Opinion ID: 185354
Heading Depth: 2
Heading Rank: 3

Heading: The Indian Trust Fund Management Reform Act (1994 Act)

Text: 18 Concern over federal mismanagement of the IIM trust funds is not new. The General Accounting Office, Interior Department Inspector General, and Office of Management and Budget, among others, have all condemned the mismanagement of the IIM trust accounts over the past twenty years. See, e.g., U.S. General Accounting Office, Financial Management: BIA's Management of the Indian Trust Funds, GAO/T-AIMD-93-4 (1993); U.S. General Accounting Office, Financial Management: Status of BIA's Efforts to Reconcile Indian Trust Fund Accounts and Implement Management Improvements, GAO/T-AIMD-94-99 (1994); Misplaced Trust: The Bureau of Indian Affairs' Mismanagement of the Indian Trust Fund, H.R. Rep. No. 102-499, at 2-3 (1992) (citing critiques of IIM trust management by Interior Department IG, OMB, and others). Time and again Interior Department officials pledged to address these concerns. Yet, as Interior officials readily acknowledge, there has been little progress at reforming the management of IIM trust accounts. See Cobell V, 91 F. Supp. 2d at 32-33 (citing Interior Department's factual stipulations); Trial Transcript at 3768 (testimony of Interior Secretary Bruce Babbitt acknowledging that [t]he fiduciary obligationof the United States government is not being fulfilled). 19 Beginning in 1988, Congress held oversight hearings on Interior's management of the Indian trust accounts. These hearings led to a report, Misplaced Trust: The Bureau of Indian Affairs' Mismanagement of the Indian Trust Fund, H.R. Rep. No. 102-499 (1992) [hereinafter Misplaced Trust], which harshly criticized the Interior Department's mishandling of the trust accounts. Consistent with prior analyses, the report found, significant, habitual problems in BIA's ability to fully and accurately account for trust fund moneys, to properly discharge its fiduciary responsibilities, and to prudently manage the trust funds. Id. at 2. Interior's persistent failure to meet its obligations led the congressional investigators to conclude that top officials have utterly failed to grasp the human impact of its financial management of the Indian trust fund. Id. at 5. To address these concerns, Interior commissioned an independent study which determined that reconciling the IIM trust accounts could cost over $200 million. See Cobell V, 91 F. Supp. 2d at 13. Yet [e]ven that expenditure would have yielded only a 'reconciliation' of approximately eighty-five percent reliability. Id. Once again the Interior Department pledged reforms; once again there was little improvement. 20 In 1994, Congress enacted the Indian Trust Fund Management Reform Act (1994 Act), Pub. L. No. 103-412 (1994). This law recognized the federal government's preexisting trust responsibilities. 2 It further identified some of the Interior Secretary's duties to ensure proper discharge of the trust responsibilities of the United States. 25 U.S.C. § 162a(d). These include (but are not limited to) the following: 21  Providing adequate systems for accounting for and reporting trust fund balances; 22  Providing adequate controls over receipts and disbursements; 23  Providing periodic, timely reconciliations to assure the accuracy of accounts; 24  Preparing and supplying ... periodic statements of ... account performance and balances to account holders; and 25  Establishing consistent, written policies and procedures for trust fund management and accounting. 26 Id. 27 There is no dispute that the federal government owes IIM beneficiaries--the plaintiffs/appellees--these duties. The district court so found and the Interior Department conceded as much at trial. See, e.g., Cobell V, 91 F. Supp. 2d at 32-33. While arguing that plaintiffs' claims should be evaluated on the basis of what is contained in the Act alone, the Interior Department did not dispute that these duties must be interpreted in light of the common law of trusts and the United States' Indian policy. Id. at 33. Most significantly, the Interior Department stipulated that many of the duties owed under the 1994 Act were not being fulfilled. See id. (listing Interior Department stipulations). In other words, the federal government readily acknowledges that it is in breach of at least some of the fiduciary duties owed to IIM beneficiaries. 28 The Office of the Special Trustee & the High Level Implementation Plan 29 The 1994 Act created the Office of the Special Trustee for American Indians (OST) to provide for more effective management of, and accountability for the proper discharge of, the Secretary's trust responsibilities and ensure proper reform measures are implemented. 25 U.S.C. § 404(1). The Special Trustee (ST) is a sub-cabinet level officer appointed by the President and confirmed by the Senate who reports directly to the Interior Secretary. Id. § 4042(b). The ST is required to develop a comprehensive strategic plan for trust management reform and an appropriate reform timetable to ensure proper and efficient discharge of the Secretary's trust responsibilities. Id. § 4043(a)(1). The ST is also to oversee a fair an accurate accounting of the trust accounts and submit annual reports to Congress. Id. § 4043(b)(2)(A) and (f). Despite these responsibilities, the ST only has general oversight responsibilities; decision-making authority for IIM trust management remains with the Secretary of the Interior. Id. § 4043(b)(1). 