Unexpended Fund Balance in the Indian Health Service Water and Sanitation Facility Construction Program

GAO examined the Indian Health Service's (IHS) Water and Sanitation Facility Construction (WSFC) Program to determine whether: (1) IHS budgeting procedures can be changed to reduce the amount of appropriated funds needed for facility construction in a given year; (2) IHS allocation and obligation procedures are contributing to the size of the unexpended balance; (3) IHS is receiving more funds than it can effectively use for WSFC; (4) Congress should consider different ways of providing funds to IHS for WSFC; and (5) the use of the memorandum of agreement by IHS as an obligating document is legal.

The reported unexpended balance was $95 million at the end of fiscal year 1979, but it averaged about $112 million for fiscal years 1977 through 1979. About one-third of the unexpended balance pertained to projects that were not started or for which construction was interrupted because of unforeseen problems that occurred after funds had been obligated. Data in the project files showed various reasons for delays in starting or continuing project construction, which include: (1) problems in obtaining rights-of-way or resolving problems concerning historical preservation of land; (2) problems encountered with contractors; (3) tribal tardiness in providing required data; (4) curtailment pending completion of other projects linked to planned projects; (5) inclement weather; and (6) problems in obtaining an adequate water supply. GAO found that the finance offices had a 3- to 5-month backlog in posting the transactions to the financial records. As a result, the reported unexpended balance was overstated by several million dollars. GAO found that the budgeting, allocating, and obligating procedures did not contribute to the unexpended balance. GAO also found that phased funding negates the flexibility provided by Congress in allowing IHS to use a no-year appropriation for WSFC. GAO believes that full-funding is the most appropriate way of funding multiyear commitments like IHS construction projects. GAO found that the memorandum of agreement contained the required documentary evidence needed to support an obligation by a Federal agency.