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Tribe mismanaged funds for the needy

Audits: Tracking of public funds spotty, misused millions identified in vast Torres-Martinez welfare program KEITH MATHENY • The Desert Sun • January 17, 2010

A lack of financial accountability, questionable spending and findings of misuse of taxpayer dollars have plagued the country's second highest-funded welfare program for Native Americans since 2001, government documents show.

The Temporary Assistance for Needy Families program is operated by the Torres-Martinez Desert Cahuilla Indians, a tribe of approximately 445 members. Its reservation is located southeast of the Coachella Valley along State Highway 86 and the Salton Sea's western shore.

The program is intended to help the poorest of the poor, providing cash assistance and other social services to impoverished Native Americans throughout Riverside and Los Angeles counties.

“A lot of abuse was happening that shouldn't have been able to happen,” said Ronald Sells, president of The Sells Group, which conducted the tribal program's audits from 2002 through 2005.
government documents revealed:

• The federal government alleged the program “misused” more than $6 million in taxpayer money in fiscal years 2002 and 2003.

The tribe worked with federal officials to justify some of the expenses, but agreed in February 2007 to pay in installments more than $1.5 million in penalties. However, “as of December 2008 the tribe is not in compliance with the terms of the agreement,” the tribe's auditor stated in its most recent audit.

• The program's books were so out of balance, “adjusting journal entries had to be posted for more than $5 million worth of transactions that had never been recorded in the general ledger,” the auditor stated in 2002.

“It would have been difficult to determine whether federal or state TANF cash was being properly drawn during the period under audit because the condition of the program's records would have made any reports generated during that period materially inaccurate,” auditors stated.

• Millions of dollars in transactions by the program over the years did not have required documentation showing how and whether the purchase complied with federal requirements, whether bids were taken, if goods or services were delivered or whether the program is still in possession of the items purchased.

A review by auditors of $3 million in charges to “participant services” could produce documentation for only $450,000 in services provided in fiscal year 2002.

During auditor testing of 13 checks written by the program in 2006, nine of 13 transactions had no documentation proving that required bids were collected.

• In a 2005 letter to federal officials, then-Torres-Martinez Tribal Chairman Raymond Torres acknowledged more than $55,000 in undocumented credit card charges by administrators of the tribal welfare program.

“Almost all credit card statements and payments carried late fees and interest penalties which were paid by the TANF program, which also suggested that credit card activity was not monitored,” auditors stated.

Though auditors stated the program's executive director during the period under audit, Virginia Hill, assured them that the credit cards were “only used for travel,” auditors found “several credit card charges to Kmart, Wal-Mart, Circuit City and other non-travel-related vendors.”

• Five top employees in the Temporary Assistance for Needy Families program “received salaries as much as 25 percent over their employment history and then received an average of $20,000 increases within 90 days of hiring,” the program's auditor stated in 2003. No records of job descriptions or performance reviews were provided to auditors.

The audits “contain numerous red flags ... significant indicators of potential fraud, waste and abuse,” said government auditor and fraud investigator Don Mullinax, who reviewed the tribal program's audits at The Desert Sun's request.

He recommended the Torres-Martinez launch an immediate “vulnerability assessment” to determine if fraud has occurred, is occurring or could occur in the future.

“It appears that the tribal management thought it had won the lottery when it came to the TANF funds,” Mullinax said.

Answering the claims

Columba Quintero, current executive director of the Torres-Martinez Temporary Assistance for Needy Families program, said tribal council members and administrators were not aware of the extent of problems at the welfare program until they were pointed out by auditors.

“When the tribe became aware, they took immediate action,” Quintero said. “I don't think they really knew the magnitude or scope. They relied upon the professionals (running the program).”

Auditors in 2002 put it bluntly: “The Tribal Council during the period under audit did not fulfill its oversight responsibilities for the Tribal TANF program.”

n their required responses to annual audits, tribal officials attributed the problems to starting a major program from scratch.

“Rather than characterizing some of the lapses in policies and procedures as the ‘abdication of oversight responsibility,' it would be fair to characterize them as ‘growing pains,'” a portion of tribal management's response to the fiscal year 2002 audit stated.

Mullinax questioned that explanation.

“The same findings were reported repeatedly over at least a five-year period,” he said.

“I find it very difficult to believe that ‘growing pains' was the reason that tribal management used these funds — intended for needy families — to give employees $20,000 pay raises, award a $64,000 consulting contract to the former tribal chairperson, buy 45 vehicles, lease apartments for personal residences and give thousands of dollars in contracts to a single vendor without any competitive bidding.”

Quintero said she started with the tribal welfare program as a human resources director a few months after it began operating in 2001. She later left the program to work for the tribe itself, dissatisfied with how the tribal welfare program was being run and her role within it.

“I was used to structure and competence,” Quintero said. “I've worked with government contracts for a long time. That was just a little bit different.”

Quintero said that despite her role as human resources director, she was not involved in many of the program's hires, both of staff and administrators.

“Usually you have the job description, the announcement,” she said. “You go through the screening process, the background check, the interview process. I was not involved in that, so I don't know who did any of that.

