Stalled in Transition - The "638 Contract" Navajo Nation Government

Revised July 22, 2026

Introduction

This page explains why the Diné people have spent decades trying to make their communities and government work—only to feel their heartfelt thoughts disappear into a vacuum. It explores why, year after year, community ideas and plans never find their way into government policy. And it may offer some insight into why language preservation and meaningful quality of life seem to be treated by Window Rock as finished, failed, or simply no longer worth pursuing.

This page is a living document. It was first published on June 28, 2026, and will be updated periodically as new information becomes available and as community feedback is incorporated.

The Indian Self-Determination and Education Assistance Act (ISDEAA)

The Indian Self-Determination and Education Assistance Act (ISDEAA), enacted on January 4, 1975, provides two paths to tribal self-determination—

— Title I Self-Determination Contracts—commonly called “638 contracting”—a tribe acts as a federal contractor, bound by BIA rules, manuals, and handbooks set forth in the contractual scope of work, for a limited period of time. Once the tribe shows “mature” capability, it is able to enter government-to-government agreements called “Self-Governance Compacts” under Title IV of the ISDEAA.

— Title IV Self-Governance Compacts—638 Contracting was always meant to be a temporary bridge: once a tribe proves it can manage federal funds, it can move to the more flexible Title IV model of “Self-Governance compacts “in which the compacting tribe enters a government-to-government agreement and can replace federal rules with its own tribal laws and policies, exercising greater sovereignty. Title IV Compacting was first offered to a few tribes as a pilot in 1990, then opened to all tribes a few years later. (Indian Health Service Compacts are under Title V of the ISDEAA).

Compacts allow for broader authority over program design and funding, shifting power from the BIA to the Nation. Under Title IV (Self-Governance Compact) the tribe would act as a sovereign partner, negotiating a government-to-government agreement that allows them to move away from federal rule-books and toward their own tribal laws. Compacting is a shift to tribal sovereignty–treatment as a sovereign through multi-year block grants that it may reallocate, invest, and carry forward freely; and ability to redesign, consolidate and integrate its programs and services for maximum efficiency to serve its communities. (Under Title I, the tribe is essentially a federal agent).

Title 1 “638 Contracts”	Title IV Compacts
Every single program must submit proposal and receive separate SOW for each program, limited ONLY to federal trust functions	Sovereign-to-sovereign single proposal for all programs and inclusive of non-Federal functions
Federal Agency staff reviews and approves proposals line item by line item every year; funds are contingent on compliance	Multi-year block grant reallocable across line items and may be carried forward and invested; funds are guaranteed
Mandatory compliance with Federal Acquisition Regulations (FAR) and extensive reporting requirements	Tribe may redesign and reallocated funds across priorities, and utilizes Tribal Procurement/Financial Systems
Navajo Nation must manage multiple (more than 100) separate contracts with non-transferable funds	Tribe may tailor efficient service delivery to local needs
Mandatory, separate financial and program reporting to the Federal Agency for each (of more than 100) program contract	Reduced, single annual report focused on outcomes and compliance, not line item approval

Navajo Nation--50 Years of Being a Federal Contractor Gov't

The Navajo Nation was among the first tribes to sign Title I “638 contracts,” beginning with its first contracts in 1976 for judicial, education, social services, and tribal government support; then in 1979 for health, police, and water resources; and for many other programs since. For 50 years, the Navajo Nation has been carrying out duties delegated by the Bureau of Indian Affairs (BIA) under Title I while struggling to maintain clean audits across all tribal programs. There does not appear to be a will or plan to move towards compacting.

As of mid-2026, the Navajo Nation is party to an estimated 105 Title I “638 contracts,” covering nearly all tribal government operations and funding the vast majority of tribal personnel positions. The 638 Contracts amount to at least $1 billion (an estimate, as no aggregated figure is publicly reported). Most of these contracts do not require Navajo Nation Council resolutions, and are handled and signed within the Executive Branch by the Navajo Nation Office of Contracts and Grants, the Navajo Nation Department of Justice, and the Navajo Nation Office of Management and Budget without needing Council resolutions. Because they bypass the Council, Council Delegates by and large do not know what are contained in the vast majority of the SOWs. “638 Contracts” set forth the contract terms and incorporates—by attachment or reference—the federal regulations, policies, handbooks (federal laws) that the contracting program must follow, plus tribal laws that do not conflict with those federal laws. The Annual Funding Amount (AFA) is the annual funding received by each program under its contract.

