Dennis Wagner

The Republic | azcentral.com

The federal Bureau of Indian Affairs is threatening to take over policing and other programs for the White Mountain Apache Tribe because leaders of the Indian nation have failed to produce audits for millions of U.S. tax dollars spent on the reservation near Show Low.

In letters to longtime tribal Chairman Ronnie Lupe, BIA awarding official Ann Button warned that if a financial report is not provided by the end of this month, the federal agency will assume control of the funds and programs.

BIA has sent at least four warning letters to the Apaches for failure to submit audits covering fiscal years 2014 and 2015, documents provided by tribal members show.

In correspondence last July, Button advised that the BIA would initiate "re-assumption procedures" to take control of federally financed programs. "The tribe's failure to submit the required audit reports is both a breach of the contract provisions and an indication that there may be gross negligence in the expenditure of federal funds," she wrote.

Lupe and his leadership team did not respond to numerous phone calls and emails seeking comment.

The White Mountain Apaches have been plagued in recent years by conflicts among the legislative, executive and judicial branches, producing allegations of fraud, mismanagement, cronyism and abuse of authority. In 2014, the tribal Housing Authority was threatened with receivership after the U.S. Department of Housing and Urban Development uncovered misappropriations. Several employees and board members were convicted in tribal court of embezzlement.

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The Apache government receives more than $8 million annually through what is known as the 638 compact, a federal grant program that fulfills U.S. trust obligations to provide public safety, education, housing, health care and other services to Native Americans. Under the Indian Self Determination and Education Act, tribes decide how the money is spent running their own programs.

However, the law requires annual audit reports and authorizes the government to take action if that mandate is not met. Potential sanctions include withholding funds and so-called "re-assumption," whereby the BIA replaces tribal government in operating essential programs.

The Apache controversy stems from a purported computer crash. According to correspondence from Button, tribal leaders who met with BIA officials last July explained that a "financial system failure" in 2014 lost all data for the prior two years.

Meeting minutes for the White Mountain Apache Council show in 2015 an outside firm was hired to reconstruct accounting records and produce an accurate report on the "state of our finances."

BIA set a new audit deadline for the end of this month. However, tribal officials late last year informed federal authorities the audit would not be done in time. Tribal Treasurer Deron Peaches estimated a completion date of May 31, 2017.

Button replied that, despite the tribe's internal problems, re-assumption would be carried out "because of the severity of your failure. ... Therefore, without question, the due date of January 31, 2017, is definite." Button noted that an audit for 2015 also is overdue.

Federal agency secretaries may rescind tribal 638 contracts and take over programs only when there is serious public endangerment, gross negligence or mismanagement of funds. The sanction is rarely utilized. Tribes may contest the decision via a hearing.

Police, courts, fire protection, agriculture and many other White Mountain Apache services are funded through the BIA. It is unclear which programs the bureau is threatening to take over or what impact the transition might have on services and employees. Button and other BIA officials did not respond to email inquiries and phone messages.