[Senate Hearing 110-608]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-608

INDIAN HEALTH SERVICE MANAGEMENT: LOST PROPERTY, WASTEFUL SPENDING, AND 

                          DOCUMENT FABRICATION

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

                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 31, 2008

                               __________

         Printed for the use of the Committee on Indian Affairs













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                      COMMITTEE ON INDIAN AFFAIRS

                BYRON L. DORGAN, North Dakota, Chairman
                 LISA MURKOWSKI, Alaska, Vice Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            TOM COBURN, M.D., Oklahoma
DANIEL K. AKAKA, Hawaii              JOHN BARRASSO, Wyoming
TIM JOHNSON, South Dakota            PETE V. DOMENICI, New Mexico
MARIA CANTWELL, Washington           GORDON H. SMITH, Oregon
CLAIRE McCASKILL, Missouri           RICHARD BURR, North Carolina
JON TESTER, Montana
      Allison C. Binney, Majority Staff Director and Chief Counsel
     David A. Mullon Jr., Minority Staff Director and Chief Counsel


















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 31, 2008....................................     1
Statement of Senator Barrasso....................................    83
    Prepared statement...........................................    84
Statement of Senator Dorgan......................................     1
Statement of Senator Murkowski...................................     4
Statement of Senator Smith.......................................     6
Statement of Senator Tester......................................     5

                               Witnesses

Kutz, Gregory D., Managing Director, Forensic Audits and Special 
  Investigations Unit, U.S. Government Accountability Office.....     6
    Prepared statement with attachments..........................     8
McSwain, Robert G., Director, Indian Health Service, U.S. 
  Department of Health and Human Services; accompanied by Randy 
  Grinnell, Deputy Director for Management Operations, and Athena 
  Elliott, Director, Office of Management Services...............    59
    Prepared statement...........................................    62
Verrier, Fernand R., Former Deputy Director, Office of Finance 
  and Accounting, Indian Health Service, U.S. Department of 
  Health and Human Services; CFO, Headquarters Indian Health 
  Service........................................................    66
    Prepared statement...........................................    67

                                Appendix

Miller, Dr. Steven J., Director, IHS National Council of the 
  Laborers International Union of North America, prepared 
  statement......................................................    87
Youpee, Isabelle Florence, Member, Fort Peck Sioux Tribe, 
  prepared statement.............................................    89

 
INDIAN HEALTH SERVICE MANAGEMENT: LOST PROPERTY, WASTEFUL SPENDING, AND 
                          DOCUMENT FABRICATION

                              ----------                              


                        THURSDAY, JULY 31, 2008


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:39 a.m. in room 
562, Dirksen Senate Office Building, Hon. Byron L. Dorgan, 
Chairman of the Committee, presiding.

          OPENING STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    The Chairman. Today, the Committee is going to hold a 
hearing on a recent GAO report documenting mismanagement and 
lost property at the Indian Health Service. This Committee has 
held a number of hearings on Indian health care, which confirms 
a full-scale crisis, including the rationing of health care in 
Indian Country. These hearings highlighted the significant 
unmet needs in health care facilities, contract health dollars, 
and other basic services.
    Despite the documented need for health care, today the 
Committee will focus on the GAO report. The GAO investigation 
concluded that a complete lack of direction at the Indian 
Health Service from the top down led to millions of dollars in 
lost or stolen property, wasteful spending, and document 
fabrication.
    As you can see on some charts I have, charts one and two 
show the key findings of the GAO report. The report found that 
5,000 property items worth $15.8 million were reported lost or 
stolen. This was between 2004 and 2007. The report covered the 
Indian Health Service headquarters and only 7 of the 163 Indian 
Health Service units.
    [The information referred to follows:]
    
    
    
    The losses include 1,100 information technology items at 
the headquarters. That mounts to more than one-third of the 
information technology equipment assigned to employees at the 
headquarters. GAO also identified thousands of missing property 
items controlled by the IHS. These items included tractors, 
all-terrain vehicles, pickup trucks, GPS systems, and even a 
Jaws of Life used by first responders in motor vehicle 
accidents.
    More troubling in the course of the investigation, GAO 
reported employee document fabrication to cover up the 
mismanagement.
    The Indian Health Service has known about this 
mismanagement for some time, if I can have chart three put up. 
We have a letter here showing that Mr. McSwain felt strongly 
enough 11 years ago when he was Acting Director of the Office 
of Management Support at the Indian Health Service to address 
the issue of unaccounted property. It took the department eight 
years to act on his concerns. In October of 2005, the 
Department of HHS issued a directive to implement a new 
universal information management system.
    [The information referred to follows:]
    


    
    I had hoped the Secretary would be here today. I invited 
the Secretary of Health and Human Services. He indicated he 
would not come. He has some meetings on the Hill, but 
apparently because of that scheduling conflict, he chose not to 
attend. I will say to the Secretary, I think he should have 
been here, and this Committee will ask him again to show up at 
this table and answer these questions.
    It seems there is no clear understanding, to me, at the IHS 
headquarters of the location, condition or even the existence 
of significant losses of property purchased with taxpayers' 
dollars. One thing is clear, however: Migration to the property 
management information system, which began or was supposed to 
have begun in 2005 is clearly not functioning at the Indian 
Health Service.
    I understand the IHS disagrees with the characterization of 
case studies that are in the GAO report. With that said, the 
Service has agreed to 9 of the 10 recommendations. They 
acknowledge a severe issue with property management and 
security at the IHS, so we have asked Director McSwain to give 
us his comments today.
    This report has received a fair amount of attention in the 
past few weeks. I hope the explanations that we hear today will 
clear up some of this, but I must say that we have people dying 
in this Country because they don't get adequate health care. 
All of us see them when we go to reservations in our Native 
communities. There is full-scale rationing going on. We run out 
of contract health care money, in some cases early in the year 
in tribal governments.
    I have described before my concern about the bureaucracy in 
the Bureau of Indian Affairs. I described my concern about the 
management in the Indian Health Service. This GAO report, I 
think, is a scathing indictment of the way things have been 
done at the Indian Health Service.
    Mr. McSwain has just recently been confirmed. He has been 
on the job a relatively short period of time. Our Committee 
confirmed his nomination, but Mr. McSwain has inherited an 
agency that has, in my judgment, very serious problems.
    I have described before circumstances where incompetent 
employees, rather than being dealt with as incompetent 
employees, are transferred from one area to another, so they 
transfer the incompetents, and the next group of patients is 
treated to the same incompetence and mismanagement. I tell you, 
it is enough to make you pretty depressed when you take a look 
at the way both the BIA and the Indian Health Service have been 
managed.
    That is not to say there aren't some good people working in 
the system, but I am telling you, in my judgment this GAO 
report describes an agency in desperate need of repair, and one 
that is not doing what it should to serve the health needs of a 
very vulnerable population.
    Senator Murkowski?

               STATEMENT OF HON. LISA MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman.
    You point out the number of hearings that we have had in 
this Committee that have looked to the issue of the inadequacy 
of Indian Health. Just within this Congress alone, the number 
of hearings that we have had, the discussion on the floor about 
Indian Health Care reauthorization, and time and time again we 
have heard about the struggles that the Indian Health providers 
face as they try to stretch very, very limited resources to 
address the increasing health care costs.
    Every year, this Committee issues its budget views and 
estimates letter, and we are always advocating for increases to 
the health care funding. Every year we are challenging our 
colleagues to do more to provide for Indian health care by 
increasing the appropriations, just a couple of weeks ago with 
the PEPFAR bill and efforts there.
    But then to receive a report like we have before us today 
from the GAO about this wasteful spending and the property 
mismanagement by the IHS, I mean, it truly undermines the 
confidence in the structures that we have been defending when 
we say, well, we need more appropriations. But if internally we 
have this level of mismanagement going on, it really causes you 
to wonder how we truly move forward.
    I am so disappointed that so many of the very basic 
shortfalls in property management were identified within this 
report. You would like to think that the management shortfalls 
that have been highlighted are limited just to these instances 
that are detailed in the report, but the concern that I have is 
that it is indicative of a much larger problem within the 
agency.
    This is not just a spotlight on just a few issues that we 
have identified and there is nothing more. I think it goes 
much, much deeper than that.
    I do understand that IHS was undergoing conversion to this 
new property management system. I understand that we may hear 
that the agency was short-staffed, but that is no excuse. It 
absolutely does not account for the fact that the taxpayers, we 
here in Congress, must be assured. We have to have the 
confidence that the basic procedures, that the proper 
procedures for management and accountability are in place and 
that they are followed.
    So I look forward to the comments this morning from you, 
Mr. McSwain.
    I do think that this is important to bring this up in as 
timely a manner as you have, Mr. Chairman, and I appreciate 
your doing so. Thank you.
    The Chairman. Thank you very much.
    Senator Tester?

                 STATEMENT OF HON. JON TESTER, 
                   U.S. SENATOR FROM MONTANA

    Senator Tester. Thank you, Mr. Chairman, and thanks for 
having this hearing. I want to express my appreciation for the 
remarks that you and the Ranking Member both made on this 
topic.
    I guess it explains a lot, after what I have seen over the 
last year and a half with IHS in the hearings we have had here 
and how the health care system in Indian Country is upside-
down. I guess this is the way it ought to be. You know, $15.8 
million for years, not knowing where the equipment went to.
    I guess it fits in with the pattern of what we have been 
hearing here for the last year and a half and probably a lot 
longer before that before I came onboard.
    I would just tell you this, it boils down to two things as 
far as I am concerned: flat, blatant incompetence, number one; 
and number two, a total vacuum when it comes to leadership. 
This isn't like developing technology for battery-powered cars. 
There are no excuses here.
    I don't know who is responsible. It is probably multiple 
folks at different levels. But I will tell you this, if there 
was this kind of incompetence on my farm, people wouldn't be 
working there anymore, bottom line.
    GAO came forth with some recommendations, and I look 
forward to hearing how these recommendations have been 
implemented, but the bottom line as far as I am concerned is 
that you don't get rid of incompetence like this without 
getting rid of the people who were responsible for the 
incompetence.
    That is all. Thank you.
    The Chairman. Senator Smith?

              STATEMENT OF HON. GORDON H. SMITH, 
                    U.S. SENATOR FROM OREGON

    Senator Smith. Mr. Chairman, members of this Committee, 
thank you for moving out the two bills that were moved in the 
business part of this hearing. I appreciate that. One of them 
was my own.
    I also want to thank you, Mr. Chairman, for moving this 
issue forward in the minds of the Senate and all those who are 
concerned with Indian health. I share your concern. I 
appreciate this GAO report and look forward to using it as a 
vehicle to improve Indian health care.
    The Chairman. Thank you very much for your comments.
    We will now call to the witness table Director McSwain and 
Greg Kutz from the Government Accountability Office. Mr. Kutz 
is the Managing Director of Forensic Audits and Special 
Investigations.
    Mr. Kutz, we welcome you.
    Director McSwain, we welcome you.
    We will begin with the testimony of Mr. Greg Kutz. Mr. 
Kutz, you and your agency produced this Government report. We 
would like to hear your testimony, followed by the testimony of 
Mr. McSwain. Then we will proceed to one additional witness.
    You may proceed.

