All right. 

The CHAIRMAN. On that point, my understanding is that is the 

point at which the Indian Health Service does not agree with the 

recommendations. They say they agree with 9 of the 10, but one 

of the recommendations they apparently do not necessarily agree 

with is this issue of the dollar threshold to track sensitive equipment such as BlackBerrys and cell phones, even if they fall under 

the accountable dollar threshold criteria. 

I don’t quite understand that. If you are assigning, for example, 

BlackBerrys to employees, you are not going to keep track of that? 

Mr. MCSWAIN. It becomes a threshold accounting issue, but in 

practice we are in fact bar-coding. I am walking around with a 

BlackBerry right now that has a bar-code on it. 

The CHAIRMAN. Then why would you object to the recommendation of the GAO? 

Mr. MCSWAIN. The objection to, certainly the idea of simply tracking all equipment under $500 is a threshold issue. And they 

are suggesting, I think their recommendation is that we track all 

of those items by the issuance of bar-codes, I believe. 

Mr. KUTZ. Our only suggestion was the PDAs and cell phones. 

That is what we disagree with, because those are gateways to potentially sensitive information. So it is not about dollars, it is about 

information. And most places do keep track of things like BlackBerrys. So hopefully they are going to agree conceptually with what 

are talking about. I think he actually agrees with our recommendation. 

The CHAIRMAN. Except that they have expressed exception to 

that recommendation. 

Mr. KUTZ. In writing they did, but it sounds like they agree with 

it conceptually, so I am not sure exactly where that puts them. 

The CHAIRMAN. Senator Tester. 

Senator TESTER. Just so you know, if you are not going to keep 

track of that equipment, I lost my BlackBerry a while back, it was 

$300. I mean, I quite frankly, hopefully that is going to be—let’s 

79 

get right to the crux of it. Mr. McSwain, do you think you have a 

problem? 

Mr. McSwain. Yes. I believe I have a problem. But not to the extent that is being portrayed. 

Senator TESTER. How much do you think it is over-inflated by? 

Mr. MCSWAIN. I couldn’t tell you at this point, but it is certainly not $15.8 million. It is much less than that. 

Senator TESTER. In your opinion, do you think it has been overinflated by double? 

Mr. MCSWAIN. For example, we just quickly parsed out that the $6 million worth of equipment in Alaska is deducted, $700,000 of 

the—— 

Senator TESTER. Well, I’m not—— 

Mr. MCSWAIN. I am trying to answer your question as to do I 

think it is inflated, yes. It is inflated, if not just from the fact that 

it is at cost value, not a depreciated value. 

Senator TESTER. A couple of things. First of all, if we extrapolated this out to all 163 regions, we would be talking nearly $400 

million, if the rate was the same. You could say they are inflated 

figures, they may be inflated figures if depreciation is taken into 

account. 

But I will also tell you that it also points out to me that you are 

running different sets of books. I don’t know how many sets of 

books you have out there, but they ought to be a lot clearer than 

that. Because quite honestly, the reason that person had to fabricate that form, by your admission, is because you had a different 

set of books than they though you had, and when they started 

changing forms, books, however you want to put it, they end up 

screwing up, and it ends up with two forms with different signatures on them and different equipment. 

So the whole thing seems to be pretty well screwed up. If it is 

not the employees’ fault, you have a systemic problem with your 

tracking system that quite frankly, you need to get somebody in to 

fix, and sooner, rather than later. 

The other thing is this. If you have a Caterpillar that you have 

given away or a backhoe that you have given away, and it is okay 

to give it away under 86–121 and you are following the rules, that 

is fine. But it needs to be documented. And the truth is, what Mr. 

Kutz said was exactly correct. You can have the best policies in the 

world, and if you don’t implement them, if there isn’t somebody implementing those policies, they are worthless. They are worthless. 

What actually is more disturbing to me than anything was the 

previous board you had up with a letter that was signed by you. 

And it was signed by Mr. McSwain, at the bottom, talked about 

1997, that little memorandum right there, March 12th, 1997, 

where you said, we have a problem, it needs to be fixed. We are 

light years further, we have much better technology than we had 

in 1997. You knew that there was a problem, and there is a problem now that is equally as bad, maybe worse than it was in 1997. 

