Indian Issues: The Office of the Special Trustee Has Implemented Several Key Trust Reforms Required by the 1994 Act, but Important Decisions about Its Future Remain
Published: 2006-12-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The American Indian Trust Fund Management Reform Act of 1994 established the Office of the Special Trustee for American Indians (OST), within the Department of the Interior, to oversee the implementation of management reforms for funds--derived primarily from Interior's leasing of Indian lands--that Interior holds in trust for many Indian tribes and individuals. Specifically, the act directs that an integrated information system be developed that interfaces the trust fund accounting system with the land title records and asset management systems maintained by Interior's Bureau of Indian Affairs (BIA). GAO examined (1) OST's progress in implementing the trust fund management reforms and (2) the extent to which OST has used contractors in implementing these reforms. GAO reviewed OST's strategic plans and contracting documents and interviewed OST and BIA managers.
section_title: What GAO Found
paragraphs: OST has implemented several key trust fund management reforms, but has not prepared a timetable for completing its remaining trust reform activities and a date for OST's termination, as required by the 1994 Act. OST estimates that almost all key reforms needed to develop an integrated trust management system and to provide improved trust services will be completed by November 2007. Specifically, OST implemented a new trust funds accounting system for processing trust account funds, and BIA and OST are currently validating data for the trust asset and accounting management system for managing Indian land title records and leases for land with recurring income. However, the Special Trustee estimates that data verification for leasing activities will not be completed for all Indian lands until December 2009. OST's most recent strategic plan, issued in 2003, did not include a timetable for implementing trust reforms or a date for OST's termination. The Special Trustee notes that many OST functions, including trust fund operations, trust records management, and appraisal services, need to be performed after reforms are completed. If OST is terminated, these responsibilities would have to be transferred to another Interior office. OST plans to reduce expenditures primarily by terminating contracts once trust reforms are completed. However, OST has not yet developed a workforce plan that reexamines the expenditures and staffing levels needed for trust fund operations once trust reforms are completed. OST has used contractors to perform many of its trust reform activities as a way to minimize the size of its permanent staff. In fiscal years 2004 and 2005, OST allocated $89.7 million, or nearly 21 percent, of its appropriated funds to contracting. About 66 percent of contracting dollars from these 2 fiscal years went to two firms. Over $31 million during this period went to the largest contractor, an Indian-owned 8(a) small business, by adding task orders through an existing contract. OST has primarily relied on Interior's National Business Center to award and manage contracts.

section_title: Letter
paragraphs: The Bureau of Indian Affairs (BIA), within the Department of the Interior  (Interior), for many years was responsible for managing the income that  Indians derived primarily from Interior’s leasing of rights to minerals,  timber, and grazing on Indian lands. However, BIA experienced long- standing problems in managing this income, which it had received and  held in trust. Specifically, BIA’s Office of Trust Funds Management, which  was responsible for providing accounting and investment services and  managing the accounting system that recorded the receipt and  disbursement of Indian trust funds to tribal and individual Indian account  holders, did not have adequately trained personnel or adequate accounting  and information systems to ensure that lease income was deposited in the  correct trust accounts and that trust balances were accurate. Moreover,  each of BIA’s 12 regional offices has been responsible for recording land  title ownership and tracking lease revenues. Several BIA regional and  agency offices created their own automated systems for tracking this  information, while some offices performed this function manually. As a  result, these regional information systems were not integrated, and the  regional offices could not ensure that their information was regularly  updated, accurate, and complete.
In response to these problems, the Congress enacted the American Indian  Trust Fund Management Reform Act of 1994 (the 1994 Act). Among other  things, the 1994 Act established the Office of the Special Trustee for  American Indians (OST) to oversee and coordinate Interior’s  implementation of trust fund management reforms. To improve  information systems and accounting practices, the 1994 Act directs OST to  oversee the development of an integrated information system that  interfaces the trust funds accounting system with BIA’s land title records  and asset management systems for Indian lands. These systems are to be  integrated with asset management systems that Interior’s Minerals  Management Service and Bureau of Land Management are developing. The  1994 Act also requires OST to develop a comprehensive strategic plan with  a timetable for implementing the identified reforms and a date when OST  will be terminated. The 1994 Act directs that the Special Trustee provide  the Secretary of the Interior and the Congress with a 30-day notice prior to  the termination date, and authorizes the Special Trustee to recommend  either the continuation or permanent establishment of OST if necessary  for the efficient discharge of Interior’s trust responsibilities. The 1994 Act  states that OST will be terminated 180 legislative days after reforms are  completed, unless the Congress extends the Special Trustee’s authorities.
Subsequently, in response to direction in the conference report  accompanying Interior’s fiscal year 1996 appropriations bill, the Secretary  of the Interior directed, through Secretarial Order 3197, that the Office of  Trust Funds Management and other financial trust services be transferred  from BIA to OST. This transfer effectively expanded OST’s responsibilities  from overseeing and coordinating Interior’s implementation of trust fund  management reforms to also include managing tribal and individual Indian  trust fund accounts and providing financial services. OST reports that it  currently maintains about 1,450 accounts for more than 250 tribal entities  with assets of about $2.9 billion and about 300,000 individual Indian  accounts with financial assets of about $400 million.
Between fiscal years 1997 and 2006, OST’s staff increased from 245 to 590,  and total funding grew from $34.1 million to $222.8 million. In April 2003,  the Secretary of the Interior reorganized OST to create three separate  divisions that are responsible for (1) implementing trust reform activities,  (2) providing financial trust services, and (3) providing trust fund  management and beneficiary services in the field through the creation of 6  regions that are aligned with BIA’s 12 regional offices. The reorganization  also doubled the number of OST’s Senior Executive Service (SES)  positions to 14.
