[Survey Report on Legal Services Costs Incurred by the Cherokee Nation of Oklahoma]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 99-E-70

Title: Survey Report on Legal Services Costs Incurred by the Cherokee Nation
       of Oklahoma

Date:  October 29, 1998




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U.S. Department of the Interior
Office of Inspector General





SURVEY REPORT


LEGAL SERVICES COSTS
INCURRED BY THE
CHEROKEE NATION OF OKLAHOMA



REPORT NO. 99-E-70
OCTOBER 1998









                                   C-SP-BIA-003-98-R
                                    October 29, 1998


SURVEY REPORT


Memorandum


To:       Assistant Secretary for Indian Affairs

From:     Robert J. Williams
          Assistant Inspector General for Audits

Subject:  Survey Report on Legal Services Costs
          Incurred by the Cherokee
          Nation of Oklahoma (No. 99-E-70)


INTRODUCTION

This report presents the results  of  our  survey  of
legal  services costs incurred by the Cherokee Nation
of Oklahoma.   The  objectives  of the survey were to
(1) determine  whether the Cherokee  Nation  acquired
and  paid  for  legal  services  in  accordance  with
applicable  laws,   regulations,   and  policies  and
(2) identify the source of funds used  to pay for the
legal services.  We conducted the survey  in response
to a Congressional request.

BACKGROUND

In  fiscal  year  1996,  the Cherokee Nation received
revenues of approximately $131 million, consisting of
$88 million  primarily  from   Federal,   state,  and
private   grant   and   contract  sources  and  about
$43 million  from the Nation's  business  operations.
Within   the   $88 million,   the   Nation   received
approximately   $64.5 million    from   the   Federal
Government,  including $8.6 million  awarded  by  the
Department of  the  Interior  under a self-governance
compact,  of which the Nation expended  approximately
$6.4 million.   At  the time of our audit, the Nation
had  not  prepared financial  statements  for  fiscal
years 1997  and  1998;  therefore,  we were unable to
determine  the  funding  sources  and  total   dollar
amounts of receipts and expenditures for those years.
However,  according to records provided by the Office
of Self Governance,  Department  of the Interior, the
Nation  was awarded approximately $15  million  under
its fiscal year 1997 annual funding agreement and has
received  about  $8.9  million  under its fiscal year
1998  annual  funding agreement as  of  September  3,
1998.  The agreements  were executed  pursuant to the
Nation's Self-Governance Compact with the Department.

The  1994  amendments  (Public  Law 100-413)  to  the
Indian Self-Determination  and  Education  Assistance
Act  (Public Law 93-638) permanently established  the
self-governance  program  for  Indian  tribes.  Under
self-governance   funding   agreements,  tribes   are
authorized to plan, conduct, redesign, and administer
programs, services, functions,  and  activities  that
meet  the needs of the individual tribal communities,
including  control  over  funding and decision making
for  Federal  programs.   On  October 1,   1990,  the
Cherokee Nation entered into a compact agreement with
the  Secretary  of  the  Interior  to participate  in
self-governance and agreed to abide  by  all existing
Federal  standards  in  carrying  out  the  programs,
services,  and  functions  under  the self-governance
compact.   Also,  the  Bureau of Indian  Affairs,  on
February 12,   1998,  published   draft   rules   and
regulations for  tribal self-governance programs that
require the tribes to maintain management systems and
practices at least  comparable  to those in existence
when the tribe entered the self-governance program.

SCOPE OF SURVEY

Our  survey  was  conducted  in accordance  with  the
"Government  Auditing  Standards,"   issued   by  the
Comptroller    General    of   the   United   States.
Accordingly, we included such  tests  of  records and
other   auditing   procedures  that  were  considered
necessary under the circumstances.  To accomplish our
objectives,  we  obtained   and  reviewed  applicable
criteria related to the procurement  and  payment  of
legal  services,  reviewed  and  discussed  financial
controls  over these functions with Nation officials,
and selected  and  reviewed samples of legal services
payments and Federal program funds transfers.

Of  335 legal services  transactions,  totaling  $1.3
million,  recorded  in  the  Nation's  general ledger
system  during  the  period  of October 1995  through
February 1998, we judgmentally  selected  a sample of
89  (27 percent)  transactions,  totaling  $1 million
(77 percent).  We sampled legal services transactions
equal  to or greater than $1,000 and all expenditures
identified for three legal services vendors.  We also
judgmentally    selected   from159   Bureau   program
interfund transfers, totaling $35.5 million, a sample
of 21 (13 percent)  transfers, totaling $11.5 million
(32 percent), which varied in amounts from $63,000 to
$800,000.  The interfund  transfers were from special
revenue  accounts  (used  to account  for  restricted
funds such as Bureau grants)  to the Nation's general
operating fund and motor fuel tax  accounts  (used to
account for Nation revenues) and occurred during  the
period of October 1996 through February 1998.

As  part  of  our  review,  we evaluated the Nation's
system of internal controls over  the (1) procurement
of and payment for legal services and (2) transfer of
Federal program funds from special  revenue  accounts
to  the  general fund and motor fuel tax accounts  to
the extent  we  considered  necessary.   The internal
control  weaknesses identified are discussed  in  the
Results  of   Survey  section  of  this  report.   If
implemented, the  recommendations  should improve the
internal controls.

Our survey was performed from March 31  to  September
3, 1998, and included visits to the  Headquarters  of
the  Cherokee Nation, in Tahlequah, Oklahoma, and the
office  of  the  Nation's  independent accountant, in
Oklahoma City, Oklahoma, in April and May 1998.

PRIOR AUDIT COVERAGE

During  the  past  5 years,  neither  the  Office  of
Inspector General nor the General  Accounting  Office
has  performed any audits that specifically addressed
the Cherokee  Nation's procurement of and payment for
legal services.

