oversight

Indian Programs: BIA's Management of the Wapato Irrigation Project

Published by the Government Accountability Office on 1997-05-28.

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

                  United States General Accounting Office

GAO               Report to Congressional Requesters




May 1997
                  INDIAN PROGRAMS
                  BIA’s Management of
                  the Wapato Irrigation
                  Project




GAO/RCED-97-124
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Resources, Community, and
      Economic Development Division

      B-276157

      May 28, 1997

      The Honorable Slade Gorton
      Chairman
      The Honorable Robert C. Byrd
      Ranking Minority Member
      Subcommittee on Interior and
        Related Agencies
      Committee on Appropriations
      United States Senate

      The Honorable Patty Murray
      United States Senate

      The Honorable Richard Hastings
      House of Representatives

      In the late 1800s, the Congress began authorizing funds for the
      construction of Indian irrigation projects. Such projects were constructed
      primarily to enhance the economic development of Indian reservations or
      to meet federal legal obligations. Currently, the Bureau of Indian Affairs
      (BIA) administers over 70 projects that deliver water to about 1 million
      acres of reservation land.

      The Wapato Irrigation Project is located within the boundaries of the
      Yakama1 Indian Reservation in Yakima County, Washington, and irrigates
      about 142,000 acres. Some of the irrigated land is held in trust for
      individual Indian landowners and for the Yakama Indian Nation by the
      United States, and some is privately owned. The costs of operating and
      maintaining the project, which BIA has designated as self-sustaining, are to
      be covered by annual assessments against all irrigable acres. Individual
      Indian landowners may pay the assessment themselves or lease their lands
      to lessees who agree to pay the assessment. Alternatively, BIA may lease
      lands on behalf of the Indian landowners. Neither the Indian landowners
      nor BIA is required to lease Indian trust lands. BIA does not lease privately
      owned (nontrust) land.

      The project has contributed substantially to the local economy. In 1994,
      the total market value of crops raised on land irrigated by the project was
      $152 million. Over the years, however, the project has fallen into disrepair,


      1
      P.L. 103-434, title XII, section 1204(g), dated Oct. 31, 1994, changed the spelling of the Yakima Indian
      Nation back to the original spelling of Yakama. The spelling of the county’s name was not changed.



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                   and many irrigated acres are idle (not in agricultural production).
                   Estimates of the costs to repair the project and bring it up to operating
                   standards range from about $100 million to $200 million.

                   The Senate Committee on Appropriations is concerned about the viability
                   of the project in light of reports issued by the Department of the Interior’s
                   Office of Inspector General that found significant problems with the
                   project’s management.2 To supplement this work, you asked us to further
                   investigate (1) the key reasons for the project’s idle acreage and the steps
                   that can be taken to return these lands to production, (2) the principal
                   reasons why operation and maintenance assessments for the project are
                   past due, and (3) the obstacles that BIA will face in trying to collect the past
                   due operation and maintenance assessments.


                   BIA officials estimate that approximately 30,000 acres, or 21 percent of the
Results in Brief   project’s acreage, are currently idle. These lands are out of production for
                   a variety of reasons, including changing farm economics and poor soil
                   conditions. In addition, BIA has not often exercised its authority to grant
                   leases on behalf of Indian landowners who have not leased the lands
                   themselves. In 1996, BIA decided to exercise its authority to grant leases
                   more often and began marketing the idle lands more extensively.

                   Over the last decade, uncollected operation and maintenance assessments
                   have accumulated to a total of $7.3 million, excluding interest, penalties,
                   and fees. BIA’s practice of deferring the collection of operation and
                   maintenance assessments for idle trust land is the main reason why
                   assessments are past due. Deferred collections on idle trust land account
                   for $5.5 million in past due assessments. The remaining $1.8 million in past
                   due assessments consists of delinquent payments from lessees of Indian
                   trust land and from owners of nontrust land. BIA has not aggressively
                   attempted to recover any of the $7.3 million in past due assessments.

                   The biggest obstacle to the collection of past due assessments is BIA’s
                   belief that assessments on idle trust land are not justified. Moreover,
                   because BIA has not collected past due assessments in a timely manner,
                   federal and state statutes of limitations preclude the agency from using
                   certain methods to collect the older assessments. For example, the federal
                   statute of limitations for using administrative offsets, such as deductions

                   2
                    Indian Irrigation Projects, Bureau of Indian Affairs (Rpt. No. 96-I-641, Mar. 29, 1996), Wapato
                   Irrigation Project, Bureau of Indian Affairs (Rpt. No. 95-I-1402, Sept. 30, 1995), and Operation and
                   Maintenance Assessments of Indian Irrigation Projects, Bureau of Indian Affairs (Rpt. No. 88-42,
                   Feb. 3, 1988).



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             from federal income tax refunds, is 10 years. When BIA has collected past
             due assessments through land sales, it has not, since August 1991, returned
             the funds to the project as required by law. Instead, it has deposited the
             funds in special accounts, anticipating that the past due assessments
             would eventually be canceled and the funds could then be returned to the
             landowners. As of December 1996, the balance in the special accounts was
             about $103,000.


