oversight

Financial and Management Activities of the Lummi Indian Business Council, Marietta, Washington

Published by the Government Accountability Office on 1971-06-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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L               Od
                      COMPTROLLER     GENERAL      OF      THE   UNITED     STATES
                                    WASHINGTON,     D.C.     20548




B-170214

Dear   Senator    Jackson:

          This is our report    on the financial    and management       activities
of the Lummi       Indian Business    Council,    Marietta,    Washington,      funded
primarily      by the Office of Economic       Opportunity     and the Department
of Commerce.         Our review    was made pursuant        to your request       of
June 25, 1970,

        As agreed with your office,          we are sending copies of this re-
port to the Director,      Office     of Economic   Opportunity;       the Assistant
Secretary   for Economic        Development,      Department       of Commerce;
and the Chairman,        Lummi      Indian Business     Council,     in order that
appropriate    corrective      actions    in areas in need of improvement            may
be undertaken.      Also as agreed with your office,             we are sending
copies of this report      to Senator      Warren  G. Magnuson         and Congress-
man Thomas      M. Pelly.

       We plan to make no further      distribution     of this report   unless
copies are specifically  requested,     and then we shall make distribu-
tion only after your agreement      has been obtained        or public announce-
ment has been made by you concerning            the contents    of the report.

                                                            Sincerely         yours,




                                                            Comptroller              General
                                                            of the United            States

The Honorable      Henry     M. Jackson
United States     Senate




           -,..     50TH ANNIVERSARY              1921 - 1971             -%-m---p
                      COMPTROLLER     GENERAL     OF      THE   UNITED   STATES
                                    WASHINGTON.    D.C.     20548




B-170214

Dear   Mr.   Meeds:

          This is our report    on the financial    and management       activities
of the Lummi       Indian Business    Council,    Marietta,    Washington,      funded
primarily      by the Office  of Economic      Opportunity    and the Department
of Commerce.         Our review    was made pursuant        to your request       of
June 25, 1970.

        As agreed with your office,           we are sending       copies of this re-
port to the Director,       Office of Economic        Opportunity;       the Assistant
Secretary   for Economic         Development,      Department        of Commerce;
and the Chairman,         Lummi      Indian Business     Council,      in order that
appropriate    corrective       actions    in areas in need of improvement             may
be undertaken.      Also as agreed with your office,              we are sending
copies of this report       to Senator      Warren   G. Magnuson         and Congress-
man Thomas      M. Pelly.

       We plan to make no further      distribution     of this report   unless
copies are specifically  requested,     and then we shall make distribu-
tion only after your agreement      has been obtained        or public announce-
ment has been made by you concerning            the contents    of the report.

                                                          Sincerely       yours,




                                                          Comptroller             General
                                                          of the United           States

The Honorable   Lloyd Meeds’
House of Representatives




                      50TH ANNIVERSARY            1921- 1971
    .COMPTiOLLER GENERAL'S REPORT                      FINANCIAL AND MANAGEMENTACTIVITIES
     TO THE HONORABLEHENRY M.                          OF THE LUMMI INDIAN BUSINESS
     JACKSON, UNITED STATES SENATE                     COUNCIL, MARIETTA, WASHINGTON
     AND THE HONORABLELLOYD MEEDS,                     Office  of Economic Opportunity and
     HOUSE OF REPRESENTATIVES                          Department of Commerce B-170214


    DIGEST
    -----_

    WHY THE REVIEW WAS MADE

           Senator Henry M. Jackson and Congressman Lloyd Meeds requested                the Gen-
           eral Accounting      Office   (GAO) to review certain      financial and management
           activities    of the Lummi Indian Business Council,           the Community Action
           Agency which conducted antipoverty            and economic development programs on
           the Lummi Indian Reservation.           These programs were financed      primarily
           by?lie?%fiCe‘     of'Economic     Opportunity    (OEO) and the Economic Develop-
           ment Administration,        Department of Commerce.

            From April     1966 through September 1970, about $3.6 million         was provided
            for such programs as housing, community development,          recreation,    man-
            power training,     and an Aquaculture    development project    designed to es-
            tablish   tribally    operated commercial fish and shellfish      production     ponds
            on the Lummi Indian tidelands.         Of the $3.6 million,   $3.3 million     was
            for the Aquaculture       project.

            Senator Jackson and Congressman Meeds stated that Mr. Forest L. Kinley,
            the former director  of the Lummi Community Action Program, and
            Mr. Vernon Lane, the chairman of the tribal  council,  had each requested
            that GAO make an audit of Federal funds expended under the tribe's    pro-
            grams.

           GAO evaluated the council's    fiscal procedures    and controls    and inquired
           into charges made by Mr. Kinley involving      financial  administration      and
           management of the tribe's   federally  funded projects.


    FINDINGS AND CONCLUSIONS

            Project   GnpZementatCon

            Mr. Kinley indicated   that the Aquaculture      project  had not been carried
            out in the manner originally   intended because construction        of facili-
            ties for commercial production    of fish and oysters was started        before
            research designed to demonstrate     the feasibility     of the project   had
            been completed.

    Tear
    ---- Sheet




                                                                    JUHE24,1971

I
 The research    phase of the project   was started  in June 1969.        By Junk
 1970 the Economic Development Administration       had determined      thatssuf-
 ficient  research    had been performed to demonstrate     the feasibility       of '
 the commercial    phase of the project   so that construction     of a 750-acre
 aquafarm pond could begin.       (See p. 10.)

 Control     over      project   operations

Mr. Kinley charged that the council had no real voice in matters                    relat-
ing to the Aquaculture    project     because the project      director      and busi-
ness manager had formulated       policies     and made decisions      relating     to
management of the project     without      obtaining  the council's       approval.

 GAO found no evidence that they had formulated           policies     and made de-
 cisions  that were outside the scope of the authority             delegated    to
 them by the council.     The project      director   and the business manager,
 however, did have considerable       influence     on the Aquaculture      project.
 (See p. 13.)

Project     reporting

Mr. Kinley said that research results     had not been disseminated to the
Lummi Tribe.    Also, Mr. Kinley stated that he had requested results on
the research phase of the project     from the council but that they had
not been provided to him,

Mr. Kinley did not make a direct     request to the council     for research
information   on the Aquaculture  project.   The project   director    said
that the information    would have been provided   if Mr. Kinley had re-
quested it and that data on research results     was available      to members
of the tribe.     (See p. 15.)

Hiring     practices

Mr. Kinley charged that the council     had practiced     favoritism    in employ-
ment because members of the inxnediate families       of council members had
been employed on council  projects   while other persons with more serious
needs had not been employed.     OEO instructions     preclude the employment
of council members or members of their       immediate families      on OEO-funded
projects.

GAO found some basis for this charge.       Of the 103 persons (86 were
Lummis) on the employment rolls      of the council  in calendar year 1969,
33 either   were members of the immediate families     of council  or person-
nel board members or were council      or board members.    Of the 86 Lummis,
52 received   some form of public assistance     or unemployment benefits
during 1969, which indicated     that they were in need of employment.

Also, of the 33 persons who either     were members of the immediate fami-
lies of council    or personnel board members or were council  or personnel
board members, 21 received some form of public assistance     or unemploy-
ment benefits   during 1969.    (See p. 17.)



                                              2
I
I
            1
                       Yiriq     0f non-Lunnnis and
                       off-reservation     Lummis

                       Mr. Kinley charged that,      although   the Aquaculture     project   was intended
                       to aid the Lummis living      on the reservation,     they had not been noti-
                       fied of job openings and that,        as a result,   non-Lummis and off-
                       reservation      Lummis had been hired for managerial      and lower echelon po-
                       sitions     that could have been filled     by Lummis living     on the reserva-
                       tion.

                       GAO found that there had been very limited    employment of non-Lummis and
                       that neither  OEO nor the Economic Development Administration       had re-
                       quired that only Lummis living  on the reservation    be hired.     Publicity
                       given by the council  to job openings on the reservation,       however, was
                       not adequate.   (See p. 22.)

                       lhployment     of tribal   chairman   and vice   chairman
    I
    l
                       Mr. Kinley questioned        the propriety     of expending OEO and Economic De-
    I                  velopment Administration        funds for the employment of the tribal      chair-
    I                  man and vice chairman        on council    projects.
    I
    I
    I                  The tribal      chairman and vice chairman were employed at various             times
    I
    I                  by the council        in either  OEO- or Administration-funded      positions.        The
    I                  Administration's        contract  with the council     contained  no restrictions
    I
    I                  regarding     employment of council members,and OEO had given verbal ap-
    I                  proval for the temporary         employment of council      members on OEO projects.
    I
    I
                        (See p. 25.)

                       Dismissa      of empZoyees
    I
    I                  Mr. Kinley charged that Lummi tribal   members had been discriminated
    I
    I                  against because they had been dismissed   without proper notifications
    I                  or hearings.
    I
    I
    I                  GAO    found that certain     Lummi tribal    members had been dismissed without
    I                  the    required   formal notifications.       There was no indication,   however,
    I
    I                  that     hearings   had been requested     by the dismissed  employees,  except in
    I                  one    case where the request was later withdrawn.          (See p. 26.)
    I
    1
    I                  Transfer     of funds
    I
    I
    I                  Mr. Kinley stated     that there appeared to have been numerous transfers
        I              between OEO and Economic Development Administration           funds. The council
        I
        I              maintained    separate accounts for various      funds, and its method of pay-
        I              ing expenses necessitated      numerous transfers     between the two agencies'
        I
        I              funds.     Because of delays in posting    to the records9 the accounts for
        I              the tribal    funds did not show that about $25,000 was owed to the other
        I
        I              funds.     (See p, 30.)
        I
        I
                Tear Sheet
       Matching    -funk   not received

       Mr. Finley said that matching funds of $39,000 to be donated by the
       Oceanic Foundation  for OEO activities for the program year ended
       March 31, 1970, had not been received  by June 1970.

       GAO found that the funds had not been received as of that time but had
       been received   in July 1970.    These funds, however9 were deposited    in
       the Economic Development Administration       and tribal fund accounts rather
       than in the OEO account,      An OEO official   informed GAO that the council
       would be required   to transfer   the funds to the OEO account and to prop-
       erly record them in the records.       ISee P, 31.)
      Adninistration       of funds

      The council's        control    over and administration          of Federal funds revealed
      certain    weaknesses in the council's           financial       management system and
      personnel    administration.         Many of these weaknesses were disclosed                by
      earlier    audits.       Although the council       has made efforts        to improve its
      financial    administration,        GAO believes      that further      corrective    actions
      are required       to ensure adequate internal           control    over assets and ex-
      penditures     and to ensure compliance with the requirements                    of OEO and the
      Economic Development Administration.                 (See p. 34.)

      A need existed   to improve internal     controls  over procurements,    travel,
      payrolls,  personnel    administration,   and accounting   for non-Federal     con-
      tributions   and property.      (See p. 35.)

