Indian Issues: Observations on Some Unique Factors that May Affect Economic Activity on Tribal Lands
Published: 2011-04-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Indian tribes are among the most economically distressed groups in the United States. In 2008, the U.S. Census Bureau reported that the poverty rate among American Indian and Alaska Natives was almost twice as high as the population as a whole--27 percent compared with 15 percent. Residents of tribal lands often lack basic infrastructure, such as water and sewer systems, and sufficient technology infrastructure. Without such infrastructure, tribal communities often find it difficult to compete successfully in the economic mainstream. This testimony statement summarizes GAO's observations on (1) five broad categories of unique issues that may create uncertainty and therefore affect economic activity in Indian country and (2) tribes' use of special gaming and small business contracting provisions. It is based on prior GAO reports.
section_title: What GAO Found
paragraphs: GAO's previous work has identified five broad categories of unique issues that may create uncertainty for tribes or, in some cases, private companies wishing to pursue economic activities on Indian reservations. Accruing land in trust. Having a land base is essential for tribal economic development activities such as agriculture, energy development, and gaming. However, a February 2009 Supreme Court decision has raised uncertainty about the process for taking land in trust for tribes and their members. Tribal environmental standards. The Clean Water Act, Safe Drinking Water Act, and Clean Air Act authorize the Environmental Protection Agency to treat Indian tribes in the same manner as states. In some cases, however, states are concerned that tribes with this authority may impose standards that are more stringent than the state standards, which could result in a patchwork of standards within the state and potentially hinder economic activity. Indian tax provisions. Tribes face uncertainties regarding the types of activities that they can finance with tax-exempt bonds. Also, in 2008, GAO reported that there were insufficient data to (1) identify the users of a tax provision that allows for accelerated depreciation of certain property used by businesses on Indian reservations and (2) assess whether the provision had increased economic development on Indian reservations. Obtaining rights-of-way. Securing rights-of-way across Indian land is important in providing Indian lands with the infrastructure needed to support economic activity. In 2006, GAO reported that obtaining rights-of-way through Indian lands was a time-consuming and expensive process. Legal status of tribes. The unique legal status of tribes has resulted in a complex set of rules that may affect economic activities. For example, Indian tribes have sovereign immunity, which can influence a business's decision to contract with a tribe. Also, the limitations imposed by federal law on Indian tribes' civil jurisdiction over non-Indians on Indian reservations can create uncertainties over where lawsuits arising out of contracts with tribes can be brought. In contrast to these unique issues that may pose challenges to economic activity in Indian country, some Indian tribes have taken advantage of special provisions for gaming and small business contracting. The National Indian Gaming Commission reports that tribal gaming operations generated $26.5 billion in revenue for 2009. However, not all tribes have gaming operations and the majority of the revenue is generated by a fraction of the operations. Similarly, Alaska Native Corporations (ANC) have been granted special procurement advantages. In 2006, GAO reported that obligations to firms owned by ANCs that participated in the Small Business Administration's 8(a) program increased from $265 million in fiscal year 2000 to $1.1 billion in 2004. We have ongoing work looking at the use of these special procurement advantages. This testimony statement contains no new recommendations.

section_title: Letter
paragraphs: I am pleased to be here today to participate in your hearing on the  challenges of trying to increase economic activity in Indian Country.  Indian tribes are among the most economically distressed groups in the  United States. For example, in 2008, the U.S. Census Bureau reported that  American Indians and Alaska Natives were almost twice as likely to live in  poverty as the rest of the population—27 percent compared with  15 percent. Residents of tribal lands also often lack basic infrastructure,  such as water and sewer systems, and 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.