Over the years, OST and BIA have used contractors to help implement  their trust fund management reforms. In 2003, Interior’s Office of  Inspector General began investigating allegations that senior OST  managers had given Chavarria, Dunne, & Lamey (CD&L) favorable  treatment in awarding contract work. The Inspector General’s May 2006  report presented facts showing that (1) senior OST managers had created  an appearance of preferential treatment of CD&L by socializing and  exchanging gifts with firm officials, in violation of government ethical  standards, and (2) OST contract personnel felt pressured by these senior  OST managers to continue to award work to CD&L. The Inspector  General referred the matter to Interior to take the appropriate  administrative action and review the performance of the contract.  Independent of the Inspector General’s investigation, OST began using  Interior’s National Business Center (NBC), located in Denver, Colorado, in  2003 and Fort Huachuca, Arizona, in 2004 to provide contracting services.  NBC’s Fort Huachuca branch administers a contract with an Indian small  business contractor. The contract, which was awarded noncompetitively  under the Small Business Administration’s 8(a) program, allows OST and  other agencies to place task orders for activities within the contract’s  scope. BIA also provides contracting services for OST in addition to  funding its own contracts for trust reform activities.
In recent years, representatives of several tribal organizations have  expressed concern to the Congress about the extent, duration, and cost of  OST’s reforms, noting that OST has not provided the Congress with a  timetable for completing these reforms as the 1994 Act requires. These  representatives are also concerned that OST has taken an increasingly  larger role in the management of the trust, rather than limiting itself to  overseeing trust reform efforts.
In this context, we examined (1) OST’s progress in implementing the  American Indian Trust Fund Management Reform Act of 1994 and (2) the  extent to which OST has used contractors in implementing these reforms.  In addition, appendix I provides information on retention allowances and  performance awards provided to OST managers in SES positions.
To examine OST’s progress in implementing the 1994 Act, we reviewed  laws, regulations, and legislative history pertaining to trust reforms at  Interior. We also reviewed OST’s trust reform planning documents and  interviewed OST and BIA officials to determine the status of the  implementation of trust reforms; however, we did not analyze the  adequacy of OST’s and BIA’s implementation of trust reforms. To identify  the extent to which OST has used contractors in implementing its trust  reforms, we obtained data from the Federal Procurement Data System- Next Generation (FPDS-NG) for fiscal years 2004 and 2005 and tested  these data for reliability by comparing them with procurement data from  NBC. Where discrepancies were found, we corrected the FPDS-NG data  to ensure completeness of the data. In addition, we interviewed  contracting officers at NBC and contracting officers’ technical  representatives at OST. On the basis of our testing and correction of  FPDS-NG data, we are sufficiently confident of the reliability of the data  we are reporting. We conducted our review from February 2006 through  October 2006 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: The federal government has held funds in trust for Indian tribes since  1820. Enacted in 1887, the General Allotment Act, also known as the  Dawes Act, provided for the division of Indian tribal lands into allotments  of up to 160 acres for individual tribal members and families.  Subsequently, the Indian Reorganization Act, enacted in 1934 and also  known as the Wheeler-Howard Act, ended the allotment of tribal lands and  extended indefinitely the period that the federal government would hold  allotted lands in trust. Many of these allotments remain in trust today, now  jointly owned in common by hundreds and, in many cases, thousands of  individual Indians, each with an undivided—or fractionated—interest in  the whole parcel. As trustee for tribes and Indians, the Secretary of the  Interior is required to account for the revenue generated by each interest  (amounting, in some cases, to less than 1 cent per year), invest the trust  funds, and provide other trust services to the beneficiaries. The Secretary  also is responsible for maintaining official Indian land title and ownership  records, managing natural resource assets, and probating estates. Much of  this responsibility has been delegated to BIA, which has 12 regional offices  and 85 agency offices that are located on or near reservations.
Beginning in April 1997, Interior has issued several strategic plans for  implementing trust reforms. Concerned that Interior had not achieved the  desired improvement in trust management, the Secretary in January 2002  initiated an effort to develop a comprehensive, departmentwide approach  for improving Indian trust management. On March 28, 2003, Interior issued  the Comprehensive Trust Management Plan, which presented a strategic  plan to guide the design and implementation of integrated trust reform  efforts. Interior’s performance of fiduciary trust business practices  nationwide was documented and reported in the As-Is Trust Business  Model Report. The information contained in the Comprehensive Trust  Management Plan and the As-Is Report is the foundation for the  recommendations for reengineered business processes that appear in the  To-Be Model—or Fiduciary Trust Model. The Fiduciary Trust Model  contains implementation strategies for major business processes, and  currently serves as Interior’s guide for trust reform.
As a basis for revising the department’s approach for improving Indian  trust management, Interior contracted with Electronic Data Systems in  2001 to determine how trust reforms were then being conducted and how  they could be improved. The firm’s recommendations included both  improvements in trust management and a reorganization of Interior’s  agencies carrying out trust management and improvement. In response to  these recommendations, the Secretary of the Interior reorganized BIA and  OST in April 2003. The reorganization increased OST’s SES positions from  7 to 14 by (1) creating 6 OST regional trust administrators, located at  OST’s Albuquerque headquarters, who are responsible for providing  account holders with trust services and with overseeing fiduciary trust  officers and other personnel in the field and (2) adding an SES position in  realigning OST’s management structure by creating three divisions.
As shown in table 1, OST’s budget has grown from $34.1 million in fiscal  year 1997 to $222.8 million in fiscal year 2006. Similarly, OST’s full-time  equivalent positions have increased from 245 employees in fiscal year 1997  to 590 employees in fiscal year 2006. While the growth in budget and staff  mainly reflect OST’s efforts to implement reforms and its growing  responsibility for trust fund management, OST’s funding also supports  other Indian-related activities. For example, in fiscal year 2006, OST  transferred (1) $54.4 million to the Office of Historical Trust Accounting,  (2) $34.0 million for implementing the Indian Land Consolidation Act  activities, (3) $7.6 million to the Office of Hearings and Appeals, (4) $5.6  million to the Interior Solicitor’s Office to cover costs associated with the  Cobell v. Kempthorne lawsuit, (5) $1.3 million to BIA for tribal contract  and compact appraisals, and (6) $300,000 to Interior’s Chief Information  Officer. OST began funding the Office of Historical Trust Accounting in  fiscal year 2001 and activities related to the Indian Land Consolidation Act  in fiscal year 2000. Responsibility for Indian land appraisals was  transferred from BIA to OST in 2002 and is currently managed by OST’s  Office of Appraisal Services.