The bottom line is this. I hear from folks in Native American 

Country all the time about, you have to plan when you are going 

to get sick, because the Indian Health Service never has enough 

money, Senator Murkowski talked about it. We come in here, we 

try to do the right thing, we try to get the money down to the peoVerDate Aug 31 2005 07:55 Dec 01, 2008 Jkt 045293 PO 00000 Frm 00083 Fmt 6633 Sfmt 6601 S:\DOCS\45293.TXT JACK PsN: JACKF
80 

ple who want it. And if you have employees who are walking out 

the door with laptops under their arms or with desktops, and it is 

not being documented, I can tell you this, employees do have 

rights. And I think they should have rights, by the way. But a thief 

has none. 

And you guys honestly, you can downplay this all you want. But 

the fact is, this isn’t going to get better until you admit there is 

a problem. I told the Chairman a minute ago, an alcoholic will 

never get better until they admit to themselves that they are an 

alcoholic. You have a problem within your agency that needs to be 

fixed. And if you are in denial, it is going to get worse. And the 

GAO came out with a report, you had an employee that came up 

and said, hey, I pointed this out. And I don’t mean to lecture to 

you, but the truth is what I said in my opening statement, this is 

totally unacceptable. It is totally unacceptable. And it gives Government a bad name. 

When I go home and people come up to me and tell me how 

worthless the Federal Government is, I personally take offense to 

it. But it’s damned hard to justify it when this kind of crap is going 

on in the agencies. 

The CHAIRMAN. Senator Tester, thank you. 

Let me ask a couple of additional questions. I don’t understand 

who has been in charge at the Indian Health Service of property 

inventory, all of these last years since you wrote the memorandum. 

Is there one person in charge in this system that sends out information to all the other agencies and so on, or all the other areas? 

And if so, who is that? Because you keep suggesting this is a system problem. Seems to me, it is a people problem as well, probably 

more a people problem. 

I want to just ask Mr. Verrier, who said this. He took a look in 

his area, couldn’t find 20 percent of the property, and the Property 

Book Office said they would prepare a new property book reflecting 

that. And then he said, okay, what are we going to about the items 

still missing? Their response was—was this the Property Book Office response? 

Mr. VERRIER. The Property Book Officer. 

The CHAIRMAN. Officer, I am sorry. Their response was, we are 

going to write it off. Mr. Verrier’s response was: What? You are not 

going to conduct an investigation? The answer is: No, we just write 

it off like we have always done. 

So the question is, you know, who was in charge and is that person still in charge, because I don’t think—you know, it is not as 

if a system doesn’t exist for inventory 10 years ago or today or 10 

years from now. An inventory is something every agency does, 

every business does. 

So who was in charge, Mr. McSwain? 

Mr. MCSWAIN. Well, we have had I think a fair amount of turnover in that particular leadership position, but let me just clarify. 

I believe it is important. I didn’t mean to say it was just a system 

problem. I think that you accurately describe that it is a people 

problem, because it is the people who in fact, as Senator Tester 

says, it is the people who are the custodial folks. These are people 

that are custodial people. 

There are faces on the problem. There are faces on the fix. 

81 

The CHAIRMAN. And if they are writing it off without investigating what happened to the property, would that violate procedures at the Indian Health Service? 

Mr. MCSWAIN. It certainly will in the future. 

The CHAIRMAN. Would it in the past? 

Mr. MCSWAIN. Well, in the past, if we couldn’t find it, then this 

is a reasonable means. One of the things that I—excuse me, I am 

having a difficult time with Mr. Verrier’s comments on the side 

while I am trying to speak. Thank you. 

The whole issue of having the trained personnel in the positions 

has eroded over the years. That is something we have to fix. I say 

eroded because—— 

The CHAIRMAN. What does that mean? I don’t understand that 

at all. 

Mr. MCSWAIN. We have property officers. We don’t have full-time 

property officers out there. We are moving, and a part of this new 

system is actually identifying individuals. In fact, we have increased the number of people who could be trained in proper receipt of equipment, which means receiving and tagging and 

inventorying equipment. 

The other end of it is custodial personnel that are trained. When 

I say there has been an erosion over time, it is that we have had 

retirements, we have turnovers. We need to strengthen our people 

system, if you will. 

The CHAIRMAN. Yes, but you have always had people in place to 

do these things, and somebody obviously hasn’t been doing it. And 

so it goes back to my question, is anybody held accountable? 

One of the things that you have said today, it appears to me from 

the GAO report, some property has been stolen, some property has 

been lost, some property has been misplaced. And you are describing to us, well, maybe that is true, but they are over-stating the 

value of what has been stolen, lost or misplaced. 

You know, the fact is, I think it is pretty irrelevant what the 

value is. If you have people stealing property, you have people losing property or misplacing property, it doesn’t matter to me so 

much what the value is. What matters to me is the system is broken and you have people who are supposed to be in charge that 

aren’t doing the job. 

