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

                                                            S. Hrg. 107-278

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

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED SEVENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 1857

            TO ENCOURAGE THE NEGOTIATED SETTLEMENT OF TRIBAL CLAIMS

                                   __________

                                FEBRUARY 7, 2002
                                 WASHINGTON, DC

                                    _______

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

    ____________________________________________________________________________
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                          COMMITTEE ON INDIAN AFFAIRS

                       DANIEL K. INOUYE, Hawaii, Chairman

                BEN NIGHTHORSE CAMPBELL, Colorado, Vice Chairman

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

            Patricia M. Zell, Majority Staff Director/Chief Counsel

             Paul Moorehead, Minority Staff Director/Chief Counsel

                                      (ii)

                                C O N T E N T S

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

                                    Appendix

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

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

                                  ----------

                           THURSDAY, FEBRUARY 7, 2002

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

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

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

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

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

        The Chairman. I call upon the gentleman from Alaska.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                A P P E N D I X

                                  ----------

                  Additional Material Submitted for the Record

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

     Prepared Statement of Hon. Ben Nighthorse Campbell, U.S. Senator from
              Colorado, Vice Chairman, Committee on Indian Affairs

        Good Morning. Thank you Mr. Chairman for holding this hearing. It
    is worth stressing, it seems to me, that this hearing is not about the
    history of trust funds management. It is not about proposals to reform
    trust management. And it is not about the Cobell litigation.
        It is about avoiding litigation which I think is in everyone's
    interest.
        In the 1980's Congress directed the Department of the Interior to
    reconcile tribal trust accounts; required an independent certification
    to ensure the reconciliation was complete; and provided that the
    statute of limitations would not be triggered until the account holder
    received an accounting.
        In January 1996, the Department of the Interior provided a report
    to each tribe. When the tribes received and reviewed the reports
    concerns were raised, concerns about their accuracy and reliability.
        In May 1996, the GAO issued a report also raising concerns. If
    these reports constitute ``accountings'' then the statute of
    limitations will be considered ``running'' and out of a sense of
    caution many tribes will feel compelled to file suit to protect their
    claims.
        Many tribes have already filed suit, as you know Mr. Chairman.
        What we are interested in, and what the Chairman and I have been
    working on for some time now, is trying to provide a ``cooling off
    period'' in which the United States and the tribes have a chance to
    settle potential claims arising out of this reconciliation process.
        I very much believe that a wave of lawsuits against the United
    States will serve no good purpose and will further alienate the
    parties.
        Mr. Chairman, since 1996 the United States has been embroiled in
    litigation for Individual Indian Money [IIM] accounts in the case of
    Cobell v. Babbit [and now Cobell v. Norton].
        I believe this committee can play a role in guiding the parties to
    a just settlement of all trust claims.
        I also believe that legislation along the lines of S. 1857 could
    encourage settlement and discourage protracted and expensive
    litigation.
        I know this Mr. Chairman: Without assurances to the tribes that
    their claims will not be barred, we will see an avalanche of lawsuits
    and that doesn't help anyone--other than the lawyers.
        I ask unanimous consent to include in the Hearing Record a letter
    dated August 30, 2001, from the GAO that summarizes its concerns about
    the reconciliation process, and with that I look forward to hearing
    from our witnesses this morning.
        Thank you Mr. Chairman.
                        U.S. General Accounting Office,
                                        Washington, DC, August 30, 2001
    Hon. Ben Nighthorse Campbell,
    Vice Chairman,
    Committee on Indian Affairs,
    U.S. Senate, Washington, DC.

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

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

    Enclosures
                                     ______

    Enclosure I

    SELECTED INDIAN TRUST FUNDS PROVISIONS CONTAINED IN APPROPRIATIONS ACTS

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

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

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

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

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

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

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

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

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

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

    Enclosure II

                              Related GAO Products

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

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                                     ______