      The fact that certain         of the weaknesses identified      by earlier   audits
      continued     to exist at the time of GAO's review should not be considered
      indicative      of a lack of concern by the council and management officials
      over matters       that were in need of attention.        Since the advent of the
      Aquaculture       project   in May 1969, the council     has taken on significantly
      greater    financial      management responsibilities     but has been unable to
      keep up with the increased          levels of accounting,     personnel,   and procure-
      ment activities.
      Council officials       were receptive     to GAO's findings         and seemed willing
      to initiate    corrective    action.      (See p. 34.)


RECOk&!ENDATIOIKSOR SVGGESTIOh'S

      The Director   of OEO and the Assistant           Secretary    for    Economic   Development,
      Department   of Commerce, should

        --require     the council     to adequately    publicize     job openings and to ap-
           ply hiring      procedures   that will result       in the selection   of the most
           qualified     low-income applicants      for employment on the council's
           federally     funded projects     (see p. 28),



                                               4
               --require   the council's personnel board          to provide written     notices     to
                  employees in advance of the effective           dates of their    terminations       of
                  employment (see p. 28), and

               --provide      for continuing   assistance     to the council   in effecting      im-
                  proved    financial    and administrative      control and for carefully       mon-
                  itoring     the council's   actions     (see p. 38).


AGENCY ACTX'NS AND UNRESOLVEDISSUES

         Both OEO and the Economic Development Administration    agreed with GAO's
         findings and stated that the council  either  had taken or would be re-
         quired to take action in line with GAO's recommendations.

         The Deputy Director    of OEO stated that
           --OEO had been informed by the council that it would regularly        pub-
              licize  job openings in the hulnmi newsletter,   that the newsletter
              reached most of the reservation    residents,  and that weekly listings
              of job openings would be posted in six or more public places (see
                  p* 29);
               --OEO had reemphasized to the council   that personnel             actions     were the
                  responsibility of the personnel board (see p. 29);
               --the council     and personnel   board would follow     their   established        pro-
                   cedures,  including   the issuing of written     termination     notices
                   (see p. 29); and

               --the OEO Indian Division        would provide assistance     to the council  to
                   effect improved financial      and administrative   controls    (see p. 39).

             The council's  formal comments on GAO's findings            were included        in OEO's
             reply' and are reproduced in appendix II.




Tear Sheet



                                                     5
                        Contents
                                                           Page

DIGEST                                                       1

CHAPTER

  1        INTRODUCTION                                      6

  2        PROJECT IMPLEMENTATION,CONTROL, AND REPORT-
           ING                                              10
               Project implementation                       10
               Control over project   operations            13
               Project reporting                            15

  3        PERSONNELACTIVITIES                              17
              Hiring practices                             -17,
              Hiring of non-Lummis and off-
                 reservation   Lummis                       22
              Employment of tribal    chairman and vice
                 chairman                                   25
              Dismissal of employees                        26
              Recommendations to OEO and EDA                28

  4        OTHERACTIVITIES                                  30
              Transfer of funds                             30
              Matching funds not received                   31

   5       ADMINISTRATION OF FUNDS                          34
              Weaknesses reported as a result of
                 prior audits                               34
               Need for continued improvement in fi-
                 nancial and personnel management           35
              Recommendations to OEO and EDA                38

APPENDIX

      I    Letter dated June 25, 1970, to the Comp-
             troller   General of the United States from
              Senator Henry M. Jackson and
              Congressman Lloyd Meeds                       43
APPENDIX                                                 Page
   II      Letter dated April 8, 1971 ffrom the Dep-
             uty Director,  Office of Economic Oppor-
             tunity,  to the General Accounting Office    44
 III       Letter dated April 15, 1971, from the As-
              sistant Secretary of Commerce to the
             General Accounting Office                   47

                         ABBREVIATIONS
EDA        Economic Development Administration
GAO     General    Accounting   Office
OEO     Office    of Economic Opportunity
COMPTROLLERGENERAL'S REPORT                    FINANCIAL AND MANAGEMENTACTIVITIES
TO THE HONORABLE HENRY M.                      OF THE LUMMI INDIAN BUSINESS
JACKSON, UNITED STATES SENATE                  COUNCIL, MARIETTA, WASHINGTON
AND THE HONORABLE LLOYD MEEDS,                 Office  of Economic Opportunity and
HOUSE OF REPRESENTATIVES                       Department of Commerce B-170214


DIGEST
e-m---

WHY THE REVIEW WAS MADE

     Senator Henry M. Jackson and Congressman Lloyd Meeds requested              the Gen-
     eral Accounting      Office   (GAO) to review certain    financial and management
     activities   of the Lummi Indian Business Council,          the Community Action
     Agency which conducted antipoverty          and economic development programs on
     the Lummi Indian Reservation.          These programs were financed     primarily
     by the Office     of Economic Opportunity      (OEO) and the Economic Develop-
     ment Administration,        Department of Commerce.

     From April 1966 through September 1970, about $3.6 million            was provided
     for such programs as housing,      community development,    recreations     man-
     power training,    and an Aquaculture    development project    designed to es-
     tablish   tribally  operated commercial fish and shellfish       production     ponds
     on the Lummi Indian tidelands.        Of the $3.6 million,   $3.3 million     was
     for the Aquaculture     project.

     Senator Jackson and Congressman Meeds stated that Mr. Forest L. Kinley,
     the former director  of the Lummi Community Action Programs and
     Mr. Vernon Lane, the chairman of the tribal  council,  had each requested
     that GAO make an audit of Federal funds expended under the tribe's    pro-
     grams.

     GAO evaluated the council's    fiscal procedures     and controls    and inquired
     into charges made by Mr. Kinley involving      financial   administration      and
     management of the tribe's   federally  funded projects.


FINDINGS AND CONCLUSIONS

     Project   CnpZementation

     Mr. Kinley indicated   that the Aquaculture      project   had not been carried
     out in the manner originally   intended because construction          of facili-
     ties for commercial production    of fish and oysters       was started    before
     research designed to demonstrate     the feasibility     of the project     had
     been completed.




                                         1
The research phase of the project   was started  in June 1969.        By June
1970 the Economic Development Administration    had determined      that suf-
ficient  research had been performed to demonstrate     the feasibility     of
the commercial phase of the project   so that construction     of a 750-acre
aquafarm pond could begin.    (See p. 10.)

Control    over project    operations

Mr. Kinley charged that the council           had no real voice in matters          relat-
ing to the Aquaculture    project      because the project     director      and busi-
ness manager had formulated       policies     and made decisions      relating     to
management of the project     without      obtaining  the council's       approval.

GAO found no evidence that they had formulated           policies     and made de-
cisions  that were outside the scope of the authority             delegated to
them by the council.     The project      director   and the business managers
however, did have considerable       influence     on the Aquaculture      project.
(See p. 13.)

Project    reporting

Mr. Kinley said that research results    had not been disseminated  to the
Lummi Tribe.   Also, Mr. Kinley stated that he had requested results     on
the research phase of the project    from the council but that they had
not been provided to him.

Mr. Kinley did not make a direct     request to the council for research
information   on the Aquaculture  project.   The project   director    said
that the information    would have been provided if Mr. Kinley had re-
quested it and that data on research results     was available      to members
of the tribe.     (See p. 15.)

Hiring    practices

Mr. Kinley charged that the council had practiced         favoritism    in employ-
ment because members of the immediate families        of council members had
been employed on council  projects   while other persons with more serious
needs had not been employed.     OEO instructions     preclude the employment
of council members or members of their       immediate families      on OEO-funded
projects.
GAO found some basis for this charge.     Of the 103 persons (86 were
Lummis) on the employment rolls    of the council in calendar year 1969,
33 either  were members of the immediate families   of council or person-
nel board members or were council    or board members.   Of the 86 Lummiso
52 received some form of public assistance    or unemployment benefits
during 1969, which indicated   that they were in need of employment.

Also, of the 33 persons who either were members of the immediate fami-
lies of council or personnel   board members or were council  or personnel
board members, 21 received   some form of public assistance  or unemploy-
ment benefits  during 1969.   (See p. 17.)



                                         2
I'iiring of non-Lwnmis and
off-reservation    Lummis

Mr. Kinley charged that,      although the Aquaculture     project   was intended
to aid the Lummis living      on the reservation,   they had not been noti-
fied of job openings and that, as a result,        non-Lummis and off-
reservation      Lummis had been hired for managerial    and lower echelon po-
sitions     that could have been filled   by Lummis living     on the reserva-
tion.

GAO found that there had been very limited    employment of non-Lummis and
that neither  OEO nor the Economic Development Administration       had re-
quired that only Lummis living  on the reservation    be hired.     Publicity
given by the council  to job openings on the reservation,       however, was
not adequate.   (See p- 22.)

EmpZoyment of tribal        chairman   and vice chairman
Mr. Kinley questioned    the propriety     of expending OEO and Economic De-
velopment Administration    funds for the employment of the tribal      chair-
man and vice chairman on council       projects.

The tribal      chairman and vice chairman were employed at various times
by the council       in either  OEO- or Administration-funded   positions.    The
Administration's       contract  with the council contained   no restrictions
regarding     employment of council members,and OEO had given verbal ap-
proval for the temporary employment of council members on OEO projects.
 (See p. 25.)

Dismissal    of employees

Mr. Kinley charged that Lummi tribal   members had been discriminated
against because they had been dismissed without   proper notifications
or hearings.

GAO    found that certain     Lummi tribal members had been dismissed without
the    required   formal notifications.    There was no indication,  however,
that     hearings had been requested by the dismissed employees,     except in
one    case where the request was later withdrawn.      (See p. 26.)

Transfer    of funds

Mr. Kinley stated that there appeared to have been numerous transfers
between OEO and Economic Development Administration       funds.   The council
maintained    separate accounts for various funds, and its method of pay-
ing expenses necessitated      numerous transfers between the two agencies'
funds.     Because of delays in posting to the records,     the accounts for
the tribal    funds did not show that about $25,000 was owed to the other
funds.     (See p. 30.)
      Matching    funds   not received

      Mr. Finley said that matching funds of $31,000 to be donated by the
      Oceanic Foundation for OEO activities for the program year ended
      March 31, 1970, had not been received by June 1970.

      GAO found that the funds had not been received         as of that tjme but had
      been received   in July 1970. These funds, however, were deposited         in
      the Economic Development Administration       and tribal   fund accounts rather
      than in the OEO account.      An OEO official   informed GAO that the council
      would be required   to transfer   the funds to the OEO account and to prop-
      erly record them in the records.      (See pI 31.)

      Administration      of funds

      The council's        control   over and administration         of Federal funds revealed
      certain    weaknesses in the councWs            financial      management system and
      personnel administration.           Many of these weaknesses were disclosed               by
      earlier    audits.       Although the council has made efforts            to improve -its
      financial    administration,       GAO believes     that further      corrective    actions
      are required       to ensure adequate internal         control    over assets and ex-
      penditures     and to ensure compliance with the requirements                  of OEO and the
      Economic Development Administration,               (See p. 34.)