“That was my whole thing, with H.R. being kind of isolated. And normally you don't operate like that.”

Quintero said she returned to an administrative role with the tribal welfare program in 2004 to help search for documentation justifying program expenditures, following the Administration for Children and Families' finding that the program potentially misused millions in funds in 2002 and 2003.

Tribal officials in their 2002 audit responses put much of the blame for the tribal welfare program's problems on Hill, who helped found the program. She resigned under pressure in 2003 amid intense questioning from the tribe about the program's financial accountability.

The tribal “council made a determination that personnel changes were necessary at the TANF management level,” a portion of the tribe's audit response stated, adding that it had since hired “qualified and experienced individuals” to run the program.

But Hill said she was made a scapegoat by tribal administrators, particularly Torres, who had taken over as tribal chairman from Mary Belardo the previous

“I was never given any direction from the tribal council except (from) Mary Belardo,” Hill said.

Torres did not respond to repeated telephone messages seeking comment. But Ronald Sells, president of The Sells Group, which conducted the Torres-Martinez tribal program's audits from 2002 through 2005, defended Torres' actions after taking over.

“As long as Chairman Torres was there, he was very focused on getting them in compliance,” Sells said.

Hill, however, said tribal leaders didn't pay much attention to the social services program, “as long as the money kept rolling in.”

Oversight questioned

The Torres-Martinez Temporary Assistance for Needy Families program has received an average award of more than $33 million each year in federal and state taxpayer funds since it formed in 2001. Its federal funding is second only to the vast Navajo Nation's social services program, which operates in three states.

Like the 51 other tribal welfare programs nationwide, the Torres-Martinez program is overseen and provided federal funds by the Administration for Children and Families, a division of the U.S. Department of Health and Human Services.

Tribal welfare programs in California also receive state matching funds administered through the California Department of Social Services.

The Desert Sun made repeated requests to the Administration for Children and Families to interview agency officials regarding the findings of the newspaper's investigation of the Torres-Martinez tribal welfare program. Officials with the federal agency declined the requests.

“An HHS (Health and Human Services) ‘auditor' from San Francisco conducted on-site visits, apparently without looking at documentation, and applauded everything he was told,” Sells stated in a 2002 draft audit of the Torres-Martinez tribal welfare program. “But if he had looked at the substance rather than the form, he should have been more critical.

“(Program) management was directly involved in putting a positive spin on very high-risk behaviors, and the consultants responded to that by playing down the risks and playing up the accomplishments.”

That statement was edited out of the final version of the program's audit.

Hill provided The Desert Sun with a Jan. 23, 2003, e-mail purportedly sent to her by James Henry, then a tribal program specialist for Administration for Children and Families' San Francisco office.

The e-mail discussed Henry's on-site visit to the Torres-Martinez tribal welfare program in 2002.

“Since there are no official or unofficial review tools, the trip report is the format we currently use,” Henry stated.

“It was a good opportunity to see what the program has been doing and the benefits being provided to native communities ... Based on my initial visit, the program is progressing well.”

The opinion of federal and state officials about the Torres-Martinez program's operation changed by 2005.

Cracking down

The Torres-Martinez tribal welfare program's spending habits eventually led state and federal officials to threaten major action.

The Administration for Children and Families in 2005 found “potential misuse of federal TANF funds” by the Torres-Martinez program totaling in excess of $6 million from the 2002 and 2003 fiscal years.

The program was declared a “high-risk grantee,” and significant restrictions were placed on how the tribal program could draw upon and spend federal funds.

Tribal officials also were informed that significant financial penalties for the misspending were likely.

The program's problems delayed the most significant economic improvement project in Torres-Martinez history — the construction of its Red Earth Casino and travel center off state Highway 86 near the Salton Sea.

In a March 2005 letter to state Department of Social Services officials, Torres-Martinez Tribal Administrator Todd Vogt stated that a lender providing construction money and other financing for the casino project wanted assurances that the state would not compel the tribe to pay any penalties related to the tribal welfare program before the lender.

“The project is now delayed as a result of the inability of the tribe to complete the initial funding of the loan,” Vogt stated.

Vogt added that the casino, once open, “may represent a source of payment for some portion of the TANF liabilities of the tribe.”

It's unclear how the state agency responded to Vogt's request. But the casino eventually opened in April 2007.

Four days after Vogt appealed to state Social Services officials, on March 7, 2005, the agency demanded the Torres-Martinez tribal welfare program either repay all state funds provided to the program since its inception — more than $24 million — or provide audited proof that the money was properly spent.

But by 2006, the program was able to satisfy the state and keep its money.

“The state's fiscal issues raised have since been satisfactorily addressed and reconciled,” Department of Social Services spokesman Jennifer Iida stated in an April 2009 e-mail response to Desert Sun inquiries.

“Questions put forth by the state were addressed and additional materials were brought forth to properly account for Torres-Martinez's Tribal TANF expenditures.”

Though allowing the Torres-Martinez program to keep its funding, the state took precautions, entering into one-year contracts with the program instead of traditional three-year deals, only reimbursing the program's expenditures and not advancing state funds.