In addition to its trust reform activities, OST is responsible for maintaining  trust-related Indian records and developing trust investment strategies for  beneficiaries. In 1999, OST created the Office of Trust Records to ensure  that Indian records are maintained and safeguarded. In September 2003,  Interior signed a Memorandum of Understanding with the National  Archives and Records Administration to create a national repository for  American Indian records, including fiduciary trust records, in Lenexa,  Kansas. OST’s Division of Trust Funds Investment is responsible for  managing and investing individual Indian and tribal assets. OST is allowed  to invest trust funds only in securities backed by the federal government,  including U.S. Treasuries and securities from government-sponsored  agencies.
section_title: OST Estimates that Almost All of Its Key Trust Reforms Will Be Completed by November 2007, but Has Yet to Prepare a Timetable for Completing Its Remaining Reforms
paragraphs: OST has implemented several key trust fund management reforms, but  OST has not prepared a timetable for completing its remaining trust  reform activities or identified a date for its termination under the 1994 Act.  OST estimates that almost all of the key reforms needed to develop an  integrated trust management system and to provide improved trust  services will be completed by November 2007, but OST believes some  additional improvements are important to make. In particular, once the  validation of BIA’s new trust asset and accounting management system  (TAAMS) leasing information for Indian lands with recurring income is  completed, BIA and OST plan to validate the leasing information for Indian  lands that do not have recurring income. The Special Trustee expects  these validation activities will be completed by December 2009. Despite  the 1994 Act’s requirement, OST has not proposed a termination date for  the office once trust reforms are completed. The Special Trustee noted  that Interior will need OST’s staff to continue to perform their functions  after trust reforms are completed, whether or not OST is terminated,  because OST was given responsibility for managing trust fund operations  and other trust-related activities after the 1994 Act was enacted. The  Special Trustee also added that OST will reduce its expenditures once key  trust reforms are completed by terminating contracts, but he believes that  OST’s current staff is about the right size needed to manage OST’s  operations after trust reforms are completed. However, because OST has  not developed a workforce plan that reexamines the expenditures and  staffing levels needed for trust fund operations once trust reforms are  completed, additional opportunities may exist to further reduce  expenditures and OST staff.
subsections: section_title: Almost All of OST’s Key Reforms Are Scheduled for Completion by November 2007
paragraphs: OST has made important progress in implementing trust fund management  reforms and plans to complete almost all of the key reforms by November  2007. Specifically, OST is responsible for trust reforms associated with the  trust funds accounting system and the overall integration of the various  trust reform automated systems. BIA and OST are responsible for trust  reforms associated with its implementation of the TAAMS system for  managing land title records and leasing activities for Indian lands. NBC is  responsible for developing a management system for Indian land  appraisals.
OST is responsible for implementing the following trust reforms:    Trust Funds Accounting System (TFAS). In March 1998, OST awarded a  contract to SEI Investments to use a modified version of its commercial  trust accounting system that provides basic collection, accounting,  investing, disbursing, and reporting functions. TFAS replaced a module in  BIA’s Integrated Records Management System and two OST systems,  which could not fully perform trust accounting functions. TFAS was  deployed in August 1998 and was fully operational in May 2000. OST  continues to contract with SEI Investments at a cost of about $14 million  per year for operations and general maintenance, which includes system  upgrades twice annually.
TFAS is an accounting and investment system that enables the automated  production of account statements for individual Indians and tribal account  holders. It also allows, for example, automated trade settlements,  automated payments of financial asset income, daily securities pricing,  and automated reconciliation. In addition, landownership and leasing  accounts will be included in TFAS as part of BIA’s and OST’s TAAMS  conversion project to ensure that both systems contain accurate and  complete information.
Trust Funds Receivable. In 2004, OST awarded a contract to Bank of  America to centralize the collection of trust payments through a single  remittance-processing center, also known as a lockbox, to minimize the  risk of loss or theft. Under phase I of the new system, which became  effective in October 2005, trust payments are sent to the processing center  in Prescott, Arizona, for deposit into trust fund accounts. Previously, BIA  and OST personnel in agencies for each of the 12 regions collected trust  payments for trust fund account holders and then mailed or deposited the  payments.
Phase II of this project is to have all collections and distributions  automated in TFAS. However, implementation requires the completion of  the validation of the land title and leasing data in TAAMS. According to  OST officials, full automation of all collections and distributions is  scheduled for November 2007. OST officials said that two agencies in  BIA’s Southern Plains region completed Phase II by the end of June 2005— the remaining agencies in BIA’s Southern Plains region and one agency in  BIA’s Eastern Oklahoma region completed Phase II by the end of January  2006. Several agencies in BIA’s Great Plains region completed Phase II by  the end of June 2006—the remaining agencies in BIA’s Great Plains region  and several agencies in BIA’s Northwest region completed Phase II by the  end of August 2006. BIA’s Rocky Mountain region completed Phase II by  the end of July 2006, and BIA’s Navajo region and several agencies in BIA’s  Western regions completed Phase II by the end of September 2006. In  addition, OST has completed its desktop procedures for handling the  receipt of trust funds, and BIA is completing its desktop standardization  procedures, with some assistance from OST.
Trust Beneficiary Call Center. In December 2004, OST established the  Trust Beneficiary Call Center, a centralized call center in its headquarters  office in Albuquerque, New Mexico. Through a toll-free telephone number,  the call center provides timely responses to beneficiaries’ questions and  allows them to access account information. In addition, the call center  operators and staff have recently received training and access to TAAMS  through OST’s trust portal to enable them to better answer questions  about beneficiaries’ assets. If a beneficiary’s question cannot be answered,  the call center operator is to refer the question to an OST Fiduciary Trust  Officer, generally colocated at the BIA field agencies, to research and  respond accordingly. The call center was fully operational by December  2005.
In establishing the call center, calls were redirected from preexisting toll- free telephone numbers at BIA field agencies. OST officials told us that the  Trust Beneficiary Call Center has helped to relieve some of the workload  from OST and BIA staff in the field. OST data show that, as of July 2006,  the call center had received over 135,000 calls from beneficiaries, with a  first-line resolution rate of about 89 percent.
Trust Portal. OST completed the implementation of its trust portal in May  2006. OST’s trust portal provides employees with a single point of access  to applications and other resources, such as the trust funds receivable  system and the intranet. Currently, the trust portal is available to OST  employees and some BIA employees. According to an OST official, various  contractors developed the trust portal and OST staff maintain it.
