Financial Management

The Bureau of Indian Affairs (BIA) has a fiduciary responsibility to ensure that proper control and accountability are maintained over each account in the Indian Trust Funds, something BIA has failed to achieve. Recent BIA efforts to reconcile and audit the Indian trust fund accounts have shown that a complete reconciliation of the accounts would be unreasonably expensive and, for many accounts, impossible. After spending 7 months and more than $1.7 million to gather and organize account information and revise its reconciliation methodology, BIA's contractor is still trying to reconcile the fiscal year 1990 tribal account transactions. Missing records continue to be a problem. The bulk of the problems are internal to BIA--things such as poorly designed accounting systems, weak internal controls, and untrained staff. Some issues, however, are external and not under BIA's control. For instance, BIA depends on accurate and complete land ownership records to properly distribute revenues. Yet audits and studies have uncovered persistent problems with these records. In addition, the accuracy and completeness of information BIA receives from the Minerals Management Service on royalty income has been called into question. Although BIA recognizes the seriousness of the situation, little progress has been made in resolving the problems. GAO recommends that BIA develop a comprehensive strategic plan that will address interfaces between other systems and operations affecting trust fund accounting, such as the land records and reporting by the Minerals Management Service. GAO summarized this report in testimony before Congress; see: Financial Management: Problems Affecting BIA Trust Fund Financial Management, by Jeffrey C. Steinhoff, Director of Civil Audits, before the Senate Select Committee on Indian Affairs. GAO/T-AFMD-92-12, July 2, 1992 (11 pages).

GAO found that: (1) in May 1991, BIA awarded a contract for reconciliation of the Indian trust fund accounts, which involves reconstructing trust account transactions so that account holders are provided the most accurate accounting information possible; (2) BIA and its contractor have since evaluated what the reconciliation effort would entail and have concluded that full reconciliation is neither possible nor cost-effective because of missing records, poor documentation, and the volume of data to review; (3) the projected cost of the reconciliation effort is substantial, and in some cases the cost of reconciling accounts exceeds their value; (4) BIA must address the root cause of its long-standing problems in its trust fund accounting systems, or it will continue to have unreconciled accounts; (5) Congress has directed BIA to develop a plan to improve trust fund financial management, including a method to keep accounts accurate in the future; and (6) although BIA has devised several short-term plans, it has not yet devised a comprehensive plan, which is a critical first step in improving its financial management operations.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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