             The Wapato Irrigation Project is one of the oldest and largest irrigation
Background   projects operated by BIA. The project consists of three
             units—Wapato-Satus, Toppenish-Simcoe, and Ahtanum—and irrigates
             approximately 142,000 acres. The Wapato-Satus Unit accounts for about
             95 percent of the total acreage within the project. Ownership of the
             142,000 acres is split between Indians and non-Indians; Indians own
             55 percent, and non-Indians own the remaining 45 percent. The title to the
             Indian-owned land is held in trust for individual Indians and the Yakama
             Indian Nation by the United States.3 Most of the project’s acreage held in
             trust is leased to non-Indians for agricultural purposes. See appendix I for
             a map of the project.

             The project is operated and maintained by BIA’s Wapato Irrigation Project
             Office, located in Wapato, Washington. BIA’s Yakama Agency Office,
             Branch of Real Estate Services, located in Toppenish, Washington, has the
             authority to lease Indian trust land within the project on behalf of
             individual Indians. See appendix II for an organizational chart showing
             these BIA offices. The Yakama Indian Nation handles the negotiation of
             leases for tribal trust land. Private landowners farm or lease nontrust land
             within the project.

             In 1960, BIA classified the project as self-sustaining; that is, BIA considered
             the project’s lands capable of supporting the full amount of the project’s
             annual operation and maintenance costs. Therefore, BIA’s regulations
             require that all irrigable lands within the project be assessed annual
             operation and maintenance charges that cover the full costs of delivering
             water, including the day-to-day operation and maintenance costs plus an
             allowance for rehabilitation and replacement as necessary. The total
             estimated annual costs are to be divided by the total number of irrigable

             3
              Originally, all of the Yakama Indian Reservation was owned by the Yakama Indian Nation. Over time,
             portions of the reservation were allotted to individual Indians or sold to non-Indians. For more
             detailed information on land ownership on Indian reservations, including the Yakama Indian
             Reservation, see Indian Programs: Profile of Land Ownership at 12 Reservations (GAO/RCED-92-96BR,
             Feb. 10, 1992).



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                            acres to determine the annual assessment rate. The base assessment rate
                            for the Wapato-Satus Unit for 1996 was $40 per acre.4

                            The project’s operation and maintenance problems are well documented.
                            Since 1990, BIA, the Yakama Indian Nation, the Bureau of Reclamation, and
                            the Department of the Interior’s Office of Inspector General have issued at
                            least seven reports on the project’s deteriorated physical condition. In its
                            1995 report on the project, the Inspector General recommended, among
                            other things, that BIA (1) develop assessment rates for the project that fully
                            cover the costs of properly operating and maintaining it and of
                            rehabilitating or replacing its infrastructure; (2) comply with the
                            Department of the Interior’s billing regulations and procedures, which
                            require that all owners or users of water on the project’s lands be billed an
                            annual assessment charge; and (3) enforce debt collection procedures. BIA
                            generally concurred with these recommendations and, in August 1995,
                            established a task force to address the Inspector General’s findings and
                            recommendations, set forth in reports that go back to 1988. The task force
                            is implementing these recommendations at 3 BIA power projects and 18
                            Indian irrigation projects, including the Wapato Irrigation Project. As of
                            March 31, 1997, the task force’s work was still ongoing.


                            BIA officials estimate that approximately 21 percent of the project’s
Factors Contributing        acreage is idle. Changing farm economics, poor soil conditions, BIA’s past
to Idle Trust Land          leasing practices, and high appraised rental values have contributed to
                            keeping these lands out of productive use. BIA revised its leasing practices
                            in 1996, in an effort to move the idle lands into productive use.


Changing Farm Economics     Over time, the project’s farm economy has deteriorated. In the early to
and Physical Deficiencies   mid-1980s, high interest rates and low crop prices further depressed the
                            project’s farm economy. Some farmers had to reduce operations, while
                            others—particularly small “mom and pop” operators—quit farming
                            altogether. According to project officials, about 30,000 acres—or about
                            21 percent of the land served by the project—were idle in 1996, including
                            24,000 acres of Indian trust land and 6,000 acres of nontrust land.

                            The inventory of idle trust land includes small and isolated parcels, parcels
                            with poor-quality soil, and parcels with poor drainage—all of which limit
                            their leasing potential. The size of a typical parcel on the reservation is 80


                            4
                             Because of the lower cost of providing irrigation water for the two smaller units—Toppenish-Simcoe
                            and Ahtanum—the 1996 assessment rate for these two units was $10 per acre.



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                      acres for irrigated agricultural land. The farmable area of some parcels is
                      reduced by features such as irrigation canals, residences, and uneven
                      terrain (gullies and steep slopes).

                      Over the project, the soil varies in quality, depth, and drainage, from
                      shallow, gravelly soil in the floodplain of the nearby Yakima River to
                      richer, deeper soil near the foothills. Several studies issued during the past
                      10 years have found severe soil limitations associated with portions of the
                      project’s idle land. BIA has identified about 8,000 acres of idle trust land
                      with high alkaline or saline content or excessive gravel that would
                      preclude the growth of some crops or require reclamation practices to
                      make the land productive. Where remediation is feasible, repeated
                      leaching and draining would be required to reduce the soil’s alkalinity or
                      salinity.


BIA’s Leasing and     Although BIA generally has no control over the economic and physical
Appraisal Practices   factors that have contributed to the idling of trust land, it does have more
                      authority than it has exercised, until recently, over the leasing process.
                      Specifically, the Superintendent of BIA’s Yakama Agency Office has the
                      authority to grant leases on behalf of individual Indian landowners, but
                      former superintendents did not often exercise this authority. The current
                      superintendent, appointed in October 1996, plans to exercise his authority
                      more often. However, the lands’ unrealistically high appraised rental
                      values pose an obstacle to leasing. BIA has also expanded its advertising of
                      idle lands available for lease.