However, on June 27,  1997, an independent accounting
firm  issued  the report  entitled  "Cherokee  Nation
Single Audit Reports  and Supplementary Schedules for
the  Year  Ended  September 30,  1996."   The  report
stated   that  the  Nation's   financial   management
information system was considered a material weakness
and  was not  capable  of  producing  timely  interim
and/or    year-end   financial   information,   which
significantly impacted Tribal management's ability to
prepare reliable  financial reports and make informed
financial decisions.   In addition, the report stated
that  the  Nation  processed  Self-Governance-related
procurement  actions   greater   than   $1,000  in  a
noncompetitive   manner  and  did  not  have  current
general and cash management  accounting  policies and
procedures.    Further,   the   report   stated  that
"significant  uncertainty  and  disagreement   exists
regarding   interpretation  and  application  of  the
Nation's tribal  budget  approval  and implementation
process, with the primary issue involving  whether or
not budgeted expenditures are approved by the  Tribal
Council  at  a  global  level,  or at a more detailed
level such as by fund type, department,  or  specific
line   item."    The   independent   accounting  firm
recommended that the Nation determine whether its new
accounting  software[1]  was  appropriate   for   the
Nation,  assess  the  proposed  plan  to complete the
implementation of the accounting software,  designate
an  internal full-time project manager to manage  the
implementation   project,  and  utilize  an  external
resource  to  monitor   project  implementation.   In
addition, the independent accounting firm recommended
that  the  Nation  (1) consistently  follow  policies
regarding competitive  bidding and any grant or other
funding  source  requirements   and   (2) update  and
maintain  current accounting policies and  procedures
to assist Nation  personnel  in the day-to-day use of
the new accounting system.  Further,  the independent
accounting  firm recommended that the Nation  develop
and embark on  a  specific  strategy  to  address and
resolve    the   uncertainties   and   disagreements,
including approving  amendments to existing laws that
would clarify the Nation's budgetary laws.

In addition, at the request of the Tribal Council, an
independent accounting  firm issued, on September 30,
1997,  the  report  entitled   "Report   on  Applying
Agreed-Upon Procedures."  The report stated  that the
Nation   (1) entered   into   contracts  without  any
requirement for prior or subsequent  notification  of
the  Tribal  Council; (2) had made payments for legal
services  without   having   appropriate   supporting
invoices,  without  staying  within the terms of  the
contract, and sometimes when no  written contract had
been   executed;   (3) was   unable   to  produce   a
year-to-date  trial  balance  report  (a  listing  of
assets,  liabilities, equity, revenues, and  expenses
for financial statement preparation) for fiscal years
1996 or 1997;  (4) recorded  expenditures  to Federal
programs  that were not in compliance with Office  of
Management and Budget Circular A-87, "Cost Principles
for State,  Local,  and  Indian  Tribal Governments";
(5) recorded   expenditures   without    having    an
established  appropriation/budget  code;  (6) had not
established    Federal    program    funds   transfer
procedures;  and  (7) had  not  updated the  Nation's
general  accounting  policies  and  procedures  since
1985.   The  independent accounting firm  recommended
that the Nation  (1) develop  a policy to require the
Executive Branch to present to the Tribal Council all
proposed  contracts for concurrence  prior  to  their
execution,  (2) develop  a  policy to ensure that all
invoices are read before they  are  paid to determine
whether a contract has been put in place and that the
payment  due  was for agreed-to services  and  within
dollar limitations  in  accordance  with the terms of
the  contract,  (3) determine the actions  needed  to
enable timely production  of a current trial balance,
(4) develop   policies  and  procedures   to   ensure
compliance  with   Federal  and  state  requirements,
(5) clarify  the  role   of  the  Tribal  Council  in
approving budgets, (6) establish  a  consistent means
of measuring compliance with established  budgets and
perform  regular  budget  versus  actual  expenditure
analyses for each program, and (7) develop an updated
policies   and  procedures  manual  and  ensure  that
internal  controls   are   adequately  developed  and
implemented as soon as possible.

Based  on  the two prior audit  reports,  the  Nation
instituted  a   number  of  actions  to  improve  its
financial  management.    In   an  August  13,  1998,
memorandum  to  our  office,  the Nation's  Executive
Director of Finance and Administration stated:

     The  Cherokee Nation Executive  Branch  and
     the Cherokee  Nation Legislative Branch are
     strongly  committed  to  strengthening  and
     maintaining    an    efficient,   effective
     financial   system.    Evidence   of   this
     commitment    is   the   development    and
     implementation  of  a Financial Improvement
     Plan  .  .  .  and  the  appropriation   of
     $2,000,000  for  the project.  The Nation's
     financial department and the contractor for
     the project . . .  have  the  project  well
     underway and expect successful completion.

     The  Financial  Improvement  Plan, not only
     includes    the    complete   and   correct
     installation  of  the   American   Fundware
     Accounting system, correct organization  of
     97  data  for  audit and organization of 98
     data (to date) and  proper  staffing of the
     Accounting Department.  Proper staffing and
     a fully functioning Accounting  System will
     provide for efficient control, maintenance,
     reconciliation   and   reporting   of  bank
     accounts.

RESULTS OF SURVEY

We found that the Cherokee Nation of Oklahoma did not
acquire and pay for legal services in accordance with
applicable    laws,    regulations,   and   policies.
Specifically, the Nation  incurred  costs  for  legal
services  without  formal contracts, without adequate
support  for costs billed,  outside  the  purview  of
contract terms  and  conditions  (when  contracts had
been    prepared),    and   in   excess   of   Tribal
Council-approved appropriations.   We also found that
the Nation incorrectly used Federal  funds  from  the
Department  of  the  Interior  to  pay for litigation
against  the Federal Government, transferred  Federal
funds to the  Nation's  general  operating  fund  and
motor  fuel  tax  accounts  without ensuring that the
Federal  funds were needed to  pay  for  expenditures
under the Federal programs, and inaccurately prepared
a Financial  Status Report[2] before it was submitted
to the Bureau  of  Indian Affairs.  However, we could
not determine the source of funds used to pay for all
legal  services  because   when  Federal  funds  were
transferred to the general operating  fund, they were
commingled with the Nation's general funds  and  lost
their  identity  as  Federal funds.  The requirements
for  the use of and the  accounting  for  Nation  and
Federal  funds are contained in the Nation's Code and
implementing  regulations  and procedures, the Indian
Self-Determination Act Amendments of 1994, the annual
funding  agreements,  and Office  of  Management  and
Budget circulars.[3]  However, the Nation's Executive
officials  had  not  developed   and  implemented  an
adequate financial management information  system  to
ensure   compliance   with   established  regulations
regarding legal services, adequate  identification of
Federal  program expenditures and amounts  owed,  and
accuracy  and   completeness   of   Federal   program
financial  reports.   As a result, the Nation (1) did
not have assurance that  legal services incurred were
reasonable  and  necessary,   (2) improperly  charged
$88,000 to the Department of the  Interior  for legal
services,  (3) transferred Federal funds of at  least
$16.1 million  to  the general operating fund without
assurance  that  Federal   program  expenditures  had
previously  been  incurred and  were  owed,  and  (4)
included inaccurate  financial  data in the Financial
Status Report submitted to the Bureau.

