Indian Programs:

BIA Should Streamline Its Processes for Estimating Land Rental Values

RCED-99-165: Published: Jun 30, 1999. Publicly Released: Jun 30, 1999.

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Pursuant to a legislative requirement, GAO reviewed the Bureau of Indian Affairs' methods of establishing the lease value of Indian land, focusing on: (1) how the Bureau uses appraisals and other methods to establish the lease value of Indian land; (2) how its appraisal methods compare to those of other federal and state agencies and of private appraisers and what other methods are used to value federal, state, and private leases; (3) what impediments to leasing Indian trust land have been identified; (4) what alternatives to appraisals could be used to establish the lease value of Indian land, including any changes in federal laws and regulations that would be required; and (5) what efforts the Bureau has made to improve its appraisal methods.

GAO noted that: (1) the Bureau relies mostly on appraisals to ensure that Indian land is leased for a fair annual rental; (2) however, the Bureau has not defined fair annual rental and does not have a clear policy on how that amount should be determined; (3) GAO found no statutory or regulatory requirement that appraisals be used to establish lease values; (4) under certain circumstances, some Bureau offices use other methods in addition to appraisals; (5) the standards and methods that apply to Bureau appraisers also apply to other appraisers, including other federal, state, and private appraisers; (6) however, managers of other lands also use other methods to establish lease values; (7) according to several private appraisers GAO spoke to, the rents for agricultural leases on private land are often not set by appraisal; (8) however, leases for other uses on private land, such as business uses, may be valued by appraisal; (9) appraisal amounts were considered a particular problem because of Bureau officials' reluctance to approve leases for less than the appraised value; (10) in addition, while Bureau and other appraisers stated that there is no standard for the amount of time it should take to prepare or review an appraisal, some Indian communities expressed frustration with the time taken by the Bureau's processes; (11) in addition to appraisals, other methods are available for establishing lease values in some circumstances; (12) such other methods include advertising for competitive lease bids, conducting market surveys, and applying fee schedules or formulas; (13) laws and regulations do not require the use of appraisals to establish lease values and would not need to be changed for the Bureau to adopt these or other alternative methods to establish rents for leases; (14) Bureau officials said a more comprehensive review of laws, regulations, and court cases would need to be conducted before Bureau-wide changes would be considered; (15) the Department of the Interior is reviewing the Bureau's use of appraisals and is considering improvements to the Bureau's processes; (16) proposed improvements include training realty staff on the circumstances under which appraisals should be requested to limit the number of unnecessary appraisals and automating and thus streamlining the valuation processes for certain types of real estate transactions; and (17) the improvement plan also includes a recommendation that the Bureau develop a system for tracking appraisals to allow more effective use of appraisal resources.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Bureau of Indian Affairs issued regulations on January 22, 2001, that clarify that the Bureau will determine fair annual rental value for leases on Indian lands by appraisal, advertisement, competitive bidding, or any other appropriate valuation method.

    Recommendation: In addition to concurring with the Department of the Interior's ongoing efforts to review and revise the Bureau's appraisal program, The Secretary of the Interior should direct the Commissioner of the Bureau of Indian Affairs to develop a clear policy on how fair annual rental can be estimated using other methods in addition to appraisals, such as market surveys, fee schedules, and formulas, where appropriate.

    Agency Affected: Department of the Interior

  2. Status: Closed - Not Implemented

    Comments: In its initial response to this recommendation, the Bureau indicated that the appraisal chapter of the Indian Affairs Manual for Real Estate Services would be updated, and that the Chief Appraiser would revise the appraisal handbook as needed to reflect changes in the program and to clarify specific appraisal standards and processes. However, the Manual update is still not complete because in June 2002, pursuant to Secretarial Order 3240, the appraisal function was moved from the Bureau's Office of Real Estate Services to the Office of the Special Trustee. According to the Bureau's Chief Appraiser, drafting of the revised handbook has not occurred because of the Department of the Interior's pending consolidation of its appraisal function under the Secretary of the Interior.

    Recommendation: In addition to concurring with the Department of the Interior's ongoing efforts to review and revise the Bureau's appraisal program, The Secretary of the Interior should direct the Commissioner of the Bureau of Indian Affairs to establish consistent standards and guidelines for applying lease valuation methods.

    Agency Affected: Department of the Interior

  3. Status: Closed - Not Implemented

    Comments: In June 2002, Secretarial Order 3240 transferred the Bureau's appraisal function to the Department of the Interior's Office of the Special Trustee. Meanwhile, trust reform has delayed the development of the appraisal tracking system, and the Department has issued a contract with EDS to develop an automated system for trust fund management. The completion date is not yet known. According to the Bureau of Indian Affairs' Chief Appraiser, as of August 2003, development of the tracking system continues to be delayed because of ongoing litigation.

    Recommendation: In addition to concurring with the Department of the Interior's ongoing efforts to review and revise the Bureau's appraisal program, The Secretary of the Interior should direct the Commissioner of the Bureau of Indian Affairs to review the area offices' appraisal tracking data and ensure that the data are consistent and complete so that the Bureau can monitor and make the most effective use of its appraisal resources.

    Agency Affected: Department of the Interior

 

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