Financial Management: The Indian Trust Fund Strategic Plan

Published by the Government Accountability Office on 1997-09-02.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Accounting and Information
      Management Division


      September 2, 1997

      The Honorable Ben Nighthorse Campbell
      Committee on Indian Affairs
      United States Senate

      Subject:    F!inancial Management:   The Indian Trust F’und Strategic Plan

      Dear Mr. Chairman:

      Enclosed are responses to the questions that you asked subsequent to our
      testimony during your July 30, 1997, oversight hearing on “the Special Trustee’s
      Strategic Plan to Reform the Management of Indian Trust Funds.” (See

      I hope that this information is.helpful. If you have further questions, or would
      like to discuss any of the issues in more detail, please contact me at
      (202) 5128341 or Gayle Fischer, Assistant Director, at (202) 512-9577.

      Sincerely yours,

      Linda M. Calbom
      Director, Civil Audits


                               GAO/AlMD-97-161R   Indian Strategic Plan Testimony &s&As
ENCLOSURE                                                                    ENCLOSURE


Question 1: In your view, does the entire Strategic Plan need to be put on hold?

GAO Resnonse: No, it does not. As our testimony’ indicates (pages lo-14), some
proposals can move forward quickly and others require more detailed planning or added
information. For example, the Office of Trust Funds Management’s (OTFM) cleanup of
Individual Indian Money (IIM) records is already underway and the Bureau of Indian
Affairs (BJA) should proceed with the clean up of appraisal, ownership, and lease records.
The Special Trustee proposes that this work be outsourced to independent contractors
due to inadequate resources. This proposal is consistent with our past recommendations.

The JIM commercial trust accounting system component also should be able to move
forward once certain questions are addressed. These include whether to (1) convert all
IIM accounts to the new system immediately, or convert them as they are cleaned up,
(2) identify and archive inactive accounts before conversion, and (3) convert small-
balance or pass-through accounts (zero balance accounts where receipts are immediately
withdrawn) to the new system or maintain them separately.

However, as we testified, other systems proposals, such as those for acquiring lease and
ownership system components, need more detailed planning to ensure effective
implementation.    Before proceeding with these information technology investments, the
following need to be developed to lessen the risk of acquiring systems that will not meet
business needs: (1) criteria for the evaluation of major information system investments,
(2) an information architecture which aligns technology with mission goals, and (3) a
strategic Information Resources Management plan.

In addition, we testified that more information and analysis need to be provided to the
Committee on the proposal for a new organization, its relationship to ‘the Department of
the Interior, and its funding and authority. We also testified that more information and
analysis are needed before proceeding with the establishment of the American Indian
Trust and Development Bank.

Question 2: Does the Strategic Plan address settlement issues or related issues such as
            land fractionation?

%‘inancial Management:   Indian Trust Fund Strategic Plan (GAOiT-AIMD-97-138,
July 30, 1997).

2                              GAO/AIMD-97-161R    Indian Strategic Plan Testimony Q&As
ENCLOSURE                                                                      ENCLOSURE

GAO Resnonse: The Strategic Plan does not address settlement issues. It does, however,
address fractionated land ownership. Phase I of the Plan refers-to the Department’s
legislative proposal to consolidate fractionated ownership interests. Under Phase II of the
Plan, the American Indian Trust and Development Bank would be allowed to invest up to
$300 million for the purchase, holding, and financing of Indian fractionated realty
interests on allotted lands.

Question 3:   Do you think the plan has been thoroughly researched with regard to how
              the AITDA [American Indian Trust and Development Administration] will
              assume functions currently performed by the BIA?

GAO Resnonse: As discussed in our written testimony (pages 11 and 12) the Strategic
Plan does not adequately address how proposals for establishing a centralized
organization responsible for trust fund accounting and asset management would be
implemented. The Plan was developed without sufficient input from affected Interior
agencies such as BIA, the Bureau of band Management, the Minerals Management Service,
and the Office of American Indian Trust. Changes in trust systems outlined in the Plan
could have major effects on the business processes and practices in these agencies. The
Plan needs to be more fully developed to (1) provide adequate evidence of a framework
for sharing related business and functional information and program requirements among
the cognizant organizations and functions and (2) support the design and development of
management and information systems.