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

    Mr. Kutz. Mr. Chairman and members of the Committee, thank 
you for the opportunity to discuss Indian Health Service 
property and equipment.
    Today's testimony highlights our investigation of 
allegations we received in June of 2007. The bottom line of my 
testimony is that these allegations were accurate. 
Specifically, IHS had millions of dollars of lost and stolen 
property, including items containing sensitive personal 
information.
    My testimony has two parts. First I will discuss the 
problems that we identified. And second, I will discuss the 
causes of these problems.
    First, IHS records show that from 2004 through 2007, at 
least 5,000 property items with an acquisition value of $15.8 
million were lost or stolen. Our own inventory work during 
Fiscal Year 2008 identified similar problems.
    For example, at the Rockville, Maryland headquarters, 1,100 
or 36 percent of IT property items were lost or stolen. This is 
based on a 100 percent inventory by my staff. In addition, 
based on a statistical sample of IT equipment at seven field 
locations, we estimate that 1,200 or 17 percent of these items 
were also lost or stolen.
    The following cases give you a flavor for what we found. 
First, the poster board on my right shows four reports of lost 
or stolen property totaling over $1.8 million. IHS routinely 
writes off millions of dollars of these types of losses without 
holding anyone accountable.
    The next poster board shows the Montana region writing off 
over $700,000 of equipment because it was infested with bat 
dung. And according to a Phoenix-area executive officer and 
others, a yard sale of Government furniture and equipment was 
held in Nevada. Fliers were provided to the public advertising 
this event.
    We also found indications of the compromise of sensitive 
personal data. For example, a computer with Social Security 
numbers and medical information for at least 849 uranium miners 
was stolen from a New Mexico hospital. A PDA with medical 
information and patient names at an Arizona hospital was also 
lost. This PDA did not have encryption or password protection. 
And 17 computers that were not cleaned may have contained 
sensitive information for kids at a youth patient center in 
Arizona.
    Let me move on to my second point, the causes of these 
problems. First, let me point your attention to the same memo 
the Chairman described earlier, that was in 1997 and written to 
all IHS headquarters employees. As you can see, lost and stolen 
property has been a problem for more than a decade. However, 
management has not fixed the problem or held anyone 
accountable. The clear message from the top is that the status 
quo is acceptable.
    Although the problems we found are chronic, they are not 
complex. These are basic property management issues, or what I 
would refer to as property management 101. For example, we 
found lack of required annual physical inventories, property 
that was not properly bar-coded, lack of required hand 
receipts, and lack of required physical security. Notice that 
most of what we found is not flawed policy, but the lack of 
adherence to policies and procedures that are already in place.
    I am encouraged that the letter we received from management 
in response to our report agreed with 9 of our 10 
recommendations. However, the tone of that letter indicated 
ongoing denial of the problems. The letter even tries to 
rationalize an IHS employee fabricating 116 documents to make 
it appear that 571 property items were actually not lost or 
stolen.
    In conclusion, nobody at IHS has been held accountable for 
the issues that we have described today, including the loss of 
millions of dollars and the compromise of sensitive data. So 
who then must pay for this problem? Unfortunately, it is the 
American taxpayer.
    Mr. Chairman, this ends my statement. I look forward to 
your questions.
    [The prepared statement of Mr. Kutz follows:]

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



                                 ______
                                 
Attachments




    The Chairman. Mr. Kutz, thank you very much.
    Director McSwain, thank you for being with us. You don't 
look very happy today and I understand no agency will want to 
receive a report like this from the Government Accountability 
Office, and certainly this Committee is concerned, and I would 
say the entire Congress is concerned when they see a report of 
this type.
    You are here, let me explain again that I invited you to 
testify. I also asked the Secretary of HHS to be present today. 
He has decided not to be present, but this Committee will 
continue to seek his testimony as well.
    Mr. McSwain, why don't you proceed with your statement?

    STATEMENT OF ROBERT G. MCSWAIN, DIRECTOR, INDIAN HEALTH 
    SERVICE, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; 
 ACCOMPANIED BY RANDY GRINNELL, DEPUTY DIRECTOR FOR MANAGEMENT 
OPERATIONS, AND ATHENA ELLIOTT, DIRECTOR, OFFICE OF MANAGEMENT 
                            SERVICES

    Mr. McSwain. Thank you, Mr. Chairman and members of the 
Committee.
    Good morning. I am Robert McSwain, Director of Indian 
Health Service. Today, I am accompanied by Randy Grinnell, 
Deputy Director for Management Operations, and Athena Elliott, 
Director of Office of Management Services. On behalf of 
Secretary Leavitt, we appreciate the opportunity to testify on 
the Indian Health Service's Property Management Program.
    As you mentioned earlier, I did not envision that my term 
as Director of the Indian Health Service would begin in this 
fashion, but here we are. While the IHS does not agree with 
some statements and allegations contained in the GAO report, 
IHS takes the GAO recommendations very seriously and concurs 
with 9 of the 10 GAO recommendations addressed in the report to 
strengthen the overall environment, to control the environment 
for property management, and has been and is now fully engaged 
in the ongoing process of updating its personal property 
management policies, conducting necessary investigations of any 
unaccounted property, and ensuring that employees are held 
accountable. I will speak to that in my closing comments.
    I must point out that IHS has already been working with the 
department, as was mentioned, since the early 2002 through 
2005, to begin to improve our property management systems. In 
fact, even more so in the recent year, we were working very 
feverishly to prepare for the implementation of the unified 
financial management system, which is a department-wide 
financial system that requires that some of our old legacy 
systems in property management be abandoned. We have now moved 
on to PMIS.
    I will report to you that we have been moving inventories 
and training personnel in preparation for the full 
implementation. There are a couple of major concerns that we 
have with the GAO report, which was noted earlier, and GAO 
acknowledges itself various limitations to its audit 
investigation, some of which are listed, which I will talk 
about in a moment here.
    The report asserts that IHS did not consistently document 
lost or stolen property items and concludes that the number of 
currently unaccounted for items might be much higher. But I can 
assure you with the new HHS PMIS system, that in fact we will 
be reducing those numbers significantly in the reconciliation 
process.
    The report also overstates the net worth of currently 
accounted for items by not taking into consideration 
depreciation of those items. Some items referenced in the 
report at 15- to 35-year old. As you know, like our facilities 
that average 33 years across the Country, our property likewise 
is quite old. I think, for example, the comment about the 
property in Wyoming that was in fact infested was in fact 
transferred to the warehouse at zero value and was being held 
there to be disposed of by a process.
    Now, the interesting thing is, this points up another major 
issue that we wrestle with in Indian Country, is that our 
facilities are so far out in remote locations that are not 
available to GSA disposal sites for many of them, so we wind up 
either housing it or putting it into a location to be able to 
move it out.
    In this particular instance, the Billings area has engaged 
the Department of Defense and we will be moving property that 
has been excessed to them for their final disposition.
    Now, to highlight the report, and I think in fairness to 
GAO I must point out that several of the updates on these 
highlights were submitted late, and in some cases not 
acceptable to the General Accounting Office, but we will 
include these updates in our 60-day response. As I understand, 
we have 60 days from the date of the report to the middle of 
September to provide our progress report on what we are doing 
with the recommendations outlined in the report.
    The Alaska--I think it is so critical--the Alaska 
determination, in fact the ATVs, the tractors referred to in 
the GAO report as lost and sold were identified in a 2006 
Alaska border survey as transfers to communities or abandoned 
in place. Given the fact that Alaska, as Senator Murkowski said 
at the last hearing, is identified by the remoteness of the 
various locations.
    When we move equipment out to these remote locations, and 
they are there for a period of time until we finish the water 
and sanitation projects, for example, we literally turn them 
over to the community to continue to operate and maintain. So 
as a matter of an artifact of process, the border survey in 
fact shows that much of that equipment was in fact transferred.
    Now, I think it is also important that of the 1,097 items, 
the average age spans between 15 and 35 years. Two very 
important factors: this is really a one-time. We were building 
towards the ultimate complete takeover of the program by the 
Alaska Natives. They have done that, and we have--in fact, I 
have a note from a tribal leader up here that says basically 
that much of the equipment that was turned over to them is 
being used.
    It was old, but I think it is important to point out that 
the 86-121 law that enables us to build water and sanitation 
facilities in Indian Country does enable us to transfer 
property and equipment to them, to the tribe, for their 
operation and maintenance of their system. In the case of 
Alaska, 98 percent of the $6 million of property identified was 
in fact transferred in that fashion, 98 percent of all the 
equipment, and the law authorizes us to transfer that 
equipment. This accounts for about $6 million of the $15.8 
million in the GAO report.
    The Tucson survey of the report for Jaws of Life, the fact 
that it got a lot of press as well, we have since found those 
five pieces, and in fact they were missed in one inventory. In 
the subsequent inventory, they were not available. I think the 
General Accounting Office made a look and couldn't find them. 
We subsequently found them. We have verified that the Jaws of 
Life are in fact in condition, have been used, but they are now 
accounted for. We will provide that in our response for the 60-
day inventory.
    The whole notion about fabricated documents is really an 
attempt by an employee to in fact provide the right form. We 
had actual information that tracked the property disposal. It 
was not in the right form and it was not acceptable to the 
General Accounting Office. But by creating these documents, it 
was referred to as fabrication. We do have evidence that tracks 
the actual request for property action.
    The yard sale, we are investigating that as well. It was 
brought to our attention by the General Accounting Office and 
we have been investigating that very heavily. I think the 
important part is the particular PCs that were referenced were 
actually for educational purposes, for training and use in how-
to-use computerized equipment. There was no patient information 
on it, nor student information on that.
    But let me just close. I am sure you have questions on a 
whole host of issues, but let me just say that going forward, 
IHS is committed to strong enforcement and updating our 
policies. We have had the policies in its final throes. I want 
them on my desk in the next 60 days so that we can move forward 
with clear current policies.
    I have recently held a conference call with the 12 area 
directors that manage the areas. I have advised them because of 
this particular report and my sitting here today, they are 
going to be held responsible. In fact, part of my assurance is 
to put a performance element in their performance contracts 
that cascades down to the service unit directors that will in 
fact hold them accountable performance-wise for accounting for 
and management of personal property.
    We will tighten up our management internal controls. We use 
a self-assessment means. I am going to ask that our staff make 
random visits, as the GAO has done, to our remote sites to 
ensure that they are adhering to not only receiving reports of 
equipment, but also the proper disposal reports.
    We will continue with the support of the department to 
fully implement UFMS and the PMIS, and I am confident that with 
the implementation of both, I look forward to a revisit, if you 
will, by the General Accounting Office at some point as they 
would desire, and that even in 60 days, I expect that our 
report on the status of our accomplishments will demonstrate 
significant progress, because we are doing it as we speak.
    Mr. Chairman, this concludes my summary statement. Thank 
you for this opportunity to report on the property management 
in the Indian Health Service, and I will be happy to answer any 
questions you might have.
    [The prepared statement of Mr. McSwain follows:]

   Prepared Statement of Robert G. McSwain, Director, Indian Health 
         Service, U.S. Department of Health and Human Services
    Mr. Chairman and Members of the Committee:
    Good Morning. I am Robert McSwain, Director of the Indian Health 
Service. Today I am accompanied by Randy Grinnell, Deputy Director of 
Management Operations, and Athena Elliott, Director of the Office of 
Management Services. We appreciate the opportunity to testify on the 
Indian Health Service's property management program.
    The Indian Health Service provides health services to nearly 1.9 
million American Indians and Alaska Natives (AI/ANs). In carrying out 
this responsibility, the IHS maintains a unique relationship with more 
than 560 sovereign Tribal governments located in the most remote and 
harsh environments within the United States as well as in modern 
metropolitan locations such as Anchorage and Phoenix. This geographic 
diversity and major health disparities offer extraordinary 
opportunities and challenges to managing and delivering health 
services.
    The IHS and Tribal programs provide a wide array of individual and 
public health services, including clinical, preventive, and 
environmental health services. In addition, medical care services are 
purchased from outside the IHS system through the Contract Health 
Services (CHS) program when the care is otherwise not available at IHS 
and Tribal facilities.
    The IHS is committed to its mission to raise the physical, mental, 
social, and spiritual health of all AI/ANs to the highest level.
    IHS appreciates the opportunity to respond to GAO's report on IHS 
property management. IHS has been and remains committed to proper and 
accountable property management. To this end, IHS Headquarters and Area 
Offices have fully cooperated with GAO in the audit and investigation 
by providing detailed records, performing extensive data 
reconciliations upon request of the GAO, and participating in multiple 
and extended staff interviews.
Overview of the IHS Inventory System
    IHS currently uses the HHS Property Management Information System 
(PMIS) to inventory personal Federal property. The PMIS was first 
implemented in FY 2005, and provide tools that enable IHS to continue 
to improve property accountability.
    Indian Tribes are authorized by Public Law 93-638, the Indian Self-
Determination and Education Assistance Act, to assume control of 
programs administered by the IHS, including administrative support 
functions. The statute also permits IHS to transfer title to both real 
and personal Federal property associated with the operation of the 
contracted program to the Tribes.
    Also, Public Law 86-121, Indian Sanitation Facilities, authorizes 
IHS to transfer property to Indian Tribes in order to maintain 
sanitation facilities. IHS also has additional authority for providing 
equipment for safe water and sanitary waste disposal facilities to 
Tribes under the Public Law 94-437, the Indian Health Care Improvement 
Act, as amended. The Secretary of Health and Human Services (HHS), 
acting through the Service, also is authorized by P.L. 86-121 to 
provide financial and technical assistance to Indian Tribes and 
communities in the equipping of utility organizations to operate and 
maintain Indian sanitation facilities.
    In early FY 2005, HHS made a decision to have all HHS Operating 
Divisions, including IHS, utilize the Property Management Information 
System (PMIS). At implementation, the IHS-wide inventory was comprised 
of approximately 121,000 items with an original acquisition cost of 
$302 million prior to assigning new and higher HHS accountability 
thresholds and assessing the value of depreciation. After applying the 
new HHS accountability thresholds under PMIS, the IHS inventory is 
comprised of approximately 49,000 accountable and sensitive items with 
a total original acquisition cost of $205 million.
    The implementation of the new HHS consolidated PMIS, including 
staff training, took an extensive amount of time and resources. 
Training is still ongoing and is a continuous process. Conducting 
physical inventories using the new system therefore lagged and many IHS 
Areas reverted to some legacy systems that had not been decommissioned. 
The process for conducting wall-to-wall physical inventories became 
more challenging due to the volume of equipment and property, and the 
time and effort required to undertake such a process.
    The new HHS logistics management policy mandates that all 
accountable and sensitive property, but not all Government equipment, 
be tagged with a Government decal. Accountable property is any item 
with an acquisition cost of $5,000 or more. Sensitive property is an 
item identified to be tracked with an acquisition cost between $500 and 
$4,999 that requires stricter inventory control. Property items meeting 
the new, higher dollar threshold or the sensitive items criteria are 
affixed with a barcode tag and entered into the PMIS. The PMIS includes 
a depreciation expense feature which will adjust the book value of the 
IHS inventory when it has been fully implemented, a feature which was 
unavailable in the legacy property system. As of 2007, a physical 
inventory was completed for 100 percent of accountable/sensitive 
property in 5 of the 14 accountable areas throughout the IHS, including 
IHS Head Quarters (HQ). An additional 5 accountable areas completed 
partial inventories (50-90 percent of accountable/sensitive property) 
and the remaining 4 accountable areas examined 15 percent or less of 
their accountable/sensitive property. By the end of FY 2008, a physical 
inventory of 100 percent of accountable and sensitive property will be 
conducted in 14 accountable areas throughout the IHS.
Response to GAO Report
    IHS worked extensively with the GAO to provide detailed information 
regarding the agency's property management system. Their review was 
conducted at a time IHS was fully engaged in a transition from one 
outdated system to a newer, more efficient PMIS. As such, not all 
concerns cited by GAO in their report are current or defensible. GAO 
itself acknowledges various limitations to its audit and investigation, 
some of which are listed below. These limitations seriously undercut 
and are not reflected in GAO's conclusions.