Our testimony today will cover (1) five broad categories of unique issues  that may create uncertainty and therefore affect economic activity in  Indian Country—land issues, tribal environmental standards, Indian tax  provisions, rights-of-way, and certain issues related to the legal status of  tribes—and (2) tribes’ use of special gaming and small business  contracting provisions. This statement is based on previously published  work issued from December 2001 through March 2011. See the list of  related GAO products at the end of this statement and other products cited  for detailed descriptions of the scope and methodology used to conduct  our work. We conducted our work in accordance with generally accepted  government auditing standards or GAO’s Quality Assurance Framework,  as appropriate to each engagement.
subsections: section_title: Background
paragraphs: Tribal lands vary dramatically in size, demographics, and location. They  range in size from the Navajo Nation, which consists of about  24,000 square miles, to some tribal land areas in California comprising less  than 1 square mile. Over 176,000 American Indians live on the Navajo  reservation, while other tribal lands have fewer than 50 Indian residents.  Some Indian reservations have a mixture of Indian and non-Indian  residents. In addition, most tribal lands are rural or remote, although some  are near metropolitan areas.
The federal government has consistently recognized Indian tribes as  distinct, independent political communities with inherent powers of a  limited sovereignty which has never been extinguished. To help manage  tribal affairs, tribes have formed governments or subsidiaries of tribal  governments including schools, housing, health, and other types of  corporations. The United States has a trust responsibility to recognized  Indian tribes and maintains a government-to-government relationship with  those tribes. As of October 2010, there were 565 federally recognized  tribes—340 in the continental United States and 225 in Alaska.
According to tribal officials and government agencies, conditions on and  around tribal lands—including the lack of technology infrastructure such  as telecommunications lines—generally make successful economic  development more difficult. In addition, a 1999 Economic Development  Administration (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 Indian communities continued to deter widespread  private sector involvement.
To help address the needs of Indian tribes, various federal agencies  provide assistance, including economic development assistance. The  Bureau of Indian Affairs (BIA) in the Department of the Interior is charged  with the responsibility of implementing federal Indian policy and  administering the federal trust responsibility for about 2 million American  Indians and Alaska Natives. 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, for example, providing resources to administer tribal  revolving loan programs and guaranteed loan programs to improve access  to capital in tribal communities. 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.
section_title: Some Unique Issues that May Affect Economic Activity in Indian Country
paragraphs: Our prior work has highlighted five broad categories of unique issues that  have the potential to create uncertainty for tribes or, in some cases,  private companies wishing to pursue economic activities on Indian  reservations. Some of the issues that we have identified during our past  work include (1) accruing land in trust for tribes and individual tribal  members, (2) tribal environmental standards, (3) Indian tax provisions,  (4) obtaining rights-of-way, and (5) certain legal issues that arise from the  unique legal status of tribes. In addition to these five issues there may be  others, such as access to financing, which may also hinder economic  activity on Indian reservations. The five broad categories should only be  considered as illustrative of some of the unique circumstances that exist in  Indian country, which tribes or other business entities will need to take  into account when they consider undertaking economic activities on tribal  lands.
subsections: section_title: Land in Trust Issues May Create Uncertainty
paragraphs: Having a land base is essential for many tribal economic development  activities such as agriculture, grazing, timber, energy development, and  gaming. Since the early days of colonization, Indian lands have diminished  significantly, in large part because of federal policy. By 1886, Indian lands  had been reduced to about 140 million acres, largely on reservations west  of the Mississippi River. Federal policy encouraging assimilation in the late  1800s and early 1900s further reduced Indian lands by two-thirds, to about  49 million acres by 1934. In 1934, however, the enactment of the Indian  Reorganization Act changed the government’s Indian policy to encourage  tribal self-governance. Section 5 of the act provided the Secretary of the  Interior with discretionary authority to take land in trust on behalf of  Indian tribes or their members. Trust status means that the federal  government holds title to the land in trust for tribes or individual Indians.  Once land is taken in trust it is no longer subject to state and local  property taxes and zoning ordinances. In 1980, Interior established a  regulatory process intended to provide a uniform approach for taking land  in trust. Under the regulations, tribes or individual Indians who purchase  or own property on which they pay property taxes can submit a written  request to the Secretary of the Interior to have the land taken in trust; if  approved, the ownership status of the property would be converted from  taxable status to nontaxable Indian trust status. Some state and local  governments support the federal government’s taking additional land in  trust for tribes or individual Indians, while others strongly oppose it  because of concerns about the impacts on their tax base and jurisdictional  control. Since 1934, the total acreage held in trust by the federal  government for the benefit of tribes and their members has increased from  about 49 million to about 54 million acres.