                      Individual Indian landowners have the authority to grant leases on their
                      land. A new lease agreement can be entered into starting 1 year before an
                      existing lease expires. If, after 3 months, the individual landowner or
                      landowners have not negotiated a new lease, BIA can begin acting on the
                      landowner’s or landowners’ behalf, advertising the available land and
                      trying to find a lessee. If a lessee is found, the superintendent can choose
                      either to obtain the consent of the landowner(s)—who thereby grant the
                      lease—or to grant the lease on behalf of the landowner(s). Former
                      superintendents sought to obtain the consent of Indian landowners rather
                      than exercise their authority to grant leases.

                      Obtaining the consent of a parcel’s Indian landowner(s) can be
                      burdensome because the ownership of many parcels on the Yakama
                      Indian Reservation is highly fractionated. As we reported in
                      February 1992, over one-third (2,236) of the reservation’s parcels had



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                       multiple owners, while just under two-thirds (3,823) had a single
                       owner—usually the Yakama Indian Nation.5 For example, the most highly
                       fractionated parcel had 162 owners. To lease fractionated parcels, BIA
                       formerly obtained the approval of owners representing a majority of the
                       interests in the parcel. To prevent land from remaining idle when BIA is
                       unable to locate enough landowners to obtain their consent to lease a
                       parcel, the current superintendent has decided to exercise his authority to
                       grant a lease on behalf of the Indian landowners.

                       The superintendent is generally required to lease Indian trust land at its
                       “present fair annual rental value.” According to the superintendent, he
                       relies on appraisals prepared by BIA’s Portland Area Office’s Real Estate
                       Service Team to determine the property’s present fair annual rental value.
                       However, the appraisals for idle trust properties do not take into account
                       the fact that some idle lands require rehabilitation. For example, land that
                       is idle for a number of years becomes overgrown with weeds and other
                       vegetation; such land requires work before it can be cultivated.
                       Nevertheless, BIA appraises the idle land at the same value as land that is
                       being actively farmed, not taking into account the investment needed to
                       reclaim the land. As a result, the appraised values for idle lands often
                       exceed the rents that farmers are willing to pay. The superintendent stated
                       that he is reluctant to grant or approve leases at significantly less than the
                       appraised values and noted that the current appraised rental values for
                       idle lands present an obstacle to his leasing these lands in the future.

                       In the past, BIA’s limited advertising of idle trust land also restricted leasing
                       opportunities. The agency’s former marketing strategy was limited to
                       “word of mouth” and advertising in local newspapers. In 1996, BIA’s
                       Yakama Agency Office expanded its advertising of trust land available for
                       lease to newspapers in Seattle, Portland, and Spokane. However, the 1996
                       bid cycle still produced very limited results. Only about 88 of the 632
                       advertised irrigated parcels within the Wapato-Satus Unit received bids.
                       The office is planning to continue expanding its advertising, perhaps to
                       additional newspapers, trade journals, and the Internet.


                       BIA’spractice of deferring the collection of operation and maintenance
Factors Contributing   assessments from the owners of idle trust land is the main reason why
to Past Due            assessments for the project are past due. In addition, some lessees of
Assessments            Indian trust land and some owners of nontrust land have not paid their
                       assessment bills. Finally, BIA has not aggressively attempted to collect the

                       5
                        See footnote 3.



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                              assessments owed. As a result, past due assessments have accumulated,
                              totaling $7.3 million—excluding interest, penalties, and fees—over the life
                              of the project. However, through 1984, the project received annual
                              appropriations from the Congress to cover the uncollected assessments.
                              Since fiscal year 1984, when the Congress authorized the establishment of
                              an interest-bearing account for collections, the project has earned
                              $3.6 million in interest from its operation and maintenance collections to
                              partially offset the uncollected assessments. However, neither the
                              appropriations nor the interest earnings canceled the past due
                              assessments.


BIA’s Deferral of             Deferred collections on idle trust land account for $5.5 million of the total
Collections and Practice of   $7.3 million in past due assessments, some of which date as far back as
Not Taking Aggressive         1926. BIA assumed that because the land was not being leased, the Indian
                              landowners would not be able to pay their assessments. According to BIA’s
Collection Action             manual, when assessable Indian trust land is idle and assessments are
                              “impossible” to collect during the current irrigation season, bills “shall be
                              prepared and kept on file.” The Department of the Interior’s Inspector
                              General reported in 1995 that BIA did not provide any analysis to support
                              its assumption that operation and maintenance assessments for idle trust
                              land were uncollectible.6 BIA prepares assessment bills for the idle trust
                              land but does not mail them to the Indian landowners. Past due
                              assessments become a lien against the Indian trust land, and their
                              collection is deferred until the land is sold.

                              The remaining $1.8 million of the total $7.3 million in past due assessments
                              consists of delinquent payments from lessees of Indian trust land and from
                              owners of nontrust land. Currently, the lessees of Indian trust land owe
                              about $1.2 million and the owners of nontrust lands owe about
                              $0.6 million. Table 1 breaks down the past due assessments owed by the
                              owners of idle trust land, the lessees of trust land, and the owners of
                              nontrust land.