The state agency restored the program's access to advance funds on July 1, 2009.

“The required annual audit is relied upon to assure fiscal integrity on an ongoing basis,” Iida said.

But the tribal program's negative audit findings continued.

“The TANF program is not in compliance with grant requirements,” auditor Joseph Eve stated in the tribe's 2006 audit.

State Department of Social Services spokeswoman Lizelda Lopez noted that the Torres-Martinez program, like all tribal welfare programs, has had to work through challenges such as inexperience, building up infrastructure for a new program and recruiting and maintaining adequate staffing despite the remoteness of most Indian reservations

“We find the Torres-Martinez tribe committed to working with us to address all issues as identified in federally mandated audits,” Lopez said.

“CDSS will continue to monitor their progress and take necessary precautions to ensure proper expenditures of funds.”

With any program of the size of the Torres-Martinez welfare program “there's always room for improvement,” Lopez said.

“But we have found that as Torres-Martinez Tribal TANF acquire more experience, their audit findings are improving and they take immediate action to remedy any negative findings. The corrective actions and improvements have sufficiently addressed concerns from previous audits.”

But the program's most recent available audit, for fiscal year 2008, showed three significant findings from 2006 as “unresolved” two years later.

Mullinax had a different assessment of the Torres-Martinez tribal welfare program's progress.

“The tribe's audit opinions went from bad to worse,” he said.

The program's 2007 and 2008 audits, Mullinax said, “continue to identify significant deficiencies and material weaknesses, some of which were identified in previous audits and the tribe had responded that corrective actions were planned or had been taken.”

Tribes ‘left on their own'

“I know I made mistakes,” said Hill, who is now the tribal administrator for the La Jolla Band of Luiseño Indians.

“I know I'm not going to come out of this smelling like a rose.”

Hill has had a hand in the formation of at least five other tribal social services programs in California and other states. She said the federal government hasn't provided enough support.

“There's a real lack of training and technical assistance from ACF,” she said. “The tribes are left on their own.”

Tribal Temporary Assistance for Needy Families programs overall have been a “real success story,” said Jo Ann Kauffman, president and CEO of Kauffman and Associates, a company based in Spokane, Wash., that primarily works with federal agencies on American Indian issues.

Kauffman, a member of the Nez Perce Indian Tribe, authored an influential study on welfare reform and American Indian tribes for the Kaiser Family Foundation in the late 1990s, when Tribal Temporary Assistance for Needy Families programs were in their infancy.

Kauffman called such programs “the glue to bring together a variety of resources for higher education, child care, youth programs, job placements,” she said.

“Clearly the paperwork and the administrative challenge is significant for this type of a program, with the amount of resources that are being managed and transferred to individual families in need.

“I would hope that the one or two examples of where things have not gone well would not taint the track record of some very excellent work other tribes have been able to do.”

Tribal welfare programs have a responsibility regarding the taxpayer funds entrusted to them, according to Kauffman.

“Every governmental entity, federal, state and tribal, needs to comply with the requirements of compliance with financial accountability in welfare reform. Nobody gets a pass on that,” she said.

“I think tribes generally are financially accountable and would want their peers to be held to the same standard that the many tribes that are succeeding are held to.”

Where did it all go?

Sells' firm ceased its auditing practice in 2006, and now works as a consultant for tribes in helping them to meet federal requirements.

Nationwide, he said, “we've seen a lot of unqualified people be put in charge of an awful lot of money.”

“I have a huge amount of respect for tribal sovereignty, so long as it's not abused.”

The Torres-Martinez tribal welfare program still is serving only about one-quarter of the number of families envisioned when it formed nearly a decade ago. But Quintero pointed out that caseloads have increased recently, and the tribe plans further outreach.

Though auditors continued to question the program's spending, documentation and financial management in the years after Hill's departure, Quintero said the problems outlined in the early audits led to key changes at the tribal welfare program, including tightened rules for credit card use and creation of a procurement department to keep track of purchased items such as cars.

“Definitely internal controls came from that — rigorous internal controls now,” she said.

Software system problems are being resolved, and a new financial officer and procurement department are becoming more established, she said.

Audits “have incrementally improved though it may not seem like it,” she said. “By 2012 we should see something clean, hopefully squeaky clean, by then.”

The program's services have a positive impact, Quintero said.

“There are a lot of needs that are not met right now for the families that we serve,” she said.

“I hate the fact that yes, things have happened. But we're working on it. And all I can say is, it takes time. I wish the transition time was not as long. We want the public and taxpayers to see us and be proud of what we do.”

A resident of the Torres-Martinez reservation, who asked that her name not be used because she fears retribution for being seen as criticizing tribal officials, said she'd received assistance from the tribal welfare program in the past, and added that she had always viewed the program positively.

“In the last few years they've offered some good programs for kids and families — education, training,” she said. “Before it was just handing out checks, handing out money.”

The woman said she was surprised to learn how much funding the program had received over the years, and the level of mismanagement and misspending found in government audits.

“I don't know where that money could have gone,” she said. “There's still so much unemployment and poverty here.”

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