I want to ask a question of Mr. Kutz. What was the date on 

which you finished your GAO investigation? When it was completed generally? 

Mr. KUTZ. This spring, and then what we did is send a report 

to the agency and give them a chance to comment. 

The CHAIRMAN. But you say this spring. Generally, when did you 

send the report to the agency for comment? 

Mr. KUTZ. May. 

The CHAIRMAN. In May. Now, it is the end of July. That is 60- 

plus days, I suppose. Any personnel changes in your system of inventory, Mr. McSwain, down at the Indian Health Service? I mean, 

any changes with respect to those that were alleged to have fabricated? Those who were alleged to have obstructed? Those that I 

assume had been in charge, but hadn’t really been in charge? 

Mr. MCSWAIN. I guess, let me just say that I am very fortunate 

in the fact that we pulled a property officer back into the position 

82 

as acting, that knows the system. Our biggest challenge now will 

be to fill that job permanently, the agency property officer. 

But no, there haven’t been any real changes in the last 60 days. 

Other than that, there were some individuals who took other jobs 

and left the agency, out of the property staff. But aside from that, 

there haven’t been any changes in personnel or leadership. That is 

not saying there won’t be. 

The CHAIRMAN. Do you understand how that sounds to me, when 

I have a report from the GAO, and by the way, I have worked with 

the GAO for over 20 years. I have read a lot of GAO reports. We 

rely on them. And they say that your agency, you had people inside 

the agency that worked for you, and I am talking about the headquarters now, who tried to obstruct their investigation, some who 

tried to fabricate information. 

And you say, well, we have not had any changes in personnel, 

and we have the GAO saying you have some people down there 

that have really crossed the line in a very serious way. How do you 

reconcile that? 

Mr. MCSWAIN. The way I reconcile it, certainly, is given the 

bright light that has been shined on our property management system is to review it across the Country, beginning with headquarters. We are doing that. We will be improving the staffing, 

dedicating more staff to it. I think during this process of the last 

few years, we moved the property function from Albuquerque. It 

was out there for a number of years, in my recollection. We moved 

it to Rockville. We haven’t been able to fully staff the property 

function in headquarters and are continuing to do so. 

It is my sincere hope that we will fill those positions very soon, 

and have the people trained and accountable, and not have the 

kinds of issues that surfaced during the investigation. 

The CHAIRMAN. But these aren’t just issues. These are some pretty fundamental things that the GAO has said. Frankly, I think you 

are destined to fail unless you shake this up in a significant way. 

I don’t hear that here. 

I tell you what, if I had to explain what the GAO has said about 

an agency I am now in charge of, and I recognize you have just assumed this role. You have been there for a long while, but you just 

assumed the role of Director. I would be furious sitting here reading that someone in my agency took actions that the GAO interpreted to be fabrication or obstruction. I would be furious. I tell you 

what, employee or not, they would be working at a different place 

right now, 60 days later. 

At any rate, here is what I am going to suggest; I am almost at 

a loss to try to figure out what we do with some of these agencies. 

You know, the Indian Health Service is desperately short of money, 

under-funded. You have health care rationing going on. We have 

massive bureaucracy. I went through a clinic and they said, here 

is where our new X-ray machine is going to be; we desperately 

need it; we are waiting for it. How long have you been waiting? 

Well, it has been about 18 months the requisition has been in, but 

it just needs a signature, but it has been waiting 18 months for signature at the region. 

You know, I hear that stuff all the time. I just think we have 

such a serious problem. This GAO report is an embarrassment to 

83 

an agency that just has to be doing much better work to try to address health care needs that cry out for assistance among the Native American population. 

I am going to ask on this subject, Mr. Kutz, whether the GAO 

could in about 90 days go back in. That is about five or six months 

after you have engaged with the Indian Health Service, and provided a report to them, if in about 90 days you would be willing 

to send somebody back in and give me an assessment of what has 

been done in 90 days from this date, to give us some assurance 

that things are happening there that keep track of property, that 

we don’t have future reports of stolen property, lost property, misplaced property. 

Are you able to give us some service to do a review in about 90 

days? 

Mr. KUTZ. Sure. As you mentioned, we work for you, so we would 

be happy to work with you and your staff and Mr. McSwain, looking forward. 

The CHAIRMAN. We will be in touch. The staff of this Committee 

will be in touch with you and Director McSwain. I really hope that 

we could get a report. I am not asking for a full audit. I am just 

asking for a consultation between you and the Indian Health Service so you can give us an assessment of what has happened since 

you submitted this information in May to the Indian Health Service. 