      A need existed   to improve internal     controls   over procurements,    travel,
      payrolls,  personnel    administration,    and accounting   for non-Federal     con-
      tributions   and property.      (See p* 35.)

      The fact that certain        of the weaknesses identified      by earlier   audits
      continued     to exist at the time of GAO's review should not be considered
      indicative      of a lack of concern by the council and management officials
      over matters      that were in need of attention.        Since the advent of the
      Aquaculture      project   in May 1969, the council     has taken on significantly
      greater    financial     management responsibilities     but has been unable to
      keep up with the increased         levels of accounting,     personnel,   and procure-
      ment activities.
      Council officials       were receptive        to GAO's findings         and seemed willing
      to initiate    corrective    action.         (See p. 34.)


RECOMMENDATIONSOR SUGGESTIOA'S

     The Director of OEO and the Assistant               Secretary      for    Economic   Development,
     Department of Commerce, should

        --require     the council     to adequately    publicize    job openings and to ap-
           ply hiring      procedures   that will result      in the selection   of the most
           qualified     low-income applicants      for employment on the council's
           federally     funded projects     (see p. 28),



                                               4
       --require   the council's personnel board         to provide written     notices     to
          employees in advance of the effective          dates of their    terminations       of
          employment (see p. 28), and

       --provide      for continuing   assistance     to the council  in effecting      im-
          proved    financial    and administrative     control and for carefully       mon-
          itoring     the council's   actions     (see p. 38).


AGENCYACTIONSAND UNRESOLVED
                          ISSUES
     Both OEO and the Economic Development Administration    agreed with GAO's
     findings and stated that the council  either  had taken or would be re-
     quired to take action in line with GAO's recommendations.

     The Deputy Director    of OEO stated that
       --OEO had been infowned by the council       that it would regularly    pub-
          licize  job openings in the Lunnni newsletter,     that the newsletter
          reached most of the reservation    residents,    and that weekly listings
          of job openings would be posted in six or more public places (see
          pa 29);

       --OEO had reemphasized to the council   that personnel            actions     were the
          responsibility of the personnel board (see p. 29);
       --the council     and personnel board would follow     their   established         pro-
           cedures,  including   the issuing of written   termination     notices
           (see p. 29); and

       --the OEO Indian Division        would provide assistance     to the council  to
           effect improved financial      and administrative   controls    (see p. 39).

     The council's formal comments on GAO's findings             were included       in OEO's
     reply and are reproduced in appendix II.




                                             5
                              CUAPTER1

                            INTRODUCTION

        The Lummi Indian Business Council,     a Community Action
Agency s   is responsible   for   the conduct of  antipoverty and
economic development programs on the Lummi Indian Reserva-
tion in Marietta.       The programs were funded by the Office
of Economic Opportunity;       the Economic Development Adminis-
tration    (EDA), Department of Commerce; the Department of
Labor; and the Bureau of Indian Affairs,         Department of the
Interior.

      Our review was performed pursuant to the request con-
tained in a letter   dated June 25, 1970, to the Compfzrolles
General from Senator Henry M. Jackson and Congressman Lloyd
Meeds. Senator Jackson and Congressman Meeds stated that
Mr. Forest L. Kinley,    the former Lummi Community Action Pro-
gram director,   and Mr. Vernon Lane, the council chairman,
had each requested that we make an audit of Federal funds ex-
pended for the Lummi Indian Tribe's    programs.  (See app. I.)

      Our review, which was conducted primarily         at the coun-
cil's   office   on the Lummi Reservation,     was made during the
period July through October 1970. Cur review included an
evaluation     of the council's    fiscal procedures and controls
over expenditures      and transactions   and an inquiry   into
charges made by Mr. Kinley in a letter         dated June 20, 1970,
to Senator Jackson and in interviews.

      We reviewed grant agreements and contracts            and the
council's   policies,    procedures,     and records.    We interviewed
Federal officials,      council members and employees, Mr. Kinley,
and other persons who we had reason to believe had informa-
tion concerning      the matters under review.        We also made
tests of the financial       transactions    of the council for the
months of October 1968 and January and July 1970. We did
not make an evaluation       of the effectiveness      of the council's
antipoverty   and economic development programs.
      The Lummi Indian Reservation   is about 5 miles west of
the city of Bellingham in the northwest corner of the State
of Washington.    In 1968 the council reported that, of the
approximately  1,600 Lummis, about 1,200 lived on the

                                    6
reservation.         The council   reported    that,         of   the 161 Indian
families     living    on the reservation,       111,        or   about 69 percent,
had family       incomes of less than $3,500.                At   that time there
was a reported        male unemployment     rate of          46   percent.

       To assist  the poor and unemployed       Lummis and to pro-
mote economic development       on the Lummi Reservation,       Federal
grant and contract     funds totaling     about $3.6 million     were
approved    for Lummi Reservation     programs   and activities    from
their   inception   in April   1966 to September    30, 1970.

        The tribe   received    $1.2 million      from OEO, $1.8 million
from EDA, $560,000        from the Department        of Labor, and $40,000
from the Bureau of Indian         Affairs.      Of the $3.6 million,
about $3.3 million        was provided     to further    the development
of an Aquaculture       project   and the remainder       was for other
functions     of the Community Action        Program.

        The concept      of the Lummi Aquaculture              project     was formu-
lated     in April     1968 at a meeting         of the council.           The project
was designed       to establish      tribally       operated       commercial       fish
and shellfish        production    ponds on the Lummi Indian                 tidelands.
Financial      support    and technical         assistance       to develop       the
plans for the project           was provided         soon after       by the Oceanic
Foundation      of Hawaii,      a nonprofit        organization         engaged in
oceanic     research     and resource        development       activities.          The
council     submitted     an application          to EDA in October          1968 for
a grant     to study the feasibility             of the project.            EDA
awarded the grant          in May 1969.         Grants were also requested
and awarded by OEO for construction,                    by the Department           of
Labor for training,           and by the Oceanographic              Commission        of
Washington      State for baitworm           studies.

       As indicated     in its long-range     plan, the tribe    expects
to dike more than 2,500 acres of tidelands.            The EDA-funded
technical    assistance     feasibility   study showed that 5,000
pounds of trout       and 200,000 oysters     could be successfully
grown in a l-acre       pond of seawater.

      OEO awarded grants    for the construction       of the dikes
and research   ponds, which were used in the feasibility          study.
The council  reported   that the Lummis h-ad proved that they
were capable    of doing the difficult     construction      work


                                             7
themselves.      On the basis of this demonstration,      EDA pro-
vided the tribe     with $1,500,000  to build  a 750-acre    commer-
cial  production    aquafarm which in May 1971 was reported        to
be about 85 percent      complete.

        The first-year       Manpower Development         and Training    Act
program     in aquaculture--     funded by the Department           of Labor--
was completed        in August 1970.        In September     1970 the council
reported      that the 20 Lummis who had graduated             from the
training      program either     were employed in the Aquaculture
project     or were receiving       university     training.       The program
for the second year provided            for the training       of 64 Lummis
in aquaculture         on the reservation       to provide    a trained    work
force    for the tribe       to operate     its aquafarm.

      By applying    the results     of the feasibility       study to
the 750-acre    pond, the council       anticipates     that the project
will  provide   the tribe    with a gross income of up to $3 mil-
lion a year and will      employ about 200 Lummis in all phases
of management and technical         operations.       As the project   ex-
pands to 2,500 acres,       the tribe     expects   that a work force
of over 600 will     be directly     or indirectly      employed.

       An illustration      of the Aquaculture  project,          which was
provided     by the council,     is shown on the following          page.
    GATES                                       OYSTER RACKS                                 FEEDING STATION




               OUTLET   GATES                                                                           /




                                          RESEARCH   PONDS



                                                                                                                   h




Aerial perspective of phase II of the Lummi Aquoculture    Project. The 750.acre pond fills at high tide through
the inlet gates which close automatically  after the tide begins to drop. The outlet gates allow the pond level
to drop about 25 percent between tides.   Through this action the tide acts as a pump to pulse about 700 acre-
feet of water per day through the ponds.      A. Fish screens on one-way gates retain pond fish and keep out
trash fish, crabs, etc. B. oyster trays on racks produce high quality and high volume meat.      C. Mobile feed-
ing stations ot fixed sites in pond give maximum food dispersion for fish.




                                                        9
                             CHAPTER2

       PROJECT IMPLEMETYTATION,CONTROL,AND REPORTING

 PROJECT IMPLEMENTATION

      Mr. Kinley was of the belief    that the Aquaculture    proj-
ect had not been carried out in the manner originally        in-
tended because construction  of facilities      for commercial pro-
duction of fish and oysters was started before research deL
signed to demonstrate the feasibility      of the project  had
been completed.

       We found that, as early as June 1969, the council had
started the research.    We fo-ad also that, by June 1970,
EDA had determined that sufficierLt   research had been per-
formed to demonstrate the feasibility     of the commercial phase
of the project   so that construction  of a 750-acre aquafarm
pond could begin,

       The council's     application     to EDA, dated October 10, 1968,
requested that $143,220 be provided for an aquaculture            feasi-
bility   study.     The application      stated that the duration  of
the proposed work would be 1 year and that the work performed
could lead to the construction           of the commercial phase of the
Aquaculture     project.    EDA, under a 3-year grant contract with
the council,     dated May 9, 1969, provided $143,220 for the
first   year of operations       to determine the commercial feasi-
bility   of an aquaculture       business and to assist in training
Lummis in the technical        and commercial procedures necessary
to operate an aquaculture          business.

      On May 29, 1969, OE;K> awarded a grant of $200,000 to the
council for the construction    of ponds and facilities for
research on the project.

       The counciles    progress report to EDA, dated June 19,
1969, showed that the construction        of the research ponds
and facilities      on the Lummi Reservation    had been schedu!cd
to begin in July 1969 and that fish were to have been trains-
ferred to the ponds in September 1969. Because of problems
with rights-of-way,       permits, and local opposition   to the
project,     actual construction   did not begin until   September
1969. The research ponds were completed in March 1970, and
the first     fish were placed in the ponds at that time.
       The council's  monthly progress reports  to EDA showed
that, even though the research ponds had not been completed
until March 1970, fish had been obtained as early as June
1969 and were being raised in Federal hatcheries.       In addi-
tion, the June 1969 progress report showed that research
was being continued on oysters,     baitworms, and oyster rack
design.    The progress reports from June 1969 through March
1970 showed that research had continued throughout      this pe-
riod and had not necessarily     been dependent upon the com-
pletion   of the research ponds and facilities   on the reserva-
tion.