Legal Services Payments

We found that the Cherokee Nation  incurred  and paid
for   legal   services   without  contracts,  without
adequate   supporting   documentation,   outside   of
contract  terms  and conditions,  and  in  excess  of
Tribal   Council-approved    appropriations.     This
occurred because the Nation's Executive officials did
not   have  effective  internal  controls  to  ensure
compliance with established regulations for incurring
and  paying  legal  services,  as  described  in  the
examples that follow.

Payments  Without  Contracts.  The Nation paid 35 legal
services invoices, totaling $791,000,  without having
contracts.   The  Nation's  Employment Policy  Manual
(Chapter II, Subsection  H) requires that (1) a draft
(legal services) contract accompanied  by  a  written
justification    be    prepared   before   contractor
(attorney)   services  are   acquired   and   (2) all
contractor agreements  be  approved in advance by the
appropriate Executive Director  and Contract Manager.
For  Federal  funds, the Code of Federal  Regulations
(43 CFR 12.60(b)(6)) requires that accounting records
(including  payment  transactions)  be  supported  by
source  documentation,   such   as   contract   award
documents.   However,  in  one  instance  noted,  the
Nation   paid  14 invoices,  totaling  $622,000,  for
various legal  services  provided  by  one legal firm
from  September 4,  1996 through July 31,  1997,  for
which  there  was  no  contract.   According  to  the
invoices,  the  legal  services  related  to  (1) the
Nation's     Delaware     and    Arkansas    Riverbed
litigations;[4]      (2) navigational      servitude;
(3) compound interest  recovery  from the Government;
(4) meetings  with Congressional, Department  of  the
Interior,  and Department  of  Labor  officials;  and
(5) review of  the  Cherokee  Nation Marshal's search
warrant.

For these 14 invoices, the Nation did provide us with
a  September  5,  1996, letter from  the  firm  which
stated "The District of Columbia Code of Professional
Responsibility requires  us  to  put  in  writing our
billing practices regarding the work we will be doing
for the Cherokee Nation."  In that regard, the letter
stated  that  the  firm  would  issue  bills monthly,
listed the billing rates for three representatives of
the firm, and specified that the firm would also bill
for expenses.  However, we found that the  letter did
not  identify  the  scope  of  work,  the  period  of
performance,  or  the   cost  of services and was not
signed by a representative of the  Nation.  Regarding
payments  of  six  of  these  invoices, the  Nation's
former Controller, in a September 26, 1997, letter to
the former Secretary/Treasurer, stated:

      I  need  your  written  authorization  to
      release    the    checks    since     the
      documentation    is    inadequate.     In
      addition,  the  request for production of
      documents  from  KPMG   [an   independent
      public accounting firm] covered  this law
      firm.   The Cherokee Nation has indicated
      to the Tribal  Council  that  no contract
      was available for this firm.

On  September 15, 1997, the Nation's Principal  Chief
signed  a  contract  which  stated,  in  part,  "This
contract,  which  memorializes  the arrangement under
which  [the  firm] previously has performed  services
for the Cherokee Nation, may be terminated at will by
either party."   The  independent  public  accounting
firm   issued  its  "Report  on  Applying  Agree-Upon
Procedures"  on  September  30,  1997, which reported
that  the  Nation  did  not  provide a  contract  for
payments to this firm.

We  believe  that  the Nation should  not  have  paid
invoices without having a contract that specified the
services contracted for.

Payments Without Adequate Supporting Documentation.
The  Nation  paid  26 invoices   for  legal  services
totaling   $269,000   that  did  not  have   adequate
information  to verify the  specific  nature  of  the
legal services  received,  the  hours billed, and the
hourly rates charged.  For example:

The Nation made a $27,000 payment on a legal services
invoice  that  did not provide the  number  of  hours
worked by the legal  firm in relation to the services
provided.

-The Nation made a $2,800 payment on a legal services
invoice  that  did  not provide the number  of  hours
worked or the hourly  billing  rate  charged  by  the
legal firm in relation to the services provided.

The  Nation's  "Operational  Policies,"  No.  86-180,
states  that documentation for check requests are  to
consist of  original  invoices, including an itemized
description and price of  goods  or services invoiced
and  a  total  invoice  amount.   In  addition,   the
"Policies"  states  that  "non-itemized statements do
not  constitute  proper  invoices."   Further,  sound
business practices dictate  that  vendor  invoices be
sufficiently  detailed  to  allow  for  a review  for
appropriateness, accuracy, and completeness to ensure
that  they  are  in  compliance  with  the underlying
agreement authorizing the expenditure or disbursement
of  funds.   A  Nation's  accounts  payable  official
stated,  "It is not the Nation's normal procedure  to
pay invoices which lack adequate documentation and/or
detail; however,  invoices that are signed [approved]
by  Executive  Office   officials  are  automatically
processed for payment [by  accounts payable], without
any further questions."

Payments Outside Contract Terms and Conditions.  The
Nation  paid  15 invoices for legal services totaling
$43,932 that were  in excess of the agreed-to billing
rates.  The Code of Federal Regulations (43 CFR 12.76
(b)(2)) requires recipients  of Federal assistance to
ensure that their vendors perform  in accordance with
the  terms, conditions, and specifications  of  their
agreements.  However, we found the following:

For 14 invoices, the Nation incurred costs of $14,775
that were  in  excess  of  billing  rates  for  legal
services.   In  this instance, the billed hourly rate
of $325 was $25 per  hour more than the contract rate
of $300.  A Nation official  stated that the payments
were  made "because the billing  documents  had  been
approved  by  various  Executive  officials."  In its
October 2, 1998, response to the draft  audit report,
the Nation included a November 26, 1997,  letter from
the firm which stated:

      On  September  15,  1997, at the Nation's
      request,   we  entered  into   a   formal
      contract  with   the  Nation  as  to  our
      representation.  This contract, which was
      intended  to  memorialize   the   billing
      arrangement  established  by the retainer
      letter  . . . listed the rates  we  would
      charge.   By  inadvertence,  my  rate was
      listed as $300 instead of $325. . . . The
      only  bills  for  services rendered after
      signing the contract  were bills sent you
      on October 27, 1997, for  September 1997.
      These bills have not yet been  paid.  The
      last   bills   paid   were  for  services
      rendered  through  July  1997.   Although
      listing my rate as $300 in  the September
      15 contract was a mistake, we  will honor
      that rate at least until the end  of  the
      year  because it was our error.  Thus the
      September    bills    will   be   revised
      accordingly.