   The report asserts that IHS did not consistently document 
        ``lost or stolen'' property items and concludes that the number 
        of currently unaccounted for items might actually be higher 
        than GAO has identified. In fact, the ongoing process of 
        reconciling the prior property management system to the new 
        PMIS will reduce the number of currently unaccounted for items 
        as the reconciliation progresses.

   The report also overstates the net worth of currently 
        unaccounted for items by not taking into consideration the 
        depreciation value of these items. Some items referenced in the 
        report are 15 to 35 years old, and yet are assigned their 
        original acquisition cost. For example, some of the large, non-
        IT items of inventory, such as all terrain vehicles (ATVs) are 
        valued at the original acquisition cost despite the fact that 
        the actual equipment was acquired between 1974 and 1999, well 
        past their useful life expectancy of 8 years.

    While IHS met with GAO on multiple occasions to discuss specific 
situations addressed in the report, GAO has persisted in defending some 
inaccurate situations described below.
Alaska Tribal Self-Determination Award
    The ATVs and tractors referred to in the GAO report as ``lost or 
stolen,'' were identified on the 2006 Alaska Report of Survey as 
``transferred'' or ``abandoned in place''. Some of the large 
construction equipment in the extremely isolated locations in Alaska 
has to be flown in, or shipped by barge. The acquisition dates of these 
1,197 items span 15-35 years. The useful life and actual ``value'' of 
these items were taken into consideration by the Board of Survey and 
the Determining Authority's final decision to remove the items from the 
inventory records for the Alaska Area.
    At the time of the transfer of IHS property to the Alaska Tribal 
compact in 2000, personal property in use in Alaska reflected a non-
depreciated value of approximately $13 million, of which approximately 
$7 million was transferred to the Alaska Tribal compact under the new 
agreement/award. IHS-Alaska Tribal health officials jointly researched 
and reconciled the inventory and wrote off the remaining $6 million of 
this original amount representing 1,197 items in a single Report of 
Survey in 2006. The Report of Survey clearly stated that most of the 
written off items were disposed of either by (1) transfer to local 
Tribal communities; (2) transfer to a local Air Force Base; or (3) 
``abandoned'' on an IHS construction site due to the extraordinary 
expense associated with the removal of the equipment, leaving 68 items 
valued at a non-depreciated value of $177,000 unaccounted for.
Tucson Report of Survey and ``Jaws of Life''
    All of the Jaws of Life extrication equipment which the GAO report 
characterizes as ``lost or stolen'' has been accounted for by Tucson 
Area in early May 2008. The Jaws of Life extrication equipment had been 
stored in a Rescue Truck and the inventory team missed locating the 
items on their earlier attempts when conducting the physical inventory. 
The Tucson Area property staff is in the final stages of completing the 
2008 physical inventory which includes reconciling any differences 
between the physical inventory and the property records. The initial 
work on the 2008 reconciliation process has resulted in locating and 
accounting for many of the items listed on the 2006 draft Report of 
Survey, however, the report does not reflect this.
Allegation of Misrepresentations Made by IHS Property Staff
    The GAO report continues to categorize IHS HQ inventory items that 
have been accounted for by the IHS inventory as ``lost or stolen.'' 
When the GAO investigation commenced in August 2007, IHS property staff 
were in the process of reconciling the April 2007 physical inventory of 
IHS HQ property with additional information, including a follow up on-
site inspection by IHS staff and independent verification of returned 
property by the Federal warehouse. While the initial IHS April 2007 
inventory results indicated that 1,180 items were listed but not 
located on site, and over 500 items were on site but not listed on the 
HQ inventory, subsequent research of alternate records determined that 
the property had been properly disposed or accounted for. Independent 
verification with the Federal warehouse in 2007 confirmed that 498 
items had in fact been properly disposed of as turn-ins to the 
warehouse. Additionally, in a subsequent inspection by IHS staff in 
late 2007, 222 items were found on site in IHS HQ that had been missed 
in the initial physical inventory taken in April 2007. The entire 
reconciliation process was completed in January 2008 and updated 
information was provided at that time to the GAO, but GAO's report does 
not appear to have considered this additional information.
GAO's Allegation of Fabricated Documents
    In January 2008, an IHS property staff member, in an effort to 
ensure GAO received needed information in an acceptable form, generated 
blank disposal records and recorded the disposal information that was 
provided from the HHS Federal warehouse onto ``Request for Property 
Action'' forms commonly referred to as HHS 22 forms. An HHS 22 form is 
used to document property transfers, turn-ins, and disposition 
instructions. This form is also used to document new receipts when 
other source documents are not available. When these ``HHS 22s'' were 
provided to GAO, they reflected a current date of January 2008 and were 
clearly presented as having been created for purposes of establishing 
the requested audit trail using independent warehouse verification. 
Although they were not backdated or otherwise falsified, GAO accused 
the property staff person of ``fabricating disposal records.'' No one 
in IHS conveyed to GAO that these documents were anything but newly 
generated documents. The staff person who generated the HHS-22s after 
the fact, created them for the purpose of recording otherwise verified 
information for the review of the GAO, but there was no intent to 
deceive or mislead the investigators.
Allegation of ``Wasteful'' Purchases
    In 2007, IHS Headquarters initiated a procurement strategy to 
increase the cost efficiency of the replacement of computer technology 
used by all its employees. The useful life of many desktop computers 
and smaller portable devices is 3-5 years. By buying in bulk to meet 
needs in advance and making those purchases once a year, IHS can take 
advantage of significant price discounts, and reduce critical down time 
of vital IT tools. Only the numbers of desktops exceeding their useful 
life are replaced in the annual bulk purchase. A very few additional 
computers must be purchased for emergent needs arising during the year, 
such as new employees or to replace faulty equipment. IHS also uses 
those few additional computers, pending deployment to individual staff, 
for IT training purposes of all staff at both the Albuquerque and 
Rockville Headquarters locations. The 25 on-hand ``spare computers'' 
noted in the report as ``excess'' and examples of ``wasteful'' 
purchases, represents roughly 6 percent of the total number of desktops 
deployed at IHS Headquarters, which is an acceptable level of inventory 
to meet these needs.
    GAO alleges that IHS has assigned 10 computers to each employee in 
IHS Headquarters. This calculation appears to have been made by GAO by 
taking the total preliminary and unreconciled inventory (3,155 items) 
in April 2007 (which included items later verified to have been 
properly disposed) and divided the total by the number of IHS employees 
at HQ (about 300). If one uses the final reconciled number for the 2007 
HQ inventory, approximately 1,500, the ratio is closer to about 5 items 
per employee.
``Yard Sale''
    We are initiating an investigation into the allegation that a yard 
sale was conducted to dispose of surplus computers and other property. 
We appreciate the matter being brought to our attention by the GAO. In 
the meantime, we have verified that these computers were used for 
educational purposes at the Desert Vision Youth Wellness Center, and 
were not used in a clinical setting in which the computers would more 
likely be used to store sensitive data.
HHS Response to GAO Recommendations
    IHS concurs with nine of the ten GAO recommendations addressed in 
the report to strengthen overall control environment for property 
management and has been, and is now, fully engaged in the ongoing 
process of updating its personal property management policies, 
conducting necessary investigations of any unaccounted property and 
ensuring that employees are held accountable as appropriate throughout 
the Report of Survey process. IHS is committed to strong enforcement of 
standing agency policies designed to ensure accurate and timely 
inventories of accountable personal property throughout the entire 
agency with official certification by property management staff. This 
includes enforcement of policies requiring proper use, control, 
maintenance and protection of federal government property and continued 
use of barcodes to identify and control all accountable and sensitive 
government property.
    Mr. Chairman, this concludes my statement. Thank you for this 
opportunity to report on the property management program in the Indian 
Health Service, serving American Indians and Alaska Natives. We will be 
happy to answer any questions that you may have.

    The Chairman. Mr. McSwain, thank you very much for your 
testimony. We all have a number of questions, of course, for 
you and Mr. Kutz. Before we get to those, I am going to ask Mr. 
Fernand Verrier, who is with us, he is one of three people who 
worked in the agency. Would you come forward to the witness 
table? You are going to give a short testimony.
    You were Deputy Director of the Office of Finance and 
Accounting, and Chief Financial Officer for the headquarters, 
Indian Health Service, in Rockville, Maryland until March of 
2008. If I might stipulate, you have in your testimony a 
substantial amount of information about your service in the 
Navy, the Far East, your direct commission, your service in 
Operation Desert Shield and Enduring Freedom and so on; one 
year at CENTCOM; one year at the U.S. Embassy in Yemen.
    Let me stipulate, if I might for all of us, all of that 
information about your service to our Country and thank you for 
it, and ask if you would begin on page two of your information 
and describe. You say on page two, ``I would like to share my 
personal experience.''
    Your description here is of a rather small area in the IHS, 
but I think you provide it as descriptive of what you think 
happens at the IHS with respect to inventory. If you would 
start there and go to the end, that way we will have on record 
your impression as someone who worked in those offices, then we 
will go to questions.
    Mr. Verrier, thank you.

        STATEMENT OF FERNAND R. VERRIER, FORMER DEPUTY 
   DIRECTOR, OFFICE OF FINANCE AND ACCOUNTING, INDIAN HEALTH 
  SERVICE, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES; CFO, 
               HEADQUARTERS INDIAN HEALTH SERVICE

    Mr. Verrier. Thank you. As you stated, I would like to 
share my personal experience with the property management 
problems at IHS.
    In the fall of 2007, the IHS Property Book Office submitted 
a request to our office requesting that we conduct a complete 
inventory of our computer equipment. Mr. Tommy Thompson, who 
was my direct boss at the time, directed me to perform this 
inventory. He said that was my responsibility.
    Having not been there a long time, I asked a secretary to 
conduct the inventory. Out of the approximately 100 items, she 
could not locate approximately 20 items in our assigned office. 
Hearing this, I decided to conduct the inventory myself to 
determine the discrepancy. I did conduct the inventory and 
found the same discrepancy.
    I then contacted the Property Book Office and asked them to 
come and conduct an independent inventory to verify ours. They 
performed the same inventory and came up with the same results. 
I then sent an e-mail to our staff, which is approximately 35 
individuals, and asked them if they knew of the possibility of 
where these missing items could be located. Their response came 
and we located one laptop computer and one desktop computer 
that was located in the individuals' homes.
    I asked for documentation that permitted these individuals 
to remove the Federal Government property and take it home. 
Their response was, we do not do that around here. My response 
was, effective immediately, you will do this.
    I then contacted the Property Book Office and informed them 
of the location of the two missing items. The Property Book 
Office told me that they would prepare a new property book 
reflecting what they had found. My response was, okay. However, 
what are you going to do about the missing items? Their 
response was, we are going to write them off. My response was, 
what? You are going to write them off without conducting an 
investigation? And their response was, no, we write things off 
as we have always done. My response was, I can't believe this.
    At this point, I contacted the Property Book Officer and 
informed him of what was going on. He told me he would check 
into it. I would estimate that the value of the property that 
was missing, the 18 items still missing, is approximately 
$18,000 to $20,000. If this is what is found in a small office 
at the headquarters of approximately 35 individuals, what would 
you expect in the other offices throughout the agency?
    I am very grateful to have the honor and opportunity to 
address the Committee and to assist in the effort to help 
implement property control management within HHS. Proper 
property management control will allow IHS to allocate its 
funding wisely and frugally in providing medical care for our 
Native American and Alaskan natives which the funding is for.
    At this time, I will answer any questions you have.
    [The prepared statement of Mr. Verrier follows:]

