Indian Economic Development: Relationship to EDA Grants and Self-determination Contracting Is Mixed
Published: 2004-09-08T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: American Indians and Alaska Natives generally face worse economic conditions than the rest of the U.S. population. The Economic Development Administration (EDA) within the Department of Commerce provides grants to distressed communities, including to American Indian tribes and Alaska Native entities, to generate employment and stimulate economic growth. Because data on how these EDA grants helped tribes was not publicly available, GAO analyzed all EDA grants made to Indian tribes from 1993-2002 and determined what economic development resulted. Tribes also enter into self-governance and other contracting arrangements with two federal agencies--the Bureau of Indian Affairs (BIA) and the Indian Health Service--to assume the management of individual services, including law enforcement, education, social services, and road maintenance. GAO also analyzed the relationship between changes in tribes' economic profile and the extent to which they had self-governance or contracting arrangements to perform their own services. BIA and EDA provided comments on a draft of this report. BIA generally agreed with GAO's conclusions. EDA took issue with GAO's characterization of the relative success of EDA grant programs.
section_title: What GAO Found
paragraphs: Indian tribes have used EDA grants to create businesses, build roads and other infrastructure, and create economic development plans, but these grants have had mixed success in generating jobs, income, and private sector investment. From 1993 to 2002, 143 Indian tribes and tribal organizations received $112 million in EDA grants, but this represented a small portion of EDA's awards to all organizations. Of the total amount awarded to Indian tribes or Alaska Native entities, $54 million was used to fund 63 enterprise projects designed to create income and jobs. Of the 59 projects GAO collected data on, 25 had not yet begun operating, and 3 others had just been completed and no results were available. Of the 31 operational projects, tribal officials reported that about half were profitable or were covering their costs, and the remainder were being subsidized or had failed. Most had resulted in the creation of 10 or fewer jobs, and few had attracted private sector investment. EDA also provided $22 million in grants to tribes for infrastructure projects, such as roads and sewer systems, $30 million in grants to assist tribes with economic planning, and $5 million for loan funds and business development. Almost all of the 219 federally recognized tribes with available data had entered into either contracts or self-governance compacts to operate their own tribal programs and services. Based on GAO's analysis of U.S. Census Bureau data, tribes that had self-governance arrangements or were engaging in higher levels of contracting showed greater gains on average in employment levels from 1990 to 2000 compared with tribes that were contracting less. However, the change in per capita income or the percentage of tribal individuals with incomes above poverty levels over this period was not statistically different for self-governance or high-contracting tribes compared with low-contracting tribes.

section_title: Letter
paragraphs: Creating employment and raising incomes is a key priority for Indian and  Alaska Native communities, and we have previously reported that over 100  federal programs were potentially available to assist tribes or tribal  members with economic development activities. One agency providing  such aid is the Economic Development Administration (EDA) within the  Department of Commerce (Commerce), which provides grants to  distressed communities to generate new and retain existing jobs and to  stimulate economic growth in areas of the nation experiencing high  unemployment, low income, or severe economic distress, including  American Indian tribes and tribal consortia. Annually, EDA awards  between $200 and $400 million in total grants, but public information on the  extent to which EDA grants are assisting tribes was not readily available. In  addition to financial assistance from federal agencies, Congress has also  attempted to help tribes assume management of their own affairs. Since  1975, the Indian Self-Determination and Education Assistance Act has  authorized tribes to assume the management of programs that had been  administered on their behalf by the two federal agencies that provide  services to tribes—the Department of the Interior’s Bureau of Indian  Affairs (BIA) and Health and Human Service’s Indian Health Service. As a  result, tribes can enter into contracts with these agencies to assume  management of individual services, including law enforcement, education,  social services, and road maintenance. Under self-governance compacts,  tribes can receive lump sum funding to assume many of the services that  were previously provided federally. Proponents of contracting and self- governance expect that the experience, expertise, and control that these  arrangements provide should also help these tribes develop economically.
To assess the success of these efforts, you asked us to review EDA grants,  as well as contracting and self-governance arrangements. In response, we  analyzed (1) all EDA grants made to Indian tribes from 1993-2002 and  determined what economic development resulted and (2) the relationship  between changes in the economic profile of tribes and the extent to which  they have entered into self-determination contracts or self-governance  compacts to perform their own services under the Indian Self- Determination and Education Assistance Act, as amended. We also  identified other advantages and disadvantages to these arrangements and  other factors that can affect changes in tribes’ economic profiles.
To determine the results of the EDA grants to tribes, we obtained data on  all EDA grants made to tribes from 1993-2002. Over this period, EDA  provided grants to 125 of the 562 federally recognized tribes and also to 18  tribal or Alaska Native organizations. For our analysis, we classified EDA’s  grants by type of project funded, including projects for   producing income (enterprise projects), such as saw mills;   business development, including training;  improving infrastructure, such as roads; and   conducting economic development planning.
To determine what economic development resulted from these grants, we  gathered information from all 95 tribes that received EDA grants for  enterprise, infrastructure, and business development projects from 1993 to  2002 by (1) visiting 15 tribes to inspect the projects funded and (2)  conducting a telephone survey of the remaining 80 tribes. If these tribes  also received a planning grant from EDA, we also obtained information  about the results for the planning grant from tribal officials. We analyzed  this information to identify the extent to which the projects these grants  funded were profitable or had led to other economic development. Our  survey results reflect the information provided by and opinions of tribal  officials who participated in our survey. We also interviewed EDA officials  in headquarters and regional offices to discuss application and monitoring  policies and procedures and reviewed Inspector General reports involving  EDA funding to tribes.
To determine the relationship between the economic profile of tribes and  the extent to which they had self-determination contracts or self- governance compacts, we identified the extent to which tribes in the lower  48 states were contracting using a database that shows the amounts from  federal programs received by tribes that received at least $300,000 in  federal assistance. For purposes of our analysis, we placed tribes into one  of the following three separate groups:   self-governance tribes that receive funds to perform multiple services.   tribes whose total contracting dollars exceeded a calculated threshold  (high-contracting tribes), and   tribes below this amount (low-contracting tribes).
Using data from the U.S. Census Bureau (Census), we compared the extent  to which various economic variables, such as the per capita income of the  Native Americans living in the tribal area, had changed from 1990 to 2000  for the tribes in these three groups. Because we were not able to include  the extent to which other external factors also affected the tribe’s  economic development, our results cannot be used to definitively  determine whether any changes in tribes’ economic profiles are the result  of the extent to which they engaged in contracting or self governance. Our  contracting analysis also included only 219 tribes located in the lower 48  states for which requisite information for our analysis was available and  excluded Alaska Native entities because comparable contracting and  economic profile data was not available. We performed various steps to  assure ourselves of the reliability of the data that we used in the analyses  for this report and we describe these efforts in appendix I. We determined  that the data was sufficiently reliable for our purposes.
We conducted our work in Washington, D.C.; Philadelphia; and various  locations in California, Alaska, Arizona, New Mexico, and Washington from  July 2003 through September 2004 in accordance with generally accepted  government auditing standards. Appendix I contains a detailed description  of our scope and methodology.
subsections: section_title: Background
paragraphs: American Indian tribes are among the most economically distressed groups  in the United States. According to data from the 2000 U.S. Census,  American Indian tribes’ median per capita income of $9,200 in 1999 was  less than half the $21,600 per capita income for the entire U. S. population.  In addition, the percentage of American Indians with household incomes at  or below the official poverty level averaged 30 percent across tribes—more  than double the 12 percent for the U.S. population as a whole. According  to tribal officials and government agencies, conditions on and around tribal  lands generally make successful economic development more difficult.  These officials indicated that American Indian communities often are  lacking in adequate basic infrastructure, such as water and sewage  systems. These communities also frequently lack sufficient technology  infrastructure, such as telecommunications lines that are commonly found  in other American communities. Without such infrastructure, tribal  communities often find it difficult to compete successfully in the economic  mainstream. A 1999 EDA study that assessed the state of infrastructure in  American Indian communities found that these communities also had other  disadvantages that made successful business development more difficult.  This study found that the high cost and small markets associated with  investment in Native communities continued to deter widespread private  sector involvement. Another factor that creates more difficult business  conditions in some tribal areas has been downturns in regionally significant  industries. For example, tribes in the Northwest and Alaska have been hurt  by the decline in the fishing and timber industries in their areas.
To help address the needs of Indian tribes, various federal agencies provide  assistance, including economic development. BIA is charged with the  responsibility of implementing federal Indian policy. BIA assists tribes in  various ways, including providing for social services, developing and  maintaining infrastructure, and providing education services. BIA also  attempts to help tribes develop economically by providing resources to  administer tribal revolving loan programs and guaranteed loan programs to  improve access to capital in tribal communities and providing assistance in  obtaining financing from private sources to promote business development  initiatives on or near Indian reservations. In addition to the support  provided by BIA, other agencies with significant programs for tribes  include the Department of Health and Human Services, which provides  funding for the Head Start Program and the Indian Health Service; the  Department of Housing and Urban Development, which provides support  for community development and housing-related projects; and the  Department of Agriculture, which provides support for services pertaining  to food distribution, nutrition programs, and rural economic development.
The Department of Commerce’s EDA is an agency that provides assistance  to tribes specifically for economic development. EDA’s mission is to create  wealth and minimize poverty in economically distressed rural and urban  communities that experience high unemployment, low income, or other  severe distress. EDA fulfills its mission with grant programs, including six  programs explained in table 1.