We believe that the Nation should  have  ensured that
the  rate  billed  was  in  accordance with the  rate
specified in the contract.

For one invoice, the Nation incurred costs of $29,158
that were in excess of legal services costs billed by
the  Nation's Office of General  Counsel.   We  found
that the  payment  should  not have been made because
the  attorney/payee  had not fulfilled  the  retainer
agreement's minimum days  worked  clause.   A  Nation
accounts payable official stated that the payment was
made  "because the billing document had been approved
by the former Chief of Staff."  This example was also
addressed   in   the  independent  accounting  firm's
"Report  on  Applying  Agreed-Upon  Procedures"  (see
Prior Audit Coverage).

Legal Services in Excess of Appropriations.  The Nation
incurred legal  services  costs of $491,000 in excess
of   Tribal  Council-approved   appropriations.   The
Cherokee  Nation Code Annotated (Title 62, Chapter 4,
"Appropriations") requires that the (1) Executive and
Finance   Committee,    upon    direction    of   the
Secretary-Treasurer   and   with   advice   from  the
Controller,   propose   amendments   to   the  annual
appropriations law based on material changes  in real
or  estimated  expenditures  that  affect  the  total
amount  budgeted  and  (2) amendments be presented to
the  full  Tribal  Council   for   consideration  and
passage.  For example:

The Tribal Council appropriated a total  of  $300,000
for  the  Nation's  Delaware  Separation  litigation.
However,  we  found  that costs of $539,000 had  been
charged against the appropriation and that the excess
legal services costs of  $239,000  had  been incurred
without  Tribal  Council  approval.  In addition,  we
determined that $272,000 of the $539,000 was incurred
for  legal  services  unrelated   to   the   Delaware
Separation  litigation,  such  as  issues related  to
Department  of Labor hearings, the Arkansas  Riverbed
litigation, the  establishment  of the Arkansas River
Port  as a means to create Cherokee  Nation  business
income, and the Marshal's search warrant.

The Tribal  Council  appropriated  a total of $67,000
for   the   Law  and  Justice  Department's   general
($33,500) and indirect ($33,500) legal services costs
categories. However,  we  found that general costs of
$146,135  and  indirect costs  of  $84,412  had  been
charged to the Department's  costs  categories.  As a
result,   the  general  costs  exceeded  the   Tribal
Council's appropriation  by  $112,635,  and  indirect
costs   exceeded   appropriations   by  $50,912.   In
addition,  we  determined  that the Law  and  Justice
Department exceeded its overall appropriation for all
costs categories by $117,000.

Because  Nation Executive officials  did  not  comply
with  the  tribal  appropriation  requirements,  cost
appropriations  were  exceeded.   For  example,  in a
memorandum dated November 7, 1996, a Nation's Law and
Justice  Department  attorney  stated, "I cannot sign
this check request (for payment), nor can I recommend
approval  of  the  check  request  by   anyone  else,
because,  in  my  opinion  it is not covered  by  the
Continuing Resolution authorizing  funding at 100% of
the  fiscal  year 1996 budget (funding)  level."  The
memorandum was  in  response  to  the Chief Financial
Officer's  directive to process a check  request  for
payment  of  Delaware   separation  litigation  legal
services.  In addition, the attorney stated, "Perhaps
we should propose a legislative  act  to  appropriate
funds for the Delaware litigation and then present it
to  the  full Council."  However, the Chief Financial
Officer and  the  Principal  Chief approved the check
request  without  the attorney's  approval,  and  the
check   request   was  processed   for   payment   on
December 20,   1996.     Further,   we   found   that
differences existed between  the Executive office and
the   Tribal   Council   as   to   whether   budgeted
expenditures are approved at the program  or the line
item level.  For example, Executive officials stated,
"It  has  never  been  the  practice  for  the Tribal
Council  to approve budgets at the line item  level."
However, a  Tribal Council official stated, "When the
Tribal Council  approves  the  budget, the Council is
approving  each  budgeted  line  item   and   program
managers/personnel  are responsible for managing  the
programs within the approved line item amount."  This
issue was also addressed  in  the  June  1997  report
issued  by  an independent accounting firm (see Prior
Audit Coverage).

Program Funds Used  for  Litigation Against the Federal
Government.  The Cherokee  Nation  improperly charged
the Department of the Interior for legal  services of
$88,000  related  to  the  Nation's Arkansas Riverbed
litigation against the Federal  Government. The legal
services  had  not been provided for  in  the  Annual
Funding Agreement  (No. OSGT905) for Self-Governance,
dated July 14, 1995,  or  included  in  the  Nation's
Tribal  Council-approved budget for expenditure  from
Self-Governance  Oversight  Program funds provided by
the Bureau of Indian Affairs.   In addition, we found
that the Nation incurred the legal services without a
contract.  Office of Management and  Budget  Circular
A-87 states that Federal program funds cannot be used
for   prosecution   of  claims  against  the  Federal
Government.   The Nation's  Chief  Financial  Officer
stated  that  even   though   the  Arkansas  Riverbed
litigation legal services "had  not  been  previously
included  in  the  Nation's Self-Governance Oversight
program budget and had  been  incurred"  prior to her
tenure,  she  "decided  to  charge  the costs to  the
self-governance program because it was  necessary  to
find funds to pay for the legal services."

Transfers of Federal Program Funds

The  Code  of Federal Regulations (43 CFR 12.60(a)(2)
and (b)(3))  requires  that  the  fiscal  control and
accounting  procedures  of  a tribal organization  be
sufficient  to  (1) permit  the  tracing  of  Federal
program funds to a level of expenditure  adequate  to
establish  that  they have not been used in violation
of any restrictions  or prohibitions contained in any
statute that applies to  the  Federal  assistance and
(2) ensure that funds are used solely for  authorized
purposes.    In   addition,   a   February 4,   1998,
memorandum from the Associate Solicitor, Division  of
Indian  Affairs,  to  the  Acting  Inspector  General
stated,   "Federal   funds   provided   under  Tribal
Self-governance    compacts    and   annual   funding
agreements are only available for programs previously
administered by the Department of the Interior or for
programs specifically authorized  by  Federal statute
(not tribal programs)."  However, we found  that  the
Nation  processed  all  payments  through its general
operating  fund,  including  payments   for   Federal
program  fund expenditures.  We also determined  that
the  Nation's   accounting   data   resided   on  two
accounting systems because accounting data needed for
the creation of a receivable, or due from operations,
was on the old system and the data for a payable,  or
due  to  operations,  was on the new system.  We also
found that Federal program  funds were transferred to
the Nation's general operating  fund  and  motor fuel
tax  accounts without assurance that Federal  program
expenditures   had   been  incurred  and  were  owed.
Transfers of Federal funds  to  the general operating
fund should be made to reimburse the general fund for
expenditures    for    Federal    programs.     These
deficiencies occurred because the Nation  (1) had not
developed   and  implemented  an  adequate  financial
management  information   system   to   ensure   that
transfers   occurred   only  when  expenditures  were
incurred and owed by Federal  programs  and  (2) used
Federal  program  funds to cover the Nation's general
operating fund cash  deficit  position.  As a result,
we  identified  10 transfers of Departmental  program
funds,  totaling  $5.6 million,  and  7 transfers  of
other Federal program  funds, totaling $10.5 million,
that  were  not fully supported  by  Federal  program
expenditures.   The   10 transfers   of  Departmental
program  funds occurred at a time when  the  Nation's
general  operating   fund   was  in  a  deficit  cash
position.  For example:

