oversight

Financial Management: Recommendations on Indian Trust Fund Strategic Plan Proposals

Published by the Government Accountability Office on 1997-11-26.

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

                 United States General Accounting Office

GAO              Report to the Secretary of the Interior




November 1997
                 FINANCIAL
                 MANAGEMENT
                 Recommendations on
                 Indian Trust Fund
                 Strategic Plan
                 Proposals




GAO/AIMD-98-37
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Accounting and Information
      Management Division

      B-278410

      November 26, 1997

      The Honorable Bruce Babbitt
      The Secretary of the Interior

      Dear Mr. Secretary:

      Our July 1997 testimony, Financial Management: Indian Trust Fund
      Strategic Plan, prepared for the Senate Committee on Indian Affairs,
      provides an analysis of the Special Trustee for American Indians’ Strategic
      Plan for Indian trust fund accounting and asset management improvement.
      The testimony (GAO/T-AIMD-97-138, July 30, 1997, a copy of which was
      provided to your office) (1) describes the trust asset management
      problems that the Strategic Plan proposes to resolve, (2) provides a
      high-level summary of the Strategic Plan, (3) explains the basis for the cost
      estimates included in the Strategic Plan, and (4) identifies implementation
      issues. The testimony also contains our assessment of needed actions
      related to the implementation issues that we identified. These needed
      actions concern the implementation timing of certain initiatives, additional
      planning for some proposals, and issues relating to establishing two new
      organizations.

      Subsequent to our testimony, on August 22, 1997, you issued to certain
      high-level Interior officials who have Indian trust responsibilities a
      memorandum that outlines plans that relate to several of the initiatives for
      which we had identified implementation issues. In that memorandum, you
      indicated that you and the Special Trustee for American Indians have
      reached agreement on some of the initiatives proposed in the Strategic
      Plan. Your memorandum outlined the Department’s approach for
      improving Indian trust management and engaging affected Interior
      bureaus and offices in planning and implementing activities for a “trust
      improvements project.”

      The objective of this report is to officially transmit recommendations to
      you based on our assessment of implementation issues contained in our
      testimony and the related actions contemplated in your August
      memorandum. Our work was done in accordance with generally accepted
      government auditing standards from April through October 1997. Our
      scope and methodology are in appendix I. We requested comments on a
      draft of this report from the Secretary of the Interior or his designee. On
      November 24, 1997, Interior officials provided us with oral comments,
      which are discussed in the “Agency Comments” section.




      Page 1                             GAO/AIMD-98-37 Indian Trust Fund Strategic Plan
                   B-278410




                   Our July 1997 testimony identified implementation issues related to
Results in Brief   several of the Strategic Plan’s proposed initiatives. Your August 1997
                   memorandum outlined plans that relate to several of the initiatives for
                   which we had identified implementation issues. There remain, however,
                   some implementation issues not addressed by your memorandum,
                   including the timing of record cleanup and conversion in connection with
                   acquiring the proposed automated accounting system module and the
                   need for additional coordination and planning for proposed major
                   information technology investments. Addressing those issues will enhance
                   the opportunity for successful implementation.


                   As we have reported in the past,1 Interior’s Indian trust fund accounting
Background         and asset management problems are long-standing and permeate all facets
                   of the trust fund management business cycle. They include (1) the lack of
                   accurate, up-to-date information on ownerships to ensure that revenue is
                   distributed to the correct account and the increasing workload associated
                   with fractionated ownerships, (2) inadequate management of natural
                   resource assets resulting in a lack of assurance that all earned revenues
                   are collected, (3) weaknesses in trust fund management systems and
                   internal controls and policies and procedures that result in a lack of
                   assurance about the accuracy of trust fund balances, and (4) the failure, in
                   the past, to invest trust funds consistently and prudently and pay interest
                   to accountholders. These overall weaknesses preclude accountholders
                   from having assurance that their account balances are accurate and that
                   their assets are being prudently managed. The purpose of the Special
                   Trustee’s Strategic Plan was to address these long-standing problems.