EDA has six regional offices that administer its grant programs across  multistate areas. Each regional office accepts preapplication investment  proposals from prospective grantees, including American Indian tribes and  Alaska Natives. Based on established regulations, EDA regional officials  encourage only those investment proposals that will significantly benefit  areas experiencing or threatened with substantial economic distress to  continue with the application process. Before receiving a grant, an entity  must submit a preapplication proposal to an EDA Economic Development  Representative responsible for that area. After preliminary reviews by  various EDA regional office staff, each preapplication proposal is  considered by the region’s Investment Review Committee, which consists  of the Regional Director, Regional Counsel, and Division Chiefs, to ensure  that entity is eligible to receive funds and that the project is likely to  provide benefits meeting EDA’s criteria. The Investment Review Committee  will then recommend whether the entity should be invited to submit an  application. EDA headquarters reviews the recommendation action for  quality assurance. According to Commerce, after receiving quality control  clearance and depending on the type of grant program, the Regional  Director approves the decision to invite the entity to submit a formal  application. After this application is received and found to be complete, the  grant funds will be awarded. During the 1990s, the goals EDA generally  sought to meet through its grants were to fund projects that would create  jobs and produce income for distressed communities. However, since 2002  EDA has placed more emphasis on projects that create higher-skill, higher- wage jobs and that are market based and likely to attract private sector  investment.
subsections: section_title: Activities Tribes Perform under the Indian Self- determination and Education Act Are Also Envisioned to Help Economic Development
paragraphs: Activities that tribes are authorized to undertake as a result of the Indian  Self-Determination and Education Assistance Act, as amended, could help  them develop economically. This act authorizes Indian tribes to take over  the administration of programs that had been previously administered on  their behalf by the Departments of the Interior or Health and Human  Services. In passing the act, Congress recognized that the government’s  administration of Indian programs prevented tribes from establishing their  own policies and making their own decisions about program services. The  act allowed tribes to contract for a range of Indian programs that are  managed by the Interior Department’s BIA and Health and Human Services’  Indian Health Service on their behalf. According to the act, tribal  contractors must receive funding equivalent to what each of the agencies  would have provided if they had operated the programs. The act, as  amended, also provides that tribal contractors are to receive funding for  the reasonable costs of activities that they must perform to manage a  program’s contract—known as contract support costs. Once having  contracted a program, a tribe assumes responsibility for all aspects of its  management, such as hiring program personnel, conducting program  activities, delivering program services, and establishing and maintaining  administrative and accounting systems. Typical programs that are  contracted by tribes include such BIA programs as law enforcement, social  services, road maintenance, and forestry as well as such Indian Health  Service programs as hospitals and health clinics; dental care; and mental  health services.
Congress has amended the act several times since 1975. A series of  amendments from 1984 through 1994 streamlined contracting  requirements, provided funds for contract support, and allowed more  participation by tribal governments in federal rulemaking. In 1988, a new  title was added to the 1975 act authorizing the creation of the Self- Governance Demonstration Project that enabled a number of tribes to  receive funding for multiple federal programs in one lump sum under a self- governance agreement. This new title to the act, known as Title III Self- Governance Demonstration Project, enables tribes generally to receive  funding for multiple federal programs in one lump sum under a self- governance compact. Tribes operating under a self-governance compact  have the flexibility to administer funds for multiple programs as they see  fit, rather than abiding by the circumstances of single-program contracts.  The 1988 amendment also added reasonable contract support costs to  comply with the terms of the contract and to support prudent management.  The Tribal Self-Governance Act Amendments of 1994 directed the  Secretary of the Interior to negotiate contracts annually with participating  tribes to enable the tribes to plan, conduct, consolidate, and administer  functions and activities that were administered by the Secretary. Through  the act and the subsequent amendments, Congress envisioned that Indian  tribes and Indian people are best able to determine the most effective and  efficient provision of government programs, services, and economic  development for Indian people.
section_title: EDA Grants Have Provided Some Benefits to Tribes, but Overall Success in Producing Economic Development Has Been Mixed
paragraphs: The funding that EDA provided to tribes between 1993 and 2002  represented a small portion of the economic assistance that EDA provided  during this 10-year period. The extent to which tribes received EDA grants  varied across states and these were used for various purposes. From 1993  to 2002, EDA provided funding for 63 enterprise projects intended to  generate revenues but these have had mixed success in producing  economic development. EDA has also provided a small amount of funding  for business development activities, including several revolving loan funds,  which were used to fund tribal enterprises or training. In addition, 23 tribes  received EDA grants for infrastructure projects that tribal officials reported  as having resulted in subsequent economic development activities for their  tribes. During the 10-year period, 99 tribes and tribal organizations received  EDA grants for planning activities, including feasibility studies, and almost  all of the tribes that got these grants either received other funding from  EDA or obtained economic development aid from other government  agencies.
subsections: section_title: EDA Grants to Tribes Represented a Small Portion of its Overall Program
paragraphs: The funding that EDA provided to tribes represent a small portion of  overall EDA grants. We obtained data from EDA that included all grants it  made to American Indian tribes during the years 1993 to 2002. Our analysis  of these data indicated that 143 Indian tribes and tribal organizations  received a total of $112 million in EDA grants during this 10-year period.  Comparing this with the total amount of grants that EDA awarded, EDA  grants to tribes represented 3 percent of the $3.4 billion that the agency had  awarded overall between 1993 and 2002. Figure 1 shows the relative  proportion of funding that tribes received each year from EDA, which  ranged between 2.1 percent and 5.3 percent of total EDA grant  appropriations during this period.
Using information from the 2000 Census, we calculated that approximately  3.5 percent of the persons in the United States with income below the  official poverty level are American Indians or Alaska Natives. Therefore,  the proportion of EDA funds going to tribes appears to be similar to the  proportion of the U.S. population living in poverty that these tribes  represent.
Based on our analysis of EDA data, 125 (or 22 percent) of the 562 federally  recognized tribes in the lower 48 states and Alaska received EDA grants  between 1993 and 2002. EDA also provided grants to 18 tribal organizations  or Alaska Native entities. According to EDA officials, other tribes did not  receive any EDA grants for various reasons. For example, they said that the  demand for funding exceeds the available grant funding. Also, one EDA  official said that some tribes are unable to propose a project that appears  likely to generate sufficient economic development.
section_title: EDA Funding to Tribes Varied across States
paragraphs: Of the $112 million in total grants to tribes that EDA awarded between 1993  and 2002, $86 million went to 113 tribes in the lower 48 states. This  included grants to 100 federally recognized tribes and 13 tribal  organizations. The remaining $26 million was awarded to 30 Native entities  in Alaska, including grants to 25 federally recognized Native entities and 5  Alaska Native organizations representing more than one entity.
Our analysis indicated that the amount of EDA funding to tribes varied  across states. For example, Alaska accounted for almost 23 percent of EDA  grants to all tribal entities during the years 1993 to 2002, as shown in figure  2. In 2001 alone, Native entities in Alaska received over half of all EDA  grants to tribes, much of which were awarded under EDA’s disaster relief  appropriation for projects to address the slump in Alaska’s fishing industry.
In addition to more tribes in some states receiving grants, our analysis  showed that EDA-awarded grants to tribes also varied on a per capita basis  across states. As figure 3 shows, tribes in seven states, including Colorado,  Florida, Idaho, Maine, Massachusetts, North Carolina, and Oregon,  received more than $600 per individual in grants from EDA between 1993  and 2002. In contrast, tribes in at least eight states received no EDA grant  funding during this period.
section_title: EDA Grants to Tribes Used for Various Purposes
paragraphs: The grants EDA made to tribes were for various purposes. In the data we  analyzed, EDA categorized the grants it awarded according to the various  funding programs it administers, such as for planning, public works, or  economic adjustment. However, upon review of these data, we found that  EDA used funds from these different categories to provide grants for  similar types of projects. For example, an economic adjustment grant or a  public works grant could be used for either the planning of a project or the  construction of a project. Therefore, for our analysis, we grouped the  various grants into the following categories according to type of project or  activity funded:   Enterprise projects: grants used to develop projects designed to  generate income for the tribe, such as a cannery, a resort, or a sawmill;   Infrastructure projects: grants used for the design and construction of  public works infrastructure (e.g., roads, highways, and sewers) that  would serve as the foundation for general economic development  activities;   Business development projects: grants used to fund loan funds, training,  and other business development projects, including those for business  incubators, revolving loan funds (RLF), training and capacity building,  and other assistance that enhances the tribes’ economic development  activities; and   Planning/feasibility grants: grants used for general planning purposes  such as paying for staff salaries or the broad administration of the tribes’  planning departments, as well as for developing plans, analyses of  projects’ environmental impact, and feasibility studies for specific  economic development projects.
Based on the results of our analysis of EDA data, we found that the largest  portion of the dollars EDA awarded to tribes were for enterprise projects.  As figure 4 shows, about half of the $112 million that EDA awarded to  tribes between 1993 and 2002 was for enterprise projects. Grants for  planning and feasibility studies represented the next largest portion of the  grants.
In addition to accounting for 27 percent of grant dollars EDA awarded  between 1993-2002, the most frequent type of grant that tribes received was  for planning and feasibility studies. As shown in figure 5, more tribes  received planning and feasibility grants than any other type.
section_title: EDA Funding of Tribal Enterprise Projects Has Had Mixed Success Generating Economic Development
paragraphs: The grants that EDA provided to tribes have had mixed success in creating  revenue-generating enterprises. Of the $112 million that EDA provided to  tribes from 1993 to 2002, as shown in figure 6, $54 million or nearly half  went to fund 63 tribal enterprise projects, including almost $20 million for  projects in Alaska. As shown in figure 6, most of the enterprise projects  EDA funded for tribes included industrial enterprises, such as wood  products plants, or commercial projects, such as retail businesses and  shopping centers. Most of the EDA-funded enterprise projects in Alaska  involved community or cultural centers, which provided facilities for  community and tourist activities. Some of the EDA grants also funded  natural resource enterprises involving fish, wildlife, or horticulture  restoration.
Figure 7 describes an example of one enterprise project that EDA funded.  This grant helped a tribe fund the development of a horticultural enterprise  that grows vegetation to improve fishing areas in local rivers. Although  producing some benefits, at the time we contacted the tribe operating this  project, they were using funds from other sources to subsidize its  operations, although they hoped it would eventually be profitable.