                              6
                               See footnote 2.



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Table 1: Past Due Assessments at the
Project Through Fiscal Year 1996                                Owners of idle           Lessees of      Owners of
                                       Year                        trust land             trust land   nontrust land            Total
                                       1926-84                         $555,761             $84,629           $8,937         $649,327
                                       1985-96                        4,977,065           1,071,351          567,616        6,616,032
                                       Total                         $5,532,826          $1,155,980         $576,553       $7,265,359
                                       Note: Data are as of Feb. 28, 1997.

                                       Source: BIA.



                                       BIA has not aggressively attempted to collect the $7.3 million in past due
                                       assessments. BIA has collected past due assessments only when idle trust
                                       land has been sold but has not, since August 1991, applied these
                                       collections to the project’s operation and maintenance. Additionally, BIA
                                       has made little effort to collect past due assessments from delinquent
                                       lessees or nontrust landowners.


Funds Received to Mitigate             Through 1984, the Congress annually appropriated funds to cover
Past Due Assessments                   uncollected assessments at the project. However, after 1984, the Congress
                                       stopped appropriating supplemental operating funds for Indian irrigation
                                       projects that were classified as fully self-sustaining. To replace these
                                       appropriations and enable the projects to cover their unpaid assessments,
                                       the Congress authorized BIA to deposit the annual operation and
                                       maintenance collections from the projects into interest-bearing accounts.7
                                       These deposits were to earn interest until they were withdrawn and
                                       expended for operation and maintenance purposes.

                                       BIA first began depositing operation and maintenance collections from
                                       Indian irrigation projects into interest-bearing accounts on November 10,
                                       1983. Over the 13-year period from fiscal year 1984 through fiscal year
                                       1996, these deposits generated approximately $3.6 million in interest for
                                       the project. However, the deposits have not earned enough interest to
                                       cover all of the past due assessments. See appendix III for a graph
                                       comparing the cumulative past due assessments with the cumulative
                                       interest earned on the collected assessments from 1984 through 1996.




                                       7
                                        P.L. 98-146, 97 Stat. 929, dated Nov. 4, 1983.



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                              The major obstacle to collecting the past due assessments for the project
Obstacles to                  is BIA’s belief that the charges are not justified. Furthermore, by not
Collecting Past Due           collecting past due assessments in a timely manner, BIA has severely
Assessments                   limited its ability to collect older assessments, whose collection may be
                              unenforceable under federal and state statutes of limitations. Because BIA
                              has viewed the past due assessments as not justified or not collectible, it
                              has occasionally forgiven portions of these assessments. Finally, when BIA
                              has collected past due assessments through Indian land sales, it has
                              deposited these collections into special accounts, rather than returning the
                              funds to the project as required by federal law.


BIA’s Belief That Charges     BIA has chosen not to collect past due assessments for idle trust land
for Idle Trust Land Are Not   because it believes the charges are not justified. BIA argues that
Justified                     assessments for idle trust land are not justified because, in its view,
                              (1) Indian landowners with idle trust land are not able to pay their
                              assessments and (2) land that is physically incapable of producing crops
                              should have been removed from the project’s assessable acreage and not
                              assessed in the first place.

                              BIAmaintains that Indian landowners are not able to pay their assessments
                              when their lands are idle. The 1914 law that authorized BIA to fix annual
                              operation and maintenance assessments states that they “shall be
                              reimbursable where the Indians have adequate funds to repay the
                              Government. . . .” For idle trust land, BIA has concluded that the Indian
                              landowners do not have “adequate funds” to pay their assessments, and it
                              has therefore deferred any collection action until such time as funds
                              become available. However, as the Department of the Interior’s Inspector
                              General reported in 1995, BIA has not documented its assumption that the
                              owners of idle lands are unable to pay their assessments.

                              In addition, BIA argues that some of the charges are not justified because
                              idle land physically incapable of producing crops has not been removed
                              from the project’s assessable acreage. According to BIA’s manual, land
                              physically incapable of producing crops through the use of irrigation water
                              provided by the project should not be assessed an operation and
                              maintenance charge. The manual requires the temporary or permanent
                              removal of such land from the project’s assessable acreage. BIA’s Yakama
                              Agency Office has identified about 8,000 acres of idle trust land that have
                              physical deficiencies that would limit their ability to produce crops.
                              However, these lands continue to be assessed operation and maintenance
                              charges.



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                              Because the project received annual appropriations from the Congress
                              through 1984 to offset the uncollected assessments, BIA had no incentive to
                              remove from the project the idle acreage that was incapable of producing
                              crops. Keeping the project’s assessable acreage at the highest possible
                              level meant that the assessments for all landowners were lower because
                              the project’s costs were spread over more acres.8

                              Although BIA received congressional appropriations to offset the
                              uncollected assessments, the assessments owed by the project’s
                              landowners remained as debts on their lands. Under legislation passed in
                              1961, land within the Wapato-Satus Unit cannot be redesignated or
                              removed for a “higher use” until all debts on it have been paid in full.9
                              According to BIA’s Portland Area Office’s policy, no land within the project
                              can be redesignated or removed for any purpose until all debts on it have
                              been paid in full. Because landowners have generally refused to pay the
                              past due assessments, idle land incapable of producing crops remains in
                              the project, accumulating more debt. In some cases, the assessments owed
                              on idle property exceed the property’s value. BIA and the landowners are at
                              a standoff. BIA will not remove the land from the project until the debts
                              have been paid.


