The Passamaquoddy tribal government at Sipayik is under investigation by the U.S. Department of Treasury's Office of Inspector General concerning how millions of dollars in federal funds were spent on pay increases for tribal government employees during the first year of the pandemic. The increases ranged all the way up to one employee who earned $30,000 in 2019 being paid nearly $260,000 in 2020, or more than an eightfold increase in salary. Estimated overpayments to some essential employees, above their earned hazard pay and overtime amounts, were as high as $200,000, with one worker receiving over half a million dollars in 2020. The employees are both tribal and non-tribal members and include some health center staff. The findings about the spending, through forensic audit and legal counsel investigations that were commissioned by the tribal government, were presented at a well-attended community meeting held at Sipayik on November 5.
     According to the forensic audit investigation, the tribal government's payroll expenditures ballooned by $6.7 million after the pandemic began, going from $4.7 million in 2019 to $11.4 million in 2020. Pay rates of up to two to three times the standard rate of pay were authorized for some tribal government employees, which, according to a summary of the legal counsel's investigation, "provided exorbitant amounts of pay to employees who were deemed 'essential.'" The tribal government's Incident Management Team made decisions about pay rates that were not formally approved by the chief or tribal council, the investigation found. Among the tribal administration, the tribal council and the Incident Management Team that was formed at the beginning of the pandemic there was "a general breakdown in communication, checks and balances and financial oversight."
     Dwayne Tomah, a tribal citizen and language keeper who is among those calling for accountability, says, "There are people struggling here. There are people who are homeless. There are a lot of socio-economic problems that are not being addressed because of greed. That's the bottom line." He adds, "The former governor, the vice chief, the council, the Incident Management Team and the tribal manager are responsible for this. All we want is transparency and accountability."
     He alleges that the federal government provided millions to the tribal government during the first year of the pandemic and then provided millions during the next year while the tribal government was not in compliance with how the funds were to be spent the previous year. "It does not add up," he maintains. Tomah notes that some tribal government employees were paid 300% of their wage rate during the pandemic. "They were paid egregious salaries," he says. "It's absolutely not fair."
     Chief Elizabeth "Maggie" Dana declines to comment on the issue, citing it as an internal tribal matter.

Results of investigations outlined
     Earlier this year, the tribal government commissioned a forensic audit conducted by the accounting firm of RHR Smith and Company, based in Buxton, of the payroll practices and other emergency expenditures during 2020, with the audit initially focusing on the tribal government's 25 most highly compensated employees but eventually looking at all tribal government expenditures during 2020. Because tribal accounts were commingled and not properly reconciled for multiple years leading into 2020, the audit also required reconciling the tribe's cash balances to determine where the dollars that were spent originated.
     The audit found that over $576,000 in payroll funds in 2020 came from the federal CARES Act's Coronavirus Relief Fund, with the remainder coming from a variety of sources. The tribe had received a total of $4.7 million in federal CARES Act funding that needed to be spent by the end of 2020 and was granted a maximum allowable reimbursable amount of $5 million from the Federal Emergency Management Agency (FEMA). The CARES Act relief funds are restricted and can be used only on expenses that directly relate to COVID 19 and were incurred during the year. Unused funds revert to the federal government. Expenses not allowed by FEMA or under the CARES Act have to be covered by the tribal government.
     According to the audit report, approximately $2.1 million in federal CARES Act funds were distributed directly to tribal members in the form of financial assistance.
     In addition to the forensic audit, the tribal council brought in an investigator from the Portland-based law firm of Drummond Woodsum to look at payroll policies and practices between March and December 2020. That investigation concluded that there was a breakdown in payroll procedures related to employee eligibility for wage increases and that decisions on the eligibility of particular employees for higher wages were not developed. Wage increases were made across the board, and numerous employees received higher wages despite being ineligible based on their employment status or under applicable federal guidance.

Timeline summarized
     Beginning in December 2020 the tribal government had uncovered major discrepancies in terms of how funds were disbursed, accounted for and reported. To ensure it complied with federal funding requirements, the tribal government undertook the audit investigation to track the expenditures.
     At the start of the pandemic, in March 2020, the tribal council had approved a resolution granting the chief at that time, Marla Dana, emergency powers and authorizing every tribal program director to implement their own COVID-19 prevention and response plans without further tribal council approval. The resolution empowered the chief and vice chief to expend available funds and to do whatever they felt necessary to protect the safety of the community.
     Later in March of that year, the Incident Management Team directed the tribal government's human resources director to implement an emergency pay rate structure with higher pay and hazard pay for employees deemed essential. During the state of emergency, all employees were paid emergency leave at their normal rate of pay, and essential workers were paid a COVID rate of either a set rate or a base rate times 1.75%. Some hazard pay rates were increased to a flat $42 an hour. Also, some overtime was paid at up to 3.5 times the COVID rate. No formal system for tracking the payroll expenditures was established, though, and a process to approve whether employees were essential was not adopted, the investigation found.
     In December 2020, Chief Marla Dana was recalled from office, with Vice Chief Elizabeth Dana taking over as chief. Following an internal review of emergency expenditures, the tribal council authorized the formal investigations in February 2021.
     The tribal government plans to continue its reporting obligations for CARES Act funds through the end of this year, which is when all CARES Act funds must be spent or returned to the U.S. government. It also plans to develop a corrective action plan to address the problems revealed during the investigation.