   Prepared Statement of Fernand R. Verrier, Former Deputy Director, 
     Office of Finance and Accounting, Indian Health Service, U.S. 
   Department of Health and Human Services; CFO, Headquarters Indian 
                             Health Service
    Thank you, Chairman Dorgan and Members of the Committee, for taking 
the time to hear my testimony in regards to the blatant fraud, waste, 
and abuse of property throughout Indian Health Service (IHS).
    My name is Fernand R. Verrier. Until March 6, 2008, I was the 
Deputy Director of the Office of Finance and Accounting (OFA) and Chief 
Financial Officer (CFO) for Headquarters, Indian Health Service in 
Rockville, Maryland.
    I have served in the Federal Government since 1976, starting as a 
GS-9 Auditor and working until my forced retirement on the 6th of March 
2008, due to a hostile and stressful work environment. My final 
position was at the GS-15 grade. I have served in the Federal 
Government as an Auditor, Supervisory Accountant, Budget Analyst, 
Supervisory Budget Analyst, Supervisory Accountant, Supervisory 
Auditor, Financial Manager, Financial Advisor, Auditor, Senior Auditor, 
and Deputy Director (Supervisory Accountant).
    I have also served in the Navy from 1962 to 1966 in the Far East. 
In 1977, I received a Direct Commission as a 1st Lieutenant in the Army 
Reserves and served on Active Duty during the following periods: Just 
Cause/Promote Liberty, Panama, December 1989 to September 1990; Desert 
Shield/Storm in Saudi Arabia, Kuwait, and Iraq, December 1990 to May 
1991; and Operation Enduring Freedom in Bosnia from May 1996 to 
December 1996. After 9/11, I was once again called to Active Duty and 
served 1 year at Headquarters, Central Command, and 1 year at the U.S. 
Embassy, Yemen until my retirement at age 60.
    My responsibility at IHS as Deputy Director of the Office of 
Finance and Accounting and CFO was to serve as the Principal Deputy 
Director to the office Director. This means that I fully shared in the 
responsibility to exercise broad authority for development, 
presentation, and justification of the IHS budget, and for the 
allocation and management of financial resources available to IHS 
executives on financial management matters. I also had responsibility 
for implementation the provisions of the Chief Financial Officers Act 
of 1990 and the Government Management Reform Act of 1994. I applied 
supervisory responsibilities and managed the daily operations of the 
office; supervised and provided direction to subordinate staff either 
directly or through subordinate supervisors; served as principal 
advisor to the CFO on accounting principles, standards, practices, and 
functions and chief financial operating official requirements; and 
interpreted and provided direction for the development and execution of 
policies, guidelines, manual issuance, circulars, and other directives.
    As Deputy Director, I reported to Mr. Tommy Thompson, Director of 
the Office of Finance and Accounting, who reported to Ms. Phyllis Eddy, 
Deputy Director for Management Operations, who reported to Dr. Charles 
W. Grim, Director of Indian Health Service.
    I would like to share my personal experience with property problems 
at IHS.
    In the fall of 2007, the IHS Property Book Office submitted a 
request to my office requesting that we conduct a complete inventory of 
all our computer equipment. Mr. Thompson, Director, informed me that as 
the Deputy Director, it would be my responsibility.
    I asked our secretary to conduct this inventory. Out of 
approximately 100 items, she could not locate about 20 assigned to the 
OFA. Hearing this, I decided to conduct the inventory myself and found 
the same discrepancies. I then contacted the Property Book Office and 
asked if they could send someone to conduct and independent inventory 
to verify ours. They performed the same inventory and came up with the 
same results. I then sent an e-mail to all our staff (approx. 35 
individuals at the time) and asked whether anyone knew of the possible 
location of the missing items. The responses allowed us to locate one 
laptop and one desktop computer which individuals had at their homes.
    I asked for the documentation that permitted these individuals to 
remove federal government property and take it home. Their response 
was, ``we do not do this around here.'' My response was, ``effective 
immediately we will begin doing this.''
    I then re-contacted the Property Book Office and informed them that 
we had located two of the missing items.
    The Property Book Office told me they would prepare a new Property 
Book reflecting what we had found.
    My response was, ``O.K., however, what are you going to do about 
the items that are still missing?'' Their response was, ``We are going 
to write it off.'' My response to that was: ``WHAT? Are you not going 
to conduct an investigation about the missing items?'' And their 
response was, ``NO, we just write it off as we have always done.'' My 
response was, ``I can't believe this! ''
    At this point I contacted the Property Book Officer and informed 
him of what was going on. He told me that he would look into it.
    I would estimate that the value of the approximately 18 items that 
were still missing was between $18,000 and $20,000.
    Now you are probably asking how this relates to the GAO report, 
``IHS Mismanagement Led to Millions of Dollars in Lost or Stolen 
Property.'' Well, I say to you, that this is proof beyond a doubt that 
IHS has a very large problem in regards to property management. If this 
is what was found in a small Headquarters office of only approximately 
35 individuals, what would you expect in the other offices and 
throughout the agency?
    I am very grateful to have had the honor and opportunity to address 
this Committee and to assist its efforts to help implement proper 
property management control within IHS. Proper property management 
control will allow IHS to allocate its funding wisely and frugally in 
providing medical care for our Native American and Alaskan natives.
    At this time, I am happy to answer any of your questions, if you 
have any.