Senator Barrasso? 

STATEMENT OF HON. JOHN BARRASSO, 

U.S. SENATOR FROM WYOMING 

Senator BARRASSO. Thank you very much, Mr. Chairman. I ask 

that my statement become part of the record. 

But you are absolutely on point. Senator Tester used the word 

unacceptable. You used the word we should be furious. To me, this 

is offensive. We have the Wind River Reservation. We have the 

Northern Arapaho, the Eastern Shoshone. I visited with some tribal members yesterday, others when I was back in Wyoming on 

Sunday. Health care is vital to these people, and we need to make 

sure that the money, the investment that we as a Nation are making is getting to the right place, getting to the patients who are in 

need, and not being used this way. 

I don’t want to repeat some of the questions that may have been 

asked before I got here. 

Mr. Verrier, if I could, in your estimation, are these findings of 

the GAO, are they in any way isolated instances? Or is this really 

a systematic nationwide problem with the Indian Health Service? 

Mr. VERRIER. I have worked for the Department of the Army, Department of Defense, troop support agencies, National Institutes 

for Health, and I have never experienced in my over 30 years of 

Federal Government service or 30 years in the military, such blatant disregard for property accountability. 

The problem, as I see it, is lack of holding people accountable for 

the loss, lack of documentation having individuals sign for equipment, and lack of annual follow-up of inventory on the property. 

Senator BARRASSO. There was a little interchange earlier where 

there was a question of is property carefully looked at, and you 

84 

were shaking your head no in the past. Do you want to just expound on that a little bit? 

Mr. VERRIER. What can I say? You know, when equipment is 

missing, the procedures that I experienced with the Property Book 

Office was if you have a missing piece of equipment, they write it 

off. Okay? They re-do the property book, okay? To me, that is not 

the answer, okay? Somebody needs to do an investigation and inquiry on what happened to the piece of equipment, okay? 

Senator BARRASSO. Mr. McSwain, I understand you have only 

been there two months in this position. But Congress is being 

asked to provide a substantial funding increase for Indian Health 

Services, an increase. And we all know that our facilities are held 

together by, as they say in Wyoming, with duct tape and baling 

wire. 

If taxpayers are going to increase their investment in the Indian 

Health Service, then you really do need to act immediately to correct the problems, don’t you agree, to regain the public trust? 

Mr. MCSWAIN. Yes, Senator. It is our intention to certainly begin 

acting. We have already begun to act on the recommendations, and 

fully engage on all of the recommendations, and we are moving 

ahead. I welcome the 90-day visit. 

Senator BARRASSO. That was a question for Mr. Kutz. Any other 

recommendations that you would have for us as members of this 

Committee on ways that we can make sure that the public is getting their money’s worth, that the folks on the reservation in Wyoming are getting the health care that they need with the services 

going to them, and not this loss? 

Mr. KUTZ. Well, I think what Senator Dorgan said, not to walk 

away from this until you are satisfied it has been addressed. That 

is what oversight is all about. So we would support your continued 

oversight of these matters. 

Senator BARRASSO. Thank you, Mr. Chairman. 

[The prepared statement of Senator Barrasso follows:] 

PREPARED STATEMENT OF HON. JOHN BARRASSO, U.S. SENATOR FROM WYOMING

Last month, the Government Accountability Office—commonly known as the 

‘‘GAO’’—released a shocking and disturbing report. The GAO uncovered and substantiated claims that the Indian Health Service or ‘‘IHS’’ has grossly mismanaged 

government property and taxpayer dollars. The GAO report identified over 5,000 

lost or stolen items worth about $15.8 million. These items include all-terrain vehicles, tractors, Jaws of Life equipment, and—most egregious—computers containing 

social security numbers. A physical inventory found an additional 1,100 IT hardware items such as laptops and digital cameras were also missing from IHS headquarters. These lost or stolen items cost the taxpayers another $2 million. 

If Congress is going to be asked to provide significant funding increases for Indian 

health services, then the IHS must act immediately to correct the problems identified by the GAO. Safeguards and accountability measures need to be implemented 

so that these issues do not re-occur. Fraud, abuse, and theft problems are not created by small children. These issues are the responsibility of adults—and it is time 

that the people who allowed this to occur start acting like adults and put an end 

to it. Inaction only serves to condone this wasteful, abusive, and even criminal behavior. The standard defense of ‘‘this is just how the federal government operates’’ 

is not acceptable. 