These contracts have become entrenched in Navajo Nation government, with no clear alternative pathway to funding due to challenges of audits, and also due to the transitional nature of Navajo government since 1989.

Compliance Obsession

The statutory phrasing in the ISDEAA establishing the clean audit prerequisite relates directly to the ISDEAA’s definition of a “mature contract” (codified at 25 U.S.C. 5304(h)), which historically served as the benchmark eligibility threshold for entering into self-governance compacting. The exact text reads as follows:

“(h) “mature contract” means a self-determination contract that has been continuously operated by a tribal organization for three or more years, and for which there are no significant and material audit exceptions in the annual financial audit of the tribal organization…”

Despite being among the first tribes to take on 638 Contracts in 1976, the Navajo Nation was not among the twenty tribes selected for the Compact pilot in 1990. It was not pilot-ready due to its size and complexity. The Navajo Nation was, further, undergoing instability in internal political dynamics at precisely that time. In 1989, the Navajo Nation had been gripped by violent political unrest that culminated in establishment of a 3-branch governing structure that (like the 638 Contract system) was intended to be temporary, but which has persisted to this day. The notion that the 1989 structure is only temporary has complicated the tribe’s functions across decades. 40 years later, the tribe appears to be oriented towards an audit fortress mentality. The 1989 “temporary” state has inadvertently fossilized into a 40-year status quo that serves as a reason for the Nation’s reluctance to reform, but which it cannot straightforwardly express to its People. Compacting was made available to all tribes by the Tribal Self-Governance Act of 1994.

The Tribe’s focus for five decades has been on surviving annual audits and securing continued funding. The community widely perceives—though without fully grasping the contractual burdens—that central administration now prioritizes Title I compliance above all else. This intense focus on audit survival has unintentionally delayed any serious review of the 1989 provisional governance structure. The government’s primary job seems now to ensure all its programs remain in compliance with federal BIA regulations, with “success” defined by keeping the funds coming, avoiding federal audits, or lawsuits. This makes government itself the natural enemy of reform. Any attempt to push for true self-governance is often viewed by the government lawyers as a “legal risk” to the revenue streams of the Nation.

The result is a system so administratively complex that it has become a barrier to pursuing Title IV’s operational efficiencies. What was meant to be a transitional bridge to self-governance has instead created a state of dependency and dysfunction—one that now actively blocks the very sovereignty it was supposed to enable.

Detailed Community Costs

1. Federal Contractors Accountable to the BIA

Navajo Nation programs are funded through P.L. 93-638 contracts (the Indian Self-Determination and Education Assistance Act of 1975). Under these agreements, tribal programs step into the specific roles and duties originally assigned to the BIA. The scope of work is not set by the Navajo Nation, but by the BIA’s own interpretation of its trust responsibilities—rooted in the 1868 Navajo Treaty—with only limited room for negotiated supplements. As federal contractors, tribal programs must strictly follow federal laws, policies, and BIA manuals that are attached to, or incorporated by reference in, 638 contract scopes of work. Tribal laws that are viewed as within the federal trust duties may be implemented under the scope of work.

Programs like police, courts, and family services may incorporate the Navajo Nation Code into their 638 contracts—but only after difficult negotiations, and only to the extent that tribal law does not conflict with federal law. The federal framework always prevails. As one former Chief Justice observed, even securing small deviations from federal processes—such as traffic hearings conducted in the ba’ayati method—was a struggle. In practice, the “638 Compliance Laws” in the scopes of work become the primary—often the sole—”law” followed by Window Rock programs.

2. Strictly Limited to Scope of Work

Many Diné observe that the Navajo Nation government often looks more like an extension of the BIA than a sovereign body. This is by design of the 638 system. Each contract binds programs to federal trust responsibility functions—and no more than that—making it structurally difficult to add sovereign functions like localized practices or governance innovations. To do so, a program would need separate non-federal funding and a supplemental plan outside the 638 agreement—a logistical hurdle that is rarely workable.

