Tribal troubles: Funds stolen, no punishment
October 7, 2013
ETHETE, Wyo. (AP) - American Indian tribes have been caught misappropriating tens of millions of taxpayer dollars, according to internal tribal audits and other documents. But federal authorities do little about it - due to a lack of oversight, resources or political will.
The result? Poor tribes like the Northern Arapaho of Wyoming suffer.
One Arapaho manager pocketed money meant to buy meals for tribal elders. Another used funds from the reservation's diabetes program to subsidize personal shopping trips. And other members plundered the tribal welfare fund, then gambled the money away at one of the tribe's casinos.
Altogether, employees drained at least a half-million dollars from the coffers of a tribe whose members have a median household income of about $16,000 a year.
Federal agencies questioned millions more dollars the Northern Arapaho government spent, but decided not to recover any of the money - and even increased funding to the tribe.
The Wyoming tribe is hardly unique.
An Associated Press review of summaries of audits shows that serious concerns were consistently raised about 124 of 551 tribal governments, schools or housing authorities that received at least 10 years of substantial federal funds since 1997.
Fraud and theft occur across the range of nonprofits and local governments that get federal money. But tribes are five times as likely as other recipients of federal funds to have "material weaknesses" that create an opportunity for abuses, according to the review. Overall, 1 in 4 audits concluded that tribal governments, schools or housing authorities had a material weakness in their federally funded programs; the rate was 1 in 20 for nontribal programs.
Thousands of pages of audits and dozens of reports by federal investigators, obtained by the AP under the Freedom of Information Act, show evidence of embezzlement, paychecks for do-nothing jobs and employees who over-billed hours and expenses. The audits, conducted by private firms, are required of tribes that spend more than $500,000 in federal funds annually.
Agencies often cannot legally cut funding because of treaties, Supreme Court decisions and acts of Congress, and they frequently refuse to take control of failing programs.
"It's basically a reluctance to take on tribes. The Department of the Interior bends over backwards to be their friends," said Earl Devaney, the former inspector general at the department that houses the bureaus of Indian Affairs and Indian Education. "It's 'make nice,' and what you don't know, you don't know."
Many amounts were relatively small. But there are so many instances of abuses that the total was substantial.
Tribal council members in Northern California used federal grants to pay their utility bills and mortgages. A Nebraska tribe spent health clinic money on horses and ATVs. An environmental supervisor with a Washington tribe received $16,000 for mileage and other charges he either exaggerated or never incurred. A tribal housing authority in Nevada sprang for a 25-night, $6,500 retreat at a resort in South Lake Tahoe, Calif.
Among grant programs with a significant track record in a government database of audits, tribes ran 16 of the 20 with the highest rates of rule-breaking. Auditors flagged welfare grants to tribes, for example, 39 percent of the time. Most prominent were programs funded by Interior's bureaus of Indian Affairs and Indian Education and the Indian Health Service, under the Department of Health and Human Services.
Many findings by auditors suggest mismanagement, not theft or fraud.
One barrier to proper administration of tribal programs is turnover among staff and leaders - entire governments can be voted out of office every two years. Attracting qualified administrators to often-remote reservations in the first place is another challenge. "So they hire maybe the chairman's nephew who had some accounting classes," said Pete Magee, a longtime auditor of tribal books.
Sergio Maldonado, a Northern Arapaho member who is diversity coordinator at Central Wyoming College in Riverton, said tribes generally are just finding their self-governance footing after years of being under federal control. He said there are four goals for a successful tribal government - "academic preparation, professional experience, a collective consensus for the benefit of the tribe and an ethical set of guidelines."
Maldonado, who also teaches a class about the tribe on the reservation, said it is relatively easy to address each point individually. But all four must be done together, and that's not easy, he added. "It's not just our reservation; this is commonplace with a lot of tribes."
There are about 10,000 enrolled members of the Northern Arapaho, which shares a large reservation southeast of Grand Teton National Park. For the most part, they live in trailers, lapped siding homes and farm houses scratched into the high plains at the foot of the Wind River Mountain Range.
Officials at the Northern Arapaho Business Council, which governs the tribe, contended in a statement that numerous negative audits the tribe received were "primarily a result of inadequate documentation and record-keeping." The statement added that the management issues "were many years in the making and will take time and considerable financial resources to fix."
The business council has ordered a "top to bottom review of all programs, both tribal and federal, to determine if improper spending is taking place and if personnel changes are required."
Gary Collins, a former chairman of the business council who serves as the Northern Arapaho liaison with the state, said the tribe participates in more than 60 federal programs, a number that presents challenges for auditing and accountability. "There's nothing really intentional," he said of any shortcomings.
Since the early 1970s, federal policy has favored letting tribes manage housing, health, welfare, law enforcement and other programs as they see fit. As this "self-determination" approach took hold, many tribes developed the financial savvy and governmental infrastructure to handle millions in federal money without major incident. But others, like the Northern Arapaho, have not.