      On April 10, 1970, the council submitted a request to
EDA for a grant of $180,000 for the second year of the    (
aquaculture   research which had begun in 1969 under the
3-year contract with EDA. The request stated that the re-
search was to concentrate   on oyster and fish production and
on water quality,

       An EDA technical    assistance    report dated April 22,
1970, included numerous comments on a review of the research
accomplished in the first        year and recommended that the ad-
ditional   grant of $180,000 be approved.           In considering  the
recommendation,     the Director     of EDA's Office of Technical
Assistance    stated that technical      assistance    might have to
be provided for at least 1 to 2 more years.             EDA awarded the
grant in June 1970.
       The council,  in an application         to EDA, dated Febru-
ary 23, 1970, requested a grant of $1.5 million             for the con-
struction   of a 750-acre oyster and fish pond,            The council,
on the basis of information       obtained from its research and
from other sources, estimated that the 750-acre pond would
produce fish and oysters that would provide the tribe with
an annual gross income of $3 million.              The EDA Western -
Area Office recommended approval of the grant on the basis
that the then-available     results    of the technical      assistance
study of the Aquaculture     project     initiated     in 1969 had shown
that the project    was feasible.      In June 1970 EDA awarded
the grant, and in July 1970 construction             of the 750-acre
aquafarm pond began,,

      We inquired of the director of the Aquaculture project
whether it was necessary to complete the research before

                                   11
initiating   construction.       The director    stated that he and
others had begun research on certain          aspects of the project
long before the project was proposed to EDA and that, in
his opinion,   research would continue throughout          the life of
the project,     He said that, although there had been a delay
of about 2-l/2 months in the construction            of the research
ponds and facilities,      sufficient    research had been accom-
plished to demonstrate the feasibility           of the project.

      The council,     in its comments dated February 19, 1971,
to OM) on this matter,       stated that the research phase of
the Aquaculture     project was and is a continuing     program and
that its feasibility       had been proven to the satisfaction   of
the council,   OEO, EDA, and numerous other Federal. and State
agencies.
CONTROLOVERPROJECT OPERATIONS

      Mr. Kinley charged -that the council had had no real
voice in matters relating    to the Aquaculture    project  be-
cause the project   director  and business manager had formu-
lated policies   and had made decisions   relating    to manage-
ment of the project without the council's       approval.

      Our review showed that the project      director    and busi-
ness manager had had considerable     influence     on the Aquacul-
ture project;   however, we found no evidence that they had
formulated policies   or had made decisions      that were outside
the scope of the authority   delegated to them by the coun-
cil a

      Council Resolution    E-82 dated July 4, 1969, defined
the responsibilities    of the project   director   and business
manager.   These responsibilities     are as follows:

           'The Project Director     under EDA contract    and
     the OEO grant having management and supervision
     over the research project,      is also authorized    to
     incur obligation    for supplies,   materials,   equip-
     ment, rentals,   etc., and shall inform the Busi-
     ness manager of such obligations       within 5 days
     after incurred,

            sThe Business JYanager shall have responsi-
     bility   for and authority      over (1) approval of
     the purchase of supplies,         materials,    and equip-
     ment, except for those items mentioned in para-
     graph B above, (2) with the advice of the Finan-
     cial Secretary shall establish          and supervise the
     accounting     and cost data systems to be used, in-
     cluding the pay roll function,           (3) approval for
     payment by the Financial        Secretary of all pay
     rolls,   invoices 9 travel vouchers,         consultant   fees,
     and other financial      obligations      for which author-
     ity has not been otherwise delegated,             (4) prepare
     periodic    invoices   to EDA, Washington, D,C,, for
     reimbursement of expenditures         made by the Lummi
     Indian Business Council under the terms of its
     contract with EDA, and (5) render other business
     managerial services as required,"
              The council's  resolution         delegating    the responsibil-
        ities to the project    director        and business manager and
        other decisions were deemed         invalid     by certain members of
        the council,    These members       alleged that not all council
        members had been notified      of     special council meetings dur-
        ing which certain    decisions        involving    the Aquaculture     proj-
        ect had been made,

                This matter was the subject of a suit filed on Sep-
        tember 4, 1969, in the U.S. District            Court, Western District
        of Washington, Northern Division,           by Mr. Kinley and three
        council members against the council and eight other council
        members. As a result         of this suit, the council chairman
        notified     all council members in writing          of a special meet-
        ing to be held on November 21, 1969. At this special meet-
        ing the previous decisions:         including     the assignment of
        responsibilities       to the project    director     and business man-
        ager, were ratified       by the council.       Two days earlier     the
        plaintiffs      had requested and obtained dismissal          of the
        court action without prejudice,

               The project director   undoubtedly    has had a significant
        role in the implementation     of the Aquaculture      project,    He
        prepared proposals    for financing   the project,     spoke for the
        council in defense of the project,       and advised the council
        on many matters that were directly       or indirectly     related
        to the future of the Aquaculture      project.

              The business manager has been responsible     to the coun-
        cil for the financial    aspects of the Aquaculture   project
        and has advised the council on other matters pertaining       to
        the financial   position  and operational structure   needed
‘“I,.   for economic development of the Lummi Reservation.
  I.
 “ii           The project director    and business manager are account-
,~n     able to the council and, ultimately,         to the Lummi Tribe.
,-II    Because both the project      director   and the business manager
        are employees of the council,        it seems that the council can
        redefine,    if it so chooses, the duties and responsibil-
        ities of the project    director     and business manager.

              The council,   in its comments to OEO on this charge,
        stated that the council had had, and would continue to
        have, the final    say on all matters related to the

                                         14
activities   of the project     director and business manager.
The council stated also that the project       director and busi-
ness manager were employees of the tribe and were capable
and responsible    individuals.

PROJECTREPORTING

     Mr. Kinley stated that information    on the results of
the research on the Aquaculture  project had not been dis-
seminated to the Lummi Tribe,   Mr. Kinley stated also that
he had requested the research results   from the council but
that they had not been provided to him,

      Our review showed that Mr. Kinley had not made a di-
rect request to the council for research information     on the
Aquaculture   project.  The project director  informed us that,
if Mr. Kinley had made a request,   the information   would
have been provided.    He also said that data on research re-
sults was, and had been, available    to members of the tribe,

       The project   director  and the council chairman informed
us that the monthly progress reports to EDA had been made
available   to the council;    that several of the reports had
been presented at council meetings; and that, although most
of these meetings were special,        the minutes--which      included
information    on the results    of the Aquaculture     project--had
been available     to tribal  members.

       The local Lummi Reservation      newsletter,   which had a
circulation    of about 450, included a statement on the prog-
ress of the Aquaculture       project  in at least four of the 13
issues between June 1969 and July 1970. Also the progress
of the Aquaculture     project was discussed in a January 1970
general council meeting for all tribal         members. In Septem-
ber 1970 the council published        a pamphlet on the Aquacul-
ture project which provided information          on the results and
expectations    of the project,

       In October 1970 Mr. Kinley informed us that he had not
made a direct request to the council for the research data
but had requested a council member to obtain the informa-
tion for him,    Cur review showed that the council member,
by letter   dated May 12, 1970, had requested the council to
provide only financial    and personnel data on the project.

                                   15
The councilVs reoords did not show whether the data had
been provided,   The treasurer of the Lummi Tribe informed
us that, although the data 'had not been provided, the coun-
cil member had been told that he could review the records.

      The project    director told us that at no time had he
refused to provide information     on the project     to members of
the tribe.     He also said that, if Mr. Kinley had requested
information    on the research results,   the information     would
have been provided to him, The project       director    further
stated that the pamphlet published      in September 1970 had
been the first    of a series of progress reports on the proj-
ect that would be issued quarterly.

     The council,   in its   comments to OEO, stated    that:

      "The Council, due to lack of funding, has not al-
     ways been able to issue data on Aquaculture         on a
     regular basis,      However, since March 1970, an
     average of 3 tours per week were conducted for
     various groups and individuals       of the entire
     Aquaculture    Project.   Any interested   member of
     the tribe should not feel the need for a formal
     invitation   to see the project,      We have at this
     time a proposal to fund a Public Relations         posi-
     tion which will ensure members of the tribe as
     well as others, of information       on the progress
     of Aquaculture.      The Council is very proud of
     the project   and does not wish to keep it a se-
     cret from any individual     or group.s'




                               16
                           CHAPTER3

                    PERSONNELACTIVITIES

HIRING PRACTICES

       Mr. Kinley charged that the council had practiced  favor-
itism in employment because members of the immediate fami-
lies of council members had been employed on the council
projects   while other persons with more serious needs had
not been employed.     OEO instructions preclude the employ-
ment of council members or members of their immediate fami-
lies on OEO-funded projects,

      We found some basis for this charge.    Of the 103 per-
sons (86 were Lummis) on the employment rolls of the council
in calendar year 1969, 33 either were members of the immedi-
ate families,   as defined by OEO, of council or personnel
board members or were council or personnel board members.
Of the 33 persons, 21 received some form of public assis-
tance or unemployment benefits    during 1969. Of the 86 Lum-
mis, 52 received some form of public assistance     or unemploy-
ment benefits   during 1969, which indicated  that they were in
need of employment.
       The EDA contract    with the council for the Aquaculture
project   did not preclude the employment of council members
or their relatives      on the project.    The OEO Community Ac-
tion Program instructions       on nepotism and conflict of in-
terest provide,    however, that:

          "No person shall hold a job while he or a mem-
     ber of his immediate family serves on a board or
     committee of a grantee or delegate agency if that
     board or committee has authority  to order person-
     nel actions affecting  his job.'s
          *          *          J;         J;         Jc

            "No person shall hold a job while either he
     or a member of his immediate family serves on a
     board or a committee which, either by rule or by
     practice,   regularly  nominates, recommends, or
     screens candidates    for the agency or program by
      which he is employed.   For purposes of this PART,
      a member of an immediate family shall include any
      of the following persons:
               Husband               Wife
               Father                Father-in-law
               Mother                Mother-in-law
               Brother               Brother-in-law
               Sister                Sister-in-law
               Son                   Son-in-law
               Daughter              Daughter-in-law

             s'Grantees and delegate agencies not in com-
      pliance with these rules *** may apply to the ap-
      propriate    OEO Regional Office for a temporary
      waiver of the rule and permission to phase com-
      pliance over a period of time.      Such a request
      shall include a plan for accomplishing     the re-
      quired compliance and a deadline for its comple-
      tion."

        In October 1970 OEO distributed       to OEO officials   and
grantees for comment a draft of a proposed revision            of the
instructions      which would relax the current conflict       of in-
terest and nepotism instructions        when applied to Indian
tribes.      The draft recognized   the special circumstances      ex-
isting    on Indian reservations    involving    lack of outside
sources of employment, underdevelopment          of the area, large
families,     isolation,  and the need to make serving on a gov-
erning body an attractive       job to tribal    members rather than
a family hardship.

        The draft instructions   provided for a governing board
to establish     a personnel selection   committee that would be
appointed by the entire board and that would serve staggered
terms and for the governing board to delegate to the commit-
tee the final responsibility      for all board decisions    concern-
ing selection     of employees and other duties,     If these in-
structions    are adopted, the instructions     on conflict  of in-
terest would apply only to the committee and not to the gov-
erning board.