Risk Management Program. Beginning in 1999, OST has contracted with  CD&L to develop and refine the risk management program for establishing  management controls to monitor and evaluate the effectiveness of  Interior’s trust operations. The risk management program has evolved over  the past few years—the original risk management product was a stand- alone compact disk application that provided an assessment tool to  evaluate OST’s business operations. Since then, a Web-based risk  management tool, the RM-Plus tool, has been developed to facilitate data  collection and reporting for all Interior bureaus and offices with Indian  trust responsibilities. OST implemented the RM-Plus in August 2004 and  has contracted with Chickasaw Nation Industries (CNI) to operate and  maintain the tool. BIA used the RM-Plus tool in 2006 to produce its  financial assurance statement at the Southern Plains pilot location.
OST officials said that additional revisions are being made to the RM-Plus  tool in response to the new requirements in the Office of Management and  Budget’s Circular A-123 for ensuring the accountability and cost- effectiveness of agency programs. The RM-Plus is currently being revised  to incorporate the circular’s requirements and is scheduled to be  completed by March 2007. If other Interior bureaus and offices with trust  responsibilities decide to use the RM-Plus tool, OST will assist them by  providing advice and access to the RM-Plus tool.
BIA and OST are implementing the following trust reforms to develop  centralized systems for managing land title records and leasing activities  as well as managing and tracking probates for Indian lands:    TAAMS. In December 1998, Interior awarded a contract to Artesia to  develop TAAMS, a centralized system with two components for managing  Indian trust assets: the TAAMS land title system and the leasing module.  Over the years, Artesia was bought out by several contractors. Currently,  the TAAMS contract is with CGI-AMS. BIA’s TAAMS land title system  maintains both current and historical titles—some of these historical titles  in the system date back to the original land grant. This system was  completed in January 2006.
The TAAMS leasing module tracks leases of Indian assets. BIA and OST  are currently converting leasing data from BIA’s old legacy systems to  TAAMS and integrating TAAMS with TFAS to ensure that both systems  have accurate and complete title and leasing information. As a region’s  system is converted, OST will provide beneficiaries with asset statements  that identify the source of the funds and a listing of assets owned in that  region and any active encumbrances, as required by the 1994 Act. Prior to  the conversion, the statements that beneficiaries receive will only include  information on account balances and account transactions.
Before leasing data are converted into TAAMS, BIA’s Land Titles and  Records Offices and OST—primarily through a contract with CNI—are  implementing the data quality and integrity (DQ&I) project to verify the  completeness and accuracy of the TAAMS title and leasing information for  Indian lands. As part of the verification, the DQ&I teams compare the  TAAMS information with the information contained in the BIA region’s  legacy realty system for land tract allotments with recurring income. For  each land tract allotment for which the owner(s) and the interest they own  do not match, the DQ&I teams compare the TAAMS information against  source documents to identify (1) conveyances of title through probate  records, deeds, and gift conveyances and (2) active encumbrances,  including lease permits, rights of way, and timber sale agreements. This  verification is scheduled to be completed in all BIA regions by October 1,  2007, covering land tracts with recurring income for which the legacy  lease and title systems do not match.
OST also plans to verify the accuracy of the land and leasing records for  which TAAMS and the legacy realty system have matching information by  comparing the TAAMS information with source documents for a sample of  these records. OST and BIA plan to verify title and leasing data for tracts  of land without recurring income after October 2007, but a schedule for  implementing and completing this work has not yet been developed.
OST officials noted that the DQ&I project is labor-intensive. The land  validation took about 1 hour per tract in BIA’s Southern Plains region  because there are about 12 owners per tract. This validation requires more  time in BIA’s Great Plains region, which has about 32 owners per tract,  and in BIA’s Rocky Mountain region, which has over 100 owners for some  tracts.
Probate Case Management and Tracking System. BIA used a modified  off-the-shelf software program to develop the probate case management  and tracking system, also known as ProTrac, for use by BIA, OST, and  Interior’s Office of Hearings and Appeals to manage and track probate  cases from initiation to closing. BIA constructed the ProTrac database  from manual records, spreadsheets, and trust fund records and, according  to a BIA official, has verified its accuracy. BIA is currently developing a  paperless version of ProTrac that is scheduled to be implemented by June  2007.
NBC is implementing the following trust reform to improve the  management of Indian land appraisals:    Appraisal Management System. NBC is working with OST to adapt its  appraisal request and review tracking system to develop the Indian trust  appraisal request system. This new system will centralize the appraisal  process and track appraisal requests across Indian country, including the  period of time it takes to process a request. NBC and OST completed pilot  testing the appraisal management system in the Western region in October  2006. OST estimates that the appraisal management system will be fully  implemented by March 2007.
OST and BIA managers have overseen the progress of each of the key trust  reforms scheduled for implementation by November 2007. OST managers  also plan to implement two additional trust reforms. First, the managers  plan to verify the accuracy and completeness of TAAMS information for  (1) a statistical sample of the tracts of land for which the data in TAAMS  and the BIA regional legacy systems match and (2) tracts of Indian land  without recurring income. The Special Trustee estimates that this work  will be completed by the end of 2009. Second, the OST managers plan to  work with BIA to replace the oil and gas distribution system within BIA’s  Integrated Records Management System that tracks oil and gas revenue  from Indian lands. The new system will, among other things, interface with  TFAS and the Minerals Management Service’s system. This system is  estimated to cost $2.5 million per year and to be implemented by  December 2009.