    The Chairman. Mr. Verrier, thank you very much for your 
thoughts about your observations in the Indian Health Service.
    Mr. McSwain, Director McSwain, 11 years ago you wrote a 
memorandum, that is March 12, 1997, in which you said, look, we 
have had people stealing laptops around here, and we have a big 
problem. I assume back in 1997, 11 years ago, you were not 
Director, obviously. You were in the Indian Health Service 
raising a question about a problem you saw. I assume back then, 
just looking at that memorandum, you thought something serious 
was going on. When equipment gets stolen, that is a big 
problem, right?
    And so you raised the question and the need to do something 
about it. Eleven years later, we are sitting here in a 
Committee hearing room with a GAO report saying this thing is a 
complete mess.
    And your testimony, I must say, seems all too defensive of 
the existing system. For example, I read the report last night 
in full. I had read summaries before. But the report, for 
example, describes efforts by individuals in the Indian Health 
Service to fabricate documents to the Government Accountability 
Office. That is a very serious charge. You know, it seems to me 
that you have people fabricating information, that borders on 
criminal and you want to find out who would do that and get rid 
of them instantly.
    So tell me your response to the allegation of fabrication 
of documents?
    Mr. McSwain. First of all, Mr. Chairman, as I mentioned, it 
was not necessary to even write those documents because we had 
the backup information that would attest to the disposal of the 
property. But let me just say that this particular matter has 
been referred to the Office of Inspector General for their 
inquiry and investigation as well. So this matter is in fact 
under the IG's, I believe if the GAO didn't refer them, we 
certainly have referred the matter to the IG for their look.
    The Chairman. But do you think it happened? If I were in 
your position and somebody did an audit or an investigation of 
my agency and they said, ``IHS made a concerted effort to 
obstruct our work''--that is very strong language from the GAO; 
I don't know that I have ever heard that language of a Federal 
agency--``a concerted effort to obstruct our work.'' And then a 
misrepresentation, by the IHS Director over property items, and 
then fabricating receiving reports by the IHS property 
specialist.
    If I were in that chair, I would be furious if you had half 
a notion that any of that was true, and I would damn well find 
out as quickly as I could. Your impression is, well, we are 
directing this to the IG.
    Mr. McSwain. As any kind of behavior of that type, we are 
duty-bound to refer them to the IG and we have done that. What 
I am saying is, and quite frankly the particular employee that 
attempted to--the interesting thing about this particular event 
was, yes, there were receiving reports that were filled out and 
they were dated the day they gave it to the, which was three 
months later than it was actually received. So the real fault 
there is the fact that a receiving report was not prepared as 
the policy requires upon receipt.
    With the employee feeling that this form, this HHS-22, 
which is a form that literally manages and moves property 
around the system from acquisition to ultimate disposal was not 
there, their attempt to simply create one based upon documents 
that we already had that were not in that form, I question the 
fullness of ``fabrication.'' He may have prepared a form, but 
it is borderline.
    It is not like he completely backdated the document to the 
date of receipt. That would be fabrication, in my opinion, but 
not simply preparing the report and signing on today's date, 
and providing it to the GAO as requested is, in my view, not 
quite the same level of fabrication as completely going back 
and redoing the report and representing it as performed in 
accordance with the policy. But that is just my opinion, but 
the fact is that it did occur, so it has been referred to the 
IG for further investigation.
    Mr. Kutz. Mr. Chairman, could I address that?
    The Chairman. Yes.
    Mr. Kutz. I don't have an opinion. I have facts. He is 
talking about two different matters. If you look at the board 
up there, that is one of the 116 documents that were 
fabricated, showing that 571 items have been transferred. 
Notice that there are no actual signatures on there. One of the 
individuals whose name was blocked out at the bottom did not 
even work there at the time that this transfer supposedly took 
place. We spoke to both people whose names are blacked out and 
they said that those documents did not exist.
    The worst situation that shows this as a fabrication, some 
of the items that supposedly were transferred before April, 
2007, which is what those documents say, we found in our 
physical inventory after that date, clearly showing that these 
are fraud and fabricated documents.
    Mr. McSwain might not be aware of all the facts, but those 
are the facts.
    The second case is a separate case, where we asked for 
three receiving reports, and that was a little bit different. 
The document wasn't fabricated. We were given a document that 
showed no signatures and no one had actually received the 
items. We got a second document the day we asked for it with a 
signature that day. So we have two copies of the same document, 
one with signatures on it and a date in December of 2007, and 
the other one with no signatures. So that is a separate 
incident from the 116 documents that were fabricated.
    The Chairman. I will come back to that, but the report 
suggests that you can't locate a Caterpillar tractor? You know, 
the description of the property--a pickup truck, van trailers, 
heavy equipment lost or stolen. Is there a Caterpillar tractor 
gone?
    Mr. Kutz. It could very well be. It could be an inventory 
issue. It could be that something is gone. There are issues. I 
have read police reports of stolen vehicles. Other things may 
be just accounting issues.
    The Chairman. And so, we hear about bat dung and yard sales 
and all of these issues. It seems to me, Director McSwain, that 
this is a mess, and they have only looked at seven of the 163--
--
    Mr. Kutz. One-hundred-and-sixty-three, I believe.
    The Chairman.--seven of the 163 service areas around the 
Country. I wonder what we would be talking about here if all 
163 were surveyed. Do you agree that we have a huge mess on our 
hands, Director McSwain?
    Mr. McSwain. I would not go as far as perhaps the GAO is 
going with their generalization, because a large amount of our 
equipment is in the hospitals. It is in the facilities. It is 
my belief that the accountability of equipment within those 
hospitals and health stations and health centers, what we are 
really talking about here is the disposal.
    Much of what we are talking about is equipment that has 
completed its useful life and now is being processed out, 
either excessed in the case of the contaminated bat dung 
equipment, which was at zero value, was not being used, was no 
longer in the facility, even though it was health care 
equipment, it was so outdated that it was in fact moved out. 
That is one example.
    Of course, in Alaska where the tractors and backhoes and 
the like that get flown out for projects up there, we have had 
conversations certainly with the native corporations, and they 
are fully aware of the fact that that equipment is in those 
locations and in many cases being used.
    There is a term of art that we use, which is abandon in 
place, meaning that--and the requirements are that is it going 
to cost more to transport that piece of equipment back to a 
central place, or leave it in place.
    So it is complicated. I wouldn't characterize it as a mess, 
but I certainly hear you.
    The Chairman. But Director McSwain, your statement just now 
is at odds with your own admonition 11 years ago about property 
being stolen, with Mr. Verrier's experience of we have missing 
property, what do we do? We write it off. We don't investigate. 
We write it off.
    How much of that missing property was stolen? And you are 
telling us about a tractor that might have been airlifted in 
Alaska. We are talking past each other, I think. We have a 
GAO--the fact is that GAO is our own creation. They do work on 
our behalf. They have issued a report I think that is a 
scathing report, and you say today, you say that this system, 
inventory information management system is fully operational, 
and yet then you also say you are still migrating data and 
training staff. How can you have a system fully implemented if 
you are still migrating data and training staff?
    Your approach here today is to suggest, you know what, the 
GAO probably doesn't quite understand it all. But you 
understood it 11 years ago. I am frankly surprised, Director 
McSwain. I would be furious, if I were you. I would be furious 
about having to answer for this staggering incompetence.
    Mr. McSwain. Let me assure you that 11 years ago, I 
certainly had a perception and I knew there were some things, 
there were reports being given to me, and I took action then. 
Fast forward to the current, I can assure you that I will make 
the changes that are necessary to bring accountability for this 
particular piece, as well as accountability in other parts of 
our system, as well as we have done with accountability for 
health care performance.
    The Chairman. But do you still have the people working for 
you--I assume the answer is yes--who attempted to obstruct the 
work of the GAO? Who provided false information to the GAO? 
They have given us a list of things here--fabricated reports, 
backdated. Do you still have those folks working for you? 
Because you seem to be here today explaining what they did and 
the reason they did it. I don't think there is an explanation 
for that. Are those folks still working there?
    Mr. McSwain. Yes.
    The Chairman. By what justification does that occur?
    Mr. McSwain. I think, Mr. Chairman, we have had this 
conversation before. As employees, at least in the executive 
branch, they have rights. We will certainly deal with them, but 
they also have rights as permanent employees. But we will deal 
with them appropriately.
    The Chairman. Mr. Kutz, the work that was done here 
describes a system that is in chaos. Is that a fair 
description? And you heard Mr. Verrier's comments, and you 
described that the audit commenced as a result of 
whistleblowers. Whistleblowers are not very well thought of by 
agencies, as you know.
    You started your testimony saying that the whistleblower 
allegations about inventory mismanagement were documented as 
accurate by the GAO. Is that correct?
    Mr. Kutz. That is correct.
    The Chairman. Give me your impression of this entire 
system, and also answer for me, if you would, is it conceivable 
that the Indian Health Service could not have a fully 
operational system of property management in this period of 
time?
    Mr. Kutz. No, it is not.
    The Chairman. If they don't have training staff trained, 
and are still migrating data?
    Mr. Kutz. No. I think they are migrating the system, but 
this is a problem of people, process and system. As I mentioned 
in the opening statement, one of the things you have is a 
management culture here that has kind of allowed this to happen 
over at least 13 years, because the memo there says there have 
been problems for two years. So really, the problems at least 
go back to 1995.
    So you have the overall control environment issue. And 
then, as I said, the rest of it is property management 101. You 
have pretty good policies in place, but people aren't following 
them, and when they don't follow them, they are not held 
accountable. That is really where the culture needs to change.
    So it isn't really rewriting all the policies. Property is 
required to be bar-coded. Hand receipts are given, which means 
like if a computer is given to me, there is some accountability 
for it. They know I have it. It is in my room, and that kind of 
thing. They don't use that at headquarters, for example, and 
other places, so basic policies that need to be followed. So it 
is going to take time to change the culture to fix a problem 
like this.
    The Chairman. I have additional questions, but let me call 
on Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    You know, you mentioned the policies in place, and your 
opinion that the policies are probably adequate. It really 
comes down to enforcement and the accountability aspect of it.
    Mr. McSwain, you mentioned that as a consequence of what we 
are dealing with, this GAO report, that you are moving to 
update the policies, was the terminology that you used. And you 
are going to put protocols in place, send folks out for random 
visits to kind of do your own internal audit there.
    I am concerned that we probably do have the policies out 
there. I can't believe that we could have known to the level 
that we knew back in 1997 or whether it was 1995--obviously a 
good decade ago--that internally there were some property 
management issues that needed to be addressed.
    I can't believe that we would not adopt and address 
policies at that point in time. I have to believe that the 
policies are there. I am very concerned about the lack of 
enforcement, and that is what it seems that we have in front of 
us today.
    That is what leads me to believe, based on what I have 
heard described today, the background from the GAO report, that 
you really do have a situation of chaos, of chaotic management, 
of management that simply does not work.
    I will tell you, I don't know how else to describe my 
reaction other than saddened, that as a consequence of this, 
what we are going to be doing now in order to address the audit 
and the very obvious and glaring problems within the system, we 
are going to be spending money to send people out to make sure 
that we are doing what we need to be doing in terms of the 
bean-counting, and it is not going to get out to the hospitals. 
It is not going to get out to provide for those who have had 
their health care rationed, as we talk about.
    So in an effort to address this need, we are going to have 
to take some of these very scarce resource dollars that we all 
agree is a big part of our problem here, and we are going to 
have to direct them to kind of the accounting end of it. When 
we are dealing with the accounting end of it, as important as 
it is, it is not getting more health care to those who need it 
within the system. So I am just kind of shocked at how we deal 
with some of the management issues.
    Let me ask you just in terms of the new system that you 
have now moved to, Mr. McSwain. We have gone through this 
conversion, or it is maybe still in the process, as the 
Chairman has suggested. And maybe, maybe not, this conversion 
has contributed to some of the difficulty in conducting annual 
audits, although I have to suggest that if it goes back as long 
as we are talking about, it is not just the conversion issue 
that we can point to.
    But with this new property management system, are we doing 
anything different in terms of the system itself, that will 
ensure that we don't have the problems? Or again, does it 
really all come down to whether or not we are enforcing the 
policies and protocols that we already have in place? I am 
trying to understand how we move forward from here.
    Mr. McSwain. Thank you, Senator. As you were speaking, I 
was thinking about the same sort of balancing dilemma that we 
face, that service unit directors face every day out in the 
service units. I could just see them saying, do I hire a nurse 
or do I hire a property person? Do I dedicate resources over 
here or over there? If I am sitting there and if I have a 
backlog of patients, I can kind of guess where their decision 
is going to be. They are going to hire the nurse. They are 
going to hire the doctor. They are going to hire the health 
care professionals to carry out the mission.
    What I believe, and I firmly believe this, is that my 
experience of being around the Indian Health Service a number 
of years, we have had a number of property systems. We had 
something called the NECOP system, which is a non-expended 
control operating program, for years. It was a stand-alone. 
Areas did it. There was some data that was moved around, but it 
really wasn't a system. It was, for all intents and purposes, a 
spread sheet kind of a system that accounted for inventories. 
Then we moved forward to some later versions of online kinds of 
equipment--again, systems that were not integrated.
    This time, we have a system that is integrated as a part of 
the unified financial management system that has entry points 
throughout the Indian Health Service, and throughout the 
department, for that matter.
    So that ability to have the inputs, if you will, at the 
very local level is a system-wide application. That, coupled 
with--and I am not suggesting that we are going to go out and 
do queries and visits to every site--but it will tell us where 
the problems are and where we must go, so that we are not 
taking money away from patient care at the national level to 
provide these on-site reviews.
    We are going to be doing that balance. So we start looking 
for a system that will tell us what is going on, much like we 
do with health care, the provision of health care. We look at 
the data and it tells us where we need to focus our efforts. We 
know from our process of GPRA outcomes which parts of the 
Country, through trend analysis, where we need to deploy 
resources, where we need to make decisions. I am just taking 
that model and moving it to the management side.
    Senator Murkowski. Let me ask you, Mr. Kutz, if you think 
that this new management system is going to make a difference. 
You have been looking at it.
    Mr. Kutz. Yes, we haven't looked at the system necessarily, 
but I don't think it is an issue of software or hardware. Let's 
just use an example of bar-coding. You can have the greatest 
system in the world, but if people don't bar-code equipment and 
enter it into the system when it is purchased, it doesn't make 
any difference. We have found many, many items across the 
Country that weren't bar-coded, that weren't in the system.
    You know, the $15.8 million and other items we have seen 
were things that were in the system that couldn't be found. 
There was a whole host of things that weren't in the system 
that weren't bar-coded, and things like that, which gets into 
beyond an accounting issue. If you look in the system and you 
see the stuff isn't there, you might actually ask Congress for 
money to buy some more. And then that doesn't go to health care 
either. So it is more than an accounting issue in that respect.
    Senator Murkowski. Let me ask you, on the issue that Mr. 
McSwain brought up with the items in Alaska, some of the heavy 
equipment. I just wanted to clearly understand, ANTHC was the 
Alaska Native Tribal Health Consortium. It is not your 
understanding that they were at fault or had been involved in 
any way in anything inappropriate, I guess?
    Mr. Kutz. No, from the documents we saw and the people we 
spoke to, there was $13 million involved. Seven million of it 
was inventoried and the tribal group accepted it. The $6 
million was put on one of these reports of survey because it 
couldn't be found, is what we understand from the people we 
talked to and the documents we saw. So no, that never made it 
to the tribe, because they weren't going to accept it, because 
no one could find it.
    Now, the other issue that came up that was interesting was 
just abandoning property. I don't know if that creates 
environmental issues, it is your State, so I am not sure if you 
would be pleased having property abandoned.
    Senator Murkowski. But your audit didn't show those assets 
as abandoned in place? They didn't register anywhere, is what 
you are saying?
    Mr. Kutz. They were on a report of survey in six or seven 
different categories. And a report of survey typically means 
that items are not found, they are damaged or they are stolen 
or whatever the case may be. Whereas the other $7 million that 
was involved was transferred and accepted. So that is why the 
$6 million is in question. There were no documents that we saw 
showing that the items were found and had been transferred.
    Senator Murkowski. What about Mr. McSwain's comment about 
the fact that so much of what we are dealing with when the 
inventory is old? We have had plenty of opportunity to talk 
about the inadequacy of facilities. I have every reason to 
believe that we probably have an awful lot of equipment out 
there that has, its value truly has depreciated to the point. 
How much of an issue was that in your findings?
    Mr. Kutz. Certainly some of it is old and things that have 
no value. Now, if they were still in service and they were 
lost, they would still need to be replaced. However, we did 
identify brand new items that were gone, also. For example, as 
of April 2007, 64 at least of the items that were missing at 
headquarters were in the system as new computers. There were 10 
Dell computers bought last summer that were in the system that 
we could not find. So it wasn't just old junk. Some of it was 
old junk, certainly. But other things were new, usable items 
that were gone and couldn't be accounted for.
    Senator Murkowski. Mr. Chairman, I will defer to some of my 
colleagues at this point.
    The Chairman. Senator Tester.
    Senator Tester. Thank you, Mr. Chairman.
    Where to begin? Let's start with what Senator Murkowski was 
talking about. You had some kind of a document, this is for Mr. 
Kutz, a document that has inventory it, and you try to find 
where that inventory is and when you can't find that 
inventory----
    Mr. Kutz. The record was PMIS, the property management 
information system, and the subsidiary records. So from that 
information we would do physical inventories both from the 
records to the floor and then from the floor back to the 
records. That is where you find things that aren't bar-coded 
and aren't in the system.
    Senator Tester. So it is tough to lose a backhoe or a D8 
Cat, even in a place as big as Alaska. So what is going on, Mr. 
McSwain? Are the documents not being filled out when you 
abandon something in place, or when you turn it over to a tribe 
or whatever happens to it? Are not those documents being filled 
out to show what the final resting place for a piece of 
equipment might be?
    Mr. McSwain. Well, bear in mind that this is part of the 
86-121 program and we do buy equipment and the like, and we do 
actually transfer it to the community when they take over the 
system. So we don't operate and maintain, so----
    Senator Tester. So why isn't that reflected on your 
inventory list? Why is that equipment still on a list that the 
GAO would get and try to determine where it is at?
    Mr. McSwain. It goes to the very point I was trying to make 
earlier, is that the whole process of moving the ownership of 
equipment, either, in this case the $6 million of equipment 
shown on the report of survey for Alaska was in fact 
distributed to military bases and to communities and the like. 
And it was indicated, at least on the report as I read, and I 
like, I don't know whether GAO made a trip up there, but I have 
flown around Alaska and know how remote those locations are. 