Statutes of Limitations for   Delays in the collection of past due assessments have severely limited BIA’s
Debt Collection               ability to recover about $1.8 million in older assessments, or about 25
                              percent of the total $7.3 million owed. BIA is still carrying past due
                              assessments on the project’s books from as far back as 1926. To collect
                              past due assessments from the owners of idle trust land, BIA has the option
                              of using administrative offsets, such as deductions from federal income
                              tax refunds or from the paychecks of federal employees. However, the
                              federal statute of limitations for collecting debts by using administrative
                              offsets is 10 years. Of the $5.5 million in past due assessments on idle trust
                              land, $1.2 million, or over 20 percent, is 10 years old or older.

                              To collect past due assessments from a lessee, BIA can take the lessee to
                              court. However, the federal statute of limitations for enforcing collections
                              in court against a lessee under a lease contract is 6 years. Of the
                              $1.2 million in past due assessments on leased trust land, almost
                              $0.5 million, or over 40 percent, is more than 6 years old.

                              8
                               BIA has also been reluctant to remove land from the project’s assessable acreage for fear that the
                              removal might eventually result in a decrease in the water entitlement for the Yakama Indian
                              Reservation.
                              9
                               P.L. 87-316, section 6 (75 Stat. 680), dated Sept. 26, 1961.



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                          Finally, to collect past due assessments from a private landowner, BIA can
                          foreclose to enforce a lien on the property. In the state of Washington, the
                          statute of limitations for foreclosing on privately owned land is 6 years. Of
                          the $0.6 million in past due assessments on nontrust land, about
                          $0.1 million, or over 15 percent, is more than 6 years old.

                          Because BIA believes that the past due assessments are not justified or not
                          collectible, it has occasionally chosen to forgive rather than collect some
                          of these assessments. Past due assessments were canceled selectively four
                          times for Indian landowners under a 1932 act and three times for
                          non-Indian landowners under a 1936 act. For example, under these actions
                          past due assessments were canceled because (1) the quality of the soil was
                          poor, (2) drainage of the land was inadequate, or (3) the older assessments
                          were uncollectible. Since 1942, a total of almost $360,000 in past due
                          assessments has been canceled. See appendix IV for more information on
                          the cancellation actions taken.

                          Starting in about 1991, BIA began planning a fifth cancellation request for
                          Indian landowners, which was officially submitted to the Deputy
                          Commissioner of Indian Affairs in July 1995. In this request, BIA’s Portland
                          Area Director proposed to cancel about $2.3 million in assessments that
                          were more than 6 years old, plus accrued interest, penalties, and fees. The
                          request was returned to the Portland Area Office in August 1995. It will be
                          reconsidered after the BIA task force established to implement the
                          Inspector General’s recommendations has finished reconciling the
                          project’s past due accounts.


Assessments Collected     When Indian trust land with past due assessments is sold, BIA is required to
Through Land Sales Not    collect the past due assessments from the proceeds of the sale and apply
Returned to the Project   the collections to the project. Under federal law, the funds collected from
                          the sale proceeds of Indian trust land must be used to satisfy the project’s
                          debt. In August 1991, BIA stopped complying with this requirement when it
                          began depositing such collections in a special account, anticipating that
                          the past due assessments would eventually be canceled and that it would
                          then return the funds to the landowners. BIA had no authority to make
                          these deposits. As of December 1996, the balance in two such special
                          accounts was about $103,000.


                          The project’s idle acreage, past due assessments, and insufficient
Conclusions               collections have contributed to, but are not the main cause of, the



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                     project’s deteriorated condition. Even if all of the past due assessments
                     were collected, they would constitute only a small fraction of the
                     estimated $100 million to $200 million needed to repair the project. The
                     Department of the Interior’s Inspector General has already recommended,
                     in its 1995 report, that BIA develop appropriate assessment rates, bill
                     annual assessment charges, and enforce debt collection procedures.

                     Implementing the Inspector General’s recommendations can go a long way
                     toward correcting the project’s problems; however, our work disclosed
                     additional problems. The appraised rental values for idle trust land, which
                     do not recognize the costs of rehabilitation, pose an obstacle to leasing
                     and discourage the economic activity that is ultimately necessary to
                     support the project. The project can no longer afford to assess operation
                     and maintenance charges on land that is physically incapable of producing
                     crops and then cancel the unpaid assessments as has been done seven
                     times in the past. Removing this land from the project’s assessable acreage
                     is an essential step in developing appropriate assessment rates.


                     To facilitate the leasing of idle trust land, we recommend that the
Recommendations      Secretary of the Interior direct the Assistant Secretary for Indian Affairs to
                     develop a process that estimates the fair market rental value for the idle
                     land, taking into account the cost of the rehabilitation required to bring the
                     land back into productive use.

                     To ensure that the costs of operating and maintaining the project are
                     assessed against acreage that is physically capable of producing crops, we
                     recommend that the Secretary of the Interior direct the Assistant Secretary
                     for Indian Affairs to remove land that is incapable of producing crops from
                     the project’s assessable acreage.

                     We also recommend that the Secretary of the Interior direct the Assistant
                     Secretary for Indian Affairs to apply the past due assessments collected
                     through land sales to the project as required by law and to liquidate the
                     special accounts.


                     We provided copies of a draft of this report to BIA for its review and
Agency Comments      comment. We met with BIA officials, including the Deputy Commissioner
and Our Evaluation   for Indian Affairs, and other Department of the Interior officials, who
                     agreed with the report’s recommendations. However, they said that the
                     draft report did not acknowledge BIA’s progress in implementing the



                     Page 12                                 GAO/RCED-97-124 Wapato Irrigation Project
B-276157




Inspector General’s recommendations. They also provided some minor
clarifications, which we incorporated into the report where appropriate.

