BILLINGS, Mont. – State agencies have withheld $867,000 in grants and stimulus money from a Montana Indian tribe since auditors revealed lax accounting practices had opened the door to potential financial abuse.

The Little Shell Tribe of Chippewa Indians first ran into trouble with the state in September, when auditors raised questions about how the tribe was spending a tobacco use prevention grant worth $180,000 annually.

The audit found “little relationship” between the program’s budget and how the money was spent. Grant money appeared to be used on expenses related to tribal elections and to publish the tribal newspaper. Travel expenses topped $35,000 – more than twice the budgeted amount.

Separately, in a visit to the tribe’s offices in Great Falls, state officials found lax accounting for economic development grants.

With no way to verify how the money was spent, this year’s grant for $70,000 was put on hold. Also suspended was a $617,000 federal stimulus grant that the state Legislature directed toward the tribe.

The tribe was given until Nov. 23 to show it had fixed its accounting procedures.

“These are significant amounts of money,” said Martin Tuttle, chief legal counsel for the Department of Commerce. “We want to make sure they go where the Legislature directed – but only after we feel confident that we can account for them.”

The Little Shell, a landless tribe recognized by the state but not the federal government, has 4,300 members scattered
across central Montana.

Tribes on Montana’s seven reservations already have been awarded a combined $4.3 million in stimulus funds.

Little Shell president John Sinclair said the tribe’s small staff had not made a priority of record keeping but planned to improve its practices.

He also said the audit came to erroneous conclusions about how the grant money was spent. For example, Sinclair said the tobacco program logo was accidentally used on the tribal newsletter and election materials but that no grant money was involved.

“It was a stupid mistake,” he said. “We need to settle out with these employees that weren’t doing what they were supposed to be doing.”

State officials have said there was the potential for abuse; they have not alleged it actually occurred.

Sinclair submitted a written response to the state audit last month.

“We found those answers to be inadequate,” said Anna Whiting Sorrell, director of the Department of Public Health and Human Services.

A more critical response came from within the tribe, which recently saw a splinter group form in opposition to Sinclair and some members of the tribal council.

One of that group’s leaders, former tribal vice president James Parker Shield, said the suspension of state funds amounted to a “black eye” for the tribe as it pushes to get federal recognition through Congress. He said Sinclair was ultimately responsible for how the state money is spent.

A Dec. 1 meeting in Helena is planned between Sinclair, representatives of Gov. Brian Schweitzer and other state officials to discuss the issue.

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