Furthermore, Interior is exploring the conversion of Land Title Mapper to  the department’s National Integrated Lands System for standardization  purposes. The Land Title Mapper uses satellite imagery and geographic  information systems to link the data in the integrated computer system  with the physical site. The Special Trustee said the mapper could be  completed by 2009 or 2010 and noted that, while the mapper is not a  component of the 1994 Act’s trust reforms, it would provide an important  service to trust account beneficiaries. Additionally, as trust reforms are  completed, OST will conduct employee training, promulgate trust-related  regulations, prepare internal procedures, and prepare handbooks.
section_title: OST Has Not Provided a Timetable for Completing Trust Reforms or Identified a Termination Date
paragraphs: The 1994 Act directed the Special Trustee, within 1 year of appointment, to  provide the Congress with a comprehensive strategic plan that, among  other things, identifies a timetable for implementing the plan’s trust  reforms and a date for OST’s termination once reforms have been  implemented. However, the Special Trustee has yet to provide the  Congress with a timetable for completing the remaining trust reform  activities and a date for OST’s termination, even though OST’s most recent  strategic plan—the Comprehensive Trust Management Plan—issued in  March 2003, stated that OST would be able to forecast a date for  termination within the next 14 months. The lack of a timetable for  completing the remaining trust reforms has hindered the ability of the  Congress, tribal organizations, and the public to fully assess the status of  OST’s trust reforms or to plan for trust fund operations once reforms are  completed.
The 1994 Act includes a sunset provision for OST but allows the Special  Trustee to recommend to the Congress that OST continue operations if it  is needed for the efficient discharge of Interior’s trust responsibilities. The  Special Trustee told us that Interior will need OST’s staff to continue to  perform their functions after trust reforms are completed, whether or not  OST is terminated, because the Secretary of the Interior transferred  additional staff and responsibilities to OST for managing tribal and  individual Indian trust fund accounts and providing other trust services  after the passage of the 1994 Act. Specifically, in response to direction in  the conference report accompanying Interior’s fiscal year 1996  appropriations bill, Secretarial Order 3197 transferred the Office of Trust  Funds Management and other financial trust services from BIA to OST.  Subsequently, the Secretary transferred BIA’s land appraisal staff to OST.  If OST is terminated, it is unclear where OST responsibilities—including  trust fund management and accounting operations, beneficiary services,  trust records management, and land appraisals—will be transferred.
The Special Trustee told us that OST had decided to use contractors,  rather than hire additional OST staff, to implement many of the trust  reforms as a way to minimize the size of its permanent staff—the contracts  will end once key trust reforms are completed. The Special Trustee also  said OST’s SES positions will be reduced from 14 to 13 in the near future,  and he noted that Interior is studying whether efficiencies might exist by  combining the Chief Information Officer positions in BIA and OST (see fig.  1 for OST’s current organizational chart and SES positions). However, the  Special Trustee believes the size of OST’s staff, including the number of  SES positions, is about the right size needed to manage OST’s future  operations.
OST has not developed a workforce plan that reexamines the expenditures  and staffing levels needed for trust fund operations—including managing  and accounting for trust funds, providing trust services, maintaining trust  records, and conducting land appraisals—once trust reforms are  completed. The following opportunities may exist to realign or further  reduce expenditures and staffing levels:    The Trust Program Management Center, which is responsible for  implementing trust reforms, currently has 23 staff whose work will be  completed when trust reforms are implemented. However, one OST  manager noted that, in some cases, the staff members responsible for  implementing a given reform were then reassigned to the OST office with  operational responsibilities to ensure continuous improvements are made.
OST currently has 131 accounting technicians located in many of BIA’s  field agencies whose responsibilities for processing the collections and  disbursements of account funds will decrease once trust reforms are  completed and accounting functions are automated. However, OST  managers noted that it is important to have the accounting technicians in  the field to perform account maintenance and research accounts. In  addition, a BIA manager noted that many account technicians may still be  needed to handle checks that might be given to a local BIA office instead  of being mailed to OST’s lockbox facility in Prescott, Arizona. Regardless,  no plans have been developed to determine either the appropriate number  of the accounting technicians needed to carry out future operations or  their roles and responsibilities.
The Deputy Special Trustee for Field Operations, the six Regional Trust  Administrators, and the Fiduciary Trust Officers have been actively  involved in implementing trust reforms by coordinating DQ&I and other  activities. It is unclear whether seven SES positions will continue to be  needed to provide tribal and individual Indian account holders with trust  services and to oversee field operations once trust reforms are completed;  especially with OST’s 52 Fiduciary Trust Officers generally colocated in  BIA’s field agencies and with the Trust Beneficiary Call Center now in  place. However, the Special Trustee noted that each of the Regional Trust  Administrators has trust banking or legal expertise for providing tribal and  individual Indian account holders with important services, and the  administrators will expand their outreach to trust account holders as the  reforms are completed.
section_title: OST Has Relied on Contractors to Implement Many of Its Trust Reform Activities
paragraphs: Since its inception, OST has relied on contractors to perform many of its  trust reform activities as a way to minimize the size of its permanent staff.  In fiscal years 2004 and 2005, OST obligated nearly 21 percent of its  appropriated funds to contracting. The trust reform activities performed  and products provided by the nearly 350 firms with which OST has  contracted vary widely. About 66 percent of contracting dollars from fiscal  years 2004 and 2005 went to 2 firms. Since 2003, OST has relied primarily  on NBC to award and manage contracts. In a May 2006 report, Interior’s  Office of Inspector General found that senior OST managers had created  an appearance of preferential treatment of a contractor in violation of the  standards of ethical conduct. In response, the Special Trustee required  that all OST employees in grades GS-12 and above complete a special 2- hour ethics training course, in addition to the annual mandatory ethics  training.
subsections: section_title: OST Has Used Contractors to Perform Various Trust Reform Activities
paragraphs: OST has relied extensively on contractors to perform many of its trust  reform activities. During fiscal years 2004 and 2005, OST spent about $89.7  million, or nearly 21 percent, of its total appropriated funds on contracts.  Because 48 percent of these appropriated funds was transferred to other  offices, such as the Office of Historical Trust Accounting, the amount OST  spent on contracting comprised nearly 40 percent of its available funding  for these 2 years. During this period, OST paid about $58.8 million, or 66  percent, of these funds to 2 of the nearly 350 firms it used—CNI received  $31.1 million and SEI Investments received $27.7 million. (See table 2 for  OST’s obligations to its 10 leading contractors.)
CNI provides a variety of trust reform work for OST, including risk  management, trust data cleanup and encoding, and the development of  policy and procedures manuals. Most of the contracting with CNI, an  Indian-owned 8(a) small business, was based on an indefinite delivery,  indefinite quantity contract. (See app. II for a description of the work that  CNI performed under each task order.) An advantage of using this type of  contract is that contract task orders can be awarded quickly because there  is no requirement for competition. OST also pays SEI Investments about  $14 million a year to operate and maintain a version of its commercial  trust fund accounting system adapted to meet OST’s needs.
