DEPOSITORY - JUSTICE DEPT. LIBRARY BIA MANAGEMENT OF INDIAN TRUST FUNDS OVERSIGHT HEARING BEFORE THE SUBCOMMITTEE ON NATIVE AMERICAN AFFAIRS OF THE COMMITTEE ON NATURAL RESOURCES HOUSE OF REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION ON BUREAU OF INDIAN AFFAIRS' MANAGEMENT OF TRUST FUNDS;AND H.R. 1846 NATIVE AMERICAN TRUST FUND ACCOUNTING AND MANAGEMENT REFORM ACT OF1993 HEARING HELD IN WASHINGTON, DC SEPTEMBER 27,1993 Serial No. 103-48 Part I Printed for the use of the Committee on Natural Resources DEPT. OF JUSTICE NOV 18 1994 U.S. GOVERNMENT PRINTING OFFICE 83-758 WASHINGTON : 1994 MAIN LIBRARY For sale by the U.S. Government Printing Office Superintendent of Documents. Congressional Sales Office. Washington. DC 20402 ISBN 0-16-046007-7 COMMITTEE ON NATURAL RESOURCES GEORGE MILLER, California, Chairman PHILIP R. SHARP, Indiana DON YOUNG, Alaska, EDWARD J. MARKEY, Massachusetts Ranking Republican Member AUSTIN J. MURPHY, Pennsylvania JAMES V. HANSEN, Utah NICK JOE RAHALL II, West Virginia BARBARA F. VUCANOVICH, Nevada BRUCE F. VENTO, Minnesota ELTON GALLEGLY, California PAT WILLIAMS, Montana ROBERT F. (BOB)SMITH, Oregon RON DE LUGO, Virgin Islands CRAIG THOMAS, Wyoming SAM GEJDENSON, Connecticut JOHN J. DUNCAN, JR., Tennessee RICHARD H. LEHMAN, California JOEL HEFLEY, Colorado BILL RICHARDSON, New Mexico JOHN T. DOOLITTLE, California PETER A. DEFAZIO, Oregon WAYNE ALLARD, Colorado ENI F.H. FALEOMAVAEGA, American RICHARD H. BAKER, Louisiana Samoa KEN CALVERT, California TIM JOHNSON, South Dakota SCOTT McINNIS, Colorado LARRY LAROCCO, Idaho RICHARD W. POMBO, California NEIL ABERCROMBIE, Hawaii JAY DICKEY, Arkansas CALVIN M. DOOLEY, California CARLOS ROMERO-BARCELO, Puerto Rico KARAN ENGLISH, Arizona KAREN SHEPHERD, Utah NATHAN DEAL, Georgia MAURICE D. HINCHEY, New York ROBERT A. UNDERWOOD, Guam SAM FARR, California LANE EVANS, Illinois PATSY T. MINK, Hawaii THOMAS J. BARLOW III, Kentucky THOMAS M. BARRETT, Wisconsin JOHN LAWRENCE, Staff Director RICHARD MELTZER, General Counsel DANIEL VAL KISH, Republican Staff Director SUBCOMMITTEE ON NATIVE AMERICAN AFFAIRS BILL RICHARDSON, New Mexico, Chairman PAT WILLIAMS, Montana CRAIG THOMAS, Wyoming, SAM GEJDENSON, Connecticut Ranking Republican Member ENI F.H. FALEOMAVAEGA, American DON YOUNG, Alaska Samoa RICHARD H. BAKER, Louisiana TIM JOHNSON, South Dakota KEN CALVERT, California NEIL ABERCROMBIE, Hawaii KARAN ENGLISH, Arizona TADD JOHNSON, Staff Director MARIE HOWARD, Professional Staff Member STEVEN J.W. HEELEY, Counsel JUNE LORENZO, Professional Staff Member BARBARA ROBLES, Clerk RICHARD HOUGHTON, Republican Counsel on Native American Affairs (II) CONTENTS Page Hearing held: September 27, 1993 1 Background on Indian trust fund management 3 Text of the bill: H.R. 1846 7 Section-by-section: H.R. 1846 23 Member statements: Hon. Bill Richardson 1 Hon. Pat Williams 36 Witness statements: Hon. Mike Synar, a Representative in Congress from the State of Okla­ homa 29 Ada E. Deer, Assistant Secretary for Indian Affairs, Bureau of Indian Affairs, Department of the Interior, accompanied by Jim Parris, direc­ tor, and Donna Erwin, deputy director, Trust Funds Management 38 Brian P. Crowley, director of planning and reporting, Accounting and Information Management Division, General Accounting Office, accom­ panied by Thomas Armstrong, assistant general counsel; Gayle Condon, assistant director; and Robert Wagner, Jr., audit manager 58 Panel consisting of: Bill S. Fife, Principal Chief, Muscogee (Creek) Nation, Okmulgee, Oklahoma 87 Elouise Cobell, chairperson, The Intertribal Monitoring Association of Indian Trust Funds, Browning, Montana 98 Eric R. Davenport, board member, Intertribal Monitoring Association of Indian Trust Funds, and director, business administration, Central Council, Tlingit and Haida Indian Tribes of Alaska 114 Faith R. Roessel, Esq., executive director, Navajo Nation Washington Office 119 Panel consisting of: P. Ross Taylor III, senior vice president, United States Trust Com­ pany of New York 140 Richard C. Hyde, executive vice-president and chief investment offi­ cer, Society National Bank, and chairman and chief executive offi­ cer, Society Asset Management, Inc., Cleveland, Ohio 153 APPENDIX SEPTEMBER 27, 1993 Additional material submitted for the hearing record from: The Council of Energy Resource Tribes: Prepared statement 165 (III) BUREAU OF INDIAN AFFAIRS' MANAGEMENT OF TRUST FUNDS; AND, H.R. 1846, NATIVE AMERICAN TRUST FUND ACCOUNTING AND MANAGEMENT REFORM ACT OF 1993 MONDAY, SEPTEMBER 27, 1993 HOUSE OF REPRESENTATIVES, COMMITTEE ON NATURAL RESOURCES, SUBCOMMITTEE ON NATIVE AMERICAN AFFAIRS, Washington, DC. The subcommittee met, pursuant to call, at 9:30 a.m., in room 1324, Longworth House Office Building, Hon. Bill Richardson (chairman of the subcommittee) presiding. STATEMENT OF HON. BILL RICHARDSON Mr. RICHARDSON. Welcome. This morning the Subcommittee on Native American Affairs will conduct a hearing on the BIA man­ agement of Indian trust funds. The BIA is currently responsible for managing some $2.1 billion in Indian trust funds. This includes almost 2,000 tribal accounts