We agree that BIA has begun implementing a number of corrective actions
to address the Inspector General’s recommendations and other
management weaknesses at Indian irrigation projects. However, fully
implementing these corrective actions will be a multiyear effort, and the
agency’s efforts have not yet resulted in any significant changes in the
project’s management. BIA has worked hard over the past year to obtain
current information on landownership and addresses for the project’s
billing system, but bills were not mailed to Indian landowners with idle
trust land for the 1997 irrigation season. BIA plans to mail bills to all of the
project’s landowners for the 1998 irrigation season. BIA still does not plan
to collect the $7.3 million in past due assessments. The task force
implementing the Inspector General’s recommendations plans to
recommend that all of the past due assessments be canceled either
because they are uncollectible or because trying to collect them would not
be cost-effective.


We conducted our review from October 1996 through April 1997 in
accordance with generally accepted government auditing standards. We
did not independently verify the data BIA provided on the project’s idle
acreage and past due assessments. A detailed discussion of our scope and
methodology is contained in appendix V.

We are sending copies of this report to the appropriate congressional
committees, the Secretary of the Interior, the Assistant Secretary for
Indian Affairs, and other interested parties. We will also make copies
available to others upon request.

Please call me at (202) 512-3841 if you or your staff have any questions
about this report. Major contributors to this report are listed in appendix
VI.




Barry T. Hill
Associate Director, Energy,
  Resources, and Science Issues



Page 13                                  GAO/RCED-97-124 Wapato Irrigation Project
Contents



Letter                                                                                               1


Appendix I                                                                                          16

Map of the Wapato
Irrigation Project
Appendix II                                                                                         17

Organization Chart for
BIA’s Portland Area
Appendix III                                                                                        18

Cumulative Interest
Earned Versus
Cumulative Past Due
Operation and
Maintenance
Assessments
Appendix IV                                                                                         19
                         Cancellation Actions for Indians                                           19
Cancellation Actions     Cancellation and Deferment Actions for Non-Indians                         20
for the Wapato
Irrigation Project
Appendix V                                                                                          22

Objectives, Scope,
and Methodology
Appendix VI                                                                                         24

Major Contributors to
This Report
Tables                   Table 1: Past Due Assessments at the Project Through Fiscal Year            8
                           1996




                         Page 14                              GAO/RCED-97-124 Wapato Irrigation Project
Contents




Table IV.1: Cancellation Actions for Indians                                 19
Table IV.2: Cancellation and Deferment Actions for Non-Indians               21




Abbreviations

BIA        Bureau of Indian Affairs
GAO        General Accounting Office


Page 15                                GAO/RCED-97-124 Wapato Irrigation Project
Appendix I

Map of the Wapato Irrigation Project




                                            Ahtanum Creek
                                                                                                   BIA Wapato
                                                                                             Irrigation Project Office
                                           Ahtanum Unit




                                                                                                  Ya
                                                                                   Wapato




                                                                                                    kim
                                                                                                                         BIA Yakama




                                                                                                       a
                                                                                                                         Agency Office




                                                                                                          Ri
        Si




                                                                                                           ve
          m




                                                                                                             r
              co
                 e
                     Cr
                       ee                                       Wapato - Satus Unit
                          k
                                                                                                        Toppenish



                       rk
                    Fo ek
            u   th      re
         So           C
                 c oe                 k                                    Toppenish Creek
             Sim                   ee
                              h Cr
                           is             Toppenish -
                        en
                     pp                   Simcoe Unit                                                                                        Satus
                  To
                                                                                                                                             No. 1
                                                                                                                 Satus Creek
                                                                                                                                     Satus
                                                                                                                                     No. 2




                                                                                                                                                            Satus
                                                                                                                                                            No. 3




                                                                                                                                     Washington State




                                                                                                                                                Wapato
                                                                                                                                               Irrigation
                                                                                                                                  Yakama        Project
                                                                                                                                   Indian
                                                                                                                                 Reservation




                                                            Source: GAO’s adaptation of a map provided by the Bureau of Indian Affairs (BIA).



                                                            Page 16                                                      GAO/RCED-97-124 Wapato Irrigation Project
Appendix II

Organization Chart for BIA’s Portland Area




                                                       Portland Area Office -
                                                     Office of the Area Director




              Division of Administration and                                          Division of Trust and Ecosystem
               Human Services                                                          Management Services

              Administration Team                                                     Resources Management Team
              Administration (Financial) Team                                         Resources Regulatory and
              Tribal and Area Support Team                                             Compliance Team
              Road Construction and                                                   Real Estate Service Team
               Maintenance Team




                                                                                                        11 other agencies and
      Wapato Irrigation Project                            Yakama Agency
                                                                                                         2 field stations



      Office of the Project Administrator          Office of the Superintendent
      Office of the Administrative Officer         Branch of Administration
      Branch of Irrigation Operation               Branch of Forestry Administration Section
      Branch of Irrigation Maintenance             Branch of Facility Management
      Services                                     Branch of Land Services
                                                   Branch of Real Estate Services
                                                   Branch of Reservation Programs
                                                   Branch of Roads
                                                   Branch of Social Services


                                             Note: Bolding added to emphasize offices discussed in the report.

                                             Source: GAO’s adaptation based on information provided by BIA.