Table 3 shows the 10 leading product or service types for which OST used  contractors. Most of OST’s obligations to contractors, about $30.3 million,  were for data processing and telecommunications services. For example,  the DQ&I project for ensuring the accuracy and completeness of the  TAAMS database focuses on (1) assisting BIA with document encoding  into the trust systems, (2) validating and correcting critical data elements  to their respective source documents, and (3) implementing postquality  assurance processes. Other major data processing and  telecommunications services include developing OST’s Trust Beneficiary  Call Center, identifying the owners of whereabouts unknown accounts,  and developing risk management processes. Another major service or  product type for which contracting funds were allocated was for financial  services, at about $28 million. About 99 percent of these funds went to SEI  Investments to operate and maintain TFAS. Contractors also provided  products and services to OST that were not directly related to trust  reform, such as supplying office furniture or providing guard and security  services.
As trust reform activities are completed, OST plans to reduce funding for  contracting accordingly. For example, OST’s fiscal year 2007 budget  request proposed to reduce funding by about $4.9 million as a result of the  completion of certain contract efforts, including the following reductions:    $1,400,000 from the Office of Trust Accountability for contract costs  related to defining, developing, facilitating, and delivering trust training  programs;   $1,050,000 from the Office of Trust Accountability for contract costs  related to the development of policies and procedures and upgrades of  systems for the reengineering of trust processes;   $885,000 from the Office of Trust Accountability for contract costs related  to the modeling of business practices for the purposes of risk  management;   $675,000 from the Office of Trust Review and Audit for contract costs  related to the development of the Indian Trust Examiner certification; and    $425,000 and $450,000 from the Offices of Field Operations and Trust  Services, respectively, for contractors that were providing accounting  services, such as data cleanup and encoding.
section_title: OST Has Primarily Relied on NBC for Contracting Services
paragraphs: Prior to 2001, OST relied on NBC to provide contracting services through  an interagency agreement. However, at OST’s request, Interior delegated  contracting authority to OST in January 2001. This delegation was  conditioned on (1) the retention of authority by Interior’s Office of  Acquisition and Property Management to oversee and approve specified  actions and (2) a subsequent evaluation of OST’s operations. In March  2002, the Office of Acquisition and Property Management conducted an  acquisition management review that found several problems with OST’s  contracting operations. The review team said that many of the problems  they found could easily be fixed, and noted that OST’s contracting office  was not fully staffed and was still experiencing “growing pains.” The  review team’s draft report, which had three broad recommendations, was  provided to OST for comment and OST responded in June 2002. However,  the report was never issued in final.
Subsequently, in July 2003, OST conducted its own study to (1) evaluate  the functioning of OST’s contracting office, (2) assess customer  satisfaction with contracting services provided, and (3) determine the  feasibility (including a cost/benefit and qualitative analysis) of outsourcing  acquisition services to either NBC or another Interior office. The internal  review found that, although the contracting office had made substantial  improvements in response to the acquisition management review, the  office still was not operating as effectively as it could. On the basis of  proposals received from organizations that provide contracting services  and a qualitative evaluation of these organizations, OST found that NBC’s  branch in Denver, Colorado, offered the best value for providing  contracting services for OST.
As a result, OST signed a 5-year interagency agreement with NBC’s Denver  branch to provide contracting services beginning on October 1, 2003.  NBC’s headquarters conducted an acquisition management review of NBC  Denver’s contracting practices in April 2005 and found that, overall, the  office was highly effective in providing contracting services.
In 2004, OST also began using NBC’s branch in Fort Huachuca, Arizona,  because it is responsible for managing the indefinite delivery, indefinite  quantity contract with CNI, as we previously discussed. The contract had  been originally awarded to CNI on a sole-source basis, which is allowable  under Small Business Administration regulations to provide special  procurement advantages to businesses owned by Indian tribes that  participate in the 8(a) program. OST has used the contract by placing task  or delivery orders for implementing several of the trust reforms.
In addition to funding contracts for their own trust reform activities, such  as TAAMS, BIA also has administered contracts for OST. For example,  since fiscal year 2005, BIA has served as the contracting office for a  contract with CD&L for risk management. A BIA official stated that this  contract is set to expire in December 2006. Finally, GovWorks, one of  several federal government franchise funds designated by the Director,  Office of Management and Budget, also has provided contracting services  for OST.
section_title: An Investigation by Interior’s Office of Inspector General Found Evidence of an Appearance of Preferential Treatment by OST Management
paragraphs: In July 2003, Interior’s Office of Inspector General received allegations  that senior OST officials had given CD&L favorable treatment in awarding  contract work. The Inspector General’s May 2006 report found that senior  OST officials created an appearance of preferential treatment of CD&L, in  violation of both the Standards of Ethical Conduct for Employees of the  Executive Branch and an internal OST memorandum directing “Arms  Length Dealings with Contractors.” The report documents that over  several years, OST awarded and continued to extend, without competition,  a contract with CD&L for trust fund accounting and risk management  services; while at the same time, senior OST officials engaged in extensive  outside social activity and exchanged gifts with CD&L executives. The  report also stated that OST contract personnel felt pressured by these  senior OST officials to continue to award work to CD&L.
The Inspector General referred the matter to Interior to take appropriate  administrative action and to review the performance of the CD&L  contract. In response, the Special Trustee has required that all OST  employees at grades GS-12 or above take a special 2-hour ethics training  course. The Special Trustee stated that he was satisfied with CD&L’s trust  accounting and risk management services.