Federal officials try to coach tribes to self-correct rather than punish them - both in deference to tribal "self-determination" and because there aren't enough staff to closely monitor the thousands of service contracts between tribes and the government.
"There were less people in that hallway than you would find working in a McDonald's," said Walter Lamar, a former deputy director of the Bureau of Indian Affairs' law enforcement program. His Washington, D.C., headquarters staff of six or seven oversaw 100 tribal police agencies that patrol an area one and a half times larger than New York state.
Even when auditors raise concerns, there is no guarantee that tribal leaders will be investigated or prosecuted. Several auditors said their contracts were not renewed after they uncovered self-enrichment by tribal leaders.
In Montana - the nation's fourth-largest state by size, with a history of corruption on its far-flung reservations - just two investigators track down tips of fraud for the Interior Department's inspector general. The FBI focuses on violent crime.
Sympathy for tribes among some government officials also is at play.
During her years as a lawyer at the U.S. Senate Committee on Indian Affairs, Allison Binney said she heard some agency officials say they weren't interested in recovering funds because of "how many times a particular tribe was taken advantage of by the federal government.'"
Another justification for inaction Binney heard: A tribe is too poor to pay back federal funds.
That was the conclusion in the case of the Lake Paiute tribe in Nevada, and the fish hatchery that never was.
Over 14 years, starting in 1992, the BIA sent the tribe $1.6 million to protect the threatened Lahontan trout. Central to the effort was a fish hatchery. But by 2003 the hatchery still hadn't hatched a single fish. And that year it was converted to an office.
Local BIA staff first suggested stopping funding in the 1990s. Even after the superintendent at the nearest BIA office visited the lake within a year of the building's conversion, hatchery money kept flowing.
Several subordinates "described an atmosphere ... where they were discouraged from providing negative feedback about the tribes they were monitoring," according to an investigative report by Interior's inspector general. One employee said he was advised by a supervisor to sign an approving letter because his boss "wanted tribes to be successful."
Hatchery funds were finally cut off in 2006, after an official in the bureau's Western regional office asked how many fish had been hatched. Eventually, it emerged that Summit Lake Paiute leaders had taken the money and made nonrefundable deposits in a failed bid to buy land near the tribe's reservation in mountainous northwestern Nevada.
The agency demanded that the Summit Lake Paiute reimburse $927,000. The tribe appealed for debt relief.
In 2011, the two sides settled. The tribe would have to pay back only $108,510. Then the agency forgave the entire debt because, according to BIA spokeswoman Nedra Darling, the tribe had no way to pay it.
Indeed, agencies recoup a small fraction of what they conclude tribes owe.
Since fiscal year 2008, the BIA and the Bureau of Indian Education have collected only $2.3 million of nearly $69 million in questionable expenditures, according to financial records. In several cases, the bureaus were legally barred from recouping money because they waited too long.
Since 2003, auditors concluded that 79 tribes or Indian organizations couldn't justify $33 million of Environmental Protection Agency money they spent. EPA said it had recouped "approximately $3 million" since October 2007.
Indian Affairs and Indian Education can't legally reduce funding even to corrupt governments. Funding levels are set by federal law, regardless of how well a tribe is managed.
That explains why funding for the Crazy Horse School in South Dakota increased from $4 million in 2000 to $5.6 million in 2011, even though each year's audit reported a litany of problems: Blank checks were not locked away, expenses were not competitively bid, payments couldn't be backed up with invoices, employee travel patterns showed waste and possible abuse. During this time, Indian Education questioned at least $5.7 million in costs at Crazy Horse.
Thomas Thompson, a senior budget official at Indian Affairs, said reducing funding based on past practices would penalize tribal members rather than address management issues. The standard punishment is requiring tribes to submit invoices for reimbursement, rather than giving full funding at the start of each year.
Agencies can in theory wrest programs back from tribes, but almost never do. In 2012, for example, Indian Affairs had taken back the programs of three of 566 federally recognized tribes. "They don't want to take the program back;" said Brian Pogue, a BIA employee for 30 years who retired as its director. "They want the tribe to succeed."
Despite the myriad problems detected in Northern Arapaho programs, including personal use of grant money, the tribe is not among the three.
When the Northern Arapaho audit report for 2010 was finally filed earlier this year, the auditors gave the tribe the worst possible rating. They said the tribal government was such a mess that they couldn't even render an opinion.
Despite the disarray, federal funding kept increasing. The tribe spent $14.8 million in 2010 - up from $9.3 million in 2007.
The current business council - a group that pledged reforms when it took office in January - said the diabetes and elder food programs had been cleaned up. New software will help detect fraud, and the council said it is working to implement further reforms.
"I know it's going to take some time. Change don't happen overnight," said new Northern Arapaho Business Council member Ron McElroy. "It's a lot more than I imagined."
Pritchard reported from Los Angeles. Interactive Newsroom Technology Editor Troy Thibodeaux in New Orleans and researcher Susan James in New York contributed to this story.