This dynamic extends even to tribal programs that are not funded by 638 contracts, such as the Office of Navajo Elections Administration or the Office of Navajo Government Development. These offices, though performing non-Treaty (sovereign) duties, still operate within the same federal accounting and performance framework as their 638-contracted counterparts. The system’s gravitational pull is so strong that even non-contracted programs default to federal models rather than attempting community-based or traditional Diné structures and methods.

A Critical Gap: Culture-Based Community Needs

638 funding covers only the federal trust responsibilities as the BIA defines them—nothing more. Vital community needs—language preservation, community-led governance, and family support—fall entirely outside the 1868 Treaty and therefore outside the scope of 638 contracts. Moreover, when the tribe seeks to perform BIA duties on its own initiative—as it did leading up to the 2000 Navajo Leasing Act—those duties are not considered part of any 638 contract scheme and may be entirely unfunded.

The result is a system that actively incentivizes the government to prioritize federal compliance over the lived priorities of the Diné people. After 50 years of stepping into the shoes of the BIA and being told to strictly comply with the contracted scope of work, the Navajo Nation may have begun to believe that this is what governing is, and that the unsupported communities are to blame for not being privately resourceful enough, or inventive enough.

At practically every chapter meeting, the community continues to press for local governance, language preservation, and continuance of Diné traditional teachings, expressed as immutable Diné Fundamental Laws.

3. No Reallocations or Carry Forwards

638 funds must be spent within the fiscal year. They cannot be reallocated, invested, or carried forward. This severely limits the tribe in terms of flexibility, growth, and creating community-based funds that might one day leave 638 contracting, and excavation-based royalty dependencies, behind.

4. Supposed to be Short Term

638 contracts were designed as a short-term bridge to Title IV Self-Governance Compacts. Tribes that pass three consecutive years of clean audits may pursue compacting, which offers greater sovereignty. Yet the Navajo Nation has been stuck in the 638 system for nearly 50 years.

5. “Duty” Mistaken as Compliance to Federal Government

Each 638 program is reviewed annually by the federal agency that oversees it—primarily the BIA Navajo Region, along with HUD and IHS for housing and health. Oversight focuses narrowly on compliance with the contract’s scope of work. Over decades, however, the public has come to mistake this limited contract system for a full government structure capable of serving all community needs—including language and cultural growth.

Decades of operating within this narrow federal framework risk entrenching the belief that the BIA’s trust responsibilities define the full limits of what tribal government can do.

Since 2006 – Unfunded Management of Leases & Permits

The Navajo Nation was given the “privilege” of managing its own leases and permits in 2000 and has been managing business leases since 2006, and other leases since 2014. What most community members do not realize is that the tribal government is administering these leases and permits outside the 638 contract system and without any federal funding to support that work, while also being required to conform to federal laws on leases and permits. The origins of this “unfunded privilege” lay in a 20-year legal battle with the Federal Government.

In the 1980s, the Navajo Nation sued the federal government for bad faith dealing after the Interior Secretary had secretly aided Peabody Coal in ensuring the tribe didn’t have complete information in negotiating a fair tribal royalty rate. In 2003, the U.S. Supreme Court ruled in United States v. Navajo Nation that, even though the DOI had not been frank with information, there was no treaty or contractual duty for the DOI to have done more than it did. The U.S. Supreme Court found that no specific trust duty had been breached and, as a result, the federal government was not required to pay the tribe financial damages.

What followed was the Navajo Nation’s determined effort to manage its own leases. After numerous entreaties from the tribe, Congress agreed to allow the Navajo Nation to run its own leases and permits as a pilot program, as a “privilege.”

The framing of self-management as a “privilege” rather than a sovereign right or contractual duty proved to be a tactical trap. Congress effectively excluded the Nation from the funding streams that would have been triggered under a standard 638 contract. The Nation discovered, too late, that because it had initiated the request—rather than responding to a federal mandate—it was now responsible for all costs of leases and permits. The federal government would not even provide funds for the Navajo Nation to put an infrastructure in place. See Josephine Foo, The HEARTH Act and the Navajo Leasing Act, ABA SEER Native Am. Resources Comm. Newsl., Jan. 3, 2019.