The enterprise projects EDA funded for tribes have had mixed success in  helping tribes create revenue-generating enterprises. We gathered  information on 59 of the 63 projects funded by EDA between 1993 and  2002—12 by site visits and 47 by telephone interviews with tribal officials.  Tribal officials we contacted in late 2003 and early 2004 reported that  31 projects had been completed;  3 were completed, but just opened, and no operating results were yet   25 had not yet been completed, including 20 projects funded in 2001 and  2002.
As shown in figure 8, of the 31 completed projects with results, tribal  officials reported about half were either profitable or were earning enough  to cover their operating costs. However, the remaining projects were either  requiring subsidies or had ceased operations. Tribal officials predicted that  4 of the 7 projects currently being subsidized could become sustainable  given more time or further expansion.
Five of the 7 projects that failed were industrial enterprises, including a  sawmill, a bottled water plant, and a plant to manufacture fiberglass  household furnishings. According to tribal officials, the reasons for failure  included market changes or downturns, lack of an ongoing source of  funding to keep the enterprise afloat, management problems, and  environmental problems. Four of the 7 failed enterprise projects were  funded between 1993 and 1995. However, in recent years, some tribes  reported that they have been able to keep fledgling enterprises afloat by  subsidizing them with revenues from gaming or other tribal enterprises,  and the failure rate for EDA-funded enterprise projects has decreased.  Since 1996, EDA funded 24 tribal projects that had been completed and, of  these, 14 were either profitable or covering their costs, 3 had failed, and 7  were still being subsidized (see appendix II, figure 30 for more information  on the outcome of projects by year of funding). Figure 9 provides an  example of a project that, although it has not failed, is used only once a  year and must have its operating costs subsidized by the tribes that operate  it.
Our analysis of the enterprise projects that EDA funded indicated that most  of the projects that tribes developed with EDA funding had not attracted  funding from private entities. For most of the enterprise projects we  reviewed, EDA funds covered between 30 percent and 80 percent of the  total project costs. As shown in figure 10, tribal officials reported direct  private sector investment in 17 percent of the projects, though in some  cases the tribal share of project funding included funds borrowed by the  tribes from private financial institutions. EDA officials recognize the  difficulty tribes face in attracting private investment on Indian lands and  sometimes make allowances for the amount of matching funds they require  or suggest to tribes that they locate projects outside of reservation land.
The grants that EDA provided to tribes for enterprise projects also  appeared to create limited numbers of jobs. Tribal officials told us that  many of the EDA-funded enterprise projects had resulted in the creation of  jobs for tribal members, although the number of jobs created generally was  less than 10 per project. As shown in the figure 11, 20 (59 percent) of the  enterprise projects resulted in 10 or fewer jobs.
Although most projects did not create a large amount of jobs, some  projects that EDA funded were more successful in employing larger  numbers of people. Of the 34 completed projects we reviewed, 4 projects  resulted in the creation of 50 or more jobs. These included the following  projects:  One Northwest tribe received a $1.6 million EDA grant in 2002 to help  fund the opening of a plywood processing plant that uses wood from the  tribe’s own forests. The total project cost was $10 million, with  additional funds coming from other federal and state grants, the tribe,  and a bank loan. Tribal officials reported that the enterprise has created  265 jobs in a generally depressed rural area and is generating enough  revenue to cover costs, including debt servicing.
One Southwest tribe we visited received a $2.5 million EDA grant in  2000 to help fund a shopping center. Total project cost was nearly $4.5  million, including an earlier $1 million investment by the tribe to install  basic infrastructure for the site. The project was built to accommodate  seven retail businesses. At the time of our visit, the center had five  tenants—a grocery store, pizza restaurant, laundromat, hair salon, and  video store--and two vacancies. According to tribal officials, the project  was still being subsidized by the tribe but is expected to be profitable in  3 to 5 years. According to a tribal report, the center had generated 70  jobs, provided retail services to local consumers, stopped a portion of  leakage of tribal dollars to off-reservation towns, and provided  opportunities for some tribal members to go into business.
A Montana tribe received three EDA grants totaling $1 million between  1996 and 2002 for expansion of a tribal electronics enterprise. Total cost  of the expansion projects was $2 million. According to tribal officials,  the projects generated a total of 65 new jobs, including participants in a  welfare-to-work program. The first two projects were profitable, but the  third project was not yet turning a profit as of early 2004.
Although the projects EDA funded had only mixed success in generating  revenue and large numbers of jobs, tribal officials told us that the EDA- funded enterprise projects had produced other benefits. In some cases,  tribal officials said that the projects EDA funded resulted in the creation of  jobs and revenue at other entities. For example, one tribe used a $350,000  EDA grant in 1997 to help fund construction of a fish hatchery. This  enterprise did not make a profit, but 15 jobs were created at the hatchery.  The project had indirect economic benefits to the tribe because it helped to  support the local fishing and tourism industry, which employed 15 to 20  tribal individuals as fishing guides and 8 seasonal jobs at a campground.  The hatchery also generated increased business for local restaurants and  motels and enabled tribal subsistence fishermen to catch fish for their own  consumption. (See app. II, fig. 29, for a list of the completed enterprise  projects for which we obtained information.)
In light of the mixed success that EDA-funded enterprise projects  experienced, tribes may find obtaining EDA funding in the future more  difficult because of the changes in the agency’s criteria for awarding grants.  Since fiscal year 2002, EDA’s criteria for approving grant applications  requires its staff to seek to fund projects that create jobs requiring greater  skills and paying higher wages. Their criteria also emphasize projects more  likely to attract private sector investment. In meeting these criteria, EDA  officials informed us that tribes have to compete with other entities such as  state and local governments and nonprofit organizations for EDA grants.  As a result, tribes in rural areas, in particular, find it difficult to propose  projects that are likely to attract private sector investment or result in jobs  that pay high wages. For example, EDA officials we spoke to in one EDA  region noted that communities closer to urban areas were more likely to be  able to propose projects, such as industrial parks, that were likely to attract  high technology firms than were the more rurally-located tribes in their  region.
section_title: EDA Also Provided Funds for Loan Funds and Other Business Development Activities
paragraphs: From 1993 through 2002, EDA also awarded grants to tribes to be used for  loan funds, business development, and training. Grants for these purposes  totaled $4.9 million, comprising 4 percent of the total $112 million that EDA  provided to tribes during that 10-year period. About $2.2 million of the EDA  grants were to support RLFs. These RLFs are pools of money loaned out  for revenue-generating enterprises. The repayment of loan principal and  interest replenish the RLF, creating a revolving source of capital to finance  additional loans and further develop the local economy. Of the $2.2 million  EDA awarded for RLFs between 1993 and 2002, $950,000 was to provide the  initial capital—seed money—to get three new RLFs started and about $1.3  million was used to support business development and training programs  associated with two existing RLFs (see app. II for details).
Tribal officials reported that these RLFs EDA has supported have  successfully funded both tribal enterprises and small businesses started by  individual tribal members. For example, a tribe in Northern California has  administered one of these RLFs since 1977, when EDA originally provided  initial capital of $1.5 million to finance loans relating to the tribe’s forest  industries. Since 1994, EDA provided $285,000 to fund a business training  program to assist applicants seeking funding from this RLF with instruction  on preparing business plans, contract agreements, credit applications, and  on the use of computers and other office equipment. According to  documents provided by fund officials, over the years, this RLF has made  356 loans to businesses resulting in 658 new jobs and attracted $7.8 million  in private sector investment. Among the projects tribal officials told us  had received funding from this RLF included a shopping center, a motel, a  restaurant, a gas station, and a gravel enterprise. Tribal officials told us that  most of the projects this RLF has funded have provided jobs or other  benefits, although not all are operating profitably. To keep the more  marginal enterprises operating, tribal officials reported using profits from  the tribe’s own successful enterprises to subsidize the financing costs of  the other enterprises. By keeping these enterprises in operation until loans  were paid off, their community benefits from the additional jobs and  services, and the enterprises receive additional time to become sustainable  on their own. According to documents provided by fund officials, the total  amount of loan defaults as a percentage of the total loaned out since  inception for this tribe’s RLF was 5.4 percent, and through repayments of  principal and interest the fund’s capital pool has more than doubled to over  $3.2 million. Although we did not attempt to independently verify the  accuracy of these figures, we visited several of the businesses the tribe  indicated had received funding. For example, the gravel enterprise, in its  first year of production since receiving an $850,000 loan from the RLF to  purchase rock-crushing machinery, was in full production, and enterprise  officials expected to turn a profit within 2 years and hoped to add an  asphalt plant in the future. At the time of our visit, we saw that this facility  was operating actively with considerable truck traffic into and out of the  facility.
The amount of loan activity by the three newly-funded RLFs has been  limited by start-up challenges and the amount of money in these funds.  According to RLF officials we interviewed, there are many challenges to  establishing a successful RLF, including finding additional funds to match  EDA’s seed money and cover operating costs until sufficient interest  income begins to be received. Other challenges include finding and hiring a  competent, experienced loan manager; training loan applicants in such  areas as drawing up business plans; and establishing relationships and  gaining the confidence of financial institutions to leverage the loans. One of  the RLFs took 3 years from the time its EDA grant was approved until its  first loan was made. At the time of our survey, the three RLFs that EDA had  funded since 1998 reported each had made between 7 and 14 loans.  Because new loans cannot be made until older loans are repaid,  considerable time is required for RLFs to grow and become more active.
Figure 12 shows an example of a resort cabin business that was funded by a  loan from an EDA-supported RLF. EDA also funded a grant that was used  for the design of the project. The tribe operating the project reported that  the project is generating enough revenue to cover its costs despite a short  tourist season, but they hoped that an expansion of the project could make  it profitable.