worth $1.7 billion and some 300,000 individual money accounts worth over $450 million. These accounts are comprised of monies received mostly through leasing practices such as timber stumpage, oil and gas royalties, agricultural fees or judgment awards. Over the years, several audits and reports have detailed long- standing inadequacies in the management of these accounts. The problems are numerous. One, the BIA cannot give a complete record balance to its ac­ count holders. Two, no uniform, written policies exist to detail the proper man­ agement and care of the accounts. Three, personnel charged with the management of these funds have not received adequate training to gain the needed expertise on a consistent basis. This money belongs to the tribes and individual Indians who own these accounts. The Federal Government has the fiduciary respon­ sibility to see that these funds are invested, recorded, and managed in a proper fashion. Numerous audits and reports issued by the Department of the Interior Inspector General, the General Accounting Office, the Of­ fice of Management and Budget, and congressional committees, time and time again point to the fact that the Federal Government has not been a good trustee. OMB has listed tribal trust funds as one of the high-risk liability areas for the Government. (1) These problems did not happen overnight and this subcommittee does not expect them to be fixed overnight. Some changes have oc­ curred. The BIA has contracted to begin reconciliation of many of the accounts and the Intertribal Monitoring Association has been formed to work with the BIA and Congress to address the prob­ lems. This morning we will focus on some of these problems as well as potential solutions. We will hear from my colleague Mike Synar of Oklahoma who, as chairman of the Government Operations Sub- committee on Environment, Energy, and Natural Resources, re- leased a 1992 report entitled "Misplaced Trust: The Bureau of In­ dian Affairs' Management of the Indian Trust Fund," which has been the impetus for much of the movement in this area. Congressman Synar is also the author of H.R. 1846, which would give tribes more control over their tribal trust funds. We will also hear from the new Assistant Secretary for Indian Affairs, Ada Deer, who is responsible for the management of Indian trust funds. The General Accounting Office will testify concerning work it has completed and is currently working on in this area. Also testifying will be tribal representatives, members of the Inter- tribal Monitoring Association, and representatives of private sector financial institutions. I hope this morning will mark the start of positive dialogue that will bring forth innovative solutions to the old problems that have plagued Indian trust funds for far too long. At this time, I would ask that the background on Indian trust fund management be made part of the record. In addition to receiv­ ing testimony on trust funds, we will be taking comments to Mr. Synar's bill, H.R. 1846. With this in mind, I would also ask that the bill and section-by-section of H.R. 1846 be made part of the record. [Background, text of H.R. 1846, and a section-by-section of the bill follows:] INDIAN TRUST FUND MANAGEMENT BACKGROUND Funds have been held in trust for Indians by the Federal Government since 1820. The Bureau of Indian Affairs (BIA) has had the authority to invest Indian Trust Funds since 1918, however, it was not until 1966 that the BIA exercised its full range of investment authority. The Office of Trust Funds Management (OTFM) within the BIA is responsible for implementing the fiduciary responsibility of ensuring that all proper controls and accountability is maintained with regard to the Indian trust funds. OTFM, located in Albuquerque, New Mexico, oversees the trust fund operations at the 12 BIA Area Offices and 93 BIA Agency offices. Trust fund accounts are comprised mainly of money received through the sale or lease of trust lands and include timber stumpage, oil and gas royalties, and agriculture fees. Accounts containing judgment funds awarded to tribes are also maintained. Trust funds controlled by the BIA currently total over $2.1 billion with $1.7 billion in tribal trust funds and $450 million in Individual Indian Money (IIM) accounts. Several accounts can be held for each tribe. The BIA is currently managing some 1,880 tribal accounts and almost 300,000 separate IIM accounts. In order to protect these funds, investments must be unconditionally secured through Federal Government deposit insurance. Funds must be deposited in interest bearing accounts within 30 days of receipt. The Federal government is responsible for lost interest if funds are not invested within that time. The responsibility for management of Indian Trust Funds by the BIA has been determined through a series of court decisions, treaties, and statutes. Over the years numerous audits and reports on Indian trust funds have been published by the Inspector General of the Department of the Interior, the U.S. General Accounting Office, the Office of Management and Budget, and Congressional Committees.