U.S. Department of the Interior

Trust Accomplishments since January 2001

"I do commend you on your work on trying to bring this mess with the trust fund management under control. It is not something you caused. You inherited it . . ."

Senator Ben Nighthorse Campbell

Ranking Member, Senate Indian Affairs Committee

Interior Secretary Gale Norton is striving to ensure that the Department of the Interior assists the Federal government in fulfilling its responsibilities as trustee for Indian trust assets. The Department is now taking steps to reform a trust beset by more than a century of challenges and to advance both the present and the historical accounting of money owed to Indian beneficiaries. Since January 2001, the Department has already:

� Ordered an independent evaluation of trust services provided by Interior. That evaluation, by EDS, Inc., concluded the trust management program lacked strategic thinking and coordination. It recommended that all trust functions be consolidated into a single organization within the Department to be led by a single departmental executive. The report also said that the Department should develop standardized trust management business practices that are consistent among all departmental offices and regions of the country.

The Department is now implementing the report's recommendations to put in place standardized, beneficiary-focused systems and procedures necessary for trust reform and historical accounting.

� Established a separate Office of Historical Trust Accounting (OHTA) to plan, organize, direct and complete the historical accounting of individual and tribal Indian accounts. It is a massive task to verify the estimated 100 million unique trust transactions that have taken place since the 1887 inception of many of these accounts. OHTA is led by Bert Edwards, the former Chief Financial Officer of the U.S. State Department. Within twelve of months of being established, OHTA developed a comprehensive plan for completing historical trust accounting. OHTA reported to Congress it will take $2.4 billion, and depending on availability of funds, several years to complete the task.

"There is no doubt [this] office has made more progress in that effort in six months than the past administration did in six years."

Joseph S. Kieffer, III

Federal District Court Monitor

As of December 31, 2000, there were 235,984 IIM account holders with a combined balance of $348 million held in trust (excluding special deposit accounts). During fiscal year 2000, approximately $226 million were collected and paid out through the accounts.

OHTA is now implementing its comprehensive plan, beginning with the reconciliation of so-called Judgment and Per-Capita Accounts. These are groups of IIM accounts created by the distribution of monies from tribes to their enrolled members. These 42,218 accounts have a balance of $150.3 million, representing 36% of the total balance and more than 12% of the total number of IIM accounts.

OHTA has substantially completed historical accounting of 11,609 of these accounts. More than 1,500 additional Judgment and Per-Capita accounts are now also under review. Work will begin in FY 2003 on another 12,700 accounts with balances of $69 million.

OHTA has also begun reconciling 193,766 land-based accounts. These are, by far, the largest group to be reconciled by OHTA. With a combined balance of $198 million, these represent over half of the combined balance of IIM accounts and approximately 75% of the total number of IIM accounts.

OHTA has contracted with a number of accounting firms to perform historical accountings for land-based accounts in Eastern states, in the Southwest region, for the Agua Caliente Band of Cahuilla Indians of California, the Southern Utes and Alaska. These accounts, totaling approximately 1,000, represent IIM accounts with large balances and a sizable history of transactions.

Also in FY 2003, planning will begin on accounts for the Ute Indian Tribe of the Uintah & Ouray Reservation in Utah, the Olympic Peninsula Agency in Washington, the Fort Berthold Agency in North Dakota, and the Palm Springs Field Office. This work will cover more than 4,400 land-based accounts, comprising $35 million in balances.

� Placed the Deputy Secretary in charge of trust reform, thereby providing the focused and unified leadership that had previously been lacking. Deputy Secretary Steve Griles, the Department's Chief Operating Officer and second highest ranking official, assisted by the Assistant Secretary of Indian Affairs, the Associate Deputy Secretary, Acting Special Trustee, the Director of the Office of Historical Trust Accounting, and the Director of Indian Trust Transition, now directs Indian trust activities.

� Recruited and appointed senior managers with proven problem-solving skills to identify and solve trust problems. A summary of their qualifications follows:

o Deputy Secretary Steve Griles has 18 years of senior management experience at the Interior Department and with the Commonwealth of Virginia. This service included managing public lands, mineral resources and collection of royalties from federal mineral leases.

o Assistant Secretary - Indian Affairs Neal McCaleb was Oklahoma's Transportation Secretary and the former Chairman of the Chickasaw National Bank. He is a civil engineer by profession and a member of the Chickasaw Tribe of Oklahoma.

o Associate Deputy Secretary Jim Cason has 11 years of federal experience managing complex public lands, agriculture, and mineral programs, including service as the Acting Assistant Secretary for Lands and Minerals Management. He also has seven years experience as the Vice President for Risk Management of an international manufacturing company.

