Indian Trust Funds
Individual Indian Accounts Gao ID: GAO-02-970T July 25, 2002This testimony summarizes previous GAO work that identified gaps in information needed to reconcile Individual Indian Moneys (IIM) trust accounts, and the rationale that led GAO to suggest that the Department of the Interior seek alternatives to reconciliation, such as a negotiated agreement. Congress established an Indian trust fund account reconciliation requirement in the Supplemental Appropriations Act of 1987 in response to tribal concerns that (1) Interior had not consistently provided them with statements on their account balances, (2) their trust fund accounts had never been reconciled, and (3) Interior planned to contract with a third party for management of trust fund accounts. There are many obstacles that will complicate Interior's ability to document the amount and source of funds deposited to, managed in, and disbursed from their IIM accounts. Interior's July 2002 report enumerates among those obstacles known discrepancies in the balances, at the trust fund level, reported by Treasury and Interior, as well as the potential for (1) errors in the electronic accounting system data, (2) missing paper transaction records, and (3) missing land ownership information and revenue instruments.
GAO-02-970T, Indian Trust Funds: Individual Indian Accounts
This is the accessible text file for GAO report number GAO-02-970T
entitled 'Indian Trust Funds: Individual Indian Accounts' which was
released on July 25, 2002.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
United States General Accounting Office:
GAO:
Testimony:
Before the Committee on Indian Affairs, U.S. Senate.
For Release on Delivery:
Expected at 10 a.m. EDT:
Thursday, July 25, 2002:
Indian Trust Funds:
Individual Indian Accounts:
Statement of McCoy Williams, Director:
Financial Management and Assurance:
GAO-02-970T:
Mr. Chairmen and Members of the Committee:
I am pleased to be here today to summarize previous GAO work that
identified gaps in information needed to reconcile Individual Indian
Moneys (IIM) trust accounts, and the rationale that led us to suggest,
based upon our earlier work, that Interior seek alternatives to
reconciliation such as a negotiated agreement.
Before discussing our prior work, let me point out that we have not yet
had time to analyze Interior‘s July 2, 2002, Report to Congress on the
Historical Accounting of Individual Indian Money Accounts, evaluate its
proposed methodology, or discuss the report or its proposed methodology
with Interior officials. Also, we have not done recent work to evaluate
the current state of Interior‘s IIM records. Nevertheless it is clear
that a reconciliation of IIM accounts is a daunting endeavor, both in
terms of the magnitude of the project‘s scope and the obstacles that
are likely to be encountered. As to the scope, certainly tens of
millions, and perhaps over a hundred million, of IIM transactions have
occurred in the more than 100 years since the first Indian allotment
act. Further, the supporting documentation that must be examined to
reconstruct the account transactions must first be located by searching
more than 100 offices, warehouses, records centers, and archives.
Regarding the obstacles that Interior is likely to encounter, we
reported to this committee in June 1996[Footnote 1] that, based on our
work, we concluded at that time that records were not available to
support a reconciliation of the IIM accounts. In addition to missing
records, we pointed to the lack of an audit trail through Interior‘s
Integrated Records Management System (IRMS), which was used to maintain
IIM account information, and differences in the way IRMS operates at
various Interior locations, which affect the consistency of the IRMS
information, as obstacles that Interior would encounter in pursuing an
IIM account reconciliation.
Much of our previous work in the area of trust fund reconciliations
relates to an earlier account reconciliation requirement and a related
Interior effort to reconstruct both tribal and IIM trust accounts. From
1992 through 1997, we monitored and reported on various aspects of
Interior‘s planning, execution, and reporting of results for the
reconciliation project. First let me discuss the tribal portion of that
earlier Interior effort.
Tribal Accounts:
The Congress established an Indian trust fund account reconciliation
requirement in the Supplemental Appropriations Act of 1987. That
requirement was in response to tribes‘ concerns that (1) Interior had
not consistently provided them with statements on their account
balances, (2) their trust fund accounts had never been reconciled, and
(3) Interior planned to contract with a third party for management of
trust fund accounts.
The 1987 act required that the accounts be audited and reconciled
before the Bureau of Indian Affairs (BIA) transferred funds to a third
party. Interior‘s fiscal year 1990 appropriations act added a
requirement that the accounts be reconciled to the earliest possible
date and that Interior obtain an independent certification of the
reconciliation work. The American Indian Trust Fund Management Reform
Act of 1994 subsequently required the Secretary of the Interior to
provide tribes with reconciled account statements as of September 30,
1995.
Interior contracted with two major independent public accounting firms,
one to reconcile the trust accounts and the other to do an independent
certification to indicate that the reconciliation resulted in the most
complete reconciliation possible. Following a preliminary assessment in
March 1992 by Interior‘s reconciliation contractor, Interior decided to
have the contractor reconcile the tribal accounts for fiscal years 1973
through 1992. Subsequent to this decision, Interior also had BIA
reconcile the tribal accounts for fiscal years 1993 through 1995 to
comply with the 1994 act‘s requirement that Interior provide tribes
with reconciled account statements as of September 30, 1995.
The tribal portion of Interior‘s Indian trust fund account
reconciliation project was completed and Interior reported the results
to tribes in January 1996. During the reconciliation project, Interior
spent about $21 million for contract costs over a 5-year period in a
massive effort to locate supporting documentation and reconstruct
historical trust transactions, as well as to perform other
reconciliation procedures, in its attempt to validate tribal account
balances.