The Nation began implementing this unfunded privilege in 2006. Without any federal funds, the tribe’s solution was to fraction out pieces of land management across existing programs in different tribal divisions—a bureaucratic response to a financial vacuum—which has resulted in the People to scrambling from office to office, and signing application forms at each office that are frequently lost. Responsibility and costs for environmental and cultural surveys have also been shifted to the People. For many Diné, this exhausting, circular process has become a primary reason they have given up on the government altogether.

A full discussion of the Navajo Leasing Act and its ongoing impacts is being researched and written by this project’s research team and students.

6. Program-by-Program Rigidity

The program-by-program contracting model is labor-intensive and creates rigid accounting and spending silos. This prevents unified, efficient, and integrated service delivery across the vast Navajo reservation. Additionally, 638 contracts rarely provide enough administrative or indirect cost funding to support adequate services over such great distances.

7. Unspoken End of Local Governance

All 638 programs must pass a “clean audit” under the Single Audit Act for the tribe as a whole to pass its annual audit. This requirement has created a complex administrative maze, forcing central government (“Window Rock”) to focus on compliance over services.

Chapters are defined in the Navajo Nation Code as “political subdivisions” and therefore cannot contract directly for 638 funds. Instead, they receive federal dollars through subcontracts or grants—which still bring them under the Single Audit. When a chapter receives a federal award (e.g., for ARPA or road projects), it becomes a subrecipient, and the Nation is legally responsible for monitoring how those funds are spent. This imposes highly restrictive accounting processes on chapters, adding to the burden. Even when a certified chapter pursues an award directly, Window Rock retains approval and project oversight authority.

A 2024 report by the House Subcommittee on Indigenous Peoples examined BIA 638 contracting and offered a notable recommendation regarding audits. The report suggested that Congress consider applying a Cooperative Audit Resolution and Oversight Initiative (CAROI) system—first established by the Department of Education in 1999 and later expanded to all federal agencies—to ISDEAA contracts and compacts.

CAROI is designed to engage all stakeholders in a cooperative audit process, producing better outcomes through collaboration rather than purely adversarial oversight. However, it does not currently apply explicitly to self-determination contracts or self-governance compacts, creating uncertainty for many tribes. Applying CAROI to the ISDEAA context could help build tribal capacity through the audit process, rather than simply penalizing noncompliance. See House Subcommittee on Indigenous Peoples of the United States. (2024). Advancing Tribal Self-Determination: Examining Bureau of Indian Affairs’ 638 Contracting (HHRG-118-II24)(March 6, 2024).

Despite years of promises supporting local governance, oversight has become increasingly centralized in Window Rock. On December 29, 2022, the Resource and Development Committee quietly passed RDCD-43-22, which stripped local chapters of project oversight and centralized project oversight within the Division of Community Development (DCD)(itself a 638 program)—a move that directly conflicts with the local autonomy promised under the Local Governance Act (Title 26). No explanation was given for how this affects the Navajo Nation’s Local Self-Governance Act (Title 26), which guarantees chapter autonomy. This raises a serious legal question: can an amendment to a plan of operations quietly override an entire law?

The Nation justifies this centralization as necessary to protect itself from audit findings. Chapters are told that local governance is possible—if they help the tribe achieve clean audits. But under 638 accounting rigidity, chapters must resolve every discrepancy, with no discretion to assess “materiality” under the Single Audit Act. As of December 3, 2025, most capital projects at chapters are logjammed, reportedly waiting for signatures from DCD and the Chapter Unit of the Navajo Nation Department of Justice.

8. Chasing Clean Audits with No Clear Goals

The Navajo Nation is currently stuck in a difficult contracting system (Title I) that forces it to manage dozens of separate funding pots, each with rigid, non-negotiable federal rules. To move to a more flexible self-governance model (Title IV), the Nation must first pass three consecutive years of clean audits across all its contracted programs. That goal remains out of reach.