                   The following sections contain a brief description of the Strategic Plan
                   implementation issues raised in our testimony, the related actions
                   contemplated in your August 1997 memorandum, our observations on
                   those related actions, and our recommendations.


                   As noted in our testimony, the Strategic Plan proposes that the
Implementation     commercial trust fund accounting and investment system—which is
Timing Issues      currently used for tribal accounts—be expanded to include a module for
                   Individual Indian Money (IIM) accounts. In determining the appropriate
                   timing for acquiring an IIM commercial trust accounting system module,
                   certain questions need to be addressed, including whether to (1) convert

                   1
                   Financial Management: Focused Leadership and Comprehensive Planning Can Improve Interior’s
                   Management of Indian Trust Funds (GAO/AIMD-94-185, September 22, 1994).



                   Page 2                                     GAO/AIMD-98-37 Indian Trust Fund Strategic Plan
                      B-278410




                      all IIM accounts to the new system module 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 module or maintain them separately. Your August 1997
                      memorandum states that the Office of the Special Trustee (OST), in
                      coordination with the Department’s Chief Information Officer (CIO), is to
                      acquire, pilot, and install a core trust accounting system module suitable
                      for both tribal and IIM accounts. However, the memorandum does not
                      address the above IIM record cleanup and conversion questions.


                      Our testimony also noted that the Strategic Plan proposes upgrading or
Proposals That Need   acquiring trust-related systems for land ownership and lease and minerals
Detailed Planning     asset management. However, the Strategic Plan does not adequately
                      address all interrelated business functions and systems within Interior.
                      Further, the Strategic Plan does not provide evidence that sufficient input
                      was obtained from affected Interior agencies. In order to appropriately
                      assess the accounting and asset management systems initiatives proposed
                      in the Strategic Plan, more information and analysis are needed to ensure
                      that all related business functions and information requirements are
                      identified. Also, before proceeding with the major information technology
                      investments proposed by the Strategic 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, including an Information Resources
                      Management Plan, need to be put in place.2

                      Your August 1997 memorandum directs the Office of the Special Trustee,
                      in coordination with the Department’s CIO, and the heads of the Bureau of
                      Indian Affairs, the Bureau of Land Management, and the Minerals
                      Management Service, to evaluate, acquire, and pilot standardized,
                      commercial off-the-shelf general trust management system technology. It
                      also directs that supporting land title and records and minerals royalty
                      systems be evaluated and upgraded as appropriate. The memorandum
                      directs that all trust systems acquisitions be accomplished in compliance
                      with the Clinger-Cohen Act and Office of Management and Budget
                      guidance. We believe it is imperative that Interior follow through with
                      these actions and implement the required processes, structures, and
                      Information Resources Management Plan mentioned previously before

                      2
                       These requirements and other information systems investment guidance are discussed in attachment
                      IV of the testimony.



                      Page 3                                      GAO/AIMD-98-37 Indian Trust Fund Strategic Plan
                       B-278410




                       proceeding with the major information technology investments
                       contemplated in the Strategic Plan.


                       Our testimony discusses the Strategic Plan’s proposals to establish two
Issues Concerning      new organizations outside the Department of the Interior—the American
Establishing Two New   Indian Trust and Development Administration, which would be a
Organizations          government-sponsored enterprise, and the American Indian Trust and
                       Development Bank. Our testimony stated that the Strategic Plan needs to
                       provide more information on each of these proposals in order to support
                       full consideration by the Congress. However, because your August 1997
                       memorandum deferred these proposals, we are not making a
                       recommendation at this time regarding the specific organizational,
                       funding, and legal information that would be needed for congressional
                       decision-making on this issue.


                       Your August 1997 memorandum also stated that the Department will
Other Issues           prepare a high-level implementation plan for its trust improvements
                       project. Department officials told us that the plan is now being developed.
                       At the request of the Senate Committee on Indian Affairs, we plan to
                       monitor Interior’s implementation of the improvement initiatives.


