Financial Management

Management of the Indian trust funds has been plagued by inadequate accounting and information management systems, untrained and inexperienced staff, backlogs in appraisals and ownership determinations and recordkeeping, inadequate written policies and procedures, and poor internal controls. As a result, account holders have few assurances that their account balances are accurate and that their assets are being prudently managed. This testimony analyzes the strategic plan developed by the Special Trustee for American Indians to improve trust fund accounting and asset management. GAO (1) describes the trust asset management problems that the strategic plan seeks to resolve; (2) summarizes the strategic plan; (3) explains the basis for the cost estimates included in the plan; and (4) identifies implementation issues, including key matters that Congress would need to consider in deciding whether to approve the plan's measures.

GAO noted that: (1) management of the Indian trust funds and assets has long been characterized by inadequate accounting and information management systems, untrained and inexperienced staff, backlogs in appraisals and ownership determination and recordkeeping, lack of a master lease file and an accounts receivable system, inadequate written policies and procedures, and poor internal controls; (2) because of these overall weaknesses, account holders do not have assurance that their accounts balances are accurate and that their assets are being prudently managed; (3) to address the Department of the Interior's long-standing Indian trust fund accounting and asset management problems, the Congress passed the American Indian Trust Fund Management Reform Act of 1994, which created the Office of the Special Trustee for American Indians; (4) the act required that the Special Trustee provide oversight of reforms within Interior, including development of policies, procedures, and systems; (5) in April 1997, the Special Trustee submitted his Strategic Plan to the Congress; (6) the Strategic Plan proposes a new organization, independent of Interior, to administer trust fund accounting and asset programs; (7) these proposals are estimated to cost $168 million for fiscal years 1997 through 1999 and another $61 million and $56 million for fiscal years 2000 and 2001, respectively; (8) in addition, the Plan proposes establishing an Indian economic development bank to be capitalized by the federal government; (9) a number of areas require further clarification, planning, or consideration before the Plan can move forward; (10) these include: (a) implementation timing of certain initiatives, such as records cleanup and the acquisition of a new individual Indian Money accounting systems component; (b) proposals, such as establishing a centralized organization and upgrading and acquiring systems, that need more planning before they can be successfully implemented; (c) issues relating to the desirability and feasibility of establishing the new organization as a private entity, including the legality of transferring the federal government's trust authorities and responsibilities to such an entity; and (d) issues relating to the establishment of the trust development bank, including the initial funding and on-going capital maintenance proposals; and (11) in order to appropriately address these issues, more information and analysis need to be included in the Plan to provide clarification of the authority and responsibility of the proposed organization, and its relationship to Interior.