Many of our state’s IHS facilities—particularly those in rural and frontier areas— 

are literally held together with duct tape. This year, the Senate worked in a bipartisan way to pass the Indian Health Care Improvement Act. I included an amendment in that bill requiring the GAO to report how various government and local 

programs coordinate health care services in Indian Country. This comprehensive reVerDate Aug 31 2005 07:55 Dec 01, 2008 Jkt 045293 PO 00000 Frm 00088 Fmt 6633 Sfmt 6621 S:\DOCS\45293.TXT JACK PsN: JACKF
85 

port is even more important now that the GAO has uncovered systemic IHS mismanagement. If we do not know: (1) where resources are being spent, (2) the number of programs dedicated to provide various health care services, or (3) how health 

care services are coordinated; then we are not maximizing our ability to help Native 

Americans and Alaska Natives. 

My amendment asks the GAO to focus its research efforts on programs such as 

Medicare, Medicaid, the State Children’s Health Insurance Program (SCHIP), and 

the IHS. It also requires GAO to explain how these federal programs interact with 

efforts by state, local, and Tribal groups to deliver essential health care services. By 

pinpointing service gaps and rooting out wasteful, abusive spending, then we can 

develop reasonable, commonsense solutions that streamline and improve Indian 

health care. It is essential our Committee have the information it needs to evaluate 

the current delivery system—exposing barriers that prevent collaboration, networking, innovation, and sharing of resources. This way, we can target federal funds 

to programs making the greatest impact—then focus on additional areas where Native American and Alaska Natives need our support. 

Mr. Chairman, the GAO is well known as ‘‘the investigative arm of Congress’’ and 

the ‘‘Congressional Watchdog’’. GAO helps Congress improve the federal government’s performance and ensure programs meet strict accountability standards—all 

for the benefit of the American people. We rely on their expert, unbiased recommendations to make sound policy decisions. This oversight shows us ways to 

make government more efficient, effective, ethical, and equitable. It uncovers what 

is working, what is not, and offers advice on how best to fix it. But, most importantly, this oversight helps us plan for the future. 

I do not believe anyone wants to play a game of ‘‘gotcha’’ with the GAO’s findings. 

Neither can we sit back, turn a blind eye, and accept that this is ‘‘business as 

usual’’. The American Taxpayers deserve better. Native Americans and Alaska Natives who depend on the IHS for their medical care deserve better. I am going to 

continue to fight to make sure individuals living on the Wind River Reservation, 

and all Native People across America, have equal access to quality medical care. But 

we cannot achieve this goal when the money we invest in IHS programs is wasted 

and property worth millions goes missing. 

Thank you for holding this hearing today, Mr. Chairman. I look forward to hearing the panel’s testimony. 

The CHAIRMAN. Senator Barrasso, thank you very much. 

Senator Barrasso brings to this Committee a unique perspective 

as a physician. Dealing with Indian Health Care has been frustrating because we know there has not been sufficient funding, and 

we know that the management of the system has not been good. 

We know contract health care money runs out. We have a lot of 

problems. 

Director McSwain, we rely on you to work with us. As Senator 

Barrasso indicated, we have only just confirmed your nomination, 

and yet you have inherited what I think is a mess. We want you 

to succeed, but we have big problems, in my judgment. 

Mr. Kutz, thanks to the GAO. We appreciate your work. We will 

look forward to having an additional report from you, and we will 

have a hearing on that report. 

Mr. Verrier, thank you. Those that are whistleblowers, I believe 

you had whistleblower status at one point. I am not certain of that, 

but they are pretty nettlesome to agencies. Agencies don’t like people who speak out when they see wrongdoing. But it is critically 

important that those employees that have the courage to speak out 

understand the value of that. I personally thank you, Mr. Verrier, 

for coming here today. 

Director McSwain, you have a lot of work to do. We appreciate 

your being here. I hope you will report directly to the Secretary of 

HHS, who should have been here today, but we will seek to get his 

comments at another time. 

Mr. Kutz, thanks to you and the GAO for your work. 

86 

[Whereupon, at 11:07 a.m., the Committee was adjourned.] 

(87) 

A P P E N D I X 

PREPARED STATEMENT OF DR. STEVEN J. MILLER, DIRECTOR, IHS NATIONAL

COUNCIL OF THE LABORERS INTERNATIONAL UNION OF NORTH AMERICA

Chairman Dorgan and members of the Committee, I respectfully submit this testimony in response to the July 31, 2008 hearing on the misuse of property at the Indian Health Service (IHS). 