On  March 17, 1997, the Nation's  general  operating
fund showed  a  $1.2 million  cash deficit.  A Nation
accounting  official stated, "The  former  Accounting
Director directed  that  Department  of  the Interior
program  funds  totaling  $500,000 and Department  of
Health  and  Human  Services program  funds  totaling
$500,000  be  transferred   to   offset  the  general
operating fund account's deficit cash position."

On  October 9,  1997, the Nation's  Chief  Financial
Officer  notified  the   Chairman,   Tribal   Council
Executive   and   Finance,  that  the  Nation  had  a
$2.3 million general  operating fund cash deficit and
said that it occurred because  of  late reimbursement
of  project  costs  by the Bureau of Indian  Affairs.
The Nation received the  $2.3 million from the Bureau
on   October 6,   1997,  and  on   October 9,   1997,
transferred that amount to the general operating fund
account.  However,  at  the time of the transfer, the
Nation's  financial  management   information  system
showed    that    program   expenditures   of    only
$1.45 million had been  incurred and were owed, which
resulted in the transfer  of Federal program funds of
$850,000 in excess of supported expenditures.

On November 19, 1997, the  Nation  received  program
funds   of  $1,064,837  from  the  Bureau  of  Indian
Affairs.   On  November 21, 1997, the Nation's former
Controller directed  that  this amount be transferred
to the Nation's motor fuel tax  account.  However, at
the  time  of  the  transfer, the Nation's  financial
management information  system  showed  that  program
expenditures  of only $256,351 had been incurred  and
were owed, which  resulted in the transfer of Federal
program  funds of $808,485  in  excess  of  supported
expenditures.

During our  review of the Nation's reconciliations of
the Federal program's  expenditures and amounts owed,
we  found  that  in a May 12,  1997,  reconciliation,
Indian Health Services  program funds of $841,000 had
been transferred in excess  of  expenditures incurred
and   owed   and   that   in   an   August 8,   1997,
reconciliation,  Indian  Health  Services   funds  of
$9 million  and   Bureau  of Indian Affairs funds  of
$937,000   had   been  transferred   in   excess   of
expenditures incurred and owed.

Federal Status and Cash Report

The Code of Federal  Regulations (43 CFR 12.60(b)(1))
requires recipients of Federal assistance to maintain
accounting   systems   sufficient   to   permit   the
preparation  of  accurate,   current,   and  complete
financial  reports.  According to a Nation  official,
the Nation annually  submits  to the Bureau of Indian
Affairs  a  financial status report  for  its  Tribal
transportation   planning  contract.   Transportation
funds are provided  to  the  Nation  as  part  of the
self-governance compact.  The report provides data on
receipts  and  expenditures  and on cash, receivable,
and payable balances.  However,  we  found  that  the
Nation  did  not  correctly  prepare  and  adequately
review  the  report  it  submitted  to the Bureau  on
March 6, 1998. Specifically, the Nation  reported (1)
a deficit cash balance of $1.1 million that  was  not
accurate  and  (2) an accounts receivable of $987,289
as  an  accounts  payable.   According  to  a  Nation
official,  the  errors  occurred  because  accounting
transactions  were   inaccurately  recorded   in  the
financial  management information  system,  financial
information that was 3 1/2 months old (November 1997)
was  reported  for  March  1998,  and  personnel  who
prepared  the  report  were  not  familiar  with  the
reporting process.

Financial Management Actions

We  recognize  that  the  Nation is taking actions to
resolve   its   previously   identified    accounting
deficiencies  and  are  aware  that it has contracted
with  an  independent  public  accounting   firm   to
reconstruct the Nation's financial accounting records
for  fiscal  year  1997  to  allow the preparation of
required auditable financial statements.  However, we
found  that  many  of  the conditions  identified  in
audits conducted by the  two  independent  accounting
firms   (see  Prior  Audit  Coverage  section)  still
existed.   Specifically,  the  Nation  had  not fully
implemented a financial management information system
that  (1) provides  accurate,  current,  and complete
reporting  and  disclosure  of  financial activities;
(2) maintains records which adequately  identify  the
source   and   application   of  funds  provided  for
activities;  (3) maintains  effective   control   and
accountability  for  all  Federal  program funds; and
(4) compares   actual   expenditures  with   budgeted
amounts for each program.  (The  August 13 memorandum
to  our  office stated that the Financial  Management
Improvement  Plan  is  "approximately 80% complete.")
In  addition,  we  determined   that  certain  Nation
officials  did  not  comply with established  budget,
procurement, and payment procedures.

The  independent  public  accounting  firm  has  been
contracted to perform  various procedures outlined in
a  Financial  Management  Improvement   Plan   (which
includes measurable performance dates and responsible
officials)  dated  January 15,  1998,  to  allow  the
implementation  of  a  single  accounting system that
will produce timely and accurate financial accounting
and management reports.  We believe  that  until  the
plan is fully implemented and a new accounting system
which  meets all applicable requirements is operating
as designed,  the  Office  of  Self-Governance should
take appropriate actions to ensure that Department of
the  Interior  funds  are  used only  for  authorized
purposes.  In addition, we believe  that the Nation's
Executive  officials  need  to foster an  environment
that stresses the importance  of  following  internal
controls  to  help ensure that controls are operating
as designed and  should  hold individuals accountable
who do not comply with established controls.