We reported in July 2006 that BIA generally followed its regulations for  processing land in trust applications from tribes and individual Indians to  take land into trust, but had no deadlines for making decisions on these  applications. BIA generally responded to our recommendations to  improve the processing of such applications, but this issue continues to  create uncertainty in Indian country, in part, because of a February 24,  2009, Supreme Court decision and ongoing litigation. The Supreme Court  held that the Indian Reorganization Act only authorizes the Secretary of  the Interior to take land into trust for a tribe or its members if that tribe  was under federal jurisdiction when the law was enacted in 1934. The  court did not define what constituted being under federal jurisdiction but  did find that a particular tribe, which was not federally recognized until  1983, was not under federal jurisdiction in 1934. It is not clear how many  tribes or pending land in trust applications will be affected by this  decision, but the decision raises a question about the Secretary’s authority  to take land in trust for the 50 tribes that have been newly recognized  since 1960 and their members. The Secretary’s decisions to take land in  trust for two of these tribes—the Match-e-be-nash-she-wish Band of  Potawatomi Indians of Michigan and the Cowlitz Indian tribe of  Washington—have been challenged in court.
Having or securing the land does not lead to economic development if that  land sits idle. In the past we have reported on concerns about idle Indian  lands and BIA’s process for leasing Indian lands, but we have not done  any recent work on these issues.
section_title: Tribal Environmental Standards May Create Uncertainty
paragraphs: The Clean Water Act, Safe Drinking Water Act, and Clean Air Act authorize  the Environmental Protection Agency (EPA) to treat Indian tribes in the  same manner as it does states, referred to as TAS (treated as states), for  the purposes of implementing these laws on tribal lands. On the one hand,  tribes want to be treated as states and assume program responsibilities to  protect their environmental resources because they are sovereign  governments and have specific knowledge of their environmental needs.  Tribes also generally believe that TAS status and program authority are  important steps in addressing the potential impacts of economic  development affecting their land. On the other hand, in some cases, states  are concerned that tribes with program authority may impose standards  that are more stringent than the state’s, resulting in a patchwork of  standards within the state and potentially hindering the state’s economic  development plans.
In October 2005, we reported that since 1986, when Congress amended the  first of the three environmental laws to allow TAS status for tribes, a  number of disagreements between tribes, states, and municipalities had  arisen, over land boundaries, environmental standards, and other issues.  The disagreements had been addressed in various ways, including  litigation, collaborative efforts, and changes to federal laws. For example,  in City of Albuquerque v. Browner, the city challenged EPA’s approval of  the nearby Pueblo of Isleta tribe’s water quality standards, which are more  stringent than those of New Mexico. EPA’s approval was upheld. In other  disagreements, some tribes and states have addressed the issues more  collaboratively. For example, the Navajo Nation and the Arizona  Department of Environmental Quality entered into a cooperative  agreement that, among other things, recognizes the jurisdiction of the  Navajo Nation within its reservation and establishes a plan to share the  cost of pilot projects. Regarding the use of federal legislation to address  disagreements, a federal statute enacted in August 2005, requires Indian  tribes in Oklahoma to enter into a cooperative agreement with the state  before EPA can approve a tribe’s TAS request. At the time of our October  2005 report, the Pawnee Nation was the only Oklahoma tribe that had  been awarded TAS status to set its own water quality standards, and we  have not conducted any more recent work on this issue.
section_title: Uncertainties Regarding the Use of Selected Indian Tax Provisions
paragraphs: The tax code has also been used to promote economic activity in Indian  country. We have reported on tax provisions regarding (1) the  uncertainties that tribes faced regarding the types of activities that they  could finance with tax-exempt bonds and (2) the impact of accelerated  depreciation provisions.