First, LIUNA’s IHS National Council (‘‘the Council’’) wants to commend Chairman 

Dorgan for holding this important hearing and for requesting the GAO investigation 

into the misuse of property at IHS. LIUNA represents over 500,000 workers around 

the nation, including over 8,000 Indian Health Service workers in 23 states. Our 

members include physicians, nurses, dental professionals, pharmacists, engineers, 

food service, medical technicians, housekeeping, and maintenance workers. We also 

represent workers in the property division at IHS. Most of our members not only 

work at IHS, but also use IHS services as enrolled tribal members. 

The Council has two primary goals in submitting this testimony. First, we unfortunately must concur with GAO’s finding that there is rampant mismanagement at 

IHS, and believe we must share our workers’ constant problems with management 

with the Committee. Hopefully we can provide the Committee with information that 

will assist you in working toward our shared goal of having a well-run agency that 

adequately serves our Native American population—as employees and users of IHS 

services. Second, the Council wants to ensure that the workers we represent are 

treated fairly in the course of this ongoing GAO investigation. We already have reason to believe that IHS violated federal law by failing to inform the union when our 

bargaining unit employees (BUEs) were questioned during the course of this investigation. We now want to ensure that if any of our bargaining unit employees are 

disciplined that they receive the due process to which they are entitled under federal law and the union’s contracts with IHS. 

Misuse of Property Is Just One Example of the Pervasive Management 

Problems at IHS 

LIUNA and our BUEs face constant challenges dealing with IHS management. 

This is not an isolated problem in one area or service unit. It is pervasive and severe. The result is less money and staff for this already resource challenged Agency 

to provide health care related services to Native American people. Our BUEs are 

constantly harassed, demeaned, discriminated against, and otherwise mistreated by 

IHS management. In a given year, LIUNA files upwards of 75 grievances, and dozens of unfair labor practice charges against the agency. These grievances range from 

wrongful discipline to management unilaterally (and illegally) making changes in 

working conditions to sexual harassment. This year, LIUNA filed a group grievance 

against IHS on behalf of our BUEs for wanton and widespread Fair Labor Standards Act overtime violations based on numerous reports that our workers were 

being forced to work overtime without compensation and were improperly classified 

so the agency would not have to pay them the overtime they were owed under federal law. 

I.H.S. is notorious for the misapplication of personnel practices and policies and 

regulatory requirements that cost employees millions of dollars over time such as 

the failure to address compensation for standby status and failure to pay appropriate uniform allowances. Then to add insult to injury, the delay in dealing with 

the problems causes additional costs and resources. In 2002, the Union prevailed 

on a back standby pay claim and the interest was in many cases equal or greater 

than the back pay due. 

Instead of following the law and the labor-management contract, IHS will attempt 

to terminate, demote, or otherwise discipline workers who attempt to exercise their 

rights at work, or who report wrongdoing at the agency. The agency also has a widespread practice of ‘‘shuffling around’’ supervisors who are found to have violated the 

law or our contracts instead of terminating or disciplining them. This is an unacceptable double-standard. This mistreatment of our BUEs not only is unfair to 

88 

them, but is yet another example of the widespread management problems at IHS. 

These practices have created a culture of fear amongst the IHS workforce that impairs our BUEs’ ability to do their jobs. 

The union’s legal and contractual rights are also often ignored by IHS. The Union 

has been forced off of IHS property twice in the past year when we were exercising 

our legal right to organize and otherwise assist our BUEs. And during the course 

of this GAO investigation into the misuse of property, IHS failed to notify the union 

that our BUEs were being questioned. This is a violation of federal law (see, 5 USC 

7114(a)(2)(A)) and yet another example of management problems at IHS. 

All of these issues greatly harm morale at the agency, and show that IHS has 

little respect for the law, its employees, the unions representing its workers, and 

the clients IHS serves. LIUNA’s goal in raising these serious issues is to hopefully 

shed some light on other pervasive management problems at IHS—labor-management relations and mistreatment of IHS employees—in order to work with the Committee, and IHS, to remedy them. 

LIUNA Wants to Ensure That the Appropriate IHS Employees Are Held Accountable for the Property Issues at IHS 

LIUNA shares the Committee’s goal of holding accountable those responsible for 

misuse of property at IHS. However, we also want to ensure that the appropriate 

individuals are held accountable. We believe those are the managers who make IHS 

policy and direct our BUEs to follow it, not the BUEs who must follow those orders. 

LIUNA is concerned that IHS management may try to ‘‘scapegoat’’ our BUEs by 

unfairly blaming them for the misuse of property issues at the agency. Managers 

and supervisors make decisions about property policies at IHS. BUEs, by statutory 

definition, cannot make these types of policy decisions and still be represented by 

the union. 