Recommendations

We recommend that  the Assistant Secretary
for Indian Affairs ensure that the Director
of the Office of Self-Governance:

1. Requires the Cherokee  Nation  to  provide assurance
that policies and procedures have been implemented to
ensure  that  legal  services  expenditures  are  not
incurred or paid without having an approved contract,
are    not    paid    without   adequate   supporting
documentation,  are  paid   within   the   terms   of
established  contracts,  and  do  not  exceed  Tribal
Council-approved   appropriations  and  that  Federal
program   funds   are   used   only   for   supported
expenditures  incurred in  accordance  with  approved
funding agreements  or  as  otherwise  authorized  by
legislation.

2.  Requires  the  Nation  to  submit audited financial
statements  for  fiscal  year 1997  which  accurately
present  the  source and use  of  all  Federal  funds
received by the Nation during that year.

3.  Requires the Nation  to  submit  interim  financial
reports  which account for the use (including amounts
held in qualifying  deposits  or  investments) of all
Self-Governance funds received from the Department of
the Interior in fiscal year 1998.

4.  Requires the Nation to repay to the  Department  of
the   Interior   any  Departmental  funds  spent  for
purposes other than  those authorized by the terms of
the applicable funding agreements.

5. Requires the Nation to  present  a  report  from its
auditing  firm  stating that a new accounting system,
meeting all applicable  requirements  for  control of
Federal  funds,  has  been  installed, is functioning
properly, and produces accurate  and timely financial
status reports and that the Nation has implemented an
adequate system of internal controls.

6. Considers deferring action on the  fiscal  year 1999
annual  funding  agreement  with the Nation or taking
other actions to ensure that  Departmental  funds are
used  only  for  authorized purposes until the Nation
complies with Recommendations 1 through 5.

Assistant Secretary  for  Indian Affairs Response and
Office of Inspector General Reply

The September 30, 1998, response  (Appendix 2) to the
draft report from the Assistant Secretary  for Indian
Affairs  described  actions  taken  by the Office  of
Self-Governance  and  by  the Nation to  address  the
report's six recommendations.  Based on the response,
we consider Recommendation 1 resolved and implemented
and  Recommendations 2 through  6  resolved  but  not
implemented.      Accordingly,    the   unimplemented
recommendations  will  be referred to  the  Assistant
Secretary  for  Policy  Management   and  Budget  for
tracking of implementation (see Appendix 4).

Cherokee   Nation   Response  and  Office  of
Inspector General Reply

On  October  2, 1998,  the  Principal  Chief  of  the
Cherokee Nation  submitted a response (Appendix 3) to
the draft audit report  that  described actions taken
by  the Nation to address the report's  findings  and
recommendations,    commented   on   the   conditions
described  in  the  report,   and  included  separate
remarks from three members of the  Tribal  Council of
the Cherokee Nation.

Because five of the report's six recommendations will
be  resolved  through terms included  in the Nation's
self-governance  funding  agreement  for  fiscal year
1999,   we   included  only  the  response  from  the
Principal Chief of the Cherokee Nation in this report
because the Principal  Chief  is "authorized to apply
for any grant to facilitate a self-governance funding
agreement"  by the Tribal Council (Resolution No. 21-
90).   As  such,  we did not include  the  individual
comments from three  Tribal Council members that were
provided with the Principal  Chief's  response or the
separate  comments  from  two  other  Tribal  Council
members that were sent directly to our  office.   The
Nation's  comments  and  our replies are presented in
the paragraphs that follow.

Legal Services Payments

Nation Response.  The Nation  stated that it "developed
and implemented an Interim Policy  and  Procedure for
Attorney  Contracts  on June 5, 1998."  According  to
the Nation, the Policy  and  Procedures  provide  for
documenting    requests    for   attorney   services,
establishing budgets, obtaining  required  approvals,
justifying attorney selection, and managing  contract
performance and payments and state:

      Minimum  items  to  be  addressed  in the
      contract   -   Parties'  names/addresses;
      billable rates;  length  of  duration for
      the  contract;  total amount of  contract
      not  to exceed; Contact  Person  for  the
      Nation;  scope  of  work and duties to be
      performed; reports to be submitted to the
      Nation;  detailed invoices  required  for
      payment; Assurances  of Good Professional
      Standing;     Professional      Liability
      Insurance;  amendment clause; termination
      or  cancellation   provision;  any  other
      standard  clauses  the   Law   &  Justice
      Department  may  recommend; and signature
      of both parties.

Office of Inspector General  Reply.   We  believe  that
implementation  of  the  Policy and Procedures by the
Nation should help ensure that attorney contracts are
adequately justified, properly  approved and awarded,
and adequately administered.

Nation  Response.   Regarding  the  14  legal  services
invoices of $622,000 which our report (page 6) states
were paid without a contract, the Nation  stated that
it "did have a letter of engagement . . . under which
the firm was paid for their services until a contract
was executed."  Regarding our finding (page  7)  that
the  Nation  paid   $14,775  in  excess of agreed- to
hourly rates for these same 14 invoices,  the  Nation
stated:

      A  letter from the subject legal firm . .
      . clarifies  that  the  rate appearing in
      the contract should have  been  $325  per
      hour,  not $300 per hour, and that it was
      billed at $325 per hour by the firm.  The
      letter goes  further  to  state  that the
      $300  per  hour rate was included in  the
      contract by  mistake.  The firm agreed in
      this letter that  the  rate of $300 would
      be honored by their firm,  since it was a
      mistake, and that future billing would be
      adjusted  as  a result.  The letter  also
      describes significant  reductions in fees
      made  by the firm over the  term  of  the
      contract.

Office of Inspector  General  Reply.  During our audit,
we reviewed a copy of the September  5,  1996, letter
of engagement.  The letter presents the billing rates
for three representatives of the firm and states that
the   representatives   also   will  bill  for  their
expenses.  However, the letter does  not identify the
services  to  be  performed or the deliverables,  the
period of performance, or the total amount to be paid
by  the Nation.  In  addition,  the  letter  was  not
signed  by  a  representative of the Nation.  Lacking
this information,  the  letter of engagement does not
meet   the   Nation's   requirements   (Chapter   II,
Subsection H, of the Employment  Policy  Manual)  for
contracting   for   attorney  services.   The  Nation
established a formal  contract  for these services on
September 15, 1997, after the independent  accounting
firm  conducting  the  agreed-upon  procedures review
(see Prior Audit Coverage) requested  a  copy  of the
contract.   The  contract  was  made  retroactive  to
September 1996.