      The chairman of the council   informed us that, during
the first  half of 1969, the council had performed the hiring
function.   He stated that the council,   by a resolution      dated
July 4, 1969, had delegated the responsibility       of selecting
and hiring  employees for the Aquaculture    project   to a person-
nel board consisting  of five members. The personnel board
also handled personnel actions for the Lummi Community Ac-
tion Program.

      We noted, however, that, after July 4, 1969, council
members had continued to make decisions          relating   to hiring
of employees on the Aquaculture        project   and that, as a re-
sult, the personnel board did not have complete responsibil-
ity for hiring Aquaculture      project    employees,     Therefore the
OEO instructions    previously   quoted would continue to apply
to those relatives     of council members who were hired after
the delegation    of the hiring    function    to the personnel board.

     The table which follows shows the total employment by
the council from January 1, 1968, through June 30, 1970.

                                                        Number of
                             Number of persons          employees
                              employed during       _ on rolls at
       Period                     period              end of period

January 1 through
  December 31, 1968                    58                     15
January 1 through
  December 31, 1969                    103                   25
January 1 through
  June 30, 1970                        82                    38
      To test the council's     hiring practices  for compliance
with OEO instructions   on nepotism and conflict      of interest,
we reviewed the records of the 103 persons on the employment
rolls during calendar year 1969. We found that 86 were mem-
bers of the Lummi Tribe and that, of these, 33 either were
members of the immediate family,       as defined by OEO, of at
least one council or personnel board member who was in of-
fice at the time that the employee was hired or were council
or personnel board members, Of the 33 employees, 12 were
paid with EDA funds, 15 with OEO funds, and six with OEO or
EDA funds at different     times.




                                  19
      We identified    71 persons who had applied for employ-
ment on the Aquaculture     project  and/or the Lummi Community
Action Program in 1969 and who had not been hired,         Of the
71 applicants     who were not hired, seven were members of the
immediate family of at least one council or personnel board
member in office     at the date of application.   The records
did not show why the 71 applicants      had not been hired.

      OEO instructions      require that preference  be given to
the employment of poor persons in OEO-funded projects.         The
counciles   personnel records did not contain information      on
family incomes or other information       showing the employment
needs of families      of those persons who had applied for em-
ployment or who had been employed in 1969,

      Information  obtained from the Washington State Depart-
ment of Public Assistance and the Employment Security De-
partment, however, showed that, of the 86 Lummis on the em-
ployment rolls of the council during 1969, 52 had received
some form of public assistance     or unemployment benefits in
1969. Also, of the 33 persons who either were members of
the immediate families    of council or personnel board members
or were council or personnel board members, 21 had received
some form of public assistance     or unemployment benefits dur-
ing 1969.

      The 33 employees included three members of the council
who had worked on the Aquaculture   project in various QEQ-
funded temporary positions   while serving on the council and
three personnel board members who had been employed in non-
aquaculture,  OEO-funded positions  while serving on the per-
sonnel board.

      The council chairman told us that verbal waivers of the
OEQ Community Action Program instructions   concerning con-
flict  of interest had been obtained from BE0 for the council
and personnel board members.

      The project director  informed us that in May or June
1969 an QEO representative    had given the council a verbal
waiver of the instructions  p provided that the council mem-
bers employed on OEO projects    would refrain from voting on
any matter concerning the Lumrni Community Action Program
and would be employed in temporary positions.      We noted,
however, that the three council members aployed    by the
council in 1969 had not refrained, in all instances,    from
voting on matters concerning the Lummi Community Action
Progral.

        In a letter     to OEQ, dated May 4, 1970, Mr. Kinley gues-
tioned the employment of six council members who had been
employed during calendar year 1970 on various federally
funded tribal       projects.      Five of the council members held
temporary positions,          and one council member was employed on
an ED&funded program.            OEO, responding by letter     dated
May 25, 1970, stated that the council had sanctioned this
apparent conflict         of interest    for five of the council mem-
bers on the basis that the instructions            were not applicable
to temporary positions.            We discussed this matter with QEO
officials    who told us that the instructions          on conflict  of
interest    did not apply to temporary positions,

       We believe that, when an Indian reservation        has a rela-
tively    small population,   of which the majority     are poor, the
application     of the OEO instructions    on conflict   of interest
can cause a hardship by denying employment to the poor per-
sons who are members of families        of council members. With
respect to the Lummi Reservation,        we believe that poor per-
sons who are members of families        of council members should
be afforded opportunities       for employment- on council projects.
QEO's proposed revision      of its instructions     on conflict   of
interest,    if adopted, would sanction the employment of mem-
bers of the immediate families        of council members,

     We believe,    however, that, even if OEO were to adopt
the proposed revised instruction,        the Lummi council should
be required,   in filling    job vacancies,   to adequately publi-
cize the available      jobs and to apply hiring   procedures that
would result   in the selection    of the most qualified     low-
income applicants.

         I'he council,   in its   comments to OEO on this   charge,
stated      that:

         "The Council, by resolution,     had given all re-
         sponsibility  for hiring   and firing   to a five
         member Personnel Board on 7-4-69.       In certain
         emergency or temporary situations,      the Council

                                     21
      hired without Personnel Board approval.    How-
      ever, this was on a rare occasion and later
      ratified   by the Board. The Council has also
      on limited occasions delegated employment au-
      thority   for construction crews and algae har-
      vest."

HIRING OF NON-LUMMISAND
OFF-RESERVATIONLUMMIS

      Mr. Kinley charged that, although the Aquaculture        proj-
ect was intended to aid the Lummis living      on the reserva-
tion, they had not been notified      of job openings and that,
as a result,   non-Lummis and off-reservation     Lunnnis had been
hired for managerial and lower echelon positions         that could
have been filled    by Lun-mis living  on the reservation.
      We found that there had been very limited    employment of
non-Lunxmis and that neither OEOnor EDA had required that
only Lummis living   on the reservation  be hired.   We believe,
however, that publicity    given by the council to job openings
on the reservation   was not adequate.

        The EDA contract and OEO grant awarded to the council
during calendar year 1969 did not contain any provisions
precluding    the employment of non-Lummis or Lurmnis living       off
the reservation.      The council's     proposals to OEO for (1) a
Community Action Program stated that all poverty-level           per-
sons were potentially     eligible    to take part in the program
and (2) the construction       of the a.quaculture research facili-
ties stated that all households of the Lumrni Tribe would be
notified    of the work opportunities       in the project through
the local newsletters.

       The proposal to EDA for the study of the feasibility     of
the project    stated that it appeared that all the Lummi
tribal   members would prefer to live on the reservation    and
that the project was intended to develop an aquaculture      sys-
tem for the Lummi Indian Tribe.

      Of the 103 persons employed by the council during 1969,
13 were non-Lummis.    Of these, three were hired between
April 1 and December 31, 1969, in the managerial positions
of project  director,  shellfish director, and business
manager 0 The other      PO non-LKmmis held a variety    of posi-
tions)  such as clerk     typist,  cement finisher,   and truck
driver@    Of the 10, eight were employed in temporary jobs
of a duration    of a month or less and two--who were members
of L    i families   as a result of marriages to L-is--held
the positions    of secretary   and carpenter trainee.

       The three managerial positions        were provided for in
the EDA contract.       The persons     ployed as project     director
and shellfish    director   were approved by EDA. The business
manager had extensive managerial        experience,    and the records
showed that he was well qualified         for the position,      We re-
viewed all the available      job applications      submitted by
Lummis to the council during 1969 and were unable to iden-
tify from the applications       any individuals     who had the ex-
perience required      for the three managerial positions.          Be-
cause the business manager position          had been filled    before
the position    was advertised,     however, qualified     Lummis may
not have had knowledge that the position          was available     and
therefore    did not apply.

       Information    available    at the council indicated        that
during 1969 nine Lummi newsletters           had been issued.        Of the
eight newsletters      that we were able to locate,        only the
June 1969 mewsletter announced job openings,              This newslet-
ter announced job openings under the EDA contract               for a
business manager, a personnel specialist,            a fishery     and
maintenance assistant,        and a secretary,      The business man-
ager position      had been filled    at the time of the newsletter
announcements, and the personnel specialist            position      had
been eliminated      before anybody was hired for it.           In addi-
tion, the June 1969 newsletter          stated that 19 job openings
under the OEQ grant were contingent           upon the c~uncil~s        re-
ceiving the grant.        The council chairman informed us that
he was not aware of any other job announcements that had
been made in the Lummi newsletters           during 1969,

        Although only 23 job openings had been advertised         in
the Lummi newsletter,        we noted that 88 persons had been
hired in 1969. It appears, therefore,          that a significant
number of job openings were made know=n by word of mouth.
The lack of formal job announcements might have resulted             in
members of the Lummi Tribe not obtaining          employment and in
limiting     the opportunity    of the council to employ the most
qualified     Lummiss
                                    23
       The council's   records showed that some of the temporary
positions   held by 10 non-Lummis in lower echelon positions
were attributable    to short-term  needs.  We believe that the
council made a reasonable effort     to employ Lummis because
only two of the 10 non-Lummis worked for more than 1 month.

       The council, in its comments to OEO, stated that the
council and the personnel board had made every attempt to
hire Lummis, regardless    of where they lived,    for every
available   opening and that many job qualifications     had been
waived in favor of on-the-job    training  to provide employ-
ment to Lummis rather than non-l-is.




                                24
EMPLOYMENT OF TRIBAL CHAIRNANAND
VICE CHAIW

     Mr. Kinley questioned the propriety  of expending OEO
and EDA funds for the employment of the tribal  chairman and
vice chairman on council projects.

      Our review showed that the tribal    chairman and vice
chairman had been employed at various times by the council
in either OEO- or ED&funded positions.       The E22Acontract
with the council contained no restrictions      regarding employ-
ment of council members on EDA.projects,     and, as stated on
page 20,-OEO had waived its restriction     by giving verbal
approval for the temporary employment of council members on
OEO projects.

      During the period January to September 1970, the tribal
chairman held two EDA-funded positions--as      a carpenter   fore-
man for 1 month and as a community relations      specialist    for
8 months.   The position  of carpenter  foreman paid $6.10 an
hour, and the position   of community relations    specialist
paid $3.85 an hour.

       The council chairman's     job as a carpenter      foreman in-
volved work on an OEO-funded project,          but his salary was
mistakenly   paid from EDA funds.       The business manager of
the Aquaculture    project   told us that the council chairman
had been hired because he was the only available             qualified
carpenter   foreman on the reservation.          The carpenter     fore-
man's job was a temporary position,         and, as discussed
earlier,   OEO had interpreted      the instructions     as not apply-
ing to temporary positions.
       The council chairman stated that his job as a commu-
nity relations      specialist     consisted    of acting as a tour
guide of the Aquaculture          project    and answering questions
about the project.        The business manager informed us that
there was no job description             for the community relations
specialist    position.        The council chairman still    held this
position   as of September 30, 1970.