                                             Page 17                                            GAO/RCED-97-124 Wapato Irrigation Project
Appendix III

Cumulative Interest Earned Versus
Cumulative Past Due Operation and
Maintenance Assessments

                   Dollars in millions
               7



               6




               5



               4



               3




               2



               1



               0      a            b                    a      a                              c
                   1984     1985       1986   1987   1988   1989   1990   1991    1992    1993    1994    1995       1996

                   Years
                          Cumulative interest earned
                          Cumulative past due operation and maintenance assessments


               a
                BIA’s estimate of the interest earned by the project is based on the total interest earned for all
               Indian irrigation projects.
               b
                The $649,327 in cumulative past due assessments for 1926 through 1984 is not included in this
               graph. The Congress annually appropriated funds through 1984 to cover uncollected
               assessments at the project.
               c
                P.L. 102-497, section 7, authorized the Secretary of the Interior to spend up to $1.3 million to
               operate and maintain the project from funds originally collected to repay the project’s
               construction costs. This $1.3 million emergency operation and maintenance authorization is not
               included in the graph.


               Source: BIA.




               Page 18                                                GAO/RCED-97-124 Wapato Irrigation Project
Appendix IV

Cancellation Actions for the Wapato
Irrigation Project

                                       Portions of the project’s past due assessments have been canceled seven
                                       times. Table IV.1 shows the four cancellation orders for past due
                                       assessments on Indian lands that were issued under a 1932 act. Table IV.2
                                       shows the three cancellation orders for past due assessments on
                                       non-Indian lands that were issued under a 1936 act.


                                       An act of July 1, 1932 (25 U.S.C. 386a), referred to as the Leavitt Act,
Cancellation Actions                   provided the authority for canceling past due operation and maintenance
for Indians                            assessments owed by Indians. Specifically, the act authorized and directed
                                       the Secretary of the Interior to “adjust or eliminate reimbursable charges
                                       of the Government of the United States existing as debts against individual
                                       Indians or tribes of Indians in such a way as shall be equitable and just in
                                       consideration of all the circumstances under which such charges were
                                       made. . . .” The act also canceled construction charges that had been
                                       assessed in accordance with the provisions of BIA’s fiscal year 1921
                                       appropriations act of February 14, 1920 (41 Stat. 409), and deferred all
                                       future construction charges as long as the land remained Indian-owned.
                                       The Secretary was required to report actions taken under the act to the
                                       Congress. The actions were not effective until either they were approved
                                       by the Congress or 60 legislative days had elapsed. Table IV.1 summarizes
                                       the four debt cancellation orders for past due assessments on Indian lands
                                       at the project under the 1932 act.

Table IV.1: Cancellation Actions for
Indians                                                                              Operation and         Acres removed from the
                                                                                      maintenance             project’s assessable
                                       Date of cancellation order             assessments canceled                         acreage
                                       January 4, 1957                                           $54,796                        210
                                       January 14, 1957                                            4,062                         99
                                       June 29, 1961                                              83,111                        678
                                       June 27, 1972                                             188,644                          0
                                       Total                                                   $330,613                         987
                                       Source: National Archives and the Department of the Interior.



                                       Table IV.1 does not show any cancellations for construction charges or
                                       penalties. The 1932 act permanently deferred the assessment of all future
                                       construction charges on Indian-owned land as long as the land remained
                                       Indian-owned. The act also canceled past uncollected construction
                                       charges against Indian-owned lands. Therefore, no further forgiveness of
                                       construction charges was necessary for Indian-owned lands. Up through




                                       Page 19                                             GAO/RCED-97-124 Wapato Irrigation Project
                        Appendix IV
                        Cancellation Actions for the Wapato
                        Irrigation Project




                        1991, BIA did not assess penalties on debts owed by Indians at the project.
                        Although BIA subsequently assessed penalties retroactively on uncollected
                        Indian assessments, all of the assessments shown in table IV.1 were
                        canceled before BIA started assessing penalties against Indian landowners.


                        An act of June 22, 1936 (25 U.S.C. 389, 389a-e), authorized and directed the
Cancellation and        Secretary of the Interior to investigate whether non-Indian landowners
Deferment Actions for   were
Non-Indians
                        “unable to pay irrigation charges, including construction, maintenance, and operating
                        charges, because of inability to operate such lands profitably by reason of lack of fertility
                        of the soil, inadequacy of water supply, defects of irrigation works, or for any other causes.
                        Where the Secretary finds that said landowners are unable to make payment due to the
                        existence of such causes, he may adjust, defer, or cancel such charges, in whole or in part,
                        as the facts and conditions warrant.”


                        The act authorized the Secretary to enter into repayment contracts for
                        deferred debts, under which payments could be made over 10 years. Table
                        IV.2 summarizes the three cancellation orders for past due assessments on
                        non-Indian lands at the project under the 1936 act.