In September 2006, we reported on Indian tribal governments’ use of tax- exempt bonds under section 7871(c) of the Internal Revenue Code.  Section 7871(c), which was originally enacted in 1983, generally limits the  use of tax-exempt bonds by Indian tribal governments to the financing of  certain activities that constitute “essential government functions.” In  1987, section 7871(e) was added to the code to limit the essential  governmental functions standard further to provide that an essential  governmental function does not include any function which is not  customarily performed by state and local governments with general taxing  powers. To date the Internal Revenue Service has not issued regulations  defining essential government function. The lack of a definition has  created uncertainty among tribes regarding the types of activities that they  can finance using tax-exempt bonds. In addition, this custom-based  essential governmental function standard has proven to be a difficult  administrative standard and has led to audit disputes, based on difficulties  in determining customs, the evolving nature of the functions customarily  performed by state and local governments, and increasing involvement of  state and local governments in quasi-commercial activities. In trying to  determine what the customary practices were of state and local  governments that tribes should be held accountable to, we reported that  state and local governments had provided financial support for a variety of  facilities, including rental housing, road transportation, parking facilities,  park and recreation facilities, golf facilities, convention centers, hotels,  and gaming support facilities.
Section 1402 of the American Recovery and Reinvestment Act of 2009  added a $2 billion bond authorization for a new temporary category of tax- exempt bonds with lower borrowing costs for Indian tribal governments  known as “Tribal Economic Development Bonds” under section 7871(f) of  the Internal Revenue Code to promote economic development on Indian  lands. In general, this new authority provides tribal governments with  greater flexibility to use tax-exempt bonds to finance economic  development projects than is allowable under the existing essential  governmental function standard of section 7871(c). The Internal Revenue  Service allocated the $2 billion of bond issuance authority provided by  section 1402 to 134 tribal governments in two rounds. Furthermore, the act  required the Secretary of the Treasury to study the effect of section 1402  and report to Congress on the results of the study, including the  Secretary’s recommendation regarding the provision. According to the  Treasury Department, the House Ways and Means Committee and the  Senate Finance Committee indicated that, in particular, Treasury should  study whether to repeal on a permanent basis the existing more restrictive  essential governmental function standard for tax-exempt governmental  bond financing by Indian tribal governments under section 7871(c). The  act required that the study be completed no later than 1 year after  enactment, which would have made the deadline February 17, 2010. The  Treasury Department published a notice in the Federal Register in  July 2010 seeking comments from tribal governments regarding the tribal  economic development bond to assist the department in developing  recommendations for the required study, but, to our knowledge, the  department has not yet issued the report to Congress. There is continuing  uncertainty in this area because it is unknown what the Treasury  Department may recommend regarding changes to section 7871(c) and  ultimately what changes, if any, Congress may adopt.
A second tax measure intended to promote economic activity in Indian  country is the Indian reservation depreciation provision, enacted in 1993.  The provision acts as an incentive for investment on Indian reservations  because it permits taxpayers to accelerate their depreciation for certain  property used by businesses on Indian reservations. The provision’s  special depreciation deduction schedule permits eligible taxpayers to take  a larger and earlier deduction for depreciation from their business  incomes than they otherwise would be allowed, thereby reducing any tax  liability. Reducing tax liability earlier is an incentive for economic  development because having a lower tax payment today is worth more to  the taxpayer than having a lower tax payment in the future. However, in  June 2008, we reported that there were insufficient data to identify users  of the provision and assess whether the provision had increased economic  development on Indian reservations.
section_title: Obtaining Rights-of-Way Across Indian Land Can Involve Uncertainty
paragraphs: Securing rights-of-way across Indian lands is an important component of  providing Indian lands with the critical infrastructure needed to support  economic activity. We have reported on the uncertainties that  telecommunication service providers and a nonprofit rural electric  cooperative have faced in trying to negotiate rights-of-way involving Indian  lands.
