EMBEZZLEMENT IN THE TRIBE

A U.S. Federal Court in Oklahoma found two officials of the Cheyenne and Arapaho Tribes of Oklahoma guilty of using their positions to embezzle more than US $150,000 from the tribe, according to a Native American Times report. The officials, who are a married couple, served on the tribe’s business committee from 1998 to 2006. During that time, prosecutors say the couple embezzled funds through travel expense claims for conferences they didn’t attend, inappropriate reimbursements, and payments for relatives’ expenses. They also used tribal funds to obtain cashiers’ checks for personal use and to purchase several cars, trucks, and riding lawn mowers. The couple each face up to five years in federal prison and a US $250,000 fine. The case was the result of a long-term investigation that has led to the convictions of 12 other tribal officials.

Lessons Learned 

The possibility of fraud being committed on U.S. Native American reservations, and by Native Americans in positions of authority and trust, is a significant issue. Approximately 56.2 million acres are held in trust by the United States for various Indian tribes and individuals, and approximately 326 Indian land areas are administered as federal Indian reservations. This makes for a complex environment. While the U.S. government has a significant fiduciary responsibility to protect Native American people and property, the tribes have independence in the ways in which they govern, manage, and hold their members to account.

A major component of the fraud investigation of Cheyenne-Arapaho officials involved the theft of revenues from the tribally owned Lucky Star casino. According to the National Indian Gaming Commission (NIGC), there are 460 Indian gaming establishments in the United States, operated by 240 federally recognized tribes. Revenue generated by these establishments was close to US $27.1 billion in 2011, making them a key income source for tribal governments.

While fully recognizing the relative independence and resource constraints of Native American tribal governments, there are several measures that the tribe’s internal audit function can advise officials to take to prevent or identify this type of fraudulent activity at an early stage. Among these measures are:

  • Establishing clear governance and accountability arrangements for all tribal officials (such as shorter term-of-office limits), providing training that covers ethics and conflicts of interest, and monitoring their effectiveness.
  • Implementing security and background checks for tribal officials.
  • Enhancing financial controls for both gaming and tribal council operations, including segregated duties (e.g., a chief financial officer role, a financial approval and monitoring role, and a focus on larger financial transactions and payments to tribal officials).
  • Engaging an external auditor or accountant to review the tribe’s financial records periodically and report the results to the tribal council. A possible alternative might involve exchanging financial review expertise among experienced officials from other tribal councils as a degree of independent oversight.
  • To the extent possible, tribes could place greater reliance on the oversight and enforcement resources available from the U.S. government on an established, periodic basis to check the health and adequacy of tribal council operations, while respecting the tribe’s culture, history, and way of life.

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April 2014IaCover