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United States General Accounting Office: 


Before the Committee on Indian Affairs, U.S. Senate: 

For Release on Delivery: 
Expected at 10:00 a.m.	
Thursday, February 7, 2002: 

Indian Trust Funds: 

Tribal Account Balances: 

Statement of McCoy Williams, 
Acting Director, Financial Management and Assurance: 

Mr. Chairmen and Members of the Committee: 

I am pleased to be here today to summarize observations from our past 
work regarding Indian tribal trust fund accounts. 

In a June 1993 letter to this committee, we noted that the 
appropriations acts for the Department of the Interior had for many 
years contained a provision that tolled the statute of limitations on 
claims for losses to, or mismanagement of, tribal trust funds until 
the tribe had been furnished with an accounting of its funds from 
which the tribe could determine whether there had been a loss. We also 
noted that the parties envisioned that such an accounting would result 
from Interior's then-ongoing reconciliation and audit of the tribal 
trust fund accounts, which the congress had mandated. 

At that time, we expressed our view that until there was a mutually 
acceptable basis for determining account balances and any associated 
losses, it would be premature to allow the statute of limitations to 
run. We observed that tolling the statute of limitations until 
reconciliation and audit of an account was completed, or until some 
mutually acceptable agreement was reached as to the account balance, 
had two overall purposes. First, it provided all interested parties, 
including accountholders, Interior, and the Congress, an opportunity 
to examine and evaluate all pertinent account information. Second, it 
permitted interested parties to attempt to resolve all claims arising 
from Interior's management of the accounts rather than addressing 
specific claims in a piecemeal fashion. 

The Congress first established an Indian trust fund account 
reconciliation requirement in the Supplemental Appropriations Act of 
1987. The requirement was in response to tribes' concerns that 
Interior had not consistently provided them with statements on their 
account balances, their trust fund accounts had never been reconciled, 
and Interior planned to contract with a third party for management of 
trust fund accounts. 

The original provision required that the accounts be audited and 
reconciled before the Bureau of Indian Affairs (BIA) transferred funds 
to a third party. A provision in 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. In 1994, the Congress, 
through the American Indian Trust Fund Management Reform Act of 1994 
(Pub. L. 103-412, 108 Stat. 4239; Oct. 25, 1994), required the 
Secretary of the Interior to provide tribes with reconciled account 
statements as of September 30, 1995. 

To fulfill these requirements, 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 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. 

Interior's Indian trust fund account reconciliation project was 
completed 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. In January 1996, Interior began providing to each tribe a 
report package containing the tribe's reconciliation results. Each 
package included unreconciled account statements with schedules of 
proposed adjustments based on reconciliation project results for each 
year covered by the reconciliation, and a transmittal letter that 
described the information provided. 

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 on shortcomings 
of Interior's reconciliation project.[Footnote 1] The shortcomings 
consisted of procedures that were not completed due to missing 
records, systems limitations, or time and cost considerations. 
Attachment I to my statement describes the major shortcomings presented 
in our 1996 report. 

From 1992 through 1997, we monitored and reported on various aspects 
of Interior's planning, execution, and reporting of results for the 
reconciliation project. In May 1997, we reported[Footnote 2] to this 
committee that as of May 6, 1997, Interior had provided reconciliation 
reports to 310 tribes, 51 of those tribes had disputed the 
reconciliation results, and 41 had accepted the results. Of the 
remaining 218 tribes, 47 had requested more time to consider the 
results, and 171 had not responded to the reconciliation results. 
Attachment II is a list of GAO products issued between 1992 and 1997 
on various aspects of Interior's Indian trust fund reconciliation 

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. 

I would be pleased to respond to any questions that you or other 
members of the committee may have. 

[End of section] 

Attachment I: Reconciliation Project Shortcomings: 

Basic (Noninvestment) Transaction Reconciliation Procedure: The basic 
transaction reconciliation segment of the project included tracing 
251,432 noninvestment transactions that had been recorded in the 
general ledger to source documents such as deposit tickets and 
disbursement vouchers. The total value of these receipt and 
disbursement transactions was $17.7 billion. Due to missing records, 
32,901 of the transactions, with a total value of $2.4 billion (14 
percent of the total value of the transactions), could not be 
reconciled. In addition to the limitation related to the unreconciled 
transactions, this segment focused only on transactions that had 
already been recorded in the general ledger, and no reconciliation 
procedure was performed to address the completeness of the general 
ledger itself. 

Investment Transaction Reconciliation Procedure: The reconciliation 
contractor also did individual testing of $21.3 billion, or 16 
percent, of the recorded investment transactions. However, to achieve 
efficiencies, Interior and the contractor substituted a review of 
tribal account investment yields for individual transaction testing 
for the remaining investment transactions. 

Fill the Gap (Leases) Procedure: Another segment of the project 
reconciled collections for certain tribes with a sample of lease 
documents and timber sales contracts. Initially, the contractor was to 
review all leases greater than $5,000 and a test sample of 100 
additional leases of less than $5,000 on a cross section of tribes. 
The reconciliation contractor identified 6,446 surface leases with 
annual collections of over $5,000. However, due to time constraints 
for completing the reconciliation, only 692 leases-10.7 percent of the 
leases originally identified for testing--were tested. In addition, 
because of missing records, a number of leases, and sample test months 
for timber contracts, were substituted for those in the original 

Systems Reconciliation Procedures: The systems reconciliation was to 
include reconciling (1) information in the trust fund investment 
system to the General Ledger in the Finance System, (2) the tribal 
general ledger in the Finance System to U.S. Treasury records, and (3) 
the Integrated Records Management System (IRMS) subsidiary records to 
the Finance System general ledger. The latter two reconciliations 
could not be performed or completed due to time and funding 
limitations, according to Interior officials. 