On December 5, 2025, the Navajo Nation Council released a KPMG audit report showing 24 findings across 19 federally funded programs. Eight major programs received qualified opinions due to repeated issues: missing procurement records, weak cost analyses, poor eligibility tracking, subrecipient problems, and late federal reports. Systemic accounting struggles—like incorrect fringe rates, faulty cost allocations, and delayed reconciliations—add to the burden. (Other federal funds from FEMA, DOE, and ARPA only make the audit more complex.)

These audit failures are now the biggest barrier to transitioning from Title I contracting to Title IV compacts.

Instead of rethinking the system, current reform proposals—from the Office of Navajo Government Development and the Navajo Nation Council—accept the fragmented, siloed structure and focus only on centralizing oversight, without integrating services or involving communities.

Beyond legal and administrative problems, this fragmented system clashes with core Navajo values like K’é and Hózhó—relational law, balance, and holistic well-being. The administrative maze makes it hard for people to access services and disconnects programs from the community.

A real solution requires three simultaneous tracks: Legal/Structural, Administrative, and Cultural/Chapter. But most importantly, the Navajo people themselves must be informed, engaged, and leading the process.

The goal cannot be just a clean audit. The Nation must also ask: Is this system keeping families together? Is it supporting the Diné Life Way and language? Can future generations live and raise their families on Diné bikeyah? The focus must shift from answering auditor questions to asserting Diné sovereignty.

Source: Murray, Mariel. Indian Self-Determination and Education Assistance Act (ISDEAA) and the Bureau of Indian Affairs. CRS 2021.

The Reality of More Than 100 “638 Contracts”

At present, the Navajo Nation is party to an estimated 105 “638 contracts.” A complete, publicly accessible list is not provided by either the Navajo Nation or the BIA.

Below is a selection of 15 recent Navajo Nation Council resolutions approving BIA “638 contracts.” Note that more than 90 other “638 Contracts” entirely bypass the Navajo Nation Council.

Navajo Nation Division of Natural Resources

Fish & Wildlife — NABIN-53-25 (Nov 2025) — AFA: $251,996
Natural Heritage — NABIN-54-25 (Nov 2025)–AFA: $284,166
Fish Hatchery Modernization & Upgrade — NABIMA-04-23 (Mar 2023) — Period: one-time construction — Amount: $3,000,015
Wheatfields Lake Recreation Area – Design & Engineering — NABIN-58-24 (Dec 2024) — AFA: $617,615
Safety of Dams (Water Resources) — NABID-66-24 (Dec 2024) — Period: 3 years — Amount: $622,400
Water Monitoring & Inventory Program — NABID-65-24 (Dec 2024) — Period: 5 years — Amount: $261,922

Navajo Nation Division of Public Safety

Criminal Investigation — NABIO-51-25 (Oct 2025) — Period: 5 years — Amount: $4,486,926
Patrol Services — NABIO-50-25 (Oct 2025) — Period: 5 years — Amount: $21,906,759
Emergency Medical Services (EMS) — NABIN-46-23 (Nov 2023) — Period: 6 years — Amount: $14,223,824

Navajo Agricultural Products Industry (NAPI)

Farming-related operations — NABIS-44-25 (Sept 2025) — Period: 5 years — $9,663,851

Navajo Nation Division of Children and Family Services

“477 Plan” workforce development pilot (under P.L. 93-638) —NABIJN-33-25 (June 2025) — Period: 5 years (2024–29) — Amount: $68,722,886
Navajo Treatment Centers — PENDING — Period: 5 years — Amount: $6,569,261

Navajo Nation Department of Diné Education

Johnson O’Malley (JOM) Program — BIN-49-23 (Nov 2023) — Period: 3 years — Amount: $3,865,997

Navajo Nation Division of Community Development

Housing Improvement Program (HIP) — NABID-64-24 (Dec 2024) — Period: 3 years — Amount: $2,201,242

Navajo Nation Division of Human Resources

Office of Vital Records — NABIJA-03-25 (Jan 2025) — Period: 3 years — Amount: $1,015,435

Navajo Nation Department of Health

NABID-68-24 (Dec 2024) — Period: 10 years — Amount: Unspecified.

Office of the Executive Director
Behavioral Health
Mental Health
Public Health
Community Health Representative (CHR) Program
Infectious Disease Control
Health Education
Public Health Nursing
Environmental Health

For related reading, go to The Option of Title IV Compacting →