In January 2006, we reported that according to several  telecommunications service providers and tribal officials, obtaining a  right-of-way through Indian lands is a time-consuming and expensive  process that can impede service providers’ deployment of  telecommunications infrastructure. The right-of-way process on Indian  lands is more complex than the right-of-way process for non-Indian lands  because BIA must approve the application for a right-of-way across Indian  lands. BIA grants or approves actions affecting title on Indian lands, so all  service providers installing telecommunications infrastructure on Indian  lands must work with BIA or its contractor (a realty service provider) to  obtain a right-of-way through Indian lands. To fulfill the requirements of  federal regulations for rights-of-way over Indian lands and obtain BIA  approval, service providers are required to take multiple steps and  coordinate with several entities during the application process. These  steps must be taken to obtain a right-of-way over individual Indian  allotments as well as tribal lands. Several of the steps involve the  landowner, which could be an individual landowner, multiple landowners,  or the tribe, depending on the status of the land. Specifically, the right-of- way process requires (1) written consent by the landowner to survey the  land; (2) an appraisal of the land needed for the right-of-way;  (3) negotiations with the landowner to discuss settlement terms;  (4) written approval by the landowner for the right-of-way; and (5) BIA  approval of the right-of-way application. One telecommunication service  provider told us that an individual Indian allotment of land can have over  200 owners, and federal regulations require the service provider to gain  approval from a majority of them. The service provider stated that the time  and cost of this process is compounded by the fact that a  telecommunications service line often crosses multiple allotments. In  addition, if the service provider cannot obtain consent for the right-of-way  from the majority of landowners, the provider is forced to install lines that  go around the allotment, which is also expensive.
Rights-of-way can also be necessary to deliver energy to consumers. In  September 2004, we reported that the Copper Valley Electric Association,  a nonprofit rural electric cooperative, had been unable to reach  agreements with several individual Alaska Natives for rights-of-way across  their land. In 1906, the Alaska Native Allotment Act authorized the  Secretary of the Interior to allot individual Alaska Natives a homestead of  up to 160 acres. We found 14 cases where conflict exists regarding  Copper Valley’s rights-of-way within Native allotments. Resolution to a  number of these conflicts had been intermittently pursued since the mid- 1990s, but at the time of our report, only a few cases had been resolved  using existing remedies. Copper Valley had three remedies to resolve these  conflicts: (1) negotiating rights-of-way with Native allottees in conjunction  with BIA; (2) relocating its electric lines outside of the allotment; or  (3) exercising the power of eminent domain, also known as condemnation,  to acquire the land. We reported that Copper Valley had ceased trying to  resolve these conflicts because it maintains that the existing remedies are  too costly, impractical, and/or potentially damaging to relationships with  the community. More importantly, Copper Valley officials told us that on  principle they should not have to bear the cost of resolving conflicts that  they believe the federal government had caused.
Section 1813 of the Energy Policy Act of 2005 required the Secretaries of  Energy and of the Interior to conduct a study of issues regarding energy  rights-of-ways on tribal land and issue a report to Congress on the  findings, including recommending appropriate standards and procedures  for determining fair and appropriate compensation to Indian tribes for  granting, expanding and renewing rights-of-way. Issued in May 2007, the  study focused on rights-of-way for electric transmission lines and natural  gas and oil pipelines associated with interstate transit and local  distribution. The study recommended that valuation of rights-of-way  continue to be based on terms negotiated between the parties and that if  negotiations failed to produce an agreement that has a significant regional  or national effect on the supply, price, or reliability of energy resources,  Congress should consider resolving such a situation through specific  legislation rather than making broader changes that would affect tribal  sovereignty or self-determination generally.
section_title: Certain Issues Related to the Legal Status of Tribes May Complicate the Resolution of Disputes
paragraphs: The unique legal status of tribes has resulted in a complex set of rules that  may affect economic development efforts. As we reported earlier this year,  as a general