In addition to grants to support RLFs, EDA also provided tribes with  funding for training or business development, but according to tribal  officials, the success of these programs has been hampered by lack of  operating funds. Between 1993 and 2002, EDA provided Indian tribes with  $2.1 million in grants to start 6 training programs. The largest of these was a  $1.2 million grant in 2000 to renovate a building for a vocational training  center in Alaska that, according to local officials, has trained 830 students.  A California tribe that, according to a tribal official, lost 150 jobs due to  timber industry closures, used a $66,000 grant in 1998 to establish a training  program that has resulted in 2 entrepreneur classes, 100 individual  business counseling sessions, and 5 start-up businesses. All 6 of these  programs sought operating funds from other sources, such as state and  federal agencies. However, 4 of the 6 programs reported difficulties getting  on-going operating funds—two closed down due to lack of funds, one  transferred its facilities to a university program, and the fourth reported  that its program was in jeopardy.
In addition to training programs, EDA also provided about $500,000 to six  other Indian tribes and organizations for business development activities  between 1993 and 2002. In most cases the grants were for one-time training  workshops or conferences on business development related topics. In two  cases, the grants were used to recruit several businesses for  business/industrial parks. One tribe, which received a $75,000 grant in 2000,  reported finding one current and two future tenants for their park and used  part of the grant to conduct a seminar on how tribal businesses can apply  for government contracts under the Small Business Administration’s 8(a)  minority contracting program.
section_title: EDA Infrastructure Grants Reported to Have Facilitated Development
paragraphs: About 20 percent of the funding that EDA provided to Indian tribes  between 1993-2002 was for projects to improve infrastructure for tribal  lands. According to government and tribal officials, many rural Indian  communities lack the infrastructure needed to support industrial and  commercial development, such as roads, water and waste treatment  pipelines, and processing facilities. A 1999 EDA study cited lack of funding  as the overwhelming reason why tribes were not making the infrastructure  investments needed to facilitate economic development. The tribal  officials we spoke with said that obtaining sufficient funding for  infrastructure development was particularly difficult because such projects  do not always offer an immediate return on the investment. However, in  some cases tribes with revenues from gaming and other tribal enterprises  were able to use these sources in addition to funding from EDA and other  federal grants to finance improvements to their infrastructure.
Our analysis indicated that EDA provided $22.1 million in grants to 23  tribes for 26 infrastructure projects between 1993 and 2002. In many cases,  these funds were supplemented by grants from other federal agencies.  Most of these projects involved construction or expansion of water and  waste treatment systems, electrical lines, and roads. Other grants that EDA  awarded were used to improve dock and harbor facilities, to shore up  riverbanks for flood control, and to install telecommunications equipment.
For example, one coastal tribe we visited used $2.6 million in EDA funds to  construct a breakwater and marina to support and protect the tribal fishing  boats and to bolster the tribe’s seasonal boating-related tourism industry  (see figure 13). Another tribe we visited received a $1 million EDA grant in  1997 to construct the water and sewer pipes, roads, and electrical lines  needed for a new industrial park.
Of the tribes that received EDA infrastructure grants, tribal officials  reported that the funded projects facilitated either current or anticipated  future business development. We gathered information on 25 of the 26 EDA  infrastructure grants, visiting 4 during our site visits, and conducting  telephone interviews for the remainder. Nineteen of the 25 projects had  been completed and, according to tribal officials, all have led to economic  development for their tribes. For example, one tribe received a $1.1 million  EDA grant in 1995 to upgrade and extend their water and sewer systems,  which enabled the development of a resort, hotel, and casino complex with  more than $25 million in annual revenues. Tribal officials reported that the  complex has created more than 550 jobs, which helped reduce the tribal  unemployment rate from 37 percent to 11 percent. According to these  officials, the success of this project is spurring further economic  development, including a planned industrial park. Figure 14 shows the  various developments that were facilitated by the infrastructure grants that  EDA provided to tribes.
The benefits for some of the enterprise projects EDA had funded had yet to  be realized. Of the 25 infrastructure projects that we reviewed,  construction on 6 had not yet been completed, and 4 had only recently been  opened, and tribal officials told us that it was too soon to realize most of  the anticipated development benefits.
section_title: EDA Planning Grants Helped Tribes Obtain Other Funding for Their Economic Development
paragraphs: About one-fourth of the total dollars that EDA awarded to tribes were  provided to fund planning and feasibility study efforts, which appeared to  help these tribes identify their needs and obtain other funding for their  economic development efforts. According to the Department of  Commerce’s fiscal year performance report, EDA considers funding  distressed communities’ planning efforts critical to effective economic and  sustainable development. Based on our analysis of EDA grants, 99 tribes  and organizations received $30 million in EDA grants to conduct planning  activities or to fund the preparation of feasibility studies from 1993-2002.
The grants awarded for planning went to 72 tribes and 7 tribal  organizations in the lower 48 states and 6 Alaska Native villages or  organizations. These grants, which typically ranged from $30,000 to  $65,000, were generally used by tribes to pay part or all of the salary of an  individual tasked with developing economic development plans for the  tribe. More than half of the tribes receiving planning grants received them  annually throughout the 10-year period, and many have received these  grants continuously since the 1970s. Over 90 percent of the tribal officials  in our survey indicated that the planning grants were crucial or very  important in achieving success in their tribes’ economic development.  However, some officials reported that the effectiveness of their planning  grants was limited because of lack of funds to implement the projects they  envisioned or lack of support or consensus among the tribal leadership as  to what projects to pursue.
EDA also helped fund feasibility studies for 38 tribes. These grants were  awarded to 34 tribes in the lower 48 states and 4 in Alaska. According to  tribal officials, performing a feasibility studies before embarking on a  potential project can assist tribal officials in determining whether the  project would benefit the tribe. Of the 17 feasibility studies that we  obtained information on from our telephone interviews and site visits, 3 of  the projects studied were successfully implemented, 4 were in the planning  stage, 3 were not implemented due to a lack of funds, 3 were not  implemented due to a change in direction by the tribal council, and 4 were  determined not to be feasible.
As shown in figure 15, most tribes that receive planning or feasibility study  grants also receive project funding from EDA or other federal agencies.
The EDA planning grants appeared to help tribes successfully implement  EDA enterprise projects. According to the information we obtained on 25  completed enterprise projects in the lower 48 states that EDA funded from  1993-2002, 9 of 14 that had also received EDA planning grants were either  profitable or covering their costs, compared with 4 of 11 projects done by  tribes that had not obtained EDA planning grants. In addition, 4 of the 7  tribal enterprise projects that had failed during this period were  implemented by tribes that had not received EDA planning grants.
section_title: Tribes Contracting to Operate More of their Own Programs and Services Generally Experienced Greater Employment Gains but Not Greater Income Growth Than Other Tribes
paragraphs: As authorized under the Indian Self-Determination and Education  Assistance Act, as amended, nearly all tribes enter into contracting or self- governance arrangements to operate their own tribal programs and  services. Based on our analysis of the relationship between contracting and  changes in tribes’ economic profiles, we found that self-governance tribes  and those that had contracted to operate a high proportion of their  programs and services generally experienced greater growth in their  employment levels but had not generally shown greater gains in income  levels. Our analysis also suggested that tribes that received a high  proportion of their income from federal contracts and grants generally  experienced lower income growth than tribes that had been able to find  other sources of revenue. Despite these results, the tribal representatives  saw advantages to running their own programs, including the experience  such arrangements provide in administering their own affairs and the  increased flexibility provided for tailoring programs to meet local needs.  However, tribal officials we spoke to said that one disadvantage to  contracting is the amounts provided under such arrangements can lead to  funding shortfalls that divert money away from other tribal activities.  Furthermore, tribal representatives and others identified other factors,  such as the tribes’ location, availability of resources, ability to generate  gaming revenues, access to capital, and quality of tribal governance as  significant influences on the ability of tribes to develop their tribal  economics successfully. Because we were not able to include the extent to  which these factors also affected tribe’s economic development, our  contracting analysis examined only the relationship to such activities and  changes in economic profile and could not assess causation.
subsections: section_title: Most Tribes Entered Into Contracting Arrangements with the Federal Government
paragraphs: The Indian Self-Determination Act allows tribes to enter into various  arrangements with BIA or the Indian Health Service to assume the  operation of many of the programs and services previously provided by the  agencies. From the list of federally recognized tribes and from 2000 Census  data, we identified 219 tribes in the lower 48 states that had 100 or more  Native Americans living in the tribal area. According to BIA information,  43 of the 219 were tribes that had entered into self-governance  arrangements with BIA. As a result, these tribes operated most of their own  tribal functions and services under a funding compact agreement with BIA.  By analyzing Single Audit Act data that shows funding provided by federal  agencies, we determined that nearly all of the remaining 176 tribes  operated many of their tribal functions and services under contracts or  other agreements with BIA.
section_title: High-Contracting Tribes Generally Experienced More Employment Growth, but Income Growth Compared with Other Tribes Was Mixed
paragraphs: Our analysis of the relationship between contracting and economic profile  changes for Indian tribes showed that tribes that contracted more generally  experienced greater employment growth than did tribes that contracted  less. To identify the extent to which tribes were contracting, we grouped  the 219 tribes in the lower 48 states with populations greater than 100 into  three categories. The first category included the 43 tribes that had entered  into self-governance compacts with BIA. Such tribes generally have  assumed the operation of most of the services used by tribal members. For  the remaining 176 tribes that were non-self-governance, we analyzed how  much funding these tribes received from BIA contracts and grants from  1998 to 2000 in total and on a per capita basis. Based on these analyses, we  categorized the 121 tribes with annual per capita BIA contract amounts  exceeding $580 and total annual BIA contracting amounts greater than  $300,000 as high-contracting tribes, and we, therefore, categorized the  remaining 55 tribes whose per capita or total contracting amounts were  less than these thresholds as low-contracting tribes.