If IHS managers directed or encouraged our BUEs to violate federal law or IHS 

policies regarding the use of property, those managers should be the ones held accountable, not the workers who were merely carrying out orders. IHS managers 

have great power over their employees, and employees can and do face discipline 

for refusing orders from management. Workers at IHS are thus faced with the terrible choice of standing up and refusing to violate the law or IHS policy, knowing 

that many other IHS workers have lost their jobs for refusing such orders from their 

boss, or following a manager’s misguided orders in order to protect themselves 

against being terminated or otherwise disciplined. 

If any BUEs are found to have willfully and knowingly broken the law, LIUNA 

wants to ensure that they are held accountable. But if IHS, or Congress, attempts 

to discipline our BUEs regarding the misuse of property issues discovered and alleged by GAO, proper procedures must be followed and workers’ rights must be protected (such as the right to have a union representative present during questioning, 

a worker’s right to present evidence in his/her defense, etc.). This right to due process is granted to the worker under both federal law and the union’s contract with 

the agency. The right to due process separates those workers who are represented 

by a union from those who are ‘‘at-will,’’ or lacking union representation. Unlike 

BUEs, ‘‘at-will’’ employees have no statutory right to defend themselves when 

charged with wrongdoing. The right to due process does not mean that the worker 

cannot ultimately be disciplined; it simply means that the agency or Congress must 

follow certain procedures to ensure fairness and impartiality during the course of 

its investigation and any subsequent disciplinary process. 

Conclusion 

LIUNA is very concerned about the allegations raised in the GAO report, ‘‘Indian 

Health Service—IHS Mismanagement Led to Millions of Dollars in Lost or Stolen 

Property,’’ and those raised at the July 31 hearing in your Committee. Our workers 

have dedicated themselves to improving the lives of Native Americans by ensuring 

they have access to adequate health care services. This mismanagement by IHS 

takes essential funds away from patient care and other needed services at the agency, makes it harder for our workers to do their jobs, and harms the agency’s reputation. The mismanagement, however, is not limited to misuse of property. 

Our BUEs face discipline, harassment, and other types of mistreatment every day 

from IHS managers. The culture at IHS is one of acceptance of this mismanagement 

and mistreatment of our workers, and this is simply unacceptable. LIUNA hopes 

that the Committee will continue to work to fix these rampant mismanagement 

problems at the agency so that our workers can do their jobs in a supportive, rather 

than a hostile, work environment. LIUNA further requests that our BUEs are treated fairly during the course of the ongoing GAO investigation, and not scapegoated 

by the managers who actually made the decisions resulting in lost and stolen propVerDate Aug 31 2005 07:55 Dec 01, 2008 Jkt 045293 PO 00000 Frm 00092 Fmt 6601 Sfmt 6621 S:\DOCS\45293.TXT JACK PsN: JACKF
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erty at IHS. We look forward to working with the Committee as you continue your 

work in this area. 

PREPARED STATEMENT OF ISABELLE FLORENCE YOUPEE, MEMBER, FORT PECK SIOUX

TRIBE

Dear Chairman Dorgan and Distinguished Committee Members: 

Thank you for allowing me to address this Committee. 

My name is Isabelle Florence Youpee. I am 61 years old and enrolled in the Fort 

Peck Sioux Tribe in Poplar, MT. I have worked in various capacities at various Indian Health Service facilities throughout more than 20 years of my lifetime. Most 

recently, from 1996 until May, 2008, I was employed as HIPAA Compliance Officer/ 

Computer Technician at the Spotted Bull Treatment Center in Poplar, MT, which 

is an alcohol/chemical dependency treatment center for treating residential aftercare 

adolescent clients and outpatient adult clients. It is fully federally funded through 

a 638 grant to the Fort Peck Tribes. 

Though there are several incidents I could relate regarding this subject, for this 

testimony, I wish to report on only some most recent. I feel, in doing so, it may help 

shed light on ways which may help to correct the problems resulting from IHS mismanagement. 

For the past several years at Spotted Bull Treatment Center, there has been gross 

mismanagement through political interference of Tribal Council members appointing unqualified personnel to run the treatment center. An incident stemming directly from this occurred in September 2006 when, in my capacity as HIPAA Compliance Officer/Computer Technician, I discovered that several computers had been 

given away to employees and the public without proper authorization, without proper processing, and without the necessary cleaning and reformatting of the hard 

drives. As a result, sensitive client information on those computers was released and 

accessible to whomever received the computers. This client information was completely accessible because it was in no way coded or protected. This occurred because the Tribal Council had appointed a Director with no knowledge whatsoever 

regarding the laws, rules and regulations governing chemical dependency programs. 