     During the period August 1969 through September 1970,
the council vice chairman held numerous jobs funded by OEO
or EDA. The major jobs held, the periods of employment,
and the pay rates were as follows:
                                                    Pay    Funding
   Job title   or function            Period        rate   agency

Baitworm production               Aug. 1969        $3.85     EDA
Truck spotter (spots trucks       Sept. to Dec.
   for dumping fill   material)     1969            4.70     OEO
Pond custodian                    Dec. 1969         4.70     EDA
Pump house construction           Jan. 1970         4.70     OEO
Dike construction                 Jan. 1970         4.70     OEO
Community specialist              Aug. 1969
                                  Jan. to July
                                    1970            3.85     EDA
Pond construction                 Feb. 1970         5.25     OEQ
Dumper                            Aug. 1970         5.00     EDA
Tractor operator                  Aug. and Sept.
                                    1970            7.43     EDA
     The council chairman informed us that the vice chair-
manDs duties as a community specialist  had been similar to
his own.

      The chairman and vice chairman informed us that, prior
to the vice chairman's    initial OEO employment, an OEO rep-
resentative   had provided verbal approval for the vice chair-
manIs employment.

      The council,    in its comments to OEO, stated (1) that
EDA had no restrictions      on the employment of council mem-
bers and, in fact, had encouraged it where necessary for
community development,      (2) that the chairman had never been
paid from OEO funds, and (3) that the vice chairman had
been employed on a temporary basis over a period of 5 months
and that prior verbal approval had been given by an OEO
representative.

DISMISSAL OF EMPLOYEES

       Mr. Kinley charged that Lummi tribal  members had been
discriminated    against because they had been dismissed
without proper notifications    or hearings.

       Our review showed that certain Lummi tribal    members
had been dismissed without the required formal notifica-
tions.    We found no indication,   however, that hearings had
been requested by the dismissed employees, except in one
case where the dismissed employee subsequently withdrew
his request.

      We discussed this matter with Mr. Kinley who identified
seven employees, including   himself,  who, he believed,    had
been dismissed without proper notifications    or hearings.
The individuals   identified had been employees of the Lummi
Community Action Program; six were Lummis and one was a
non-Indian.
      Prior to February 1969 Lummi Community Action Program
personnel policies     required   a written  notice of termination
or resignation     of an employee except that immediate dis-
missals could be made in cases of delinquency        and miscon-
duct.     In February 1969 the council considered     a proposed
change in personnel policy which subsequently        was adopted
by the council personnel board in December 1969. This
change provided that, in all cases, a written        notice of
termination    or resignation    of each employee be effective
not earlier    than the expiration     of a period of time equiva-
lent to the number of days in the employeegs normal pay pe-
riod.

       Mr. Kinley"s     position   prior to January 1, 1969, as the
Community Action Program director         was terminated   by council
action during a special meeting held December 112, 1968.             In
a letter   dated December 30, 1968, the chairman of the coun-
cil formally    notified      the Community Action Program director
of his dismissal       and stated that it was to take effect       im-
mediately.     After several inquiries      to CEO about a possible
hearing,   Nr. Kinley was informed by CEO that a hearing
would have to be requested from the council.            Mr. Kinley
informed us that he had not requested a hearing before the
council..

      AILsoP four employees     were dismissed at March 31, 1969,
the end of the then-current        grant year.    According to the
chairman of the councils,      the reason for dismissal     was the
nonavailability     of funds   to continue the Community Action
Program activities.      The   records did not show, however,
that CEO had intended to       discontinue   funding the Community
Action Program; actually,       OK-Cawarded a grant in April 1969.
      We found no evidence that the four employees had re-
ceived notifications,    verbal or written,   of their dismissals.
These four emplsyees were members of an eight-member staff
of the former Community Action Program irector,        Hr. Kinley.
Mr. Kinley told us that the dismissals      of the four employees
had been discriminatory.      We found no indication   that the
four persons had requested hearings before the council.

      The sixth employee mentioned by JAr. Kinley was also a
Community Action Program directora    The chairman of the
council informed him of his dismissal   in a letter  dated
April 27, 1970, which gave him 30 days-to request a hearing.
He requested the hearing and a list of the charges against
him. The council provided him with a list of charges,
whereupon he declined a hearing and resigned effective
June 30, 1970.

      The seventh person mentioned was employed initially     as
a laborer and then as a carpenter   trainee.    His last week
of employment ended December 17, 1969. One week later,      11
other carpenter   trainees also were dismissed.

      The chairman of the council informed us that he had
given verbal notices to the trainees    about 1 week prior to
their termination   of employment.  The chairman stated that
the reason for termination   had been the lack of funds.   We
found no evidence that any of the trainees had requested a
hearing.

       The council, in its comments to Qm, stated that at
times it had been forced to take direct action in the dis-
missals of employees; however, no employee had ever re-
quested a hearing except for the one who withdrew his re-
quest.

RECQM?%ENDATIQNS
              TO QEQ AND EDA

      We recommend that the Director     of QED and the Assis-
tant Secretary for Economic Development, Department of Com-
merce, require   (1) the council to adequately publicize        job
openings and to apply hiring    procedures that will result        in
the selection  of the most qualified    low-income applicants
for employment on the counci19s federally       funded projects
and (2) the councilss   personnel board to comply with its


                                28
policy that requires    written notices to employees in advance
of the effective   dates of their termination  of employment.



       By letter   dated April 8, 1971, the Deputy Director             of
ON stated that OEO was in general agreement with our recom-
mendations.      He stated also that (1) OEO had been informed
by the council that       it would regularly      publicize    job open-
ings in the Lummi. newsletter,         that the newsletter       reached
most of the reservation        residents,     and that weekly listings
of job openings would be posted in six or more public
places,   (2) QEQ had reemphasized to the council that per-
sonnel actions were the responsibility            of the personnel
board, and (3) the council and personnel board would follow
their established      procedures,     including    the issuing of
written   termination    notices.

      By letter dated April 15, 1971, the Assistant  Secretary
for Economic Development informed us that he concurred in
our recommendations and that EDA would take the necessary
action to have the council follow our recommendations.




                                   29
                              CHAPT'ER4

                         OTHERACTIVITIES

TRANSFEROF FUNDS

       Mr, Kinley stated that there appeared to have been nu-
merous transfers   between OEO and EDA funds.     We found that
the council maintained     separate accounts for the various
f,unds and that its method of paying expenses necessitated
numerous transfers    between the OEQ and EDA funds.     Because
of delayed posting to the records,     the records for the
tribal   funds did not show that about $25,000 was owed to
the other funds.

        During the period of April 1969 through June 1970, the
council activities     were financed by OEO funds for dike con-
struction,     algae harvest,  and Community Action Program ac-
tivities;     by EDA funds for research and technical       assistance;
by Department of Labor funds for training;          and by council
funds for other council activities.           The OEO and Department
of Labor funds were provided on an advance-grant           basis, and
the EDA funds were provided on a cost-reimb,ursable          basis.
Most of the council tribal      funds were used for a student
loan program and for tribal       administrative    expenses, such
as power and heating costs of the council administrative
building.

      To maintain control     over the funds, the council estab-
lished a separate bank account for each activity          for which
it had responsibility.       The Department of Labor funds were
under the control      of the Oceanic Institute,   which was respon-
sible for teaching aquaculture       vocational  skills,   and were
also maintained     in a separate bank account,       Accounting for
all funds was the responsibility       of the council.

       To facilitate  the payment of payrolls   and other ex-
penses, the majority     of cash disbursements  were made through
the EDA bank account.      The other funds were required either
to advance moneys to the EDA account or to reimburse the EDA
account for expenses paid.       The accounting records for the
various funds, if maintained on a timely basis and in accor-
dance with established     methods, should have shown the amounts
due or amounts owed by the various funds.

                                  30
        Our review of the financial    transactions,    which in-
cluded a determination      of the source and the resulting       ap-
plication     of the various Federal funds provided during the
period April 1969 through June 1970, showed that 40 trans-
fers were made among the various funds.           Of the 40 trans-
fers, 24 were between OEO and EDA funds, seven were between
EDA and Oceanic Institute      funds, and nine were between the
other funds.       Also, as of June 30, 1970, except for the
transfers    between EDA.and the Oceanic Institute       funds, the
records of the other funds were not in agreement.            These
differences     were minor, except for about $25,000 which was
recorded in the records of the other funds as being due from
the tribe but which was not recorded on the tribe's           records
as payable to those funds.        The $25,000 included payments
of expenses of the tribe and loans to the tribe.

      The accountant  for the Aquaculture   project    informed 'us
in September 1970 that the postings to the tribe's         records
were not then current and that, once they were brought up
to date,, the amounts due the other funds would be properly
recorded on the tribefs   records.   He informed us further
that this problem had diminished because the number of trans-
fers in recent months had been substantially       reduced.

      We believe that the recordkeeping   should be accurate
and timely to ensure that the fund transfers     are properly
recorded and that the account for each of the various funds
accurately   shows, on a current basis, the amounts receivable
or payable.

       The council,    in its comments to OEO, stated that (1) it
had retained     a ceartified   public accounting    firm to provide
financial    service because the tribe lacked professional          ac-
counting personnel,        (2) the firm designed,    installed,   and
maintained    all accounting      records,  and (3) the firm's    ac-
counting system necessitated          the numerous transfers    and the
firm did not maintain adequate controls           or current postings
to reflect    the fund balances on a regular basis.

MATCHINGFUNDS NOI' RECEIVED

      Mr. Kinley said that $31,000      of matching funds to be
donated by the Oceanic Foundation       for OEO activities  for the


                                  31
program year ended March 31, 1970, had not been received               by
June 1970.

      Our review showed that the funds had not been received
as of that time but that, of the $31,791 due, $31,500 had
been received by the council in July 1970. These funds,
however9 were deposited   in the funds accounts of EBA and
the tribe rather than in the funds account of OEQ and there-
fore were not properly  recorded in the council's  records,

      The QEO grant agreement dated May 29, 1969, under which
$200,000 in funds were provided for the construction          of the
aquaculture   research facilities,     required a non-Federal
matching-fund    contribution    of $31,791.   The council's   pro-
posal to OEO for this grant stated that the matching funds
would be provided by the Oceanic Foundation.

       Qn February gg 1970, the director     of the Aquaculture
project,    in a letter   to the Oceanic Foundation,  stated that
the matching funds of $31,791 were due by March 31, 1970.
He requested from the foundation      a better of commitment
stating   that the contribution    would be made by March 31,
1970. The director      informed us that the letter   of commit-
ment was received from the Oceanic Foundation but that it
could not be located.

        OEO guidelines    provide that required non-Federal  con-
tributions    be recorded as an amount due in the records of
the grantee and that a further        entry be made when the funds
are received.       We found that the council had not recorded
the $31,791 due the QEO fund from the Oceanic Foundation.