To analyze the relationship between contracting and changes in tribal  economic profiles, we compared how various indicators of economic well- being from Census Bureau data had changed for these three groups of  tribes. Within each group, the changes in their economic indicators varied  greatly, with some tribes experiencing significant improvement and others  experiencing declines between 1990 and 2000 (see app. III, table 8 for  complete data). As shown in figure 16 below, our analysis showed that  high-contracting and self-governance tribes experienced higher growth on  average in their employment levels than did tribes that contracted less.  However, the high-contracting and self-governance tribes we analyzed did  not, on average, experience greater growth in the income of the Native  Americans living on their lands. As the figure also shows, high-contracting  and self-governance tribes’ per capita incomes did not grow faster than  those of tribes contracting less. Additionally, these tribes did not  experience greater improvement in the proportion of Native Americans  living on their tribal lands with incomes above poverty level. As a result of  the wide variability in our data, our statistical tests indicated that the  differences in income growth and proportion above poverty level shown  below were not statistically meaningful.
Although their incomes did not grow faster on average than low- contracting tribes, the high-contracting and self-governance tribes in our  analysis were less likely to experience declines in their income-related  measures than the low-contracting tribes. As figure 17 shows, a greater  proportion of the high-contracting and self-governance tribes experienced  positive growth on both employment and income indicators over the 10- year period from 1990 to 2000.
section_title: Tribes Making Greater Use of Federal Contracts and Grants Tended to Experience Less Income Growth
paragraphs: For many tribes, federal contracts and grants are the major funding source  for tribal jobs and income. For example, of 53 tribes we contacted by  telephone or during our site visits, 68 percent reported that tribal  government, which is funded largely from federal sources, was the main  source of jobs and income for tribal members. To examine further the  relationship between level of contracting and economic indicators, we  compared the total federal contracts and grants received by each tribe with  the total income of Native Americans living in the tribal area. For this  analysis, we identified the total average amount of federal grants and  contracts the tribes in our analysis received annually in 1998, 1999, and  2000 from all federal agencies using the Single Audit Act database. We then  found the total income of the tribe by multiplying the per capita income of  the tribe by the total number of Native Americans living in the tribal area.  Dividing the total federal funding for each tribe by this tribal income  amount resulted in a grants-to-income ratio. We then classified each tribe in  our analysis into four categories based on the level of this ratio.
By analyzing the results of these ratios across the 199 tribes in the lower 48  states for which data were available, we found that the tribes with a very  high grants-to-income ratio experienced the least amount of improvement  in their income growth on average (see app. III, table 9, for details). As the  figure 18 below shows, tribes with a moderate or low grants-to-income  ratio on average had more than double the growth in per capita income  compared with tribes with a very high grants-to-income ratio. Differences  in employment level were not statistically significant. Tribes with a  moderate grants-to-income ratio—a balance of contracts/grants and other  sources of income—showed the highest growth on economic indicators.
Looking at the high-contracting and self-governance tribes, we found that  over half had moderate or low grants-to-income ratios, indicating there  were considerable sources of jobs and income for tribal members beyond  those funded by federal grants and contracts. However, 15 percent (25 of  162) of the high-contracting and self-governance tribes had a very high  grants-to-income ratio, and the economic growth for these tribes was  relatively low. From 1990 to 2000, the moderate to low ratio group had a  median per capita income growth more than double that of the very high  ratio group. Also, the percentage above poverty for the moderate to low  ratio group increased by 18 percent, compared with 6 percent for the very  high ratio group (see fig. 19).
Many tribal officials we interviewed recognized that obtaining external  sources of income was critical to their overall economic development.  They reported that federal contracts and grants alone are insufficient to  meet a tribe’s needs and raise tribal members out of poverty. Tribes  reporting economic development success credited much of that success to  the development of other sources of jobs and income.
section_title: Tribes Report Other Advantages from Contracting
paragraphs: Although the extent to which contracting tribes appeared to have  experienced improvements in their economic profiles was mixed, tribal  officials indicated that contracting with federal agencies provided other  advantages but also some disadvantages. Officials at eight of the tribes we  spoke with indicated their contracting activities provided them other  benefits beyond improvement in their economic profile. Some tribal  representatives and Indian Health Service officials told us that the  experience of running a program helps develop specific skills, which can  be carried over to other aspects of tribal activities. For example, an official  at one tribe said that, as a result of operating their own services through  contracting, their members have developed skills to produce accurate  financial statements, helping them prove fiscal responsibility and attract  additional grants. In addition, a 1991 academic report we reviewed on tribal  activities found that tribes that entered into contracts to manage their own  their forestry activities generally resulted in increased production and  revenue than had been generated when such activities were under BIA  management. One academic who studies Indian issues told us that  contracting also allows tribes to gain experience in leadership,  management, accountability, and organization. He said that the resulting  enhanced leadership and management skills help tribes to receive audits  with unqualified opinions, which can allow these tribes to attract additional  sources of funding.
The advantages tribes gain from contracting can vary by the type of  arrangement undertaken. Under self-governance arrangements, tribes have  greater control and flexibility in the use of their funds and less reporting  requirements. This flexibility allows tribes to design programs that are  tailored to their needs and set their own priorities. For example, an official  at one tribe that switched from multiple contracts to a self-governance  arrangement said they received greater funding as a result to use as they  saw best given their priorities. According to this official, the tribe was able  to substantially increase their higher education program to provide more  assistance to tribal members who wanted to go to college and also increase  their funding for natural resource services. In regard to regular contracting  arrangements, one tribe told us that the skill sets learned through this  process are a stepping stone to undertaking self-governance, which is the  next phase of self-determination.
However, a primary disadvantage to contracting with federal agencies was  the shortfalls in contract funding. Several tribal officials told us that the  amount of direct program funding they receive when they contract to  administer their own programs is not sufficient to provide the adequate  level of service to tribal members. In addition, several tribal officials told us  that their contract programs do not receive full funding to cover the  indirect, support, or start-up costs that tribes incur as part of managing  these contracts. These contract support cost shortfalls arise when funding  appropriations for these contracts is less than that required by tribes to pay  for such costs. As shown in figure 20, BIA and the Indian Health Service  estimate that total administrative funding shortfalls arising from the  contracts these agencies funded during fiscal years 1993 through 2002  ranged from a low of about $25 million to as much as $130 million annually.
The funding shortfalls associated with contracting arrangements can  hamper tribes’ ability to develop economically. Our 1999 report on the  shortfalls in Indian contract support costs found that tribes have had to  cover the shortfalls with tribal resources, thereby foregoing the  opportunity to use those resources to promote economic development. In  addition, these shortfalls divert money away from other important tribal  activities. For example, tribes may not receive enough money to enhance  the management of their programs by establishing educational systems for  leaders, instituting constitutional reform, and developing strategies for  economic development. Several tribes mentioned that they have had to  take steps to subsidize contract programs, which includes using tribal  funds earmarked for economic development, returning the management of  the program to the federal government, and undertaking supplemental  programs of their own to fill in the unmet service gaps. According to three  tribal officials, the threat of, or actual funding shortfalls, discouraged their  tribes from entering into or continuing contracting arrangements with the  federal government.
section_title: Multiple Factors Affect Economic Development Efforts of Indian Tribes and Tribal Consortia
paragraphs: In addition to the extent to which tribes are contracting to perform their  own services, other factors can significantly influence the degree to which  Indian tribes’ efforts to develop economically are successful. According to  the tribal and federal officials we interviewed and the various studies of  Indian economic development issues that we reviewed, the location of a  tribe’s reservations or lands can greatly affect its economic development  success. For example, tribal officials whose reservation was located near  an urban area told us that this gives them greater access to existing  infrastructure, including water and power. In addition, the close proximity  of the urban population provides them with a greater potential market for  their tribal enterprises. Another tribe whose lands were located near an  urban area and a heavily traveled highway has benefited from the already  established water sewer systems and power lines for development  projects. Because of its highly visible location, this particular tribe has  successfully developed a hotel, arts and cultural center, golf course,  grocery store, and gaming facility.
Tribes located in more remote, rural areas lack such advantages. Tribal  officials told us they may have to first develop infrastructure before they  can then invest in development projects. According to tribal officials, this  can be complicated by the need to conduct more extensive environmental  or archeological surveys before land can be developed. For example,  officials for one tribe in an isolated area told us that they had to complete  land and environmental surveys and have water sewer systems, electric  power, and roads built as a prerequisite to development. In addition, Native  officials we talked to in Alaska also noted how the isolation of their villages  greatly complicates their development efforts.
Another factor related to location that can assist a tribe economically is  whether or not their tribal lands can be developed for tourism. For  example, some tribes in the Pacific Northwest were able to build  campgrounds and marinas that attracted visitors interested in recreation. A  tribe we visited in the Southwest had scenic natural rock formations that  attracted visitors to their tribal lands. However, one village in Alaska that  would like to build a visitor center to attract tourists is located in an area  that is difficult to reach and faces less certain prospects for developing  such an industry.
Another factor that can provide tribes with an advantage in economic  development is whether or not they have access or ownership to  exploitable natural resources. We found tribes with access to timber or  fisheries often were able to develop these as significant sources of income  for their tribal members. For example, one of the tribes we talked to with  forest lands on their reservation had opened a successful plant producing  plywood and dry veneer, which created jobs for tribal members. In  contrast, some tribes are located in remote desolate areas with little  vegetation or natural resources they can exploit.
Another factor that can affect tribal economic success is having sound legal  systems and commercial regulations. Because Indian tribes are considered  sovereign nations within the United States, they must develop their own  judicial system and laws for governing operations and business conduct  within their tribal lands. Having an effective judicial system is frequently  seen as a prerequisite for attracting private investments on tribal lands.  This provides investors with confidence that disputes will be resolved  fairly. For example, one expert study examined 67 tribes and found that a  strong independent judicial system reduces unemployment by 5 percent.  Another study states that tribal success can also be facilitated by sound  uniform commercial codes. According to tribal officials, an additional  challenge is having sufficient numbers of tribal members with the relevant  law and graduate degrees to help develop and administer these codes.