                       Your August 1997 memorandum outlined plans that relate to several of the
Conclusion             initiatives for which we had identified implementation issues in our July
                       testimony. There remain, however, some implementation issues not
                       addressed by your memorandum, particularly in the areas of timing of
                       record cleanup and conversion in connection with acquiring the proposed
                       automated IIM accounting system module and the need for additional
                       coordination and planning for proposed major information technology
                       investments. Addressing these concerns is important to the successful
                       implementation of the improvement initiatives outlined in the Strategic
                       Plan.




                       Page 4                            GAO/AIMD-98-37 Indian Trust Fund Strategic Plan
                      B-278410




                      We recommend that you direct the Special Trustee to work with the
Recommendations       Department’s Chief Information Officer to

                  •   take immediate action to resolve IIM record cleanup and conversion timing
                      questions so that the IIM accounting system module acquisition can move
                      forward;
                  •   identify all related business functions and obtain input on information
                      requirements from all stakeholders 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; and
                  •   comply with legal and regulatory requirements for major information
                      technology investments by developing a strategic Information Resources
                      Management Plan, criteria for the evaluation of major information system
                      investments, and an information architecture that aligns technology with
                      mission goals.


                      Interior officials told us that they generally agree with the conclusions and
Agency Comments       recommendations in this report.


                      This letter contains recommendations to you. The head of a federal agency
                      is required by 31 U.S.C. 720 to submit a written statement of actions taken
                      on these recommendations to the Senate Committee on Governmental
                      Affairs and the House Committee on Government Reform and Oversight
                      within 60 days of the date of this letter. A written statement must also be
                      sent to the House and Senate Committees on Appropriations with the
                      agency’s first request for appropriations made over 60 days after the date
                      of this letter.

                      We are sending copies of this letter to the Chairman and the Vice
                      Chairman of the Senate Committee on Indian Affairs and the Chairmen
                      and Ranking Minority Members of the House Committee on Resources, the
                      Senate Committee on Governmental Affairs, and the House Committee on
                      Government Reform and Oversight. We are also sending copies of this
                      letter to the Director of the Office of Management and Budget and to
                      interested congressional committees and Members of Congress. Copies
                      will be made available to others upon request.




                      Page 5                             GAO/AIMD-98-37 Indian Trust Fund Strategic Plan
B-278410




Major contributors to this letter were Gayle Fischer, Michael Koury, and
Meg Mills. Please call me at (202) 512-8341 if you or your staff have any
questions regarding this report.

Sincerely yours,




Linda M. Calbom
Director, Civil Audits




Page 6                            GAO/AIMD-98-37 Indian Trust Fund Strategic Plan
Page 7   GAO/AIMD-98-37 Indian Trust Fund Strategic Plan
Appendix I

Scope and Methodology


             To describe the trust asset management problems that the Strategic Plan
             proposes to resolve, we reviewed the problems identified in the Strategic
             Plan and relied on our past work and the work of independent public
             accountants Interior contracted with to perform financial statement audits
             and reviews.

             To identify implementation issues, we analyzed the Plan in detail and
             relied on our past work on Indian trust fund accounting and asset
             management issues. We also met with Department of the Interior officials;
             the Special Trustee for American Indians; and officials in the Bureau of
             Indian Affairs, the Bureau of Land Management, and the Minerals
             Management Service, and contacted the Director of Interior’s Office of
             American Indian Trust to obtain their views on the Plan. In addition, we
             reviewed tribal comments on the Plan, which were provided to the Special
             Trustee as a result of his consultation meetings with the tribes.

             We reviewed the contemplated actions outlined in your August 1997
             memorandum to determine whether they responded to implementation
             issues identified in our testimony and discussed them with Department
             officials.




(913813)     Page 8                           GAO/AIMD-98-37 Indian Trust Fund Strategic Plan
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