Regarding the payments in excess of billing rates, we
compared  the  billing  rate in the invoices with the
billing rate in the contract  and noted that the rate
in the invoices was $25 per hour higher than the rate
in  the  contract.   Based on the  hours  billed,  we
identified payments of  $14,775 in excess of contract
billing rates.  According  to  a  November  26, 1997,
letter  from  the  legal  firm  cited in the Nation's
response, bills "will be revised" on the basis of the
$300 rate.

We used these and other examples  in  the  report  to
demonstrate  that  the Nation did not comply with its
requirements for the  award  and  payment of attorney
contracts.   By not complying with its  requirements,
the Nation did  not have assurance that its purchases
were   economical  and   efficient   and   adequately
justified   and  approved.   However,  based  on  the
Nation's response,  we  have  modified  our report to
include further information about the contracting for
and payment of these 14 invoices.

Nation  Response.   The  Nation  stated  that  for  the
questioned costs of $88,000, it "agrees to set  aside
the  funding  from  the  General  Fund  ,  adjust the
expenditure to the General Fund and refund the amount
to  the  Cherokee  DOI  [Department  of the Interior]
Self-Governance fund." The Nation also  stated that a
representative  from  its  Law  &  Justice Department
would  contact  the  Office of Inspector  General  to
"conduct the requisite  research to enable the Nation
to ascertain whether there  is  concurrence with that
determination."

Office of Inspector General Reply.   On  September  25,
1998,  we  provided copies of Cherokee Nation Request
for Checks and  related  documents  pertaining to the
$88,000  to  an  attorney  with  the Nation's  Law  &
Justice Department.

Transfers of Federal Program Funds

Nation  Response.  Regarding the transfers  of  Federal
Program  Funds,  the  Nation  stated that it "concurs
with the transfers and the amounts listed for each of
the  transactions  on  page 9."  The  Nation  further
stated:

      However,  the  OIG [Office  of  Inspector
      General]  Draft  Survey   Report  is  not
      reflective  of  supplemental  information
      provided by the Nation  on  July 24, 1998
      addressing  each  of  these transactions.
      While we acknowledge that  in  some cases
      the  amount  transferred  did not exactly
      match    the   amount   of   expenditures
      attributable  to  the  DOI [Department of
      the Interior] self-governance compact, in
      all cases the amounts were reconciled and
      subsequent transfers to  the General Fund
      were adjusted as necessary  so  that  the
      total  reimbursement  for  the year equal
      the amount of DOI-eligible expenditures.

The Nation also stated that it was  "not  an  unusual
situation"  for  each  of the transfers to occur when
the  Nation's general fund  was  in  a  deficit  cash
situation.   In that regard, the Nation said that its
Director of Accounting  explained  that "program draw
downs,  because  they  are  a  reimbursement  to  the
general  fund,  were  constantly  deposited  into  an
account that is void of cash." The Nation also stated
that it "no longer incurs a deficit  in  the  general
fund."

Office  of  Inspector  General  Reply.  As noted by the
Nation,   our  report  accurately    represents   the
transfers of  Federal  program  funds  to the general
fund  at  the time of our review in March  1998.   In
addition,  because   the   Nation   stated   in   its
supplemental  information  that  "poor  integrity  of
financial   information"   will   exist   within  its
financial   system  until  its  financial  management
improvement project  is completed, which includes the
production of  financial  statements  for fiscal year
1997 and completion of the 1997 single  audit, we did
not make any adjustments to our report based  on  the
supplemental information.  However, we did review the
supplemental  information.   While we did not include
all of this  supplemental information in this report,
we have excerpted  pertinent  information,  which  we
have responded to as follows:

-  Regarding  a  transfer  that  resulted in a $539,821
  overpayment  to  the general fund  (not  used  as  an
  example in the report),  the  Nation  stated,  "There
  were   other   programs  in  the  compact  that  were
  overpaid,  but they  were  disregarded,  because  the
  report used to calculate the transfer did not include
  program  fringe  expenditures  of  $82,596.75."   The
  Nation also  stated  that  during  fiscal  year 1997,
  fringe benefits were not recorded as a receivable  to
  the   general  fund.   Therefore,  according  to  the
  response,  the  accounting records did not reflect at
  the time of the transfer  that  an additional $82,596
  had  been  incurred under the compact.   However,  we
  noted that even  if  the  $82,596  had  been properly
  recorded,  the general fund would have been  overpaid
  $457,225 ($539,821 minus $82,596).

- The Nation stated,  "To  date,  some  $1.8 million in
  fringe expense has not been reimbursed to the General
  fund from DOI [Department of the Interior]  sponsored
  programs."  Based on our review of the documentation,
  we concluded that only $600,000 is applicable  to the
  Department  of  the  Interior  and that the remaining
  $1.2 million is applicable to programs  funded by the
  Department of Health and Human Services.

- Regarding other overpayments to the general fund, the
  Nation stated:

        Our research shows no apparent reason for
        the amount of the transfers listed  above
        [six   transfers  totaling  approximately
        $3.2 million].   We  prepared  a  graphic
        representation  of all transfers for  the
        period.  This graph shows that subsequent
        transfers, after  each  of  those listed,
        were adjusted for the overpayments.

  As  identified  in  the  response,  the   unsupported
  transfers  indicate that Federal funds were  used  to
  supplement general fund operations.

-  Regarding  a   transfer   to  the  general  fund  of
  $2,309,240   which  we  reported   resulted   in   an
  overpayment to  the  general  fund  of  $850,000, the
  Nation  stated, "The entitlement was the payment  for
  an invoice  to BIA [Bureau of Indian Affairs] for the
  Sequoyah   High    School   Construction   activity."
  However,   we  noted  that   the   Nation   did   not
  substantiate  that  project  costs of more that $1.45
  million  had  been  incurred  at the  time  the  $2.3
  million  was   transferred,  which  resulted  in  the
  reported $850,000 overpayment.

-  Regarding  a  transfer  to  the  general   fund   of
  $1,064,837   which   we   reported   resulted  in  an
  overpayment  to  the  general  fund of $809,485,  the
  Nation stated:

        The transfer was payment for  an  invoice
        to  BIA  [Bureau of Indian Affairs]   for
        the Roads  activity.   Again the transfer
        was the result of a decision made with no
        apparent   knowledge  of  the   interfund
        payables/receivables   balance.   In  was
        determined,   incorrectly,    that    the
        transaction  was  made  without affecting
        those  balances.   Further  review  shows
        that   the  transaction   was   done   in
        accordance  with  established  procedure.
        We  provide  in  Attachment  E  that  the
        balance was properly affected but  on the
        wrong   cost   center.   A  copy  of  the
        correcting entry  .  .  .  corrects  this
        discrepancy.