o Office of Indian Trust Transition Director Ross Swimmer is a former Assistant Secretary - Indian Affairs. He was President of the First National Bank of Tahlequah, Oklahoma, and Chairman of the First State Bank in Hulbert, Oklahoma. Mr. Swimmer was General Counsel and Principal Chief of the Cherokee Nation of Oklahoma.

o Acting Special Trustee Donna Erwin has 33 years of experience in all facets of private and public trust management. She was the Director of the Office of Trust Funds Management and Deputy Special Trustee for Systems and Projects. A member of the Muscogee Creek Nation of Oklahoma, Erwin also has 23 years of private sector banking and trust management experience.

o Office of Historical Trust Accounting Director Bert Edwards was the Chief Financial Officer for the Department of State, where he oversaw financial, accounting and budgeting operations for a $10 billion budget.

"After all of these years, we are coming to a point where we are putting the best minds together at all levels, beginning from the Executive Branch, here in Congress, as well as the Judicial Branch, to try to bring together a system or a structure that will help the indigenous peoples of the United States . . . I am so glad that the Executive Branch is part of this, the tribes are part of this, and together we are dialoguing."

Senator Daniel Akaka, Member

Senate Indian Affairs Committee

o Creating an Under Secretary of Indian Affairs with line authority over all trust reform services.

o Establishing trust centers at the regional level.

o Appointing trust officers at the agency level.

o Establishing an Office of Self-Governance and Self-Determination that would report directly to a new Under Secretary for Indian Affairs.

� Established the Office of Indian Trust Transition (OITT) while permanent organizational reforms are developed. This office is developing the Trust Business Plan. The plan will identify key tasks and functions for a new trust reform organization. It will also contain guidance for the new trust organization by providing performance standards, budget needs, personnel requirements and training necessary to accomplish trust reform and provide improved service to meet the needs of beneficiaries and trustees. For example, OITT is preparing a trust activity training initiative for new and existing DOI employees and developing standardized business practices.

� Improved security of Trust-Related Information Technology Systems. The Department of the Interior's computer systems help manage millions of acres of lands and billions of dollars of investments, payments for land use leases and cash assets held in trust for Indian tribes and individuals. The data stored on these computer systems include complex historical land, ancestral and financial records as well as transactional accounting related to these assets.

Concerns have been raised about the Department's procedures to protect computerized trust data from malicious tampering. As part of current litigation, on December 5, 2001, a federal district court ordered Interior to disconnect all Trust-related systems from the Internet until it could demonstrate that trust information is secure and protected from unauthorized access. To comply with the Court Order, the Department disconnected most of its approximately 110,000 computer systems from the Internet.

Since that court ruling, the Department refocused efforts to aggressively improve the security and integrity of Indian trust data located in the computer systems throughout the nation. The Department devoted millions of dollars, hired expert computer security contractors, designed a separate secure network for trust data, and is creating a department-wide, defensible, consistent standard security compliance program.

DOI undertook a painstaking process to certify whether each of its computer systems housed or provided access to individual Indian trust data. Subsequently, proposals to reconnect the computer systems to the Internet were filed with the Special Master of the Court along with declarations that described the systems, the results of the certification process and the associated system security measures.

Following the implementation of additional security measures as needed, and after the completion of the Special Master's review, the Department has restored Internet service to approximately 96% of its computers. Further efforts are underway to improve the security and integrity of the remaining 4% of systems as a prelude to restoring Internet service to those as well. (See Attachment B describing specific actions taken to improve computer security.)

"The process of reconnecting and resuming operation of IT systems is a painstaking one that understandably frustrates all parties and the Court. Interior has consistently been responsive to the requests of the Special Master for more information and for greater assurances."

Alan L. Balaran

Special Master

� Requested that Congress provide in FY2003 a record high $83.6 million in spending increases for trust management and accounting. Of the $83.6 million, $48.8 million was requested for the Office of the Special Trustee, a 44% increase above the Fiscal Year 2002 level. The FY 2003 BIA budget included an increase of $34.8 million for trust services (+$15.8 million) and other trust-related programs (+$19.8 million).

�Improved reporting to Indian beneficiaries, Congress and the Court to provide a comprehensive and candid assessment of trust reform.

"It has been evident that the Deputy Secretary and his immediate staff, including the Associate Deputy Secretary, have been personally involved in addressing the recommendations of the EDS reports and the DOI management and communications problems first identified by the Special Trustee. They have visibly marshaled the resources and personnel of DOI to begin to create a new Indian trust organization - BITAM - out of whole cloth. They have accomplished these tasks and arrived at where they are in a very short time. These accomplishments, along with the creation of OHTA and the decision to bring in EDS for a comprehensive review of trust reform operations, were at the direction of this Secretary. She should be given credit for the valid accomplishments, based on her direction and support, of the Deputy Secretary, J. Steven Griles, and the Associate Deputy Secretary, James Cason. They have engineered what the Director, OITT and the Deputy Special Trustee have accomplished with the 8^th Quarterly Report preparation and review process. That this effort may be a day late and a dollar short is only partly the fault of this administration. But this administration has at least started to do something proactive and original."