Question 4: As you indicated in your testimony, the Strategic Plan would create a
            separate independent entity, referred to as the American Indian Trust and
            Development    Administration.     This entity would be established as a
            government sponsored enterprise (GSE). Does the proposed AITDA fit the
            mold of other government chartered enterprises?

GAO Resnonse: As outlined in our written testimony (page 13), AITDA, as proposed in
the Strategic Plan, does not fit the mold of other GSEs. GSEs are typically private
corporations. The Strategic Plan proposes that AITDA receive appropriations.      In
addition, the Plan proposes that AITDA oversee the functions of various Interior agencies.
Typically, nonfederal entities are privately financed, and they do not have oversight
responsibilities for federal agencies. Figure I presents a comparison of the key attributes
of various types of public and private entities.

3                             GAO/AIMD-97-161R     Indian Strategic Plan Testimony Qs&As
        ENCLOSURE                                                                                                                         ENCLOSURE

Figure 1: Comparison ol public and Private Entities

                                     PUMIC                                                                            Private
                             Owned and controlled                                                               owned
                              by Be pubfii sector                                                               by the private ssctor

            Government                                                                        Govemment-
            department/                                                                        sponsored
              agency                                                                            enterprise

  Attributes      I
    l   Funded by the U.S.                     l       Fully or partially            l       Typically ffnanced by                l       Privately owned/
        government                                     funded by the U.S.                    private investors                            controlled
    l   Strict adherence to                                                          l       Privately owned!                     . Profitseeking
        federal steMes and                     . Some flexibilii in                          controlled
        regulations throughout                   adherence to federal
        operation                                statues and regulation              l       Credit markets
                                                                                             perceive implied
                                               l       Independent or part of                financial backing by
                                                       a government                          the U.S. government
                                                                                     l       Regulated by U.S.
                                                   l   Generally created to                  government
                                                       serve a public                        to protect the
                                                       function of a                         governments interest
                                                       business nature               l       Profitseeking

    l   Department of                          l       Tennessee Valley                  l   Federal National                     l       International Business
        Commerce                                       Authority (TVA)                       Mortgage Aswciatictn                         Machines (IBM)
                                                                                             (Fannie Mae)
    l   Departmentof Energy                    l       RuralTelephone                                                                 l   Procter 8 Gamble
                                                       Sank (RTB)                        l   Federal Home Loan
                                                                                             Mortgage Corporation
                                                                                             (Freddie Mac)

                                 I                                              I                                                                                  I

  Public                                                                                                                                                     Private

        Source:           Government Col-oorations: Proiiles of Existing Government CorDorations
                          (GAO/GGD-9614, December 13, 1995)

        4                                                  GAOIAMD-97-161R          Indian Strategic Plan Testimony Q&Z&
ENCLOSURE                                                                      ENCLOSURE

Question 5: Regarding the costs associated with the plan, you indicated it would cost
            $168 million for fiscal years 1997 - 1999 for a broad- range of systems
            improvements, such as backlog cleanup, land title and records systems, and
            information technology infrastructure.   Is it reasonable to assume that if
            adequate funding were available, that all of these components could be put
            in place as proposed? And what would be some factors that may alter this
            proposal, namely existing statutory requirements?

GAO Resnonse: The Strategic Plan includes budget estimates indicating that about
$168 million would be needed for fiscal years 1997 through 1999 and approximately
$61 million and $56 million in fiscal years 2000 and 2001, respectively, for implementing
Phase I initiatives. We did not attempt to validate the estimates presented in the Plan or
their underlying assumptions, nor did we assess whether the estimates included all
necessary costs of full implementation of the Plan. However, our written testimony
(‘pages 11 through 14) identifies a number of areas where more information or analysis is
needed before certain organization and systems proposals in the Plan can move forward.

Although our work identifies key issues that the Congress needs to consider in deciding
whether to approve the initiatives described in the Plan, it is by no means all inclusive.
Also, there are other issues yet to be idenmed which could affect this estimate. For
example, as stated in our written testimony (page 12), before proceeding with the major
information technology investments proposed by the Plan, the processes and structures
required by the Paperwork Reduction Act of 1995, the Clinger-Cohen Act of 1996, and
Office of Management and Budget guidance for funding information systems investments
need to be put into place.


5                             GAO/AIMD-97-161R      Indian Strategic Plan Testimony Qs&As
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