From January 2001 through September 2003, OST had procurement  authority and in-house staff were servicing OST’s contracts. In February  2004, after the contracting function was turned over to NBC’s Denver  branch, OST attempted to get a follow-on sole-source contract with CD&L  for the risk management program. OST officials were anxious to get a  follow-on contract to meet a court-ordered June 2004 deadline for  implementing the risk management system for all agencies involved with  trust records. However, due to a lack of documentation to support a valid  justification and because of prior apparent improprieties, NBC officials  refused to award a follow-on sole-source contract. Rather than wait 4 to 5  months to award a new contract under the competitive bidding process at  NBC’s Denver branch, OST officials went to BIA and placed an order  under the General Services Administration’s Mission Oriented Business  Integrated Services program, which required a shorter time period to get a  contract awarded. The order was placed with CNI in April 2004, and CNI  subsequently hired CD&L as a subcontractor through September 2004 to  continue the risk management design work. In January 2005, a competitive  contract for additional risk management work was awarded to CNI and  CD&L, with BIA as the contracting office.
section_title: Conclusions
paragraphs: OST is in the final stages of implementing the trust fund management  reforms that the 1994 Act required. However, the Special Trustee has not  provided the Congress with a timetable for completing these reforms, as  required by the act. Without a timetable, the Congress cannot readily  oversee OST’s implementation of the trust reforms or plan for trust fund  operations once reforms are completed. OST also has not developed a  plan for future trust fund operations once reforms are completed. Whether  or not OST is terminated, the Special Trustee believes that OST’s staff will  need to continue to perform their functions after trust reforms are  completed because, after the passage of the 1994 Act, the Secretary of the  Interior transferred to OST the Office of Trust Funds Management and  other offices and personnel responsible for trust fund operations. In  addition, OST has not developed a workforce plan that reexamines the  responsibilities and needs for trust fund operations. While the Special  Trustee plans to reduce OST’s budget by terminating contracts as reforms  are completed, he believes that OST’s current size is about right for trust  fund operations once reforms are completed. However, a reexamination of  OST’s workforce needs might identify opportunities for realigning or  further reducing expenditures and staffing levels because, for example,  certain job responsibilities may decrease once trust reforms are completed  and accounting functions are automated.
section_title: Recommendations for Executive Action
paragraphs: To improve congressional oversight of the trust reforms and ensure that  trust fund accounting operations, once implemented, are economically  staffed, we recommend that the Secretary of the Interior direct the Special  Trustee to take the following three actions:    Provide the Congress with a timetable for completing the trust fund  management reforms.
In anticipation of completing the trust reforms, provide the Congress with  a plan for future trust fund operations, including, if the decision is made to  terminate OST, a determination of where these operations will reside.
As trust reforms are completed and contracts are terminated, develop a  workforce plan that reexamines and proposes staffing levels and funding  needs.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided Interior with a draft of this report for its review and  comment. In its written response, Interior agreed with our  recommendations, stating that it expects to have a timetable by late-June  2007 for implementing the remaining trust reforms, including a date for the  proposed termination or eventual disposition of OST. (See app. III.)  However, Interior disagreed with the number of key reforms we identified  and attached to its letter a list of 47 additional reforms that OST has  completed. We reviewed the 47 reform efforts on Interior’s list and, while  they are important activities for the implementation of OST’s trust  reforms, we believe they are not key components of OST’s integrated  information system that interfaces the trust funds accounting system with  BIA’s land title records and asset management systems for Indian lands.  Accordingly, we did not revise our report. In addition, Interior provided  comments to improve the draft report’s technical accuracy, which we have  incorporated as appropriate.
section_title: Scope and Methodology
paragraphs: To examine OST’s progress in implementing the American Indian Trust  Fund Management Reform Act of 1994, we reviewed (1) the 1994 Act and  its legislative history; (2) Interior’s appropriations legislation; and (3)  relevant Interior documents, including secretarial orders and OST’s March  2003 Comprehensive Trust Management Plan and prior strategic plans  that provide the basis for OST’s current reform efforts. We also reviewed  various documents showing OST’s progress in implementing trust reforms  and interviewed OST and BIA officials regarding the status of trust reform  efforts. However, we did not analyze the adequacy of OST’s efforts to  ensure that the reforms will result in an integrated computer system with  complete and accurate information. In addition, to gain insight into the  concerns that tribal organizations have expressed about OST’s trust  reform performance, we interviewed executives of the Intertribal  Monitoring Association on Indian Trust Funds, the National Congress of  American Indians, the Great Plains Tribal Chairman’s Association, the  United South and Eastern Tribes, and the Affiliated Tribes of Northwest  Indians. Although the tribal organizations we selected reflect some  variation in geography and their members include numerous individual  Indian tribes, our selections were not intended to be representative of all  tribes.
To examine OST’s use of contractors in implementing its trust reforms, we  obtained specific data elements for fiscal years 2004 and 2005 from the  General Services Administration’s FPDS-NG database. These data  elements include the amount obligated, the types of goods or services  purchased, and various vendor characteristics. FPDS-NG does not include  (1) assistance actions, such as grants and cooperative agreements; (2)  imprest fund transactions, training authorizations, and micropurchases  valued at $2,500 or less that were obtained through the use of a  government purchase card; (3) interagency agreements with other federal  agencies and organizations; or (4) actions involving transfer of supplies  within and among agencies. Finally, total dollars for fiscal year 2006 are  incomplete and were not included in this report.
To ensure the completeness and accuracy of the FPDS-NG contracting  data, we examined NBC contracting documents and interviewed  contracting officers at BIA and NBC’s Denver and Fort Huachuca branches  as well as selected contracting officer’s technical representatives at OST.  We obtained data from FPDS-NG by searching on OST as the funding  agency. However, because NBC officials told us this field was not always  completed, we also obtained FPDS-NG data by searching on NBC’s  contracting office and identifying, by the product or service description,  contracts most likely associated with trust reform efforts. In addition, we  compared these data with NBC’s procurement tracking system and made  adjustments to the FPDS-NG data as necessary. Where discrepancies were  found, we corrected the FPDS-NG data to ensure completeness of the  data. On the basis of our testing and correction of FPDS-NG data, we are  sufficiently confident of the reliability of the data we are reporting.  Furthermore, we reviewed the report and associated workpapers of  Interior’s Office of Inspector General regarding allegations that senior OST  officials had given CD&L preferential treatment in contracting for risk  management services.
To assess the performance awards and retention allowances that SES  officials at OST had received, we analyzed data for fiscal years 2001  through 2005 from the Office of Personnel Management’s Central  Personnel Data File, which contains records for most federal employees  and is the primary governmentwide source for information on federal  employees. Specifically, we examined the number and dollar amount of  performance awards and retention allowances provided to OST and  compared them with those of other Interior bureaus and other federal  agencies. In addition, we obtained documents from Interior’s Minerals  Management Service, which is responsible for providing OST with human  resources support services—including (1) processing performance awards  and retention allowances provided to SES officials at OST and (2) ensuring  compliance with the appropriate procedures for determining such awards  and allowances.