30 The first ST under the Act was Paul Homan. In April 1997, Homan submitted a strategic plan to the Secretary and Congress pursuant to the 1994 Act. Among other things, the plan called for the reorganization of Indian trust fund management and the centralization of record-keeping, changes that may have required legislative authorization. The Interior Secretary opted to implement portions of the strategic plan, including the upgrade of computer systems, the clean-up of trust records, and the elimination of processing backlogs. The Secretary's plan, known as the High Level Implementation Plan (HLIP), was issued in July 1998. As drafted, the HLIP consisted of twelve subprojects which focus on ensuring the accuracy of information regarding the IIM trust accounts and developing uniform policies and procedures to guide trust management in the future. These subprojects included data cleanup, clearing probate backlogs, improving records management, and establishing internal controls to prevent future mismanagement. 31 The HLIP is designed to overcome numerous gaps and deficiencies in the Interior Department's record-keeping and trust management. Those identified by the district court as central to this case are the following: 32  Data Cleanup--The records upon which the government must rely to fulfill its trust duties are woefully deficient. In particular, the Interior Department does not have complete or accurate information on the identities or whereabouts of all trust beneficiaries, nor does the Department have complete land title records. For instance, as of 1998, there were over 46,000 IIM trust accounts without current addresses for the beneficiary and over 123,000 accounts without a Social Security or Tax Identification number. To address these concerns, the HLIP calls for the inventorying of existing documents from IIM trust offices around the country and the reconciliation of conflicting records. However, the trial court found no written plan to obtain missing information necessary for compiling complete land title records. Cobell V, 91 F. Supp. 2d at 17. 33  Probate Backlog--The Bureau of Indian Affairs has a probate backlog of approximately 12,000 cases, some or all of which could affect the payments owed to individual trust beneficiaries. There is currently no formal plan to address this backlog. There is, however, a reinvention team that is to address probate concerns and fractionated interests in land. Id. 34  Appraisal Program--The trial court found evidence of an estimated 212,000 title defects. These defects can impact the processing of leases which can, in turn, impact the government's ability to render an accounting for the trust beneficiaries. Under the HLIP, the Interior Department plans to reduce the backlog, at least in part, by re-defining when appraisals are required as a matter of Interior policy. Id. at 18. 35  Computer Systems--The Interior Department does not have computer systems in place capable of tracking trust resources and relevant data. The current system, known as the legacy system, is not capable of performing this function. The HLIP calls for the acquisition and implementation of two new computer systems to replace the legacy system: the Trust Fund Accounting System (TFAS) and the Trust Asset and Accounting Management System (TAAMS). Id. 36  Records Management--The Interior Department acknowledges that adequate record-keeping is essential if the Department is to fulfill its fiduciary obligations to the IIM trust beneficiaries. Yet, as Interior stipulated at trial, the current record-keeping system is woefully inadequate. To address this concern, the HLIP establishes a records management group to develop a plan for transferring financial records from BIA to OST and maintaining trust records into the future. Id. at 20-21. 37 Despite OST's substantial responsibilities, Congress did not provide for funding of OST in the 1994 Act, nor has the Interior Department sought funding for OST in its departmental budget requests sufficient to meet the ST's estimated costs. In January 1999, the Interior Secretary announced his unilateral reorganization of OST, prompting Homan's resignation. 3 38 There are also trust management problems at the Treasury Department. In response to plaintiff's charges, the Treasury Department stipulated to the following problems and remedies: 39  Illegal Document Policies--The Treasury Department regularly allows the destruction of documents over six years and seven months old in conformity with the National Archives and Records Administration's document destruction schedule. At present, no effort is made to ensure that IIM trust records or other documents that could be needed to conduct an adequate accounting are preserved. As a result, IIM trust records necessary for an accounting of the trust accounts have been irretrievably lost. The Treasury Department has agreed to develop a record retention schedule for trust documents for the purposes of this litigation and into the future. Id. at 23. 40  Time Lapse in Fund Availability--There can be a time lapse between the deposit of funds with the Treasury Department and the investment of those funds by the Interior Department on behalf of IIM trust beneficiaries. The Treasury Department has agreed to facilitate investment when funds are initially deposited. Id. at 22. 41  Lost Interest on IIM Checks--According to plaintiffs, some IIM beneficiaries lose interest during the delay between the time a check is issued and when that check can be presented for payment. Treasury has agreed to conduct a study of the alleged time lapse and resulting lost interest. Id. at 22-23. 42 The Treasury Department further stipulated to the development of new systems and procedures that could potentially fulfill the Department's fiduciary obligations. Id. at 22.