Notwithstanding  the adjustment to record the  proper
cost  center,  we believe  that  the  statement  "the
transaction was  done  in accordance with established
procedures" but resulted  in  a  charge  to the wrong
cost  center  indicates  a  weakness  in the Nation's
accounting system during fiscal year 1997.

Regarding  the  general  fund  deficit,  the   Nation
stated:

        Throughout  the  history  of the Cherokee
        Nation,  the General Operating  Fund  has
        sustained enterprise fund losses, program
        cost  overruns,  unreimbursed  costs  and
        unbudgeted  expenditures  with inadequate
        cash resources.  The result  is  that  no
        matter what the policy, program drawdowns
        are  constantly deposited into an account
        that is void of cash.

We do not dispute  the statements on the condition of
the  general  fund.  However,  we  believe  that  the
deficits in the general fund resulted in the transfer
and  use  of Federal  funds  for   general  fund/non-
Federal  activities.  Regarding  the  proper  use  of
Federal funds  advanced to tribal organizations under
the provisions of  the  Indian Self-Determination and
Education Assistance Act,  the  Associate  Solicitors
for the Division of General Law and for the  Division
of  Indian  Law, U.S. Department of the Interior,  on
February 4, 1998, stated:

      The "ISDEAA"  [Indian  Self-Determination
      and Education Assistance  Act] authorizes
      the   expenditure   of   Federal    funds
      transferred  under  ISDEAA  contracts and
      annual  funding agreements only  for  the
      Federal   programs   covered   by   those
      contracts and  annual funding agreements,
      and not for other  tribal  programs  that
      are  not authorized by the ISDEAA. . .  .
      Accordingly,  such  Federal  funds should
      not  be  transferred  to tribal accounts,
      lent to such tribal accounts, or expended
      for programs not authorized  by the above
      mentioned laws.

Financial Management System

Nation  Response.   The  Nation  stated  that  it  is
"currently  engaged  in  or  has  recently  completed
several   initiatives  to  strengthen  its  financial
management system."  According to the response, these
initiatives  consist of implementing the following: a
financial improvement  plan, a comprehensive staffing
plan, its internal accounting  systems  and cash flow
procedures, and a business planning process.

Office  of  Inspector General Reply.  Our report  (page
10) recognizes  the financial improvement plan and we
believe that completion  of  all  planned  activities
will improve the Nation's financial management.

Recommendations

Nation   Response.   The  Nation  stated  that  it  had
addressed  Recommendation  1  by  issuing  an interim
policy  and  procedure on the procurement of attorney
contracts and  Recommendations  2  through  6 through
"the  Self-Governance Annual Funding Agreement  (AFA)
negotiated   between  the  Cherokee  Nation  and  the
Department of the Interior for Fiscal Year 1999.

Office of Inspector  General  Reply.  The status of the
recommendations is in Appendix 4.

Since  the  report's recommendations  are  considered
resolved,  no  further  response  to  the  Office  of
Inspector General is required (see Appendix 4).

The legislation,  as  amended, creating the Office of
Inspector General requires  semiannual  reporting  to
the  Congress  on  all  audit reports issued, actions
taken   to  implement  audit   recommendations,   and
identification  of each significant recommendation on
which corrective action has not been taken.

We  appreciate the  assistance  of  Office  of  Self-
Governance  and  Cherokee  Nation  personnel  in  the
conduct of our audit.

FOOT NOTES**

[1]:In  1994,  the  Cherokee Nation acquired a new
financial accounting software package  to update its
accounting system and  related processes to ensure
the timely and accurate preparation  of financial
statements and management reports.
However, as of  January  15,  1998, the Nation's
independent accounting firm stated that the  new  software
package  was "still  not functional" and that "there may even be
concerns as to the  fitness"  of the new software package to
meet the Nation's financial and accounting needs.

[2]:The Code of Federal  Regulations (43 CFR 12.952)
specifies the forms that are authorized for obtaining financial
information from recipients, including the Financial Status Report.

[3]:The  Nation's  Manual  "Administrative  Policies
of  the  Executive Branch" (Chapter 7, Section B) states that when
using Federal funds, the Nation is to follow Office of  Management  and
Budget  Circular  A-102, "Uniform  Administrative  Requirements  for
Grants-in-Aid  to State and Local Governments" (codified in the Code of Federal
Regulations  (43 CFR 12)),  Office of Management and Budget Circular
A-87, and any subsequent revisions to these circulars.

[4]: The  Cherokee Nation is involved in at least two lawsuits (Arkansas
Riverbed and Delaware Tribe) against the Federal Government. The
Arkansas  Riverbed suit involves disputed ownership of the Riverbed, and
the Delaware Tribe suit involves  the Cherokee Nation's opposition to
Bureau  of Indian Affairs approval of the  Delaware Tribe's  separation
from the Cherokee Nation.


                                                         APPEND
                                                           IX 1

               CLASSIFICATION OF MONETARY AMOUNTS

             ---------------------------------------------
                       Finding                 Questioned
                                             Costs
           ---------------------------------------------
           Program Funds Used for             $88,000
           Litigation
             ---------------------------------------------


                                                           APPEND
                                                           IX 4


                        STATUS OF AUDIT REPORT RECOMMENDATIONS

             ----------------------------------------------------
             ----
              Finding/
             Recommendation
             Reference   Status        Action Required

             ----------------------------------------------------
             ----
                 1       Implemented.  No further action is
                 required.
             ----------------------------------------------------
             ----
              2, 3, 4,   Resolved;     No further response to the
             5, and 6    not           Office of Inspector
             General is
                         implemented.  required.  The
                         recommendations
                                       will be referred to the
                                       Assistant Secretary for
                                       Policy, Management and
                                       Budget
                                       for tracking of
                                       implementation.
             ----------------------------------------------------
             ----




ILLEGAL OR WASTEFUL ACTIVITIES SHOULD BE REPORTED TO THE OFFICE
OF
INSPECTOR GENERAL BY:

Sending written documents to:



Within the Continental United States

U.S. Department of the Interior
Office of Inspector General
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Mail Stop 5341
Washington, D.C. 20240

Calling:

Our 24 hour
Telephone HOTLINE
1-800-424-5081 or
(202) 208-5300

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Outside the Continental United States


Caribbean Region

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Office of Inspector General
Eastern Division- Investigations
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Calling:
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North Pacific Region

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
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Suite 807, PDN Building
Agana, Guam 96910


Calling:
(700) 550-7428 or
COMM 9-011-671-472-7279