We conducted our review from February 2006 through October 2006 in  accordance with generally accepted government auditing standards.
As arranged with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days from the  report date. At that time, we will send copies to interested congressional  committees, the Secretary of the Interior, the Special Trustee for American  Indians, the Director of the Office of Management and Budget, and other  interested parties. We will also make copies available to others upon  request. This report will also be available at no charge on the GAO Web  site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-3841 or nazzaror@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix IV.
section_title: Appendix I: Retention Allowances and Performance Awards Provided to OST Senior Executive Service Managers
paragraphs: The Department of the Interior (Interior) has provided a retention  allowance to one Senior Executive Service (SES) manager at the Office of  the Special Trustee for American Indians (OST)—the Principal Deputy  Special Trustee. In addition, 7 of the 13 SES managers currently at OST  received at least two major awards in 2 years or more. However, from  fiscal years 2001 to 2005, the average performance award amounts that  SES managers received were generally lower than the average amounts  provided to other bureaus and offices within Interior and other federal  agencies. Interior’s Executive Resources Board (ERB), currently chaired  by the Secretary of the Interior and comprising senior Interior managers,  made the final determination on all performance awards and retention  allowances provided to SES managers.
subsections: section_title: Retention Allowance
paragraphs: Each calendar year from 1999 through 2005, Interior has provided OST’s  Principal Deputy Special Trustee with a retention allowance because,  according to agency justifications, her historical knowledge and  managerial ability are needed to ensure Interior’s trust oversight and  reform success. Specifically, from 1999 to 2005, Interior’s ERB has  reviewed and approved the justification for the retention allowance, which  raises the Principal Deputy Special Trustee’s total compensation to the  maximum allowable for SES employees—excluding 1999 and 2005, when  the Principal Deputy Special Trustee’s compensation was slightly under  the total maximum allowable. According to officials of Interior’s Minerals  Management Service, retention allowances are reserved for special talent  and have been provided to only two Interior SES managers—the other SES  manager received a retention allowance in 2002 and 2004. In each year, the  Principal Deputy Special Trustee’s retention allowance was lower than the  maximum amount provided to an SES manager at all other federal  agencies (see table 4). The Special Trustee stated that as OST’s trust  reforms are completed, the total compensation provided to the Principal  Deputy Special Trustee will be reevaluated.
section_title: Performance Awards
paragraphs: Seven of OST’s SES managers received at least two major awards—a  performance award, a special act award, an individual cash award, or a  time-off award—in 2 years or more, as follows:  The Principal Deputy Special Trustee, who has been in the SES since 1993,  received three major awards from fiscal years 2000 to 2006. Specifically,  the Principal Deputy Special Trustee received two time-off awards of 80  hours each in fiscal years 2000 and 2004 and a performance award of  about $9,700 in fiscal year 2006. In addition to these major awards, the  Principal Deputy Special Trustee received the Presidential Rank Award in  2002, one of the government’s most prestigious awards. While the  Principal Deputy Special Trustee received cash with the award, the full  cash amount could not be provided in 2002 because her total  compensation was at the maximum allowable for a federal employee. As a  result, she received part of the award in 2002 and the rest of the award in  2003.
A manager, who has been in the SES since 1996, received eight major  awards from fiscal years 1999 through 2006, including at least one award  in 7 of the 8 years. Specifically, in fiscal years 1999 and 2000, this manager  received three special act awards that ranged from $1,750 to $10,000. In  fiscal years 2002 through 2006, this manager received either a performance  award or an individual cash award in each year, ranging from $5,000 to  $13,000.
A manager, who has been in the SES since 2002, received six major awards  from fiscal years 2003 through 2006, including at least one award in each  year. Specifically, this manager received two special act awards of $5,000  and $10,000, two time-off awards of 40 hours each, an individual cash  award of $5,000, and a performance award of about $7,200.
A manager, who has been in the SES since 2002, received three major  awards—one award per year from fiscal years 2004 through 2006. This  manager received a performance award of $6,900 and two time-off awards  of 40 hours and 80 hours.
A manager, who has been in the SES since 2004, received two major  awards—performance awards of about $12,000 in fiscal year 2005 and  about $11,500 in fiscal year 2006.
A manager, who has been in the SES since 2004, received two major  awards—individual cash awards of $4,300 in fiscal year 2005 and $5,000 in  fiscal year 2006.
A manager, who has been in the SES since 2004, received two major  awards—a performance award of about $8,900 in fiscal year 2005 and an  individual cash award of $5,000 in fiscal year 2006.
OST’s six other current SES managers have received, at most, one major  award. In fiscal year 2005, about 54 percent of OST’s SES managers  received at least one major award. In fiscal year 2006, about 69 percent of  OST’s SES managers received at least one major award.
Table 5 compares the average performance award amounts for SES  managers at OST with the average amounts at other bureaus and offices  within Interior and other federal agencies. The average performance  award amount of OST’s SES performance awards was higher than the  average amounts of other bureaus and offices within Interior and other  federal agencies in fiscal year 2001—according to the Special Trustee, the  performance awards recognized these managers’ many hours of efforts to  validate data for the implementation of the trust funds accounting system  in 2000. However, the average amounts of OST’s performance awards for  fiscal years 2002 through 2005 were generally lower than the average  amounts provided to other bureaus and offices within Interior and other  federal agencies—excluding fiscal year 2003, when the average amount of  OST’s performance awards was slightly higher than the average amount  provided to other bureaus and offices within Interior.
Interior’s ERB approved each of the major awards provided to OST’s SES  managers. Minerals Management Service officials told us that ERB  considers supporting documentation and recommendations provided by  the Performance Review Board, which is an Interior board that reviews  only performance awards, in making its final determination.
section_title: Appendix II: OST’s Task Orders Issued to Chickasaw Nation Industries for Trust Reform Work, Fiscal Years 2004 and 2005
subsections: section_title: Statement processing and mailing software
section_title: Appendix III: Comments from the Department of the Interior
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: Woods.