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

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

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

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

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

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

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

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

    The Arthur Andersen Reports

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

    The Annual Appropriations Language

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

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

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

    The Need for Legislation

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

    Comments on S. 1857

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

    Conclusion

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

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

        I am pleased to be here today to summarize observations from our
    past work regarding Indian tribal trust fund accounts.
        In a June 1993 letter to this committee, we noted that the
    appropriations acts for the Department of the Interior had for many
    years contained a provision that tolled the statute of limitations on
    claims for losses to, or mismanagement of, tribal trust funds until the
    tribe had been furnished with an accounting of its funds from which the
    tribe could determine whether there had been a loss. We also noted that
    the parties envisioned that such an accounting would result from
    Interior's then-ongoing reconciliation and audit of the tribal trust
    fund accounts, which the Congress had mandated.
        At that time, we expressed our view that until there was a mutually
    acceptable basis for determining account balances and any associated
    losses, it would be premature to allow the statute of limitations to
    run. We observed that tolling the statute of limitations until
    reconciliation and audit of an account was completed, or until some
    mutually acceptable agreement was reached as to the account balance,
    had two overall purposes. First, it provided all interested parties,
    including accountholders, Interior, and the Congress, an opportunity to
    examine and evaluate all pertinent account information. Second, it
    permitted interested parties to attempt to resolve all claims arising
    from Interior's management of the accounts rather than addressing
    specific claims in a piecemeal fashion.
        The Congress first established an Indian trust fund account
    reconciliation requirement in the Supplemental Appropriations Act of
    1987. The requirement was in response to tribes' concerns that Interior
    had not consistently provided them with statements on their account
    balances, their trust fund accounts had never been reconciled, and
    Interior planned to contract with a third party for management of trust
    fund accounts.
        The original provision required that the accounts be audited and
    reconciled before the Bureau of Indian Affairs [BIA] transferred funds
    to one-third party. A provision in Interior's fiscal year 1990
    appropriations act added a requirement that the accounts be reconciled
    to the earliest possible date and that Interior obtain an independent
    certification of the reconciliation work. In 1994, the Congress,
    through the American Indian Trust Fund Management Reform Act of 1994
    (Pub. L. 103-412, 108 Stat. 4239; Oct. 25, 1994), required the
    Secretary of the Interior to provide tribes with reconciled account
    statements as of September 30, 1995.
        To fulfill these requirements, Interior contracted with two major
    independent public accounting firms, one to reconcile the trust
    accounts and the other to do an independent certification to indicate
    that the reconciliation resulted in the most complete reconciliation
    possible. Following a preliminary assessment in March 1992 by
    Interior's reconciliation contractor, Interior decided to have the
    contractor reconcile the tribal accounts for fiscal years 1973 through
    1992. Subsequent to this decision, Interior had BIA reconcile the
    tribal accounts for fiscal years 1993 through 1995 to comply with the
    1994 act's requirement that Interior provide tribes with reconciled
    account statements as of September 30, 1995.
        Interior's Indian trust fund account reconciliation project was
    completed in January 1996. During the reconciliation project, Interior
    spent about $21 million for contract costs over a 5-year period in a
    massive effort to locate supporting documentation and reconstruct
    historical trust transactions, as well as to perform other
    reconciliation procedures, in its attempt to validate tribal account
    balances. In January 1996, Interior began providing to each tribe a
    report package containing the tribe's reconciliation results. Each
    package included unreconciled account statements with schedules of
    proposed adjustments based on reconciliation project results for each
    year covered by the reconciliation, and a transmittal letter that
    described the information provided.
        During a February 1996 meeting at which Interior officials and the
    reconciliation contractor summarized the reconciliation project
    results, tribes raised questions about the adequacy and reliability of
    the reconciliations results. In May 1996, we reported on shortcomings
    of Interior's reconciliation project.\1\ The shortcomings consisted of
    procedures that were not completed due to missing records, systems
    limitations, or time and cost considerations. Attachment I to my
    statement describes the major shortcomings presented in our 1996
    report.
    ---------------------------------------------------------------------------
        \1\ U.S. General Accounting Office, Financial Management: BIA's
    Tribal Trust Fund Account Reconciliation Results. GAO/AIMD-96-63.
    Washington, DC: May 3, 1996.
    ---------------------------------------------------------------------------
        From 1992 through 1997, we monitored and reported on various
    aspects of Interior's planning, execution, and reporting of results for
    the reconciliation project. In May 1997, we reported\2\ to this
    committee that as of May 6, 1997, Interior had provided reconciliation
    reports to 310 tribes, 51 of those tribes had disputed the
    reconciliation results, and 41 had accepted the results. Of the
    remaining 218 tribes, 47 had requested more time to consider the
    results, and 171 had not responded to the reconciliation results.
    Attachment II is a list of GAO products issued between 1992 and 1997 on
    various aspects of Interior's Indian trust fund reconciliation project.
    ---------------------------------------------------------------------------
        \2\ U.S. General Accounting Office, Indian Trust Funds: Tribal
    Account Holders' Responses to Reconciliation Results. GAO/AIMD-97-102R.
    Washington, DC: May 23, 1997.
    ---------------------------------------------------------------------------
        In summary, although Interior made a massive attempt to reconcile
    tribal accounts during its reconciliation project, missing records and
    systems limitations made a full reconciliation impossible.
        I would be pleased to respond to any questions that you or other
    members of the committee may have.

    Attachment I

                      RECONCILIATION PROJECT SHORTCOMINGS

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

    Attachment II

                              RELATED GAO PRODUCTS

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

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

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