WASHINGTON - The Federal Circuit Court of Appeals ruled in early July that the Department of Health and Human Services breached a mid-1990s contract with the Cherokee Nation to provide administrative, so-called "indirect cost" funding for health care programs.
Indirect costs are those not associated with the direct cost of providing services. From the first years of the federal Indian self-determination policy, some tribes and many individual Indians have maintained that indirect cost shortfalls have undermined the policy by forcing tribes to use scarce funds to pay the administrative burden of federal programs. In language that may induce vibes of vindication in many quarters of Indian country, the court put it this way:
"The consistent failure of federal agencies to fully fund tribal indirect costs has resulted in financial management problems for tribes as they struggle to pay for federally mandated annual single-agency audits, liability insurance, financial management systems, personnel systems, property management and procurement systems and other administrative requirements. Tribal funds derived from trust resources, which are needed for community and economic development, must instead be diverted to pay for the indirect costs associated with programs that are a federal responsibility. It must be emphasized that tribes are operating federal programs and carrying out federal responsibilities when they operate self-determination contracts. Therefore ? Indian tribes should not be forced to use their own financial resources to subsidize federal programs."
Congress responded to the problem by passing the Indian Self-Determination Amendments of 1988, requiring the Secretary to "provide funds for the full administrative costs to the tribes," provided appropriations were available and other tribal funding would not have to be reduced.
DHHS argued that funding recommendations from a congressional appropriations committee prevented the secretary from reprogramming funds to meet the Cherokees' indirect health care costs from 1994 through 1996.
"We cannot agree that the Secretary had discretion to refuse to reprogram to meet his contractual obligations," the court countered. "As we have discussed above, it is well recognized that if the Secretary has the authority to reprogram and there are funds available in a lump-sum appropriation, there are 'available funds.'
? "We hold that there were available appropriations to pay the appellee its full indirect costs, because there were no statutory caps on funding in the appropriations acts for the relevant fiscal years, and that the Secretary has not shown that full payment would require the Secretary 'to reduce funding for programs, projects, or activities serving [another] tribe.'"
The court awarded the Cherokee Nation $7.5 million.