       On July 14, 1970, we discussed the required non-Federal
contribution      with members of the council and the Aquaculture
project    director.       The project   director    stated that the
matching funds should be forthcoming              soon from the Oceanic
Foundation.       A check for $31,500 from the Oceanic Foundation
was received by the council on July 16, 1970, The Aquacul-
ture project      director     stated that the delay in obtaining       the
matching funds resulted           because the Oceanic Foundation had
not received certain         funds it had relied upon to meet this
commitment.       He also said that the difference          of $291 be-
tween the $31,500 and the $31,791 required by the OEQ grant


                                    32
must be attributed     to an error. The business manager stated
that an effort    would be made to obtain the $291.

        The records showed that the matching funds of $31,500
for the OEO grant was deposited to the EDA fund account and
that, subsequently,         $500 of this amount was contributed       to a
special Lummi fund for education and other purposes.                 The
project     director     stated that, because the EDA fund was de-
pleted,     OEO had provided verbal approval to use the $31,000
for EDA purposes,           An OEO official     informed us that there
must have been some misunderstanding               because OEO could not
provide verbal approval to use OEO matching funds for EDA
activities.        The OEO official       stated that the council would
be required to transfer           the funds to the OEO account and to
record them in the records.             The business manager of the
Aquaculture      project     informed us that the matching funds of
$500 that were donated to the special Lummi fund were con-
sidered to be in excess of those required by the OEO grant.
He said that he understood that only $31,000 was due from
the Oceanic Foundation.            He also stated that the $500 would
be returned and deposited to the OEO account,

      The council, in its comments to OEO, stated that the
$31,500 in matching funds were posted through a misunder-
standing to the EDA account and that it had instructed   its
staff to correct the posting and to apply to the Oceanic
Foundation for $291, the balance due.




                                    33
                                    CHAPTER 5

                          ADMINISTRATION        OF FUNDS

        Our review     of the council"s           administration          of Federal
funds revealed        certain     weaknesses       in its financial          manage-
ment and personnel           administration.          Many of these weaknesses
were disclosed        by earlier       audits.       Although      the council     has
made efforts      to improve        its financial         administration,       we
believe    that further        corrective       actions     are required       to en-
sure adequate       internal      control      over assets       and expenditures
and compliance        with OEO and EDA requirements.

       We examined      into the council's          accounting     procedures
and practices      to ascertain        whether    they were in accordance
with OEO guidelines,         EDA contract       requirements,        and gener-
ally    accepted   business      practices     and whether      corrective    ac-
tions    had been taken on financial            management deficiencies
disclosed      by prior    audits    of the tribe's       programs.

         During  the period   covered by our review      of financial
activities      (April  1, 1968, to July 31, 19701, the council
expended about $821,000        for OEO- and EDA-funded       activities.
To test the validity        of accounting     procedures   and practices,
we examined into expenditures           of about $137,200,    or 17 per-
cent of the funds expended during           the test period.

WEAKNESSES REPORTED AS A RESULT OF PRIOR AUDITS

       A number of audits           made of the council's      OEO project
disclosed      weaknesses        in the administration      of funds.     Dur-
ing the program year ended March 1969, two audits                    were
made--one      by a licensed        public   accountant    and one by a cer-
tified     public      accounting     firm.   The licensed    public    accoun-
tant,    in his report         dated February      5, 1969, which covered
the period       April     through    November 1968, indicated       that the
accounting        system and internal        controls   were adequate.

        The audit    by the certified      public  accounting       firm
covered    the entire     program year ended March 31, 1969.               The
certified     public   accounting     firm in its audit      report      dated
July 9, 1969, stated         that the internal     controls     were in-
adequate.      It appears      that some accounting      and internal


                                          34
control problems occurred about the time of                 the change in
the management of the council's   OEQ program               on December 31,
vxa,    Also, we observed that the quality   of               the recordkeep-
ing decreased during the period January 1 to                 March 31, 1969.

       The certified  public accounting   firm reported that (1)
travel records had been 'kept improperly,        (2) telephone
charges had not been properly    recorded,     (3) an inventory     of
property   obtained from surplus stocks of other agencies had
not been taken, (4) social security     taxes had not been with-
held from employees, (5) expenditure      limitations     for certain
program components had been exceeded, and (6) several unau-
thorized expenditures    had been made.

       In December 1969 an OEO technical        assistance   contractor
in a fiscal     review and audit follow-up      made for OEO found a
number of deficiencies       in the council's     accounting  system and
internal    controls   and made a number of recommendations to
correct the deficiencies.        The contractor      recommended that
(1) documentation      of the non-Federal     contributions   should be
prepared on a monthly basis, (2) procedures and controls
over purchases should be implemented and maintained,             (3) im-
proved procedures and controls        over the payment of vouchers
should be established,       (4) procedures for preparation       and
approval of employee time and leave reports should be im-
proved, and (5) property and equipment records should be
brought up to date.

NEED FOR CONTINUEDIMPROVEMENT
IN FINANCIAL AND PERSONNELMANAGEMENT

       Although the council has taken actions to correct                     some
of the deficiencies        noted by the earlier           audits,    our review
indicated    that further       corrective     efforts     were required      to
develop and implement an adequate accounting                   system, includ-
ing effective     internal      controls.      Of particular        concern is
the fact that certain         types of transactions,            such as pur-
chases and non-Federal          contributions,       were reasonably well
documented during the 1968-69 period but were not adequately
documented in later periods,              Part of the problem, in our
opinion,    stems from the fact that the council's                  accounting
personnel were unable to adequately cope with the signifi-
cantly increased level of financial               activity      since the ad-
vent of the Aquaculture          project    in May 1969.

                                       35
               At that time the council                recognized      that it would have
        to establish         improved      accounting       procedures       to correct        ex-
        isting     deficiencies        and control        the increased          level     of ex-
        penditures         in future     periods.        To accomplish         this,     the coun-
        cil engaged a certified               public     accounting      firm in July 1969
        to establish         and maintain       the necessary         accounting         records.
        The services         of the certified         public      accounting         firm were
        terminated         in June 1970, however,             because the council            had
        hired     a full-time        controller      in May 1970.          We found,        how-
        ever, that improvements               were still       needed in the councilss
        financial       and personnel         management system as evidenced                   by
        the following          types of deficiencies            revealed       by our review.

        Procurements

              1. Discounts   offered by vendors    for prompt payment
        were not taken.     On the 11 billings   in July 1970 with dis-
        count terms,   no discounts  were taken.

              2. Receiving     reports   prepared      by or invoices    signed by
        the receiving    clerk    to evidence      that items purchased       had
        been received    were not always on file.            Of the 130 procure-
        ments in July 1970 which had been paid or approved                 for pay-
        ment, 24 were not supported         either     by receiving   reports     or
        signed invoices.

               3. In October 1970 the council's    controller   informed
        us that invoices    were being paid about 6 weeks after       re-
        ceipt.    These delayed payments resulted,      in some instances,
        in the assessment    of late charges by vendors.

               4. In July 1970 we found several             instances    where the
        same person authorized          the purchase     of an item and the pay-
        ment for the item.         No receiving      reportswereon       file for
        these transactions.          Internal    control    over procurement      pro-
        cedures should be strengthened            to ensure that duties       and
        responsibilities       for authorizing       purchases     and payments are
        appropriately      separated      and that procurements       are supported
        by adequate      documentation.
   I    Travel
   I
    I
,,,.,            In our review of travel            vouchers      paid   in January       and
    I
“_I     July     1970, we found that:
  I
   i                                               36
   1
       1. There was no evidence          that    out-of-town     travel   was
authorized    in advance.

        2. Times of departure and return of travelers         were not
always shown on travel vouchers, which precluded accurate
verifications      of per diems claimed.    Standard Government
Travel Regulations,      which are applicable    to federally     funded
travel,     require that per diems be computed on a quarter-day
basis.
       3. Odometer readings were not always provided                  in sup-'
port   of claims for car mileage.

Payroll    and personnel       administration
     1. Employee personnel files              and job descriptions        had
not been prepared as of October              1970.

       2. Records authorizing   appointments,  terminations,
position   classifications,   and salary rates had not been pre-
pared as of October 1970.

      3. Leave records had not been properly  maintained.   Our
examination   of the leave records for 14 council employees
in July 1970 showed that 10 of the employees' leave records
did not agree with the time and attendance reports showing
the leave taken and earned.

Non-Federal    contributions

     The non-Federal    share contributed   was not recorded in
the books.   Although required    by OEO, in-kind     contributions
were not adequately documented.       Cash contributions      were
not properly  recorded,   and, as stated earlier,      the contribu-
tion of $31,500 from the Oceanic Foundation was deposited
in the wrong account and was recorded incorrectly.

Property

      1. Formal records         for   nonexpendable       property   were not
being maintained.

      2. A general ledger control               account   for   nonexpendable
property had not been established.

                                        37
Other    expenditures

        Legal fees amounting      to $2,400--which,             for   the most
part,    pertained     to tribal  activities--were             paid   from EDA
funds    rather    than from tribal      funds,



        Council     officials       agreed that the aforementioned             weak-
nesses existed          and said that a concentrated           effort     would
be made to correct            them.     Management officials        informed      us
that action       had been taken to strengthen            the control       over
property     and travel.          They pointed    out that internal          tribal
conflicts       and changes in fiscal         personnel      in the past had
contributed       to these weaknesses.

       The fact       that certain          of the weaknesses,       identified
by earlier       audits,       continued      to exist     at the time of our
review    should not be considered                 as indicative    of a lack of
concern     by the council           and management'officials           over mat-
ters that were in need of attention.                      The council,        since
the start      of the Aquaculture             project,     took on significantly
greater     financial        management responsibilities             and was unable
to keep up with           the increased         levels   of accounting,        person-
nel,    and procurement           activities.         The council   officials
were receptive          to our findings           and seemed willing        to ini-
tiate    corrective         action.

         The fact that many of the weaknesses              which we identified
had been previously        reported     indicates      a need not only for
the council      to continue     its actions      to improve the controls
over its financial        and personnel       matters,     but also for both
CEO and EDA to carefully           monitor     the tribe's     financial   ac-
tivities     and to periodically        follow    up on recommended ac-
tions     to ensure that the weaknesses           are corrected.

RECOMMENDATIONS TO OEO AND EDA

        We recommend that the Director,          OEO, and the Assistant
Secretary     for Economic Development,         Department     of Commerce,
provide    for continuing     assistance    to the council       in effect-
ing improved       financial  and administrative       control     and re-
quire    OEO and EDA officials       to monitor    the council's      cor-
rective    actions.

                                          38
       By letter    dated April 8, 1971, the Deputy Director         of
OEO informed us that the OEO Indian Division would provide
assistance     to the council to effect      improved financial    and
administrative      controls.     He informed us further   that the
council's    problem had been a lack of administrative          man-
power and financial        support for manpower and that negotia-
tions between the Indian Division          and the council were
under way to provide the necessary financial           support for
the building     of an administrative      unit,

     By letter  dated April 15, 1971, the Assistant Secretary
for Economic Development informed us that he concurred in
our recommendation.