According to tribal officials and studies, another factor cited as important  for economic development was stable and effective tribal government. For  example, some tribal officials we spoke with cited the high turnover among  the members of their governing councils often resulted in abrupt shifts in  economic priorities that sometimes delayed their ability to seek funding or  implement previously planned projects. According to EDA officials, some  tribes’ governing councils are completely replaced very frequently, and this  greatly reduces their effectiveness in achieving economic progress.  According to tribal officials, one effective method was to stagger tribal  council members’ terms over time, which increases the continuity of the  tribal government and its policies.
Tribes’ ability to develop gaming facilities can also be a significant factor  that can affect their economic development. Tribes that own gaming  facilities near concentrated population centers have been able to use  gaming revenues to develop other projects that have aided their tribes and  produced income. For example, one particular tribe used its gaming  revenues to develop a water sewer system for development projects and  helped it withstand reduced federal and state funding for its activities.  Another tribe told us gaming revenue is used for supplementing education  and health programs. As shown in figure 21, tribes with greater amounts of  revenue from gaming generally experienced greater growth in their total  populations, employment rates, per capita income, and in the percentage  with incomes above the poverty level.
section_title: Observations
paragraphs: Efforts to improve the financial well-being of American Indians and Alaska  Natives face many challenges. These challenges can include the isolated  and rural locations of tribal lands and lack of infrastructure, which can  limit their attractiveness to private sector investment. Tribal lands may also  lack exploitable resources, such as oil or timber, or natural features that  could serve as a draw for tourism. Although EDA has provided limited  funding to assist some tribes, we found that these grants had resulted in  mixed success in helping develop the economies and improve the quality of  life for these groups. In cases in which EDA grants were more successful in  producing economic development, the tribes sometimes had advantages,  such as resources or proximity to areas with populations likely to take  advantage of gaming or other development. In other cases, EDA provided  funding to tribes without such advantages and at least produced some jobs  for tribal members.
Overall, we found that the relationship of Indian economic development to  EDA grants was mixed, and these findings could help inform decisions  about how and where to focus future efforts. However, EDA’s grants to  tribes represents only 3 percent of the total amount of funding that it  awarded between 1993 and 2002. As a result, we were neither able to  evaluate the overall effectiveness of EDA’s program nor were we able to  evaluate the adequacy of how it administers its grants, including how the  agency applies its criteria in determining what activities to fund.
Beyond government aid, Indian tribes are also taking steps to increase their  role in their own governance and community activities. Through  contracting arrangements and self-governance, nearly all tribes are  assuming the management of programs and services that federal agencies  previously provided to their communities. Although we found that tribes  with the highest levels of these contracting activities generally saw greater  improvements in employment levels, we did not find a relationship  between level of contracting and tribal individual’s incomes. However, we  did learn that tribes conducting such contracting find that it provides other  benefits to their communities, including providing them with experience in  administering their own affairs. In addition, the other factors that make  improving economic development for tribes challenging, such as  availability of resources or attractiveness to private sector investment, may  have proven to be greater determinants to tribe’s overall economic   well-being regardless of any benefits resulting from their contracting  activities.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested and obtained comments from the Department of Commerce,  which provided EDA’s comments, and the Department of the Interior,  which provided BIA’s comments; these agencies written comments are  reproduced in appendixes IV and V, respectively. The letter from the  Department of the Interior’s Assistant Secretary for Policy, Management,  and Budget stated that BIA generally agreed with our report’s conclusions.  The letter notes that BIA supports increased self-determination contracting  and compacting as a means of improving tribal economic development  efforts, but notes, as our report does, that other factors can significantly  influence the ability to develop tribal economies successfully.
In the letter from the Secretary of Commerce, EDA questioned our  characterization that EDA grants have had mixed success. EDA  acknowledged that its enterprise development investments had mixed  success given the EDA investments we reviewed and evaluated and agreed  that a large portion of EDA funds went to enterprise development projects.  EDA stated that the success of other types of EDA investments should be  considered in order to make a broad statement about the economic  development generated by EDA grants as a whole. The letter stated that the  other grant funding that EDA provided, including those for infrastructure,  business development, and planning has produced benefits.
After considering our findings for all EDA grants to tribes between 1993  and 2002, we believe that our conclusion that EDA grants have had mixed  success is accurate. The grants for enterprise projects represent the largest  portion—almost half—of the funding EDA provided to tribes during this  period and these grants, as our report shows, have had mixed success in  producing economic development. The other half of the total funding EDA  provided to tribes during this 10-year period included grants for business  development loan funds and training, infrastructure projects, and planning.  Regarding business development activities, our review of the grants that  funded RLFs indicated that some were reportedly very successful, and  others had yet to produce much development. Similarly, the training  projects had produced some benefits but were also hampered by lack of  operating funding. Although our report presents information from tribal  officials that indicates that many infrastructure grants have reportedly  produced economic development, we found that not all projects had yet  done so. In addition, although the tribes receiving EDA planning grants  reported them to be critical to their success, the benefits we reported as  resulting from these planning grants were that most tribes that received  them also received other EDA grants, including for enterprise projects  whose mixed success we discussed, or funding from other federal agencies  for economic development purposes. In addition, not all EDA planning  grants led to development projects as the result of lack of funding or other  issues. Similarly, the EDA funding for feasibility studies indicated that, at  the time of our review, 3 of the 17 projects studied had been implemented  successfully.
Commerce’s letter also provides some technical comments for which we  made changes to our draft. The letter also presented other comments that  provide additional detail about EDA grants and their administration. Our  responses to these comments are presented in appendix IV.
We are sending copies of this report to the Ranking Minority Member of the  Senate Committee on Indian Affairs; the Secretary, Department of  Commerce; the Secretary, Department of the Interior; and other interested  parties. We also will make copies available to others upon request. In  addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions regarding this report, please contact  Mr. Cody Goebel or me at (202) 512-8678 or goebelc@gao.gov or  shearw@gao.gov. GAO staff that made major contributions to this report  are shown in appendix VI.
section_title: Scope and Methodology
paragraphs: To review all grant funds made available to Indian tribes and tribal  organizations by the Department of Commerce’s Economic Development  Administration (EDA), we analyzed data from EDA on all grants awarded  to tribes during the years 1993 to 2002. For each grant, we obtained from  EDA’s data the following information:   state where the grant recipient is located,   fiscal year the grant was awarded,   general project description.
The data EDA provided categorized its grants according to the various  funding programs the agency administers, such as its planning, public  works, or economic adjustment programs. However, upon review of these  data, we found that EDA used funds from these various programs to  provide grants for similar types of projects. For example, EDA was  sometimes providing grants to fund the planning of a project or the  construction of the project using its economic adjustment grant program or  its public works grant program. Therefore, for the purposes of our analysis,  we grouped the various grants into the following categories according to  type of project or activity funded:   Enterprise projects: grants used to develop projects designed to  generate income for the tribe, such as a cannery, a resort, or a sawmill;   Infrastructure projects: grants used for the design and construction of  public works infrastructure, such as roads, highways, and sewers, that  would serve as the foundation for general economic development  activities;   Business development projects: grants used to fund loan funds, training,  and other business development projects, including those for business  incubators, revolving loan funds (RLFs), training and capacity building,  and other assistance that enhances the tribes’ economic development  activities; and   Planning/feasibility grants: grants used for general planning purposes  such as paying for staff salaries or the broad administration of the tribes’  planning departments, as well as for developing plans, analyses of  projects’ environmental impact, and feasibility studies for specific  economic development projects.
Our analysis of EDA grants was limited to grants provided to Indian tribes.  Therefore, we were not able to evaluate how EDA generally applies its  stated criteria to grant applications. In addition, the application process  includes an evaluation by EDA’s regional investment review committees of  preapplication proposals and recommending whether or not an application  should be invited. We did not analyze EDA’s preapplication process.
To determine what economic development activities have resulted from  these EDA grants, we surveyed all 95 tribes that received EDA grants for  enterprise projects, infrastructure projects, and loan funds, business  development, and training activities. We made 15 site visits in Alaska,  Arizona, California, New Mexico, and Washington to learn more about  these tribes’ economic development projects and observe the results of the  EDA grants they received during the years 1993 to 2002. We chose tribes for  our site visits based on various factors, including the types of economic  development projects the tribes had, the tribes’ location, and the projects’  stage at the time of our visit. We surveyed the remaining 80 tribes and  organizations by phone, interviewing tribal officials that were cognizant of  the tribes’ economic development projects and activities. Our survey  results reflect the information provided by and the opinions of tribal  officials who participated in our survey. Outside of obtaining documents  from some tribes and visiting some projects, we did not independently  verify the tribal officials’ responses to our questions. We also interviewed  relevant officials from EDA, the Bureau of Indian Affairs, and the  Department of Health and Human Services to get their perspective on  federal assistance to tribes.
subsections: section_title: Methodology for Analyzing Relationship between Contracting and Economic Profile
paragraphs: To determine whether there exists a relationship between the degree to  which an Indian tribe operates federal programs and services under  contracting or self-governance and that tribe’s economic profile, we used  data from the Department of the Interior’s Bureau of Indian Affairs (BIA),  the U.S. Census Bureau, and the Single Audit Act database to group all  tribes we analyzed into three separate groups. First, we used BIA data to  identify those tribes that had entered into self-governance compacts. We  then grouped non-self-governance tribes into two groups based on the  extent to which they were contracting with BIA. We grouped tribes into  these two groups based on the extent to which they were contracting on  both a per capita basis and on a total dollar amount basis. To derive the per  capita BIA grants and contracts amount, we obtained data from the Single  Audit Act database on the amount of grants and contracts that were  received by tribes from BIA during the years 1998 to 2000. For those tribes  that did not have available Single Audit Act information, we calculated this  per capita measure based on BIA’s 1998 shortfall budget data.
An examination of the listing of tribes ranked by their per capita contract  amount, tribes above a threshold of $580 appeared to include those large  tribes with the largest overall contract amounts. We found that some  smaller tribes had per capita contracting amounts that exceeded $580 but  whose total contract amount was not significant compared with other  tribes. Therefore, we only placed tribes into the high-contracting group  whose totals in total contract funding exceeded $300,000, which appeared  to be a reasonable level to indicate significant contracting activity. Table 2  summarizes our criteria for classifying tribes.
