A western Iowa tribe has mismanaged or misspent almost $14 million in federal disaster-relief funds, according to government investigators.

In an unusually harsh critique of the Omaha Tribe of Nebraska and Iowa, the U.S. Department of Homeland Security’s Office of Inspector General said the tribe has "serious and pervasive" financial management problems.

The tribe's attorney, Paul Hofmann, said Thursday morning the matter is being appealed. He took issue with some of the inspector general's findings and said the report used "thinly veiled racist" language.

"All I can tell you is that the tribe complied with all federal regulations," he said.

According to the inspector general, the tribe received $16.9 million in federal flood-assistance grants in the aftermath of the 2011 Missouri River flood.

The tribe allegedly used that money to make unauthorized repairs to a casino; to award no-bid contracts and bonuses to insiders; and to generate “artificial profits” that were used to lessen the tribe’s own share of flood-relief spending.

In a written report made public earlier this month, the inspector general said the tribe’s financial records are so “unreliable and in such disarray” that investigators cannot determine where much of the money was spent.

The Omaha Tribe’s reservation covers 307 square miles in eastern Nebraska and western Iowa. It includes the Blackbird Bend Casino in Onawa, Iowa.

During the 2001 flood, 11 tribal-owned homes, the casino and a tribal gas station were damaged. The Federal Emergency Management Agency subsequently awarded the Omaha Tribe a total of $16,911,502 in disaster-relief assistance.

The inspector general's report alleges the tribe didn’t follow federal spending rules and awarded many of the bids for repair work to tribal-owned entities.

When the tribe’s emergency management director was questioned about these issues, he allegedly told investigators that because of its sovereignty the tribe was allowed to manage federal grants according to tribal law, rather than the federal spending regulations that typically apply to such grants.

In its report, the inspector general took issue with that claim, arguing that “the principle of tribal sovereignty does not allow Native American tribes to poorly manage their finances, profit from federal grants, pay themselves bonuses or disregard federal regulations.”

Among the specific problems cited in the report:

Of the $16.9 million awarded to the tribe, $2.8 million is unspent, and only $74,749 can be confirmed as having been properly spent. Because of the tribe’s “serious financial management weaknesses” and its missing records, the inspector general expressed “little confidence” that all of the financial transactions recorded in the tribe’s books had actually occurred.

The tribe’s wholly owned general contractor, Omaha Nation Construction, allegedly billed a subcontractor a fee of $210,000. The subcontractor then billed that same amount back to the general contractor, which then billed the tribe for that amount as a legitimate subcontractor expense. The tribe is also alleged to have paid Omaha Nation Construction a $312,282 bonus for its work.

The tribe used federal money to generate “artificial profits” by awarding $11 million in no-bid contracts either to itself or to businesses that it owned or controlled. The profits were then used to cover the $1.65 million in matching funds the tribe needed to spend to qualify for the federal money.

The tribe spent $168,764 to repair an old casino that was ineligible for federal assistance once the tribe decided to shift operations to a newly constructed casino. The tribe was also unable to provide invoices or canceled checks for $5.9 million in expenses attributed to building the new casino.

Some of the tribe’s contracts with vendors didn’t specify the scope of work to be performed, and some invoices had no description of the products or services being billed to the tribe.

The inspector general has recommended the tribe be designated a “high-risk grantee” and be barred from receiving future grants unless measures are taken to ensure additional oversight.

The agency is recommending that FEMA disallow $13.9 million in reported expenditures unless FEMA can verify the money was spent on approved projects at a reasonable cost, and that FEMA reclaim any unspent money awarded to the tribe.