                                  39
APPENDIXES




  41
                                                    APPENDIX I



                   WASHINGTON.       D.C.   20110



                                 June 25, 1970




The Honorable Elmer B. Staats
Comptroller General of the United States
General Accounting Office Building
4.41 G Street
Washington, D. C.   20548
My dear Mr. Comptroller          General:
     Enclosed for your kind attention is a letter from
Mr. Forrest L. Kinley, and a telegram from Mr. Vernon Lane,
Chairman of the Lummi Indian Business Council, Marietta,
Washington, requesting that an audit be performed by the
General Accounting Office on expenditures of federal funds,
in connection with programs of the Lummi Indian Tribe.
     We believe that such an audit would be of great benefit
to the Tribe, and we are pleased that they wish to take
advantage of the expertise of the General Accounting Office.
     Any action that you may take in regsrd to this request
will be greatly appreciated.   Please contact our offices if
you require any further information.




                                 Li!i!i<h
                                  . ,...
                                   43
APPENDIX    II


                                                                 EXECUTIVE   OFFICE OF THE PRESIIDENT
                                                                             WASHINGTON,    D.C.     20506




                                                                                 APR 8 1971


   Mr. Henry Eschwege
   Associate     Director
   Civil   Division
   U.S. General Accounting       Office
   Washington,      D.C. 20548

   Dear Mr. Eschwege:

   We have reviewed the General Accounting   Office audit of the Lummi
   Indian Business Council.   We are in general agreement with the
   observations  and recommendations of the GAO. Corrective    action
   has been taken.

   The Lummi Indian Business Counoil has informed us that job openings
   will be publicized  regularly   in the Lummi paper.  This paper reaches
   almost all of the reservation    residents.  Other methods of publiciz-
   ing openings will also be utilized.

   It has been re-emphasized        to the Lummi Tribal Council that personnel
   actions   are the responsibility       of the personnel   committee.  The
   Council and Personnel Committee will follow          their set procedures
   including   written  termination      notice.

   OEOPs Indian Division     will provide assistance       to effect     improved
   financial  and administrative     controls.      To date, the grantee's
   problem has been lack of administrative          manpower and financial
   support for that manpower.      Negotiations      between the Indian Division
   and the grantee are presently      underway to provide         the necessary
   financial   support for the building        of an administrative     unit.

   We have included     a response    from         the Lummi Tribe      as a formal        portion
   of the reply.

   We appreciate  the opportunity             to review   this     report    and hope that
   our comments are helpful.
                                          /




                                              44
                                                                                                                                                APPENDIX II




                                      LUMMI INDlAN BUSINESSCOUNCIL
                                                           G.A.O.            Audit Review
                                                                         2-19-71


          The      Lummi            Indian      Business              Council       would         like        to      briefly          reply       to   the
9 spacific            charges                made   by     Mr.        Kinley,       and      to      have      this        reply        appended

to    and    made         an    integral            part         of    the      G.A.O.       audit          report.              In    addition,

we would           like        to      comment       on     the        recommendations                   as    shown            on    page      7 of

the    audit.



                                                                 Reolv        to   Charues

1.     Project  Implementation                              -    The         research    phase  of Aquaculture                                  was and
is a continuing       program.                           Feasability              has been proven   not    only                              to the
satisfaction      of the     Council                        but    to        OEO, EDA and numerous      other                                State
and Federal     agencies.

2.    Control    Over Proiect    Operations        -     The Council      has and will   continue
to have      the final    say on all   matters     referring        to the activities    of
the Project      Director    and Business      Manager.         They are employees     of the
Tribe    and are capable      and responsible        individuals.

3.       Project     Reportino           -    The Council,         due to lack          of funding,         has not
always      been able         to issue        data     on Aquaculture          on a regular         basis.
However)        since     March     1970,       an average       of 3 tours          per week were conducted
for various          groups     and individuals             of the      entire       Aquaculture        Project.
Any interested            member       of the      tribe    should      not    feel     the need      for     a formal
invitation         to see the          project.          We have at this           time    a proposal         to fund
a Public        Relations        position        which     will     ensurs     members       of the     tribe     as
well      as others,        of information             on the     progress       of Aquaculture.              The
Council       is very       proud      of the      project      and does       not wish        to keep it        a secret
from any individual               or group.

4.      Hirins        Practices          -    The Council,          by resolution,         had given       all    responsibility
for     hiring        and firing         to a five      member Personnel             Board    on T-4-69.          In
certain          emergency        or temporary        situations,           the   Council     hired    without
Personnel            Board     approval.         However,       this     was on a rare        occasion       and
later       ratified         by the Board.           TheCouncil          has also     on limited       occasions
delegated            employment        authority      for     construction         crews    and algae        harvest.

5.    Hirins      of Non-Lummis        8 Off-Reservation             Lummis     -    The Council                                                 and
Personnel       Board    madeevery      attempt      to hire       Lummis,    regardless        of                                             where
they   live,      in every    available        opening.          Many job   qualifications                                                     have
been waived         in favor    of on-the-job           training      to provide        employment                                                to
Lummis     rather     than   non-Lummis.




                                                                                     45
APPENDIX II

   6.      Emplovmentof Tribal     Chairman       and Vice      Chairman       -    EDA has no
   restrictrons              on
                       employment      of Council        members,      but in fact      encourage       it
   where  necessary    for   community      development.          The Chairman       was never      paid
   from OED funds.       The Vice     Chairman      was employed        on a temporary        basis
   spread   over a period      of 5 months       and prior      verbal     approval     was given
   by an OEO representative.

   7.        Drsmissal         of      Emplovaes         -   The Council     at times    were forced    to take
   direct        action        in      this    area.       However,  no employee      ever requested      a
   hearing        except           for      one individual       who withdrew     his request     by his nwn
   action.

   8.        Transfer        of     Funds     -   The    Council         retained      the     CPA firm
                                                                   to    provide     financial         services       because
   the     tribe    lacked      professional             accounting         personnel.            The CPA firm          designed,
   installed,         and maintained          all        accounting         records.           Their     system      necessitated
   the numerous          transfers.          The        CPA firm         was totally         at fault       for not maintaining
   adequate       controls        or current            postings         to relfect        the    funding       balances       on a
   regular       basis.

   9.     Matchinq      Funds     Not        Received         -     The matching           funds    were due by 3-31-70
   in the      amount    of $31,791            .OO.     They were           received       in the     amount       of $31,500.00
   in early       July   1970 and            were    posted       through        a misunderstanding              to the EDA
   account.        The Council              has instructed            their      staff     to reverse        this      erroneous
   entry     to the DE0 account                  and to apply           to the Oceanic           Foundation          for the
   balance      due of $291.00.                 The Council           would      like    to advise       that       the
                  CPA’s     failed           to provide         in their         accounting        system      for the
   recording       in the General               Ledger      of In-Kind           money or services.




                                            Comment      on   GAO Recommendations

   1.    As of           January     1, 1971,     the tribe         has provided            a position        for a
   personnel         clerk,        whose    primary       responsibility            is to publish           weekly      job
   listings       which       will     be posted        in 6 or more public                 places     as well       as
   mailing       with     each issue         of the Squol           Quo1 (Tribe           newsletter).           In addition
   the     personnel        clerk      will    maintain        personnel      files         and applications            will  be
   accepted       on a daily           basis     and held        in active       files        for    a period      of 6 months
   whereupon         they     will     be transferred            to inactive          files       for another        6 months
   and if       no action          is taken      by that       time      they will        be retired.

   2.    The Personnel        Board,     as of November     30, 1970,                         has     initiated         a standard
   form   for    termination      as well     as employment      notices.                            These      forms    are
   being    used    and files     maintained     by the    personnel                        clerk.

   3.      It has always           been    the wish         of the         Council       that   the   funding           agencies
   provide       adequate       support        for    financial            and administrative            control,           and
   would       be more than         pleased        to work with              the various        agencies      to        ensure
   that      the   funds    are properly             administered              and accounted        for.      At        the
   present       time    we have        submitted         proposals            to EDA and OEO to provide                       for     the
   additional         administration             and accounting                personnel      to enable       us        to    refine
   our procedures           and systems.

                                                                        Respectfully          submitted,



                                                                        Vernon        A. Lane,     Chairman
                                                                        Lummi       Indian   Business     Council




                                                                    46
                                                                        APPENDIX III




                                    THE ASSIISTANT          SECRETARY   OF COMMERCE
                                    Washington,   DC.   20230




April       15,   1971


Mr, Max A. Neuwirth
Associate      Director
Civil    Division
General    Accounting      Office
Washington,       D. C.    20548

Dear Mr. Neuwirth:

This is in reply       to Mr. Eschwege's     letter    of February
9, 1971, requesting       comments on a proposed        report   to
the Congress      on the "Review of Financial         and Management
Activities     of the Lununi Indian   Business       Council,  Marietta,
Washington,      Funded Primarily   By-Office       of Economic Oppor-
tunity     and Department    of Commerce."

We have reviewed    the comments of the Economic Development
Administration   and believe     they are appropriately respon-
sive to the matters    discussed     in the report.



Sincerely         yours,




Enclosure




                                           47
            APPENDIX III



                                                                                             E
                                                                 , DC.   20230




           Henry Eschwege, Associate      Director
           Civil  Division
           United   States   General Accounting         Office
           Washington,     D. C. 20548

           Dear Mr.    Eschwege:

           This is in response         to your February     9, 1971, communication
           transmitting       the draft   audit   report   entitled, "Review of
           Financial     Management Activities        of the Lummi Indian   Business
           Council,     Marietta,    Washington."

  1.

  I.
           We have reviewed    the subject   draft         report    and concur    with
  /.
           its recommendations    or suggestions,            namely:

“..
      I.
               (1)    - require     the Council    to adequately     publicize     job
                        openings      and apply hiring    procedures     that will
                        result    in the selection      of the most qualified
                        needy applicants       for employment     on the Council's
                        federally      funded projects;

               (2)    - require    the Council's    Personnel    Board to comply
                        with its policy      that requires    written  notice    to
                        employees     in advance of the effective      date of
                        their   termination     of employment    by the Council;
                        and,

               (3)    - provide   for continuing       assistance      to the Council
                        to effect    improved    control     and require     that     (OEO
                        and) Economic Development          Administration       officials
                        carefully    monitor   the Council's       action.

           The Economic Development   Administration        first      approved  the
           Lummi Aquaculture  Development    Feasibility        Study on February20,
           1969, and on June 4, 19709 a year's         extension       was approved.
           Currently,  it is expected  that the project           will   be extended
           for one more year (from May 21, 1971).



                                                   48
                                                              APPENDIX III


Page 2


The Economic Development        Administration        concurs   with this
report   and will   take the necessary         action   to have the Lummi
Indian   Business   Council   follow     the recommendations         or sug-
gestions    made therein    as soon as the report          is finalized     by
your office.

Sincerely,



Robe& A. Podesta
Assistant  Secretary
for Economic Development




                                       49