We then compared the change in the economic profiles for each of these  three groups of tribes. To measure each tribe’s economic profile, we  collected data from the U.S. Census from 1990 and 2000. For this analysis,  we only included those tribes in the lower 48 states that are federally  recognized, had available 2000 Census data, and had tribal population of  100 people or more based on population data from the 2000 Census. For  each tribe, we obtained economic profile data on Native Americans living  on tribal land, including the percentage employed, the per capita income,  and the percentage in households with incomes above the poverty level.  Our economic profile data categorized by self-governance, high- contracting, and low-contracting tribes is descriptive in nature and does  not represent an assessment of causation of economic factors based on  governing status or high- or low-contracting category.
section_title: Methodology for Analyzing Relationship between Federal Aid and Economic Profile
paragraphs: To supplement our analysis of contracting and economic profile changes,  we also analyzed the relationship between the extent to which tribes  received federal funding and changes in economic profile indicators. For  this analysis, we identified the total average amount of federal grants and  contracts the tribes in our analysis received annually in 1998, 1999, and  2000 from all federal agencies. We then found the total income by  multiplying the per capita income of the tribe by the total number of Native  Americans living on the reservation. Dividing the total federal funding for  each tribe by its tribal income resulted in a grants-to-income ratio (GTI).  We then classified each tribe in our analysis into four categories based on  the level of their GTI, as shown in table 3.
We then analyzed the extent to which changes in tribal economic profile  indicators varied for the tribes in these four GTI categories. Our economic  profile data categorized by grant to income ratio is descriptive in nature  and does not represent an assessment of causation of economic factors  based on the tribe’s GTI ratio.
section_title: Steps Performed to Ensure Data Reliability
paragraphs: To ensure that EDA’s data on the grants awarded to tribes and the data we  used in our analysis of the tribes’ economic profiles were sufficiently  reliable for our analyses, we conducted detailed reliability assessments of  the four datasets that we used. In assessing the reliability of EDA’s grants  data, the Single Audit Act data, U.S. Census Bureau data, and the BIA  population data, we reviewed relevant documentation, interviewed  knowledgeable officials, and conducted frequency analysis of critical data  fields, as appropriate. We restricted these assessments to the specific  variables that were pertinent to our analyses. We found that all of the  datasets were sufficiently reliable for use in our analyses but have included  know limitations in our report when appropriate.
In assessing the reliability of EDA’s grants data, we interviewed EDA  officials that were knowledgeable about the data system and reviewed  relevant documents, such as EDA’s data manual and documents on internal  controls. On the basis of the information we gathered, we concluded that  EDA’s grants data were reliable for our purposes for this analysis.
Our reliability assessment of the Single Audit Act data included two steps.  First, to assess the general reliability of the Single Audit Act data we used  in our analysis, we reviewed relevant documents (e.g., online information  on the database, a report by the Department of Commerce’s Office of the  Inspector General), as well as corresponded with a knowledgeable official  from the U.S. Census Bureau, about the Single Audit Act data. On the basis  of these document reviews and correspondence, we concluded that the  data we used in our analysis were reliable for our purposes for this  analysis. Second, to assess the completeness and accuracy of the Single  Audit Act data we used in our analysis, we conducted frequency analysis of  relevant fields. On the basis of the results of our frequency tests of relevant  data elements and our review of pertinent documents, we concluded that  the Single Audit Act data we used in our analysis were reliable for our  purposes for this analysis.
In assessing the reliability of relevant 1990 and 2000 decennial U.S. Census  Bureau data, we reviewed information available online from the U.S.  Census Bureau Web site on its data quality assurance processes and  interviewed relevant officials from Census. On the basis of the results of  our document review and discussions with Census officials, we concluded  that the relevant Census data we used were reliable for our purposes for  this analysis.
In assessing the reliability of the BIA’s population data, we interviewed  knowledgeable officials from BIA and tribal representatives and reviewed  relevant documentation. Based on the results of these discussions with  relevant officials and review of pertinent documentation, we concluded  that the BIA’s population data were reliable for our purposes for this  analysis.
We also reviewed EDA policies and regulations and talked to EDA Regional  Directors and field staff to determine if EDA complies with its legislative  criteria for monitoring grants.
We interviewed tribal officials and economic development experts and  reviewed studies by the Harvard Project on American Indian Economic  Development and the National Congress of American Indians to determine  what other factors impact tribes’ economic development efforts.
section_title: Additional Information on EDA Grants to Tribes
paragraphs: We obtained data from the Economic Development Administration (EDA)  that included all grants it made to American Indian tribes during the years  1993 to 2002. Our analysis of this data indicated that 143 Indian tribes and  tribal organizations received a total of $112 million in EDA grants during  this 10-year period. Of the $112 million in total grants to tribes that EDA  awarded between 1993 and 2002, $86 million went to 113 Indian tribes and  tribal organizations in the lower 48 states.
The extent to which EDA funded tribes varied across geographic regions.  Operating nationally, EDA has organized its staff into six regional offices  that cover the various states. These offices are in Atlanta, Austin, Chicago,  Denver, Philadelphia, and Seattle. For the purposes of our analysis, we  divided EDA’s Seattle region into three subareas: (1) Alaska; (2) the  Northwest covering Idaho, Oregon, and Washington; and (3) the Southwest  covering Arizona, California, and Nevada. By analyzing EDA’s funding  across these regions as shown in figure 22, we found that about 60 percent  of EDA grants to Indian tribes went to tribes in the Seattle region, with  tribes in the Northwest receiving 21 percent of the grant monies awarded  by EDA during the 10-year period.
In addition to funding provided to Native entities in Alaska, the extent to  which tribes in other states received EDA funding also varied. For example,  as shown in figure 23, tribes in Arizona, Washington, and Oregon received  about 35 percent of all EDA grants to tribes in the lower 48 states during  the years 1993 to 2002.
Our analysis found that 30 of the 42 federally recognized tribes in Idaho,  Oregon, and Washington received EDA grants, as shown in figure 24. In  contrast, only 3 of the 37 tribes in Oklahoma received such grants.  According to EDA officials, they funded few tribes in Oklahoma because  entities in other states in EDA’s Austin Region, which also includes Texas,  Louisiana and Arkansas; and New Mexico, were deemed more  economically distressed and in greater need of EDA assistance.
Using the EDA grants data, we also found that grant amounts varied widely  across states on a per capita basis. For example, tribes in the Pacific  Northwest, which had a combined per capita EDA grant amount of $593,  had the highest per capita, while tribes in Oklahoma and Utah had the  lowest, with per capita EDA grant amounts of $2 and $4. Although some  states received large dollar amounts of funding, the amounts were not  always large given the large Indian populations in their states. For example,  although Arizona received over $10 million during this 10-year period, this  amounted to only $46 per capita because of its large Indian population.  Table 4 and figure 26 show how these amounts varied across states.
As shown in figure 25, the total amount of EDA grants awarded also varied  considerably by region.
Similarly, as figure 26 shows, EDA grants also varied considerably by  region on a per capita basis.
The extent to which tribes received EDA planning grants also varied greatly  by EDA region. For example, EDA’s Chicago Region did not provide any of  the 29 tribes located in that region with individual planning grants,  although it did provide planning grants to three intertribal organizations in  that region that represented several individual tribes joining together to  receive a grant. By contrast, 79 percent of the tribes in the Pacific  Northwest with a population over 100 as well as two intertribal  organizations received planning grants (see fig. 27). Demand for planning  grants can sometimes exceed the amount of available funding in some  regions. For example, officials in EDA’s Seattle Region told us that they  have a waiting list of 36 tribes that would like to obtain EDA planning  grants but insufficient funds exist to award these grants.
EDA grants appeared to be awarded equally to tribes with differing levels  of income. Using Census data for 2000, we ranked the tribes in the lower 48  states by per capita income. By comparing the tribes ranked by income  with the amounts tribes received from EDA, we found that tribes in the top  25 percent of per capita income had received 28 percent of the grants EDA  awarded to tribes in the lower 48 states between 1993 and 2002. Similarly,  the tribes in the bottom 25 percent of per capita income had received 30  percent of the total amount EDA awarded to tribes during this period.
subsections: section_title: EDA Not the Largest Provider of Grants to Tribes
paragraphs: EDA has not been the largest source of funding for economic development  grants for tribes. To analyze how the total EDA grants to tribes compared  with other economic development-related grants received by tribes from  other federal agencies, we obtained data from the Single Audit Act  database, which is maintained by the Bureau of the Census and contains  information on the amounts of federal funding received by states,  governments, and nonprofit organizations, including Indian tribes. With  the data available for 1998 to 2001, we found that 7 percent of all economic  development-related grants annually received on average by tribes during  these years were from EDA. The remaining 93 percent of the economic  development-related grants tribes received came from other federal  agencies, including   the Department of Housing and Urban Development, which provided  block grants to tribes to improve the housing stock, provide community  facilities, make infrastructure improvements, and expand job  opportunities by supporting the economic development of Native  American communities;  the Department of the Interior, which provided economic development  funding to tribes for protecting and restoring rangelands and forests and  for operating irrigation projects;   the Department of Health and Human Services, which provided loans  and grants for implementing social and economic development  strategies that support locally determined projects, including developing  the tribes’ comprehensive tourism and business plans and providing  training in job, computer, and small business skills to tribal members;  and     the Department of Agriculture, which provided funds for rural  development.
Figure 28 shows, on average, the extent to which various federal agencies  funded economic development assistance to Indian tribes based on  amounts provided between 1998 and 2001.
Table 5 shows that several other federal agencies have typically given a  greater amount of economic development-related grants to tribes than has  EDA.
section_title: Additional Information on Results of EDA Grants
paragraphs: Figure 29 shows provides details on the results of completed EDA-funded  enterprise projects, including the status of the projects as of early 2004, the  EDA grant amount, the number of jobs created, and other benefits that  have accrued to the tribe as a result of undertaking the project.