Joseph S. Kieffer, III

Federal District Court Monitor

Attachment A

For more than 100 years the United States Government has managed assets for Native Americans that include:

� Land: Approximately 10 million acres of land are held in trust for more than 300,000 individual Indians and over 45 million acres are held in trust for hundreds of Indian tribes, an area approximately equal to New York, New Jersey, New Hampshire, Massachusetts, Connecticut, Delaware and Maryland combined.

� Leasing Revenues: These Indian lands produce income from more than 100,000 coal, timber, oil natural gas, recreation and other leases. Over $200 million in annual leasing and sales revenues are collected and distributed to more than 194,000 individual Indians. Over $360 million per year is collected and distributed to about 1,400 tribal accounts.

� Cash Assets: About $2.8 billion in cash and investments are held on behalf of Indian tribes and more than $400 million is held on behalf of individual Indian beneficiaries.

Trust management services include land appraisals, title reviews, cadastral (i.e., legal boundary) surveys, surface and subsurface assets management, probate (allotment interests and cash balances are inherited) and accounting, investments and records management.

A complicating factor is that many land interests have been and are continuing to be subdivided, or "fractionated" among many Indians. Some tracts of land have undivided interests owned by scores or even hundreds of individuals. In some cases, ownership has been subdivided to the point where we have single pieces of property with ownership interests that are less than .000002 of the whole. There are about 1.4 million fractional interests of 2 percent or less involving 48,0000 tracts of individually owned trust and restricted lands. Interior is required to account for each owner's interest, regardless of size.

A further complicating factor is that over the past several decades trust management has become decentralized among thousands of employees and contractors at many departmental regions and offices.

Standardized practices and procedures, systematic staff training, and the development of business plans that serve the needs of Indian beneficiaries are needed. The Department is proceeding with this effort in systematic fashion. The ongoing strategy has been to:

� Conduct independent, objective analysis of the level of services now provided and problems that exist.

� Identify changes that are needed and make specific recommendations.

� Recruit and appoint experienced managers to implement these recommendations and develop systems, procedures and staff to provide trust services Indian beneficiaries need.

� Consult with tribes on proposals to create permanent organizational reforms that will provide departmental accountability for trust services.

� Work with Congress to adopt these proposals and provide the resources needed for the level of trust services Congress believes is needed.

Attachment B

Specific Actions Taken To Protect Security and Integrity of

Individual Indian Trust Data

� Completed an extensive inventory and certification for most of the computer servers and associated personal computers/laptops in the Department. Most systems were certified as ones that did not house or provide access to individual Indian trust data.

� Improved the security of the computer systems that do house or provide access to individual Indian trust information. The Department reviewed the security clearances of system users and restricted access until after clearances were received. In some cases, network communications were reconfigured, firewall security systems or intrusion detection systems were installed or other security measures were taken. These computer systems are undergoing further evaluation to ensure full compliance with Federal security requirements.

� Requested and received approval from Congress to reprogram approximately $12 million dollars for computer security improvement efforts. The Department plans to request additional funding during FY 2003 to accelerate further security improvements.

� Designed a communications network to provide secure, timely and controlled access to Trust-related systems. The network will improve support of the Department's trust programs by ensuring the confidentiality, integrity, availability and accountability of trust information. The first phase of secure network is scheduled to be implemented in FY 2003.

� Competitively hired one of the nation's leading experts in computer technology -- Science Applications International Corporation (SAIC) -- to assess current computer security, make recommendations for changes and develop and deploy a defensible, consistent, standard security compliance program for the Department. Interior uses SAIC to perform initial security assessments on Trust-related systems and networks, and to evaluate computer systems, organizational security business practices, and the physical security of DOI facilities. SAIC will also provide training to address the roles and responsibility for maintaining a secure environment.

� Delivered DOI End-user IT Security Training to 52,579 DOI employees and contractors out of a workforce of 78,853. This training focused on IT Security Awareness, Responsibility, and Safety, exemplifying the responsibility of the end user for safeguarding and protecting sensitive data.

� Filled key positions in the Department's IT community: Departmental Chief Information Officer (acting); Departmental IT Security Officer, Departmental IT Trust Security Officer; BIA Chief Information Officer.

� Conducted weekly IT Security meetings involving the Associate Deputy Secretary, the Department's Chief Information Officers and other relevant staff and technical experts, to facilitate consistent approaches to IT security evaluations and improvement.