This is the accessible text file for GAO report number GAO-02-970T
entitled 'Indian Trust Funds: Individual Indian Accounts' which was 
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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 Interiorís 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 Interiorís IIM records. Nevertheless it is clear 
that a reconciliation of IIM accounts is a daunting endeavor, both in 
terms of the magnitude of the projectís 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 Interiorís 
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 
Interiorís 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 tribesí 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. Interiorís 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 Interiorís 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 actís requirement that Interior provide tribes 
with reconciled account statements as of September 30, 1995. 

The tribal portion of Interiorís 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 Interiorís 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 Interiorís earlier account 
reconciliation effort. In our June 1992 report[Footnote 4] on 
Interiorís 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 Interiorís 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 Interiorís 
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: 

Interiorís 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 Interiorís plan satisfies those requirements, or, if so, 
whether Interiorís 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 Interiorís 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 ďIt 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.Ē Interiorís 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: BIAís 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 
Holdersí 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]