Audit Reveals Lower Brule’s Budget has Major “Material Weaknesses”

On June 27, 2013, Eide Bailly, an independent auditor from Bismarck, ND, completed a financial audit of the Lower Brule Sioux Tribe’s (LBST) financial records for fiscal year 2012.

Read the auditor’s full report here: LBST_Audit_FY2012_Part1, LBST_Audit_FY2012_Part2.

The audit revealed that the LBST Council dispensed only a fraction of the $14.24 million of the Salazar settlement was dispensed to tribal members. Approximately $3.5 million was paid out in the form of stipends to tribal members with LBST withholding the remaining $10.74 million. Although it remains unclear as to how exactly this amount of money was spent or saved, the audit notes the Salazar money was secured to pay an undisclosed amount of debt owed to the Shakopee Mdewakanton Sioux Community ($1 million) and a loan for the Lower Brule Community Development Enterprise ($800,000). As of 2013, LBST’s long-term debt totaled $32,736,001.

The Cobell v. Salazar class-action lawsuit settled in 2009, awarding individual tribal members $1.4 billion and tribes $2 billion for the repurchase of land that allotted under the Dawes Act. The intent of the settlement was to pay individuals affected by a long history of federal malfeasance of Individual Indian Moneys and lands and assist tribes in reconsolidating tribal lands and improving reservation-based economies.

With this in mind, is the paying off of debts with money designated for the above-mentioned purposes an appropriate use of LBST’s money? Does it satisfy the requirements of the Salazar settlement?

The auditors also identified major “material weaknesses” in LBST’s use of federal funds to cover overdrawn balances, which stemmed from grant year 2010-2011 and continued through grant year 2011-2012.

For example, the tribe used Department of Interior grants money for the year 2010-2011 to cover overdrawn balances in the tribal budget. This included money designated for:

• U.S. Department of Interior (DOI)—Indian School Equalization Program (CFDA # 15.042);
• DOI—Indian Social Services—Welfare Assistance (CFDA # 15.113);
• DOI—Indian Education Facilities—Operations and Maintenance (CFDA # 15.047);
• DOI—Bureau of Indian Affairs Facilities—Operations and Maintenance (CFDA #15.048);
• U.S. Department of Defense—Title VI—Wildlife Habitat Restoration (CFDA # 12.129);
• U.S. Department of Transportation—Highway Planning and Construction program (CFDA # 20.205).

In grant year 2012-2013, five of these six federal grants continued to supplement overspending of the general fund. But two more grants were added to cover these deficiencies:

• DOI—Road Maintenance—Indian Roads (CFDA # 15.033)
• U.S. Department of Health and Human Services—Indian Self-Determination (CFDA

In sum, the LBST overspent the general fund and used federal grants to supplement this deficiency. The auditors concluded that “under 2 CFR part 225, Cost Principles for State, Local and Indian Tribal Governments, using federal to cover overdrawn balances are not allowable costs.” Although the recommendations to correct these inconsistencies, the LBST maintained that it “follows the scope of the grant[s] and meets the goals and objectives on a timely basis. Operations and services are provided on a continuing basis all the time.” Non-compliance with appropriate costs of these programs could result in the return of the grant funds and the termination of services provided under the grant.

What should be questioned is how much of the money was absorbed into the general fund to make up for deficits in other areas. Federal grant money appropriated for specific purposes and services was instead used as “slush” money in the general fund to be moved around to cover overdrawn budgets.

Also revealed by the audit was the number of tribal programs funded under federal grants, which LBST received $20,349,998 in 2012. These programs include social, health, economic, education, and infrastructure services to LBST and would be jeopardized if the tribe continues to misappropriate money in the general fund away from the appropriate activities required by federal guidelines.

Not included in the audit was LBST’s 1999 $39.3 million compensation for damages sustained by the 1944 Pick-Sloan Missouri Rive Basin program. Set aside in a special trust fund (Lower Brule Sioux Tribe Infrastructure Development Trust Fund), interest earned on the fund’s amount is to be made available to LBST for educational, social welfare, economic development, and cultural preservation projects and plans. However, these expenditures and budget items are not included in the LBST general budget and audit. It begs the question, how is this money being spent? Or, how was it spent?