                        Page 20                                          GAO/RCED-97-124 Wapato Irrigation Project
                                         Appendix IV
                                         Cancellation Actions for the Wapato
                                         Irrigation Project




Table IV.2: Cancellation and Deferment
Actions for Non-Indians                                                                Year of cancellation order
                                                                                       1942a           1958b            1962c           Total
                                         Debts canceled
                                         Construction                                $8,673           $1,071            $159           $9,903
                                         Operation and maintenance                     4,741          21,023            2,500          28,263
                                         Penalties                                     1,959          13,606            1,836          17,401
                                         Total                                      $15,372          $35,701          $4,495         $55,568
                                         Debts deferred
                                         Construction                                     $0         $11,937          $5,603         $17,540
                                         Operation and maintenance                          0          1,827            3,432           5,260
                                         Penalties                                          0              88           1,321           1,409
                                         Total                                            $0         $13,852         $10,356         $24,208
                                         Acres removed from the
                                         project’s assessable
                                         acreage                                         386             233               78             697
                                         Note: Totals may not add because of rounding.
                                         a
                                         Cancellation order dated Sept. 9, 1942. Approved Dec. 24, 1942, by 56 Stat. 1081.
                                         b
                                             Cancellation order dated May 14, 1958. Approved Sept. 16, 1959, by P.L. 86-281 (73 Stat. 564).
                                         c
                                         Cancellation order dated Sept. 12, 1962. Approved Oct. 28, 1963, by P.L. 88-159 (77 Stat. 278).

                                         Source: National Archives.




                                         Page 21                                                GAO/RCED-97-124 Wapato Irrigation Project
Appendix V

Objectives, Scope, and Methodology


              Senate Report 104-319, which accompanied the fiscal year 1997
              appropriations bill for the Department of the Interior and related agencies,
              directed the General Accounting Office to conduct an audit and provide
              recommendations on BIA’s operation and management of the Wapato
              Irrigation Project. Subsequently, through discussions with various
              congressional offices, we agreed to determine (1) the key reasons for the
              project’s idle acreage and the steps that can be taken to return these lands
              to production, (2) the principal reasons why operation and maintenance
              assessments for the project are past due, and (3) the obstacles that BIA will
              face in trying to collect the past due operation and maintenance
              assessments.

              We conducted audit work primarily at BIA’s Portland Area Office, Yakama
              Agency Office, and Wapato Irrigation Project Office. At each location, we
              interviewed responsible managers and staff and reviewed studies, reports,
              correspondence, and data related to the three objectives of this report. We
              toured the project with project officials and BIA soil scientists to observe
              some of the project’s idle acreage and facilities. We also contacted officials
              from BIA’s Central Office, the Yakama Indian Nation, the Bureau of
              Reclamation, the Department of the Interior’s Office of Inspector General
              and Office of the Solicitor, and the task force established by BIA to
              implement the Inspector General’s recommendations—the Power and
              Irrigation Reconciliation Team.

              To determine the extent of the project’s idle acreage, we obtained BIA
              reports estimating the number of idle acres. We relied on estimates of the
              project’s idle acreage provided by BIA officials and did not independently
              verify the number of idle acres. To determine the reasons for the project’s
              idle acreage, we interviewed officials at BIA’s Portland Area Office, Yakama
              Agency Office, and Wapato Irrigation Project Office, as well as
              representatives of the Yakama Indian Nation. Because BIA is not involved
              in managing or leasing nontrust land within the project, limited
              information was available on the number of idle nontrust acres and the
              reasons for this idle acreage. We also reviewed reports on Indian irrigation
              projects issued by the Department of the Interior’s Office of Inspector
              General and by BIA. We reviewed recommendations from these prior
              reports and evaluated the steps that have been taken or proposed to return
              the land to productive use.

              To determine the principal reasons why operation and maintenance
              assessments for the project are past due, we examined BIA’s policies and
              procedures for determining operation and maintenance assessment rates



              Page 22                                 GAO/RCED-97-124 Wapato Irrigation Project
Appendix V
Objectives, Scope, and Methodology




and for billing and collecting assessments from landowners. We obtained a
summary report of the past due operation and maintenance assessments
from BIA’s Irrigation and Power Liaison and Compliance Section, located in
Albuquerque, New Mexico, and asked agency officials to describe why the
unpaid balance had increased to $7.3 million, excluding interest, penalties,
and fees. In addition, we interviewed the Western Regional Audit
Supervisor for the Department of the Interior’s Office of Inspector
General, located in Sacramento, California, and reviewed audit
workpapers from the Inspector General’s prior reviews of the project. We
relied on the information provided by BIA and did not independently verify
the accuracy of any of the accounting data.

To obtain information on why the Congress stopped appropriating funds
to cover the uncollected assessments for the project, we reviewed
congressional documents for the Department of the Interior’s fiscal year
1984 appropriation. We also reviewed the budget justifications that BIA
submitted to the Congress from fiscal year 1983 through fiscal year 1987.
We did not attempt to determine whether each year’s appropriation was
sufficient to cover that year’s collection shortfall. We obtained information
on the interest earned from the project’s deposits of operation and
maintenance collections from BIA’s Irrigation and Power Liaison and
Compliance Section.

To determine the obstacles that BIA will face in trying to collect the past
due operation and maintenance assessments, we reviewed laws,
regulations, and opinions of the Department of the Interior’s Office of the
Solicitor. We also examined some steps taken to collect past due
assessments and the extent to which these steps have succeeded. In
addition, we discussed debt collection issues with the Department of the
Interior’s Office of the Solicitor in Portland, Oregon, and our own Office of
the General Counsel. We reviewed project files and congressional files at
the National Archives to obtain detailed information on the prior actions
taken to cancel past due assessments for the project.




Page 23                                 GAO/RCED-97-124 Wapato Irrigation Project
Appendix VI

Major Contributors to This Report


                        Paul Grace
Energy, Resources,      James Hunt
and Science Issue       Sterling Leibenguth
Area                    Jeffery Malcolm

                        Alan R. Kasdan
Office of the General
Counsel




(141005)                Page 24               GAO/RCED-97-124 Wapato Irrigation Project
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