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

GAO United States

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 

Results in Brief Our July 1997 testimony identified implementation issues related to

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.

Background As we have reported in the past,1

 Interior’s Indian trust fund accounting

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.

Implementation

Timing Issues

As noted in our testimony, the Strategic Plan proposes that the

commercial trust fund accounting and investment system—which is

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.

Proposals That Need

Detailed Planning

Our testimony also noted that the Strategic Plan proposes upgrading or

acquiring trust-related systems for land ownership and lease and minerals

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.

Issues Concerning

Establishing Two New

Organizations

Our testimony discusses the Strategic Plan’s proposals to establish two

new organizations outside the Department of the Interior—the American

Indian Trust and Development Administration, which would be a

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.

Other Issues Your August 1997 memorandum also stated that the Department will

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.

Conclusion Your August 1997 memorandum outlined plans that relate to several of the

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 

Recommendations We recommend that you direct the Special Trustee to work with the

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.

Agency Comments Interior officials told us that they generally agree with the conclusions and

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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