Financial Management: BIA Has Made Limited Progress in Reconciling Trust Accounts and Developing a Strategic Plan
AFMD-92-38
Published: Jun 18, 1992. Publicly Released: Jul 02, 1992.
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Highlights
Pursuant to a congressional request, GAO evaluated the Bureau of Indian Affairs' (BIA) efforts to reconcile and audit the Indian trust fund accounts and develop a strategic financial management plan to remedy its long-standing trust fund financial management problems.
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
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Interior | The Secretary of the Interior should direct the Assistant Secretary for Indian Affairs to seek alternatives to the current reconciliation project and develop a proposal for reaching a satisfactory resolution of the trust fund account balances with account holders. In developing this proposal, the Assistant Secretary for Indian Affairs should consider: (1) limiting contractor reconstruction efforts for tribal trust fund accounts to periods for which adequate records are available; (2) accepting audited balances from tribes; (3) negotiating agreements with individual Indians on balances reported on their account statements; or (4) requesting legislated settlements on all or selected accounts, based on the results of the other alternatives. |
Closed – Implemented
BIA limited its contractor's reconstruction efforts to periods for which adequate records were available and excluded Individual Indian Monies (IIM) accounts from the reconciliation effort due to prohibitive costs and difficulties locating records. Although Interior spent over 5 years in a massive effort to locate supporting documentation, it could not fully reconcile the Indian trust fund accounts. Interior brought the reconciliation process to a close in fall 1995 and in January 1996 a report was issued to each tribe on the results associated with its accounts. In November 1997, the Secretary of the Interior sent to the Congress a final report on the reconciliation process with a legislative proposal for resolving disputed account balances where tribes disagree with the reconciliation results. In addition, IIM account balances became the subject of litigation as the result of a class-action lawsuit brought on behalf of IIM account holders. In 2001, Interior created an Office of Historical Trust Accounting (OHTA) and, in July 2002, OHTA formulated a plan to reconstruct all IIM accounts over a 10-year period. As of 2014, the majority of the tribal and IIM trust fund accounts had been settled and the tribes have agreed with their account balances going forward.
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| Department of the Interior | The Secretary of the Interior should direct the Assistant Secretary for Indian Affairs to assess the mission of the Office of Trust Funds Management and conduct a comprehensive review of the entire trust fund operation, including those trust-related activities outside the control and responsibility of the Office of Trust Funds Management (OTFM), to determine how and by whom Indian trust funds can best be managed. |
Closed – Implemented
In January 1992, BIA drafted Phase I of a strategic plan for Indian trust fund management. Issuance of this plan was a necessary first step in addressing long-standing BIA trust fund problems. Phase II of the plan was to later address trust-related activities outside OTFM. However, the American Indian Trust Fund Management Reform Act of 1994 created in the Department of the Interior the position of Special Trustee for American Indians and tasked the Special Trustee with formulating a comprehensive strategic plan for trust fund management. In February 1996, the Secretary of the Interior implemented the Office of the Special Trustee (OST) and moved OTFM out of BIA and into OST. In April 1997, the Special Trustee released his strategic plan, which includes a mission statement and reforms required by the 1994 act.
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| Department of the Interior | The Secretary of the Interior should direct the Assistant Secretary for Indian Affairs to prepare an organization and staffing analysis to determine appropriate roles, responsibilities, authorities, training, and supervisory needs as a basis for sound trust fund management. |
Closed – Implemented
BIA concurred with this recommendation and contracted with a management consulting firm for an organization and staffing study of OTFM and of OTFM-related functions in its area and agency offices. The OTFM study was completed in November 1992, and the area and agency study was completed in March 1993. These studies contain a number of recommendations which, if acted upon, should improve trust fund operations.
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| Department of the Interior | The Secretary of the Interior should direct the Assistant Secretary for Indian Affairs to review current systems as a basis for determining whether systems modifications will most efficiently bring about needed improvements or whether alternatives should be considered, including cross-servicing arrangements, contracting for ADP services, or new systems design and development. |
Closed – Implemented
In March 1994, Interior approved BIA's proposal for OTFM to contract for an interim core general ledger and investment system. BIA implemented the new core general ledger and investment accounting system on April 3, 1995. The American Indian Trust Fund Management Reform Act of 1994 created in the Department of the Interior the position of Special Trustee for American Indians and tasked the Special Trustee with formulating a comprehensive strategic plan for trust fund management. In February 1996, the Secretary of the Interior implemented OST and moved OTFM out of BIA and into OST. As a basis for his strategic plan, the Special Trustee contracted for an OST/OTFM needs analysis, including systems needs. In April 1997, the Special Trustee released his strategic plan, which includes initiatives to: (1) acquire an accounts receivable subsystem; (2) upgrade BIA's existing Land Records system; and (3) develop a master lease subsystem.
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Accounting proceduresAuditing proceduresCivil auditsComputer services contractsFederal agency accounting systemsFederal records managementFinancial managementFunds managementTrust fundsCongressional-Executive relations