Tribal IIM and Special Deposit Accounts Reconciliation Procedure: 
Interior maintained some UM accounts for tribes in the IRMS accounting 
system. It also used Special Deposit accounts primarily as clearing 
accounts for funds received that had not been distributed to account 
holders because the account owners had not been identified. Due to 
missing records and the lack of an audit trail through IRMS, tribal 
transactions could not be efficiently isolated from individual Indian 
transactions. Because of this, tribal UM accounts maintained in IRMS 
were not reconciled to source documents, and Special Deposit accounts 
were not reconciled with source documents that moved funds to tribes' 
general ledger accounts, as had been planned. 

Fill the Gap (Minerals Management Service) Reconciliation Procedure: 
Interior's Minerals Management Service (MMS) collects and accounts for 
oil and gas royalties on Indian leases. The reconciliation project was 
to include some procedures to trace collections from the leases, 
through MMS, to the general ledger maintained by BIA. However, because 
MMS retained records for only 6 years, records for most of the 20-year 
reconciliation period were not available, and alternative procedures 
at MMS were not performed due to time constraints. 

Certification Procedure: Interior's fiscal year 1990 appropriations 
act required a separate, independent certification that the accounts 
had been reconciled and audited to the earliest possible date and that 
the results were the most complete reconciliation possible. However, 
BIAs certification contract required that the certification contractor 
ensure only that the reconciliation effort was performed in accordance 
with the reconciliation contract and no independent assessment of 
completeness was required. In addition, because of cost and time 
constraints, the certification contract was terminated before the 
certification contractor completed its verification that the 
procedures in the reconciliation contract were performed. The 
certification contractor issued a status letter, which communicated 
preliminary results. However, because the certification work was 
performed while the reconciliation was in process and the 
certification procedures were not completed, the usefulness of the 
status letter is limited. 

Individual Indian Accounts Reconciliation Procedures: Accounts for 
individual Indians were excluded from the reconciliation project due 
to the potential lack of supporting documents and the cost and level 
of effort that would be needed to include them in the project. 

[End of section] 

Attachment II: Related GAO Products: 

Indian Trust Funds: Tribal Account Holders' Responses to 
Reconciliation Results. [hyperlink,]. Washington, D.C.: May 
23, 1997. 

Responses to Questions from June 11, 1996, Hearing. [hyperlink,]. Washington, D.C.: June 
24, 1996. 

Financial Management: Interior's Management of the Indian Trust Funds. 
Washington, D.C.: June 18, 1996. 

Financial Management: Interior's Efforts to Reconcile Indian Trust 
Fund Accounts and Implement Management Improvements. [hyperlink,]. Washington, D.C.: June 
11, 1996. 

Financial Management: BIA's Tribal Trust Fund Account Reconciliation 
Results. [hyperlink,]. 
Washington, D.C.: May 3, 1996. 

Financial Management: Indian Trust Fund Accounts Cannot Be Fully 
Reconciled. [hyperlink,]. 
Washington, D.C.: March 8, 1995. 

Responses to Questions from September 26, 1994, Hearing. [hyperlink,]. Washington, D.C.: 
December 2, 1994. 

Financial Management: Focused Leadership and Comprehensive Planning 
Can Improve Interior's Management of Indian Trust Funds. [hyperlink,]. Washington, D.C.: 
September 26, 1994. 

Financial Management: Focused Leadership and Comprehensive Planning 
Can Improve Interior's Management of Indian Trust Funds. [hyperlink,]. Washington, D.C.: 
September 22, 1994. 

Response to Questions on Two Recommendations in April 12, 1994, 
Testimony. [hyperlink,]. 
Washington, D.C.: June 10, 1994. 

Letter on BL4 Trust Fund Reconciliations. [hyperlink,]. Washington, D.C.: April 
25, 1994. 

Financial Management: Status of BIA's Efforts to Reconcile Indian 
Trust Fund Accounts and Implement Management Improvements. [hyperlink,]. Washington, D.C.: April 
12, 1994. 

Financial Management: BIA's Management of the Indian Trust Funds. 
[hyperlink,]. Washington, 
D.C.: September 27, 1993. 

Response to Request for Views on Freeze of the Statute of Limitations 
on Claims against the United States Arising from BIA Management of 
Tribal and Individual Trust Funds. [hyperlink,]. Washington, D.C.: June 
4, 1993. 

Financial Management: BIA Has Made Limited Progress in Reconciling 
Trust Accounts and Developing a Strategic Plan. [hyperlink,]. Washington, D.C.: June 
18, 1992. 

[End of section] 


[1] U.S. General Accounting Office, Financial Management: BIA's Tribal 
Trust Fund Account Reconciliation Results. [hyperlink,]. Washington, D.C.: May 3, 

[2] U.S. General Accounting Office, Indian Trust Funds: Tribal Account 
Holders' Responses to Reconciliation Results. [hyperlink,]. Washington, D.C.: May 
23, 1997. 

[End of section] 

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