During a February 1996 meeting at which Interior officials and the
reconciliation contractor summarized the reconciliation project
results, tribes raised questions about the adequacy and reliability of
the reconciliations results. In May 1996, we reported[Footnote 2] on
shortcomings of Interior‘s reconciliation project. The shortcomings
consisted of procedures that were not completed due to missing records,
systems limitations, or time and cost considerations.
In May 1997, we reported[Footnote 3] to this committee that, as of May
6, 1997, Interior had provided reconciliation reports to 310 tribes, of
which 51 tribes had disputed, and 41 had accepted, the reconciliation
results. Of the remaining 218 tribes, 47 had requested more time to
consider the results, and 171 had not responded to the reconciliation
results. In summary, although Interior made a massive attempt to
reconcile tribal accounts during its reconciliation project, missing
records and systems limitations made a full reconciliation impossible.
IIM Accounts:
Now, let me turn to the IIM portion of Interior‘s earlier account
reconciliation effort. In our June 1992 report[Footnote 4] on
Interior‘s efforts to reconcile Indian trust accounts, we noted that
the effort originally consisted of two phases. The first phase was to
cover, in addition to 500 tribal accounts, 17,000 IIM accounts
maintained at three agency offices. However, after an initial
assessment by Interior‘s contractor of the level of effort and cost
needed to complete the various segments of reconciliation work, a
decision was made not to reconcile IIM accounts as part of the project.
In reporting this status, we noted that Interior and its contractor had
determined that a full reconciliation of all tribal and IIM accounts
was neither possible nor cost-effective due to missing records,
commingled tribal and individual Indian accounting records, poorly
documented accounting transactions, and the volume of data to be
reviewed.
At that time, we recommended that Interior seek alternatives to the
reconciliation project and develop a proposal for reaching a
satisfactory resolution of the trust fund account balances with account
holders. Among alternatives that we recommended for Interior‘s
consideration were that Interior consider negotiating agreements with
individual Indians on balances reported on their account statements and
request legislated settlements on all, or selected accounts. In a
number of testimonies and reports over the next several years,[Footnote
5] we supported the idea of Interior and tribal and IIM account holders
negotiating a resolution of their issues.
Current Situation:
Interior‘s July 2, 2002 report relates directly to the 1994 act and the
ongoing class action lawsuit commonly referred to as the Cobell
litigation, which is presently before the United States District Court
for the District of Columbia. In this regard, my comments today are not
intended to address, nor is GAO taking any position on what level of
accounting the 1994 act or the courts have required of Interior thus
far, whether Interior‘s plan satisfies those requirements, or, if so,
whether Interior‘s plan is the only or best approach for Interior to
satisfy the requirements imposed on it. Those issues will ultimately be
decided by the court.
Having said this, we note that Interior‘s report recognizes that a
number of obstacles, similar to those we have previously reported on,
will complicate its ability to document for IIM account holders the
amount and source of funds deposited to, managed in, and disbursed from
their IIM accounts. The Interior report enumerates among those
obstacles known discrepancies in the balances, at the trust fund level,
reported by Treasury and Interior, as well as the potential for (1)
errors in the electronic accounting system data, (2) missing paper
transaction records, and (3) missing land ownership information and
revenue instruments. The report further states that ’It is certain that
gaps in documentation will be encountered during the historical
accounting. Such gaps may range from a single missing lease to an
entire time period of missing documentation for some or all IIM account
holders served by a specific BIA agency.“ Interior‘s enumeration of
obstacles is consistent with what our prior work has shown.
Mr. Chairmen, this concludes my statement. I would be glad to answer
any questions from you or other Members of the Committee.
[End of section]
Footnotes:
[1] U.S. General Accounting Office, Indian Trust Fund Testimony Qs&As,
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-96-125R]
(Washington, D.C.: June 24, 1996).
[2] U.S. General Accounting Office, Financial Management: BIA‘s Tribal
Trust Fund Account Reconciliation Results, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-96-63] (Washington, D.C.:
May 3, 1996).
[3] U.S. General Accounting Office, Indian Trust Funds: Tribal Account
Holders‘ Responses to Reconciliation Results, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-97-102R] (Washington, D.C.:
May 23, 1997).
[4] U.S. General Accounting Office, Financial Management: BIA Has Made
Limited Progress in Reconciling Trust Accounts and Developing a
Strategic Plan, [hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AFMD-
92-38] (Washington, D.C.: June 18, 1992).
[5] U.S. General Accounting Office, Financial Management: Native
American Trust Fund Management Reform Legislation, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/T-AIMD-94-174] (Washington, D.C.:
Aug. 11, 1994). U.S. General Accounting Office, Financial Management:
Indian Trust Fund Accounts Cannot Be Fully Reconciled, [hyperlink,
http://www.gao.gov/cgi-bin/getrpt?GAO/T-AIMD-95-94] (Washington, D.C.:
March 8, 1995). U.S. General Accounting Office, Indian Trust Fund
Settlement Legislation, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO/AIMD/OGC-95-237R] (Washington, D.C.: Sept. 29, 1995).
[End of section]