Figure 30 shows the status of EDA-funded enterprise projects broken down  by year funded.
Officials from two of the tribes that had projects fail in the earlier years  said they have learned from their mistakes and were now engaged in  successful enterprise development buttressed by revenues from gaming  and other tribal enterprises.
As noted earlier, many of the tribal enterprise projects that EDA funded  were in Alaska, and most have yet to be completed. From 1998 through  2001, EDA provided $14 million to cover approximately 40 percent of the  cost of constructing 15 Alaska Native cultural/community centers. The goal  of these projects was to promote tourism and/or community development.  The economic impact of these projects has yet to be determined because 11  of the 15 centers are still under development, and two of the completed  projects have not been in operation long enough to establish results.  However, Native officials provided revenue and job projections that  indicate the cultural/community center projects would not create many  jobs or generate much revenue for Alaska Natives. However, an EDA  official told us that economic development for these communities is  challenging for several reasons, including these areas’ remoteness, harsh  climate, limited infrastructure, high fuel and shipping prices, and short  construction seasons.
Table 6 gives details on the Indian revolving loan funds (RLFs) supported  by EDA during the 1993-2002 period. In some instances EDA gave funds to  support business-training programs for loan fund applicants. In other  instances, EDA provided seed money to help start new RLFs.
Table 7 provides information on the results of 19 completed EDA-funded  infrastructure projects including the year funded, the project description,  the EDA grant amount, and the benefits accrued.
section_title: Declining Administrative Resources Reduced Extent to Which EDA Monitors and Provides Technical Assistance for Its Grants to Indian Tribes
paragraphs: In recent years, EDA has reduced the amount of staff and resources it uses  to conduct monitoring of grant recipients, including projects developed by  Indian tribes. EDA regulations require regional offices and field staff to  monitor grant activities by reviewing reports and conducting site visits  within 3 years of the application. According to EDA development strategy  guidelines, grant recipients annually submit their development strategy to  ensure their plan or strategies for developing the area economically are  complete and up to date. EDA headquarters officials told us they expect  for field staff to review reports quarterly and annually visit grant sites to  review the progress of EDA-funded construction projects, including  enterprise or infrastructure projects. According to the regional officials, the  purpose of these visits is to verify that grantees are actually using the funds  for the purpose stated in the approved grant application and in their  economic development strategy.
According to EDA funding documents, the number of EDA staff acting as  economic development representatives in individual states has declined by  about 26 percent from 47 to 35 between fiscal years 1993 to 2002.  According to EDA staff, this has reduced their ability to monitor funded  projects and provide technical assistance to grant recipients. Also, one  regional official told us cutbacks in travel funds have required some  economic development representatives to forego visiting some projects  and to rely instead on reviewing reports submitted by the private sector  construction engineers. For example, staff in one of the EDA regional  offices told us that one of their field staff is responsible for two very large  states with its grants located in such remote locations that site visits are  seldom made because of the limited travel funds.
The staffing and travel fund reductions have also reduced the amount of  technical assistance that EDA provided to tribes. According to regional  EDA officials, their economic development representatives frequently  provide one-on-one consultations with grantees either by telephone or  during site visits. These consultations give tribe officials the opportunity to  address concerns or issues with the grant application, construction, or  infrastructure projects. However, with fewer field staff and less travel  funds, their staff are able to provide such assistance less frequently.
Tribal officials we interviewed indicated that they needed more assistance  from EDA. For example, one tribal official told us that they needed help  completing grant applications; while others said that they would like to  have more frequent visits by the Economic Development Representatives  and to have them work directly with the tribes. Another official at one tribe  said that they experienced difficulties obtaining necessary funding to  complete their projects. According to a study on Indian economic  development, the lack of technical assistance can negatively affect the  success of EDA-funded projects. For example, one Alaskan tribe told us  they had to seek additional funds before their project failed because of lack  of direct interaction with an Economic Development Representative to  answer questions.
According to regional officials, in addition to the direct consultations, EDA  also formerly provided technical assistance through conferences and  seminars. In addition to a national conference, EDA would hold regional  seminars, which EDA officials saw as beneficial because people in the local  area could more easily attend and receive information specific to their  particular region or tribe. However, as a result of the resource cutbacks,  EDA officials told us that the agency now only holds the one annual  national conference and no longer provides funding for any regional  events.
section_title: Additional Information on Relationship between Contracting and Tribes’ Economic Profiles
paragraphs: The Indian Self-Determination Act, as amended, allows tribes to enter into  various arrangements with federal government agencies to assume the  operation of many of the programs and services previously provided by the  agencies. From the list of federally recognized tribes and from 2000 U.S.  Census Bureau (Census) data, we identified 219 tribes in the lower 48  states that had 100 or more Native Americans living in the tribal area.  According to Department of the Interior’s Bureau of Indian Affairs (BIA)  information, 43 of the 219 tribes had entered into self-governance  arrangements with BIA. As a result, these tribes operated most of their own  tribal functions and services under a funding compact agreement with BIA.  By analyzing Single Audit Act data that shows funding provided by federal  agencies, we determined that nearly all of the remaining 176 tribes  operated many of their tribal functions and services under contracts and  other agreements with BIA.
We grouped the 219 tribes in the lower 48 states with populations greater  than 100 into three categories. The first category included the 43 tribes that  had entered into self-governance arrangements with BIA. Such tribes  generally have assumed the operation of most of the services used by tribal  members. For the remaining 176 non-self-governance tribes, we analyzed  how much funding these tribes received from BIA contracts and grants  from 1998 to 2000 in total and on a per capita basis. Based on these  analyses, we determined that the 121 tribes with annual per capita BIA  contract amounts exceeding $580 and total annual BIA contracting  amounts greater than $300,000 appeared to be high-contracting tribes, and  we, therefore, categorized the remaining 55 tribes whose per capita or total  contracting amounts were less than these thresholds as low-contracting  tribes.
To analyze the relationship between contracting and changes in tribal  economic profiles, we compared how various indicators of economic   well-being from Census data had changed for these three groups of tribes.  Table 8 shows the changes in economic indicators for three categories of  tribes used in our analysis—the self-governance tribes, the high- contracting tribes, and the low-contracting tribes. The data shows that  there was great variability within each category, with the top 10 percent of  tribes showing high growth, while the bottom 10 percent had negative  growth. On average, the high-contracting and self-governance tribes  showed greater growth in employment levels, but differences in the other  indicators were not statistically significant.
We also analyzed how the amount of federal grants and contracts related to  tribes’ total tribal income and how changes in economic profiles varied  according to this relationship. For this analysis, we identified the total  average amount of federal grants and contracts the tribes in our analysis  received annually in 1998, 1999, and 2000 from all federal agencies using  the Single Audit Act database. We then found the total income of the Native  Americans living on the tribe’s lands, which was calculated by multiplying  the per capita income of the tribe by the total number of Native Americans  living on the reservation, with an adjustment for Native Americans living in  the reservation’s service area. Dividing the total federal funding for each  tribe by its tribal income resulted in a grants-to-income ratio. We then  classified each tribe in our analysis into four categories based on the level  of this ratio. As table 9 shows, tribes with a moderate or low grants-to- income ratio showed significantly higher gains in per capita income and  percent above poverty than did tribes with a very high grants-to-income  ratio.
We also analyzed the relationship between variations in tribes’ grants to  income ratio and the extent to which they were contracting or self- governance. Figure 31 shows that about half the high-contracting and self- governance tribes had moderate or low grants-to-income ratios, while  about 9 percent of the self-governance tribes and 18 percent of the high- contracting tribes have a very high grants-to-income ratio.
section_title: Comments from Department of Commerce
paragraphs: The following are GAO’s comments on the Department of Commerce’s  letter dated August 9, 2004.
subsections: section_title: GAO Comments
paragraphs: 1. Our scope for analyzing EDA grants was confined to the 95 Indian  tribes we surveyed.  Our survey methodology included interviewing  tribal officials that were cognizant of the tribes’ economic development  projects and activities.  Our survey results reflect the information  provided by and the opinions of tribal officials who participated in our  survey.  We also interviewed relevant officials from EDA.  We think our  methodology was sufficient to reach our overall findings.  2. We made revisions based on this comment. 3. Our report notes that tribal officials and some EDA staff expressed the  view that tribes, particularly those located in rural areas, would have a  harder time obtaining funding under the investment criteria that EDA  implemented in 2002.  This criteria favors projects that result in higher- wage, higher skill jobs and private investment.   However, Commerce’s  letter states that no area or region will be disadvantaged and that its  long history of support of Indian tribes will continue.  4. We made revisions based on this comment.
section_title: Comments from the Department of the Interior
section_title: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the individuals named above, Carl Barden, Mark de la Rosa,  DuEwa Kamara, Jeffery Malcolm, Bettye Massenburg, Don Porteous,  LaSonya Roberts, Walter Vance, and Carrie Wilks made key contributions  to this report.
section_title: GAO’s Mission
paragraphs: The Government Accountability Office, the audit, evaluation and  investigative arm of Congress, exists to support Congress in meeting its  constitutional responsibilities and to help improve the performance and  accountability of the federal government for the American people. GAO  examines the use of public funds; evaluates federal programs and policies;  and provides analyses, recommendations, and other assistance to help  Congress make informed oversight, policy, and funding decisions. GAO’s  commitment to good government is reflected in its core values of  accountability, integrity, and reliability.
section_title: Obtaining Copies of GAO Reports and Testimony
paragraphs: The fastest and easiest way to obtain copies of GAO documents at no cost  is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts  newly released reports, testimony, and correspondence on its Web site. To  have GAO e-mail you a list of newly posted products every afternoon, go to  www.gao.gov and select “Subscribe to Updates.”
subsections: section_title: Order by Mail or Phone
section_title: To Report Fraud, Waste, and Abuse in Federal Programs
section_title: Congressional Relations
section_title: Public Affairs