That is important, Alaska is somewhat different. We don't have 
the same kinds of heavy equipment in the lower 48.
    But let me just say that when you buy a piece of equipment 
and move it out there, it takes several years to complete its 
work, then we will say, look, we will just leave it there and 
turn it over to the community to use.
    Senator Tester. Why isn't that reflected in the documents?
    Mr. McSwain. We need to move it off, and that was the 
report of survey, was to move it off of our inventory.
    Senator Tester. Then why isn't it?
    Mr. McSwain. That is the question that the General 
Accounting Office is raising, that we didn't do that. That was 
incorrect. But the fact is----
    Senator Tester. So are they right, did you do it or didn't 
you do it?
    Mr. McSwain. We did do it. We did pull it off inventory. It 
was our report of survey that they are looking at.
    Mr. Kutz. The only difference is, the reports of survey I 
am talking about typically document lost, stolen or damaged 
property. He is representing it has been transferred. There was 
no evidence we found that it was properly found and 
transferred. It could have been, but the records didn't 
indicate that.
    Senator Tester. Which is exactly my point. The records have 
to be clear. Why aren't they clear?
    Mr. McSwain. Well, the issue is that in the 86-121 program, 
we have various agreements we make with Indian communities when 
we are building a system for them, and we transfer it to them. 
And we generally will include in that document, it also 
includes the following equipment for purposes of operation and 
maintenance. We did not do that.
    Senator Tester. Okay, thank you.
    You had talked to the Chairman about the fact that 
employees have certain rights when it comes to screwing up. And 
you said, we are dealing with it, or something to that effect. 
What exactly are you doing?
    Mr. McSwain. Well, first of all, we are doing, certainly a 
review of the conduct. There are two kinds of ways to deal with 
employees, either through performance or conduct. In this case, 
we are looking at conduct, and was that conduct enough to move 
to disciplinary action. That is what we are doing.
    Senator Tester. Okay, and Mr. Verrier, you talked about 20 
percent of the equipment, when you did your audit, being gone. 
What year, what was the time frame for that?
    Mr. Verrier. That was in the fall of 2007, I believe.
    Senator Tester. Fall of 2007. Okay, Mr. Kutz, is it the 
same facility, was it the same outfit?
    Mr. Kutz. It is at headquarters, we did a 100 percent 
inventory of headquarters in late 2007 into early 2008.
    Senator Tester. So are we inventorying the same equipment, 
and you found 36 percent gone and Mr. Verrier found 20 percent 
gone? Is it basically the same equipment?
    Mr. Verrier. That was just in my office of the----
    Senator Tester. Okay, so it was a bigger spectrum.
    Mr. Kutz. We looked at all 3,000 plus pieces of equipment.
    Senator Tester. Thank you very much. When you get the 
reports, computers do depreciate fairly rapidly, is that 
reflected on the reports you get, Mr. Kutz?
    Mr. Kutz. Their old system did not have the ability, one of 
the new features of the PMIS system is that it has 
depreciation. So one of the reasons we used acquisition costs 
is that is all there was. There wasn't depreciation 
information.
    Senator Tester. Okay, so I am just curious, did you allow 
for, when you found the bat manure on the computers in Montana, 
did you allow for any sort of depreciation, or did you not know 
when they were new?
    Mr. Kutz. The only records involved were what the 
acquisition costs were. There was nothing on the report of 
survey that showed the date of acquisition of any of that 
property. There were things like treadmills from hospitals. 
Most of it was hospital equipment, actually, the bat dung 
incident. We don't know how old it was, because no records were 
available to show.
    Senator Tester. Sounds good. The computer that is missing 
from the New Mexico hospital, that you talked about, Mr. Kutz, 
the computer that was missing from the New Mexico Hospital, Mr. 
McSwain, was that turned over to the police?
    Mr. McSwain. Yes, it was. In fact, it was reported to the 
Navajo police because it was on the Navajo reservation.
    Senator Tester. And was there anything ever--I mean, what 
happened?
    Mr. McSwain. It took a while to get a police report from 
them before we actually went through the process. I have a 
whole, if you would like to know the whole detail of a series 
of events----
    Senator Tester. Did they find out who stole it?
    Mr. McSwain. It was stolen and it was reported, and we 
reported it up to the department because of the fact that it 
had personal information identification information.
    Senator Tester. Did they find out who stole it?
    Mr. McSwain. They are still investigating it. In fact, as 
of just last week, the area indicated that they are still, they 
believe they have a line on who took it, and so we are still 
waiting for that to occur.
    Mr. Kutz. Senator, if I could just add, I read the police 
report on that also. There were no signs of break-in on that, 
so it was potentially inside.
    Senator Tester. An inside job.
    Mr. Kutz. Yes.
    Senator Tester. Okay.
    Mr. McSwain, you talked about a new computer system that 
you implemented, at least that is what I thought I heard you 
say, a new computer system you have implemented to take care of 
a lot of the GAO's concerns. Is that correct?
    Mr. McSwain. It takes care of the accounting part of it. I 
think that----
    Senator Tester. Well, the accounting part of it seems to be 
a pretty big part.
    Mr. McSwain. The accounting part of it is, but the most 
important thing I see here, and this is something that has 
surfaced with this whole process, and that is looking at boards 
of survey reports from around the Country. I have not looked at 
them in the past and I am looking at them now. Clearly, the 
ability--where those decisions are made, because boards of 
surveys take place when you have done one inventory year one, 
and year two you have an inventory and you reconcile between 
what happened to all the equipment that was on the year one 
inventory to year two--additions, deletions, losses. And so the 
system will record the first inventory and the second.
    Now, bear in mind, I should by the fact that there are 
threshold values that the system will not capture.
    Senator Tester. Is this the new system you are talking 
about?
    Mr. McSwain. The new system will not--in fact, the 
department's policies on whether or not certain threshold 
levels, and I won't get into all those details.
    Senator Tester. Can you tell me what that threshold level 
is?
    Mr. McSwain. Well, the threshold level currently is $5,000.
    Senator Tester. So it would not capture a piece of 
equipment that is less than $5,000?
    Mr. McSwain. If it is sensitive equipment under $5,000 it 
will capture it.
    Senator Tester. But if it not sensitive, it won't capture 
it. So if I have a laptop for educational purposes, it won't be 
on the books?
    Mr. McSwain. That qualifies as a sensitive piece equipment 
so it will capture it.
    Mr. Kutz. Many agencies do that, Senator. They will use a 
$5,000 threshold for financial statement reporting purposes, 
but they will keep track of property that has personal 
information and things like that. That is what Indian Health 
Service's policy is.
    Senator Tester. Okay. All right.
    The Chairman. On that point, my understanding is that is 
the point at which the Indian Health Service does not agree 
with the recommendations. They say they agree with 9 of the 10, 
but one of the recommendations they apparently do not 
necessarily agree with is this issue of the dollar threshold to 
track sensitive equipment such as BlackBerrys and cell phones, 
even if they fall under the accountable dollar threshold 
criteria.
    I don't quite understand that. If you are assigning, for 
example, BlackBerrys to employees, you are not going to keep 
track of that?
    Mr. McSwain. It becomes a threshold accounting issue, but 
in practice we are in fact bar-coding. I am walking around with 
a BlackBerry right now that has a bar-code on it.
    The Chairman. Then why would you object to the 
recommendation of the GAO?
    Mr. McSwain. The objection to, certainly the idea of simply 
tracking all equipment under $500 is a threshold issue. And 
they are suggesting, I think their recommendation is that we 
track all of those items by the issuance of bar-codes, I 
believe.
    Mr. Kutz. Our only suggestion was the PDAs and cell phones. 
That is what we disagree with, because those are gateways to 
potentially sensitive information. So it is not about dollars, 
it is about information. And most places do keep track of 
things like BlackBerrys. So hopefully they are going to agree 
conceptually with what are talking about. I think he actually 
agrees with our recommendation.
    The Chairman. Except that they have expressed exception to 
that recommendation.
    Mr. Kutz. In writing they did, but it sounds like they 
agree with it conceptually, so I am not sure exactly where that 
puts them.
    The Chairman. Senator Tester.
    Senator Tester. Just so you know, if you are not going to 
keep track of that equipment, I lost my BlackBerry a while 
back, it was $300. I mean, I quite frankly, hopefully that is 
going to be--let's get right to the crux of it. Mr. McSwain, do 
you think you have a problem?
    Mr. McSwain. Yes. I believe I have a problem. But not to 
the extent that is being portrayed.
    Senator Tester. How much do you think it is over-inflated 
by?
    Mr. McSwain. I couldn't tell you at this point, but it is 
certainly not $15.8 million. It is much less than that.
    Senator Tester. In your opinion, do you think it has been 
over-inflated by double?
    Mr. McSwain. For example, we just quickly parsed out that 
the $6 million worth of equipment in Alaska is deducted, 
$700,000 of the----
    Senator Tester. Well, I'm not----
    Mr. McSwain. I am trying to answer your question as to do I 
think it is inflated, yes. It is inflated, if not just from the 
fact that it is at cost value, not a depreciated value.
    Senator Tester. A couple of things. First of all, if we 
extrapolated this out to all 163 regions, we would be talking 
nearly $400 million, if the rate was the same. You could say 
they are inflated figures, they may be inflated figures if 
depreciation is taken into account.
    But I will also tell you that it also points out to me that 
you are running different sets of books. I don't know how many 
sets of books you have out there, but they ought to be a lot 
clearer than that. Because quite honestly, the reason that 
person had to fabricate that form, by your admission, is 
because you had a different set of books than they though you 
had, and when they started changing forms, books, however you 
want to put it, they end up screwing up, and it ends up with 
two forms with different signatures on them and different 
equipment.
    So the whole thing seems to be pretty well screwed up. If 
it is not the employees' fault, you have a systemic problem 
with your tracking system that quite frankly, you need to get 
somebody in to fix, and sooner, rather than later.
    The other thing is this. If you have a Caterpillar that you 
have given away or a backhoe that you have given away, and it 
is okay to give it away under 86-121 and you are following the 
rules, that is fine. But it needs to be documented. And the 
truth is, what Mr. Kutz said was exactly correct. You can have 
the best policies in the world, and if you don't implement 
them, if there isn't somebody implementing those policies, they 
are worthless. They are worthless.
    What actually is more disturbing to me than anything was 
the previous board you had up with a letter that was signed by 
you. And it was signed by Mr. McSwain, at the bottom, talked 
about 1997, that little memorandum right there, March 12th, 
1997, where you said, we have a problem, it needs to be fixed. 
We are light years further, we have much better technology than 
we had in 1997. You knew that there was a problem, and there is 
a problem now that is equally as bad, maybe worse than it was 
in 1997.
    The bottom line is this. I hear from folks in Native 
American Country all the time about, you have to plan when you 
are going to get sick, because the Indian Health Service never 
has enough money, Senator Murkowski talked about it. We come in 
here, we try to do the right thing, we try to get the money 
down to the people who want it. And if you have employees who 
are walking out the door with laptops under their arms or with 
desktops, and it is not being documented, I can tell you this, 
employees do have rights. And I think they should have rights, 
by the way. But a thief has none.
    And you guys honestly, you can downplay this all you want. 
But the fact is, this isn't going to get better until you admit 
there is a problem. I told the Chairman a minute ago, an 
alcoholic will never get better until they admit to themselves 
that they are an alcoholic. You have a problem within your 
agency that needs to be fixed. And if you are in denial, it is 
going to get worse. And the GAO came out with a report, you had 
an employee that came up and said, hey, I pointed this out. And 
I don't mean to lecture to you, but the truth is what I said in 
my opening statement, this is totally unacceptable. It is 
totally unacceptable. And it gives Government a bad name.
    When I go home and people come up to me and tell me how 
worthless the Federal Government is, I personally take offense 
to it. But it's damned hard to justify it when this kind of 
crap is going on in the agencies.
    The Chairman. Senator Tester, thank you.
    Let me ask a couple of additional questions. I don't 
understand who has been in charge at the Indian Health Service 
of property inventory, all of these last years since you wrote 
the memorandum. Is there one person in charge in this system 
that sends out information to all the other agencies and so on, 
or all the other areas? And if so, who is that? Because you 
keep suggesting this is a system problem. Seems to me, it is a 
people problem as well, probably more a people problem.
    I want to just ask Mr. Verrier, who said this. He took a 
look in his area, couldn't find 20 percent of the property, and 
the Property Book Office said they would prepare a new property 
book reflecting that. And then he said, okay, what are we going 
to about the items still missing? Their response was--was this 
the Property Book Office response?
    Mr. Verrier. The Property Book Officer.
    The Chairman. Officer, I am sorry. Their response was, we 
are going to write it off. Mr. Verrier's response was: What? 
You are not going to conduct an investigation? The answer is: 
No, we just write it off like we have always done.
    So the question is, you know, who was in charge and is that 
person still in charge, because I don't think--you know, it is 
not as if a system doesn't exist for inventory 10 years ago or 
today or 10 years from now. An inventory is something every 
agency does, every business does.
    So who was in charge, Mr. McSwain?
    Mr. McSwain. Well, we have had I think a fair amount of 
turnover in that particular leadership position, but let me 
just clarify. I believe it is important. I didn't mean to say 
it was just a system problem. I think that you accurately 
describe that it is a people problem, because it is the people 
who in fact, as Senator Tester says, it is the people who are 
the custodial folks. These are people that are custodial 
people.
    There are faces on the problem. There are faces on the fix.
    The Chairman. And if they are writing it off without 
investigating what happened to the property, would that violate 
procedures at the Indian Health Service?
    Mr. McSwain. It certainly will in the future.
    The Chairman. Would it in the past?
    Mr. McSwain. Well, in the past, if we couldn't find it, 
then this is a reasonable means. One of the things that I--
excuse me, I am having a difficult time with Mr. Verrier's 
comments on the side while I am trying to speak. Thank you.
    The whole issue of having the trained personnel in the 
positions has eroded over the years. That is something we have 
to fix. I say eroded because----
    The Chairman. What does that mean? I don't understand that 
at all.
    Mr. McSwain. We have property officers. We don't have full-
time property officers out there. We are moving, and a part of 
this new system is actually identifying individuals. In fact, 
we have increased the number of people who could be trained in 
proper receipt of equipment, which means receiving and tagging 
and inventorying equipment.
    The other end of it is custodial personnel that are 
trained. When I say there has been an erosion over time, it is 
that we have had retirements, we have turnovers. We need to 
strengthen our people system, if you will.
    The Chairman. Yes, but you have always had people in place 
to do these things, and somebody obviously hasn't been doing 
it. And so it goes back to my question, is anybody held 
accountable?
    One of the things that you have said today, it appears to 
me from the GAO report, some property has been stolen, some 
property has been lost, some property has been misplaced. And 
you are describing to us, well, maybe that is true, but they 
are over-stating the value of what has been stolen, lost or 
misplaced.
    You know, the fact is, I think it is pretty irrelevant what 
the value is. If you have people stealing property, you have 
people losing property or misplacing property, it doesn't 
matter to me so much what the value is. What matters to me is 
the system is broken and you have people who are supposed to be 
in charge that aren't doing the job.
    I want to ask a question of Mr. Kutz. What was the date on 
which you finished your GAO investigation? When it was 
completed generally?
    Mr. Kutz. This spring, and then what we did is send a 
report to the agency and give them a chance to comment.
    The Chairman. But you say this spring. Generally, when did 
you send the report to the agency for comment?
    Mr. Kutz. May.
    The Chairman. In May. Now, it is the end of July. That is 
60-plus days, I suppose. Any personnel changes in your system 
of inventory, Mr. McSwain, down at the Indian Health Service? I 
mean, any changes with respect to those that were alleged to 
have fabricated? Those who were alleged to have obstructed? 
Those that I assume had been in charge, but hadn't really been 
in charge?
    Mr. McSwain. I guess, let me just say that I am very 
fortunate in the fact that we pulled a property officer back 
into the position as acting, that knows the system. Our biggest 
challenge now will be to fill that job permanently, the agency 
property officer.
    But no, there haven't been any real changes in the last 60 
days. Other than that, there were some individuals who took 
other jobs and left the agency, out of the property staff. But 
aside from that, there haven't been any changes in personnel or 
leadership. That is not saying there won't be.
    The Chairman. Do you understand how that sounds to me, when 
I have a report from the GAO, and by the way, I have worked 
with the GAO for over 20 years. I have read a lot of GAO 
reports. We rely on them. And they say that your agency, you 
had people inside the agency that worked for you, and I am 
talking about the headquarters now, who tried to obstruct their 
investigation, some who tried to fabricate information.
    And you say, well, we have not had any changes in 
personnel, and we have the GAO saying you have some people down 
there that have really crossed the line in a very serious way. 
How do you reconcile that?
    Mr. McSwain. The way I reconcile it, certainly, is given 
the bright light that has been shined on our property 
management system is to review it across the Country, beginning 
with headquarters. We are doing that. We will be improving the 
staffing, dedicating more staff to it. I think during this 
process of the last few years, we moved the property function 
from Albuquerque. It was out there for a number of years, in my 
recollection. We moved it to Rockville. We haven't been able to 
fully staff the property function in headquarters and are 
continuing to do so.
    It is my sincere hope that we will fill those positions 
very soon, and have the people trained and accountable, and not 
have the kinds of issues that surfaced during the 
investigation.
    The Chairman. But these aren't just issues. These are some 
pretty fundamental things that the GAO has said. Frankly, I 
think you are destined to fail unless you shake this up in a 
significant way. I don't hear that here.
    I tell you what, if I had to explain what the GAO has said 
about an agency I am now in charge of, and I recognize you have 
just assumed this role. You have been there for a long while, 
but you just assumed the role of Director. I would be furious 
sitting here reading that someone in my agency took actions 
that the GAO interpreted to be fabrication or obstruction. I 
would be furious. I tell you what, employee or not, they would 
be working at a different place right now, 60 days later.
    At any rate, here is what I am going to suggest; I am 
almost at a loss to try to figure out what we do with some of 
these agencies. You know, the Indian Health Service is 
desperately short of money, under-funded. You have health care 
rationing going on. We have massive bureaucracy. I went through 
a clinic and they said, here is where our new X-ray machine is 
going to be; we desperately need it; we are waiting for it. How 
long have you been waiting? Well, it has been about 18 months 
the requisition has been in, but it just needs a signature, but 
it has been waiting 18 months for signature at the region.
    You know, I hear that stuff all the time. I just think we 
have such a serious problem. This GAO report is an 
embarrassment to an agency that just has to be doing much 
better work to try to address health care needs that cry out 
for assistance among the Native American population.
    I am going to ask on this subject, Mr. Kutz, whether the 
GAO could in about 90 days go back in. That is about five or 
six months after you have engaged with the Indian Health 
Service, and provided a report to them, if in about 90 days you 
would be willing to send somebody back in and give me an 
assessment of what has been done in 90 days from this date, to 
give us some assurance that things are happening there that 
keep track of property, that we don't have future reports of 
stolen property, lost property, misplaced property.
    Are you able to give us some service to do a review in 
about 90 days?
    Mr. Kutz. Sure. As you mentioned, we work for you, so we 
would be happy to work with you and your staff and Mr. McSwain, 
looking forward.
    The Chairman. We will be in touch. The staff of this 
Committee will be in touch with you and Director McSwain. I 
really hope that we could get a report. I am not asking for a 
full audit. I am just asking for a consultation between you and 
the Indian Health Service so you can give us an assessment of 
what has happened since you submitted this information in May 
to the Indian Health Service.
    Senator Barrasso?