When I reported this information to the Billings Area Alcohol Coordinator, Dr. 

Kathy Masis, she agreed that this should not have happened but she was not concerned about it, not did she seem concerned about the HIPAA/Privacy violations resulting from the incident. When I requested she do an investigation, I was told, ‘‘it’s 

up to the Tribes.’’ Dr. Masis was satisfied to let this incident pass without any accountability or oversight. It appeared to me that she didn’t want to ruffle any tribal 

feathers should she have investigated the matter and found the Tribes at fault for 

hiring an unqualified Director. 

Another incident occurred because the Tribal Council appointed another unqualified Director in November, 2006. In January, 2007, this new Director appointed a 

Safety Officer who was in violation of the Indian Child Protection and Family Violence Prevention Act with regard to background checks. When I raised the concern, 

by memo, with the new Director, I was rebuffed because she was not even aware 

of this Federal law and did not seem to care because this employee was a friend 

of hers. In early February 2007, I took my concerns to the next higher authority 

by letter to the Tribal Chairman who did not recognize the importance of the matter 

and did not take any action. I then telephoned our Contracting Specialist at the 

BAO IHS, Robert Wallette who did not take any action but referred me to the higher-ups in IHS. In mid-February 2007, I wrote to the OIG for DHHS seeking help 

and asking that my correspondence be forwarded to the proper authority if necessary. On April 3, 2007, the IHS Program Integrity and Ethics Director sent a 

memo to the Billings Area IHS Director requesting a Fact-Finding Review. It was 

not until July 5, 2007 that the BAO IHS Director finally issued a Report of Findings 

which upheld my argument, but by then the Tribal Chairman had been pressured 

by one of his political supporters to take the corrective action. To this day, I don’t 

believe the Chairman took this action because of the legal necessity because I don’t 

believe he understood the risk to our adolescent residential clients explained 

through this law; I believe he took the action because of the political pressure he 

received. I say this because he did not take any action until he heard from his political supporter, even though he had received my letter several weeks earlier. 

In relating these incidents to you, it is not my intention to demean tribal leaders; 

my intention is to show that there is a severe lack of understanding and knowledge 

of the laws, rules and regulations by tribal councils when it involves managing any 

federally-funded program. There is also, as I’ve described, a lack of engagement and 

concern on the part of our immediate IHS administrators when such violations are 

90 

reported. There must be a way to insure that those wishing to contract or manage 

these programs have the basic knowledge to do so; and if it takes mandatory training and testing BEFORE taking over a program, then so be it. There is no excuse 

for allowing IHS programs to operate willy-nilly with no regard for the laws, rules 

and regulations under which they are supposed to operate. 

At Fort Peck, we do not have at present nor have we in the past 20+ years, anyone on our tribal council who has knowledge of how these facilities must be operated 

with respect to laws, rules and regulations. This ignorance has led to IHS management’s ability to do whatever they want, including completely ignoring their oversight responsibilities. It seems the Area office personnel who are directly responsible 

for oversight have bent over backwards to please the tribal council by adopting the 

attitude that ‘‘anything goes,’’ and ‘‘whatever the tribe wants.’’ I feel the Area and 

Service Unit personnel actually depend on Congress to ignore the problems so IHS 

can continue operating the way they do. 

In conclusion, we will never have the accountability we need to make IHS work 

the way it is supposed to until these real problems are rooted from the system. It 

is never right to allow tribes to play politics with the federally funded programs 

they contract, and allow IHS personnel at all levels to ignore their oversight responsibilities with no consequences. I am not of the opinion that IHS needs to have an 

influx of additional funding , as recent findings show that there is a great deal of 

waste at the administrative level, however, I do feel that we need more funding allocated specifically for medical services. IHS needs to be restructured, with special attention paid to overhead and bureaucratic costs, especially the high salaries paid to 

Area Office and Service Unit administrators who cannot or will not do their jobs. 

Throughout the years, the Service Unit Director has never taken responsibility for 

oversight in these matters; it’s as though that level of recourse does not exist in the 

procedural chain. To address these issues, the structure and administration of IHS 

need to be reviewed immediately and a straightforward procedure for reporting and 

correcting such things in the future must be established, widely disseminated, and 

promoted; employees need to know that it is not only permissible but expected that 

they report such mismanagement. 

Thank you for allowing me this opportunity. 

Æ