Good morning. I am Michel Lincoln, Deputy Director of the
Indian Health Service (IHS). Today, I am accompanied by Mr.
Douglas Black, Director, Office of Tribal Programs; and Ms.
Paula Williams, Director, Office of Tribal Self-Governance.
We welcome the opportunity to testify on the issue of
contract support costs in the Indian Health Service.
Contract support cost funding is critical to the provision
of quality health care by Indian tribal governments and
other tribal organizations contrActing
and compActing
under
the Indian Self-Determination and Education Assistance Act
(ISDEA), Public Law (P.L.) 93-638).
The IHS has been contrActing
with Tribes and Tribal
Organizations under the Act since its enactment in 1975. We
believe the IHS has implemented the Act in a manner
consistent with Congressional intent when it passed this
cornerstone authority that re-affirms and upholds the
government-to-government relationship between Indian tribes
and the United States
.
At present, the share of the IHS budget allocated to
tribally operated programs is in excess of 40%. Over $1
billion annually is now being transferred through self-determination agreements to tribes and tribal organizations.
Contract support cost funding represents less than 20% of
this amount. The assumption of programs by tribes has been
accompanied by significant downsizing at the IHS
headquarters and Area Offices and the transfer of these
resources to tribes.
Contract support costs are defined under the Act as an
amount for the reasonable costs for those activities that
must be conducted by a tribal contractor to ensure
compliance with the terms of the contract and prudent
management. They include costs that either the Secretary
never incurred in her direct operation of the program or are
normally provided by the Secretary in support of the program
from resources other than those under contract. It is
important to understand that, by definition, funding for
contract support costs is not already included in the
program amounts contracted by tribes. The Act directs that
funding for contract support costs be added to the
contracted program to provide for administrative and related
functions necessary to support the operation of the health
program under contract.
The requirement for contract support costs has grown
significantly since 1995 due to the increasing assumption of
IHS programs. In the fiscal years 1996 and 1997
appropriations Committee reports, the IHS was directed to
report on Contract Support Cost Funding in Indian Self-Determination Contracts and Compacts. In the development of
this report, IHS consulted with tribal governments, the
Bureau of Indian Affairs (BIA) and the Office of Inspector
General within the Department of the Interior. The report
detailed the accelerated assumption of IHS programs by
tribes beginning in 1995 as a result of the 1994 amendments
to the ISDEA and authorization of the Self-Governance
Demonstration Project for the IHS. The report showed that
despite the significant growth in self-determination
contrActing
and compActing
, contract support cost
appropriations have remained relatively flat. This has
resulted in under-funding of contract support costs. The
report also highlights that the rates for tribal indirect
costs, which are the major component of contract support
costs, have averaged around 23% of direct program costs over
this same period of time.
In addition, pursuant to the statutory requirements of the
ISDEA, the IHS gathers contract support cost data annually
as a part of its annual "Contract Support Cost Shortfall
Report To Congress." This report details, among other
things, the total contract support cost requirement of
tribes contrActing
and compActing
under the ISDEA and how
these funds are allocated among the tribes.
As a result of the increase in contract support cost
appropriations in FY 1999, the IHS will be able to fund, on
average, approximately 80% of the total contract support
cost need associated with IHS contracts and compacts. No
tribe will be funded at less than 70% of their overall
contract support cost need. Although the IHS projects
future need for contract support costs on an annual basis,
there are many variables associated with these projections
that are outside the control of the IHS. These variables
include: the fact that self-determination is voluntary and
solely at the initiative of tribes and that indirect cost
rates can fluctuate. The contract support costs shortfall
at the beginning of fiscal year 1999 was approximately $52
million.
The IHS adopted a contract support cost policy in 1992 in an
attempt to address many of the issues surrounding the
determination of tribal contract support cost needs
authorized under the Act and the allocation of contract
support cost appropriations from the Congress. This policy
was subsequently revised in response to the 1994 amendments
to the Indian Self-Determination Act. In response to
concerns expressed by the Congress, the IHS is currently
working on a third version of the policy. We will work with
Congress, the tribes, and BIA to develop contract support
costs solutions that are more in line with the budget cycle,
in order to better predict future CSC needs. In concert
with Departmental and IHS tribal consultation policies, the
IHS is working closely with tribal representatives in the
development of this revised policy.
Before any agency policy on contract support costs is
adopted, tribal leadership is consulted and the significant
procedures under consideration are discussed in great
detail. While we do not always arrive at the same
conclusion as tribal leadership, the process is mutually
beneficial and has always resulted in a more harmonious
relationship. We first engaged tribes with the need to
modify the IHS contract support cost policy last fall.
Since then, we have met with tribal technicians and
Administrators on three occasions. We are continuing the
process and will be meeting again in early March. We
anticipate having a final draft of the policy available for
tribal leaders to review and comment on in late spring. The
policy should be finalized by mid-summer for implementation
in advance of FY 2000.
In addition to the specific IHS contract support cost policy
work, the IHS and the Bureau of Indian Affairs have also
collaborated with the National Congress of American Indians
(NCAI) on the contract support cost study they have
undertaken. It is my understanding that the NCAI will
forward an interim report on contract support costs to the
Congress in the near future. In addition to the NCAI study,
the IHS is presently providing data and information to the
General Accounting Office (GAO) to assist that organization
in its ongoing review of contract support costs. As you
know, the Congress has directed the GAO to undertake a
comprehensive study of contract support costs in the IHS and
BIA. We look forward to the results and findings of that
study, which will be delivered to the Congress in June.
Thank you for this opportunity to discuss contract support
costs in the IHS. We look forward to working with the
Congress in addressing this important issue. We are pleased
to answer any questions that you may have.