               STATEMENT OF HON. JOHN BARRASSO, 
                   U.S. SENATOR FROM WYOMING

    Senator Barrasso. Thank you very much, Mr. Chairman. I ask 
that my statement become part of the record.
    But you are absolutely on point. Senator Tester used the 
word unacceptable. You used the word we should be furious. To 
me, this is offensive. We have the Wind River Reservation. We 
have the Northern Arapaho, the Eastern Shoshone. I visited with 
some tribal members yesterday, others when I was back in 
Wyoming on Sunday. Health care is vital to these people, and we 
need to make sure that the money, the investment that we as a 
Nation are making is getting to the right place, getting to the 
patients who are in need, and not being used this way.
    I don't want to repeat some of the questions that may have 
been asked before I got here.
    Mr. Verrier, if I could, in your estimation, are these 
findings of the GAO, are they in any way isolated instances? Or 
is this really a systematic nationwide problem with the Indian 
Health Service?
    Mr. Verrier. I have worked for the Department of the Army, 
Department of Defense, troop support agencies, National 
Institutes for Health, and I have never experienced in my over 
30 years of Federal Government service or 30 years in the 
military, such blatant disregard for property accountability.
    The problem, as I see it, is lack of holding people 
accountable for the loss, lack of documentation having 
individuals sign for equipment, and lack of annual follow-up of 
inventory on the property.
    Senator Barrasso. There was a little interchange earlier 
where there was a question of is property carefully looked at, 
and you were shaking your head no in the past. Do you want to 
just expound on that a little bit?
    Mr. Verrier. What can I say? You know, when equipment is 
missing, the procedures that I experienced with the Property 
Book Office was if you have a missing piece of equipment, they 
write it off. Okay? They re-do the property book, okay? To me, 
that is not the answer, okay? Somebody needs to do an 
investigation and inquiry on what happened to the piece of 
equipment, okay?
    Senator Barrasso. Mr. McSwain, I understand you have only 
been there two months in this position. But Congress is being 
asked to provide a substantial funding increase for Indian 
Health Services, an increase. And we all know that our 
facilities are held together by, as they say in Wyoming, with 
duct tape and baling wire.
    If taxpayers are going to increase their investment in the 
Indian Health Service, then you really do need to act 
immediately to correct the problems, don't you agree, to regain 
the public trust?
    Mr. McSwain. Yes, Senator. It is our intention to certainly 
begin acting. We have already begun to act on the 
recommendations, and fully engage on all of the 
recommendations, and we are moving ahead. I welcome the 90-day 
visit.
    Senator Barrasso. That was a question for Mr. Kutz. Any 
other recommendations that you would have for us as members of 
this Committee on ways that we can make sure that the public is 
getting their money's worth, that the folks on the reservation 
in Wyoming are getting the health care that they need with the 
services going to them, and not this loss?
    Mr. Kutz. Well, I think what Senator Dorgan said, not to 
walk away from this until you are satisfied it has been 
addressed. That is what oversight is all about. So we would 
support your continued oversight of these matters.
    Senator Barrasso. Thank you, Mr. Chairman.
    [The prepared statement of Senator Barrasso follows:]

  Prepared Statement of Hon. John Barrasso, U.S. Senator from Wyoming
    Last month, the Government Accountability Office--commonly known as 
the ``GAO''--released a shocking and disturbing report. The GAO 
uncovered and substantiated claims that the Indian Health Service or 
``IHS'' has grossly mismanaged government property and taxpayer 
dollars. The GAO report identified over 5,000 lost or stolen items 
worth about $15.8 million. These items include all-terrain vehicles, 
tractors, Jaws of Life equipment, and--most egregious--computers 
containing social security numbers. A physical inventory found an 
additional 1,100 IT hardware items such as laptops and digital cameras 
were also missing from IHS headquarters. These lost or stolen items 
cost the taxpayers another $2 million.
    If Congress is going to be asked to provide significant funding 
increases for Indian health services, then the IHS must act immediately 
to correct the problems identified by the GAO. Safeguards and 
accountability measures need to be implemented so that these issues do 
not re-occur. Fraud, abuse, and theft problems are not created by small 
children. These issues are the responsibility of adults--and it is time 
that the people who allowed this to occur start acting like adults and 
put an end to it. Inaction only serves to condone this wasteful, 
abusive, and even criminal behavior. The standard defense of ``this is 
just how the federal government operates'' is not acceptable.
    Many of our state's IHS facilities--particularly those in rural and 
frontier areas--are literally held together with duct tape. This year, 
the Senate worked in a bipartisan way to pass the Indian Health Care 
Improvement Act. I included an amendment in that bill requiring the GAO 
to report how various government and local programs coordinate health 
care services in Indian Country. This comprehensive report is even more 
important now that the GAO has uncovered systemic IHS mismanagement. If 
we do not know: (1) where resources are being spent, (2) the number of 
programs dedicated to provide various health care services, or (3) how 
health care services are coordinated; then we are not maximizing our 
ability to help Native Americans and Alaska Natives.
    My amendment asks the GAO to focus its research efforts on programs 
such as Medicare, Medicaid, the State Children's Health Insurance 
Program (SCHIP), and the IHS. It also requires GAO to explain how these 
federal programs interact with efforts by state, local, and Tribal 
groups to deliver essential health care services. By pinpointing 
service gaps and rooting out wasteful, abusive spending, then we can 
develop reasonable, commonsense solutions that streamline and improve 
Indian health care. It is essential our Committee have the information 
it needs to evaluate the current delivery system--exposing barriers 
that prevent collaboration, networking, innovation, and sharing of 
resources. This way, we can target federal funds to programs making the 
greatest impact--then focus on additional areas where Native American 
and Alaska Natives need our support.
    Mr. Chairman, the GAO is well known as ``the investigative arm of 
Congress'' and the ``Congressional Watchdog''. GAO helps Congress 
improve the federal government's performance and ensure programs meet 
strict accountability standards--all for the benefit of the American 
people. We rely on their expert, unbiased recommendations to make sound 
policy decisions. This oversight shows us ways to make government more 
efficient, effective, ethical, and equitable. It uncovers what is 
working, what is not, and offers advice on how best to fix it. But, 
most importantly, this oversight helps us plan for the future.
    I do not believe anyone wants to play a game of ``gotcha'' with the 
GAO's findings. Neither can we sit back, turn a blind eye, and accept 
that this is ``business as usual''. The American Taxpayers deserve 
better. Native Americans and Alaska Natives who depend on the IHS for 
their medical care deserve better. I am going to continue to fight to 
make sure individuals living on the Wind River Reservation, and all 
Native People across America, have equal access to quality medical 
care. But we cannot achieve this goal when the money we invest in IHS 
programs is wasted and property worth millions goes missing.
    Thank you for holding this hearing today, Mr. Chairman. I look 
forward to hearing the panel's testimony.

    The Chairman. Senator Barrasso, thank you very much.
    Senator Barrasso brings to this Committee a unique 
perspective as a physician. Dealing with Indian Health Care has 
been frustrating because we know there has not been sufficient 
funding, and we know that the management of the system has not 
been good. We know contract health care money runs out. We have 
a lot of problems.
    Director McSwain, we rely on you to work with us. As 
Senator Barrasso indicated, we have only just confirmed your 
nomination, and yet you have inherited what I think is a mess. 
We want you to succeed, but we have big problems, in my 
judgment.
    Mr. Kutz, thanks to the GAO. We appreciate your work. We 
will look forward to having an additional report from you, and 
we will have a hearing on that report.
    Mr. Verrier, thank you. Those that are whistleblowers, I 
believe you had whistleblower status at one point. I am not 
certain of that, but they are pretty nettlesome to agencies. 
Agencies don't like people who speak out when they see 
wrongdoing. But it is critically important that those employees 
that have the courage to speak out understand the value of 
that. I personally thank you, Mr. Verrier, for coming here 
today.
    Director McSwain, you have a lot of work to do. We 
appreciate your being here. I hope you will report directly to 
the Secretary of HHS, who should have been here today, but we 
will seek to get his comments at another time.
    Mr. Kutz, thanks to you and the GAO for your work.
    [Whereupon, at 11:07 a.m., the Committee was adjourned.]
                            A P P E N D I X

  Prepared Statement of Dr. Steven J. Miller, Director, IHS National 
      Council of the Laborers International Union of North America
    Chairman Dorgan and members of the Committee, I respectfully submit 
this testimony in response to the July 31, 2008 hearing on the misuse 
of property at the Indian Health Service (IHS).
    First, LIUNA's IHS National Council (``the Council'') wants to 
commend Chairman Dorgan for holding this important hearing and for 
requesting the GAO investigation into the misuse of property at IHS. 
LIUNA represents over 500,000 workers around the nation, including over 
8,000 Indian Health Service workers in 23 states. Our members include 
physicians, nurses, dental professionals, pharmacists, engineers, food 
service, medical technicians, housekeeping, and maintenance workers. We 
also represent workers in the property division at IHS. Most of our 
members not only work at IHS, but also use IHS services as enrolled 
tribal members.
    The Council has two primary goals in submitting this testimony. 
First, we unfortunately must concur with GAO's finding that there is 
rampant mismanagement at IHS, and believe we must share our workers' 
constant problems with management with the Committee. Hopefully we can 
provide the Committee with information that will assist you in working 
toward our shared goal of having a well-run agency that adequately 
serves our Native American population--as employees and users of IHS 
services. Second, the Council wants to ensure that the workers we 
represent are treated fairly in the course of this ongoing GAO 
investigation. We already have reason to believe that IHS violated 
federal law by failing to inform the union when our bargaining unit 
employees (BUEs) were questioned during the course of this 
investigation. We now want to ensure that if any of our bargaining unit 
employees are disciplined that they receive the due process to which 
they are entitled under federal law and the union's contracts with IHS.
Misuse of Property Is Just One Example of the Pervasive Management 
        Problems at IHS
    LIUNA and our BUEs face constant challenges dealing with IHS 
management. This is not an isolated problem in one area or service 
unit. It is pervasive and severe. The result is less money and staff 
for this already resource challenged Agency to provide health care 
related services to Native American people. Our BUEs are constantly 
harassed, demeaned, discriminated against, and otherwise mistreated by 
IHS management. In a given year, LIUNA files upwards of 75 grievances, 
and dozens of unfair labor practice charges against the agency. These 
grievances range from wrongful discipline to management unilaterally 
(and illegally) making changes in working conditions to sexual 
harassment. This year, LIUNA filed a group grievance against IHS on 
behalf of our BUEs for wanton and widespread Fair Labor Standards Act 
overtime violations based on numerous reports that our workers were 
being forced to work overtime without compensation and were improperly 
classified so the agency would not have to pay them the overtime they 
were owed under federal law.
    I.H.S. is notorious for the misapplication of personnel practices 
and policies and regulatory requirements that cost employees millions 
of dollars over time such as the failure to address compensation for 
standby status and failure to pay appropriate uniform allowances. Then 
to add insult to injury, the delay in dealing with the problems causes 
additional costs and resources. In 2002, the Union prevailed on a back 
standby pay claim and the interest was in many cases equal or greater 
than the back pay due.
    Instead of following the law and the labor-management contract, IHS 
will attempt to terminate, demote, or otherwise discipline workers who 
attempt to exercise their rights at work, or who report wrongdoing at 
the agency. The agency also has a widespread practice of ``shuffling 
around'' supervisors who are found to have violated the law or our 
contracts instead of terminating or disciplining them. This is an 
unacceptable double-standard. This mistreatment of our BUEs not only is 
unfair to them, but is yet another example of the widespread management 
problems at IHS. These practices have created a culture of fear amongst 
the IHS workforce that impairs our BUEs' ability to do their jobs.
    The union's legal and contractual rights are also often ignored by 
IHS. The Union has been forced off of IHS property twice in the past 
year when we were exercising our legal right to organize and otherwise 
assist our BUEs. And during the course of this GAO investigation into 
the misuse of property, IHS failed to notify the union that our BUEs 
were being questioned. This is a violation of federal law (see, 5 USC 
7114(a)(2)(A)) and yet another example of management problems at IHS.
    All of these issues greatly harm morale at the agency, and show 
that IHS has little respect for the law, its employees, the unions 
representing its workers, and the clients IHS serves. LIUNA's goal in 
raising these serious issues is to hopefully shed some light on other 
pervasive management problems at IHS--labor-management relations and 
mistreatment of IHS employees--in order to work with the Committee, and 
IHS, to remedy them.
LIUNA Wants to Ensure That the Appropriate IHS Employees Are Held 
        Accountable for the Property Issues at IHS
    LIUNA shares the Committee's goal of holding accountable those 
responsible for misuse of property at IHS. However, we also want to 
ensure that the appropriate individuals are held accountable. We 
believe those are the managers who make IHS policy and direct our BUEs 
to follow it, not the BUEs who must follow those orders.
    LIUNA is concerned that IHS management may try to ``scapegoat'' our 
BUEs by unfairly blaming them for the misuse of property issues at the 
agency. Managers and supervisors make decisions about property policies 
at IHS. BUEs, by statutory definition, cannot make these types of 
policy decisions and still be represented by the union.
    If IHS managers directed or encouraged our BUEs to violate federal 
law or IHS policies regarding the use of property, those managers 
should be the ones held accountable, not the workers who were merely 
carrying out orders. IHS managers have great power over their 
employees, and employees can and do face discipline for refusing orders 
from management. Workers at IHS are thus faced with the terrible choice 
of standing up and refusing to violate the law or IHS policy, knowing 
that many other IHS workers have lost their jobs for refusing such 
orders from their boss, or following a manager's misguided orders in 
order to protect themselves against being terminated or otherwise 
disciplined.
    If any BUEs are found to have willfully and knowingly broken the 
law, LIUNA wants to ensure that they are held accountable. But if IHS, 
or Congress, attempts to discipline our BUEs regarding the misuse of 
property issues discovered and alleged by GAO, proper procedures must 
be followed and workers' rights must be protected (such as the right to 
have a union representative present during questioning, a worker's 
right to present evidence in his/her defense, etc.). This right to due 
process is granted to the worker under both federal law and the union's 
contract with the agency. The right to due process separates those 
workers who are represented by a union from those who are ``at-will,'' 
or lacking union representation. Unlike BUEs, ``at-will'' employees 
have no statutory right to defend themselves when charged with 
wrongdoing. The right to due process does not mean that the worker 
cannot ultimately be disciplined; it simply means that the agency or 
Congress must follow certain procedures to ensure fairness and 
impartiality during the course of its investigation and any subsequent 
disciplinary process.
Conclusion
    LIUNA is very concerned about the allegations raised in the GAO 
report, ``Indian Health Service--IHS Mismanagement Led to Millions of 
Dollars in Lost or Stolen Property,'' and those raised at the July 31 
hearing in your Committee. Our workers have dedicated themselves to 
improving the lives of Native Americans by ensuring they have access to 
adequate health care services. This mismanagement by IHS takes 
essential funds away from patient care and other needed services at the 
agency, makes it harder for our workers to do their jobs, and harms the 
agency's reputation. The mismanagement, however, is not limited to 
misuse of property.
    Our BUEs face discipline, harassment, and other types of 
mistreatment every day from IHS managers. The culture at IHS is one of 
acceptance of this mismanagement and mistreatment of our workers, and 
this is simply unacceptable. LIUNA hopes that the Committee will 
continue to work to fix these rampant mismanagement problems at the 
agency so that our workers can do their jobs in a supportive, rather 
than a hostile, work environment. LIUNA further requests that our BUEs 
are treated fairly during the course of the ongoing GAO investigation, 
and not scapegoated by the managers who actually made the decisions 
resulting in lost and stolen property at IHS. We look forward to 
working with the Committee as you continue your work in this area.
                                 ______
                                 
Prepared Statement of Isabelle Florence Youpee, Member, Fort Peck Sioux 
                                 Tribe
    Dear Chairman Dorgan and Distinguished Committee Members:
    Thank you for allowing me to address this Committee.
    My name is Isabelle Florence Youpee. I am 61 years old and enrolled 
in the Fort Peck Sioux Tribe in Poplar, MT. I have worked in various 
capacities at various Indian Health Service facilities throughout more 
than 20 years of my lifetime. Most recently, from 1996 until May, 2008, 
I was employed as HIPAA Compliance Officer/Computer Technician at the 
Spotted Bull Treatment Center in Poplar, MT, which is an alcohol/
chemical dependency treatment center for treating residential aftercare 
adolescent clients and outpatient adult clients. It is fully federally 
funded through a 638 grant to the Fort Peck Tribes.
    Though there are several incidents I could relate regarding this 
subject, for this testimony, I wish to report on only some most recent. 
I feel, in doing so, it may help shed light on ways which may help to 
correct the problems resulting from IHS mismanagement.
    For the past several years at Spotted Bull Treatment Center, there 
has been gross mismanagement through political interference of Tribal 
Council members appointing unqualified personnel to run the treatment 
center. An incident stemming directly from this occurred in September 
2006 when, in my capacity as HIPAA Compliance Officer/Computer 
Technician, I discovered that several computers had been given away to 
employees and the public without proper authorization, without proper 
processing, and without the necessary cleaning and reformatting of the 
hard drives. As a result, sensitive client information on those 
computers was released and accessible to whomever received the 
computers. This client information was completely accessible because it 
was in no way coded or protected. This occurred because the Tribal 
Council had appointed a Director with no knowledge whatsoever regarding 
the laws, rules and regulations governing chemical dependency programs. 
When I reported this information to the Billings Area Alcohol 
Coordinator, Dr. Kathy Masis, she agreed that this should not have 
happened but she was not concerned about it, not did she seem concerned 
about the HIPAA/Privacy violations resulting from the incident. When I 
requested she do an investigation, I was told, ``it's up to the 
Tribes.'' Dr. Masis was satisfied to let this incident pass without any 
accountability or oversight. It appeared to me that she didn't want to 
ruffle any tribal feathers should she have investigated the matter and 
found the Tribes at fault for hiring an unqualified Director.
    Another incident occurred because the Tribal Council appointed 
another unqualified Director in November, 2006. In January, 2007, this 
new Director appointed a Safety Officer who was in violation of the 
Indian Child Protection and Family Violence Prevention Act with regard 
to background checks. When I raised the concern, by memo, with the new 
Director, I was rebuffed because she was not even aware of this Federal 
law and did not seem to care because this employee was a friend of 
hers. In early February 2007, I took my concerns to the next higher 
authority by letter to the Tribal Chairman who did not recognize the 
importance of the matter and did not take any action. I then telephoned 
our Contracting Specialist at the BAO IHS, Robert Wallette who did not 
take any action but referred me to the higher-ups in IHS. In mid-
February 2007, I wrote to the OIG for DHHS seeking help and asking that 
my correspondence be forwarded to the proper authority if necessary. On 
April 3, 2007, the IHS Program Integrity and Ethics Director sent a 
memo to the Billings Area IHS Director requesting a Fact-Finding 
Review. It was not until July 5, 2007 that the BAO IHS Director finally 
issued a Report of Findings which upheld my argument, but by then the 
Tribal Chairman had been pressured by one of his political supporters 
to take the corrective action. To this day, I don't believe the 
Chairman took this action because of the legal necessity because I 
don't believe he understood the risk to our adolescent residential 
clients explained through this law; I believe he took the action 
because of the political pressure he received. I say this because he 
did not take any action until he heard from his political supporter, 
even though he had received my letter several weeks earlier.
    In relating these incidents to you, it is not my intention to 
demean tribal leaders; my intention is to show that there is a severe 
lack of understanding and knowledge of the laws, rules and regulations 
by tribal councils when it involves managing any federally-funded 
program. There is also, as I've described, a lack of engagement and 
concern on the part of our immediate IHS administrators when such 
violations are reported. There must be a way to insure that those 
wishing to contract or manage these programs have the basic knowledge 
to do so; and if it takes mandatory training and testing BEFORE taking 
over a program, then so be it. There is no excuse for allowing IHS 
programs to operate willy-nilly with no regard for the laws, rules and 
regulations under which they are supposed to operate.
    At Fort Peck, we do not have at present nor have we in the past 20+ 
years, anyone on our tribal council who has knowledge of how these 
facilities must be operated with respect to laws, rules and 
regulations. This ignorance has led to IHS management's ability to do 
whatever they want, including completely ignoring their oversight 
responsibilities. It seems the Area office personnel who are directly 
responsible for oversight have bent over backwards to please the tribal 
council by adopting the attitude that ``anything goes,'' and ``whatever 
the tribe wants.'' I feel the Area and Service Unit personnel actually 
depend on Congress to ignore the problems so IHS can continue operating 
the way they do.
    In conclusion, we will never have the accountability we need to 
make IHS work the way it is supposed to until these real problems are 
rooted from the system. It is never right to allow tribes to play 
politics with the federally funded programs they contract, and allow 
IHS personnel at all levels to ignore their oversight responsibilities 
with no consequences. I am not of the opinion that IHS needs to have an 
influx of additional funding , as recent findings show that there is a 
great deal of waste at the administrative level, however, I do feel 
that we need more funding allocated specifically for medical services. 
IHS needs to be restructured, with special attention paid to overhead 
and bureaucratic costs, especially the high salaries paid to Area 
Office and Service Unit administrators who cannot or will not do their 
jobs. Throughout the years, the Service Unit Director has never taken 
responsibility for oversight in these matters; it's as though that 
level of recourse does not exist in the procedural chain. To address 
these issues, the structure and administration of IHS need to be 
reviewed immediately and a straightforward procedure for reporting and 
correcting such things in the future must be established, widely 
disseminated, and promoted; employees need to know that it is not only 
permissible but expected that they report such mismanagement.
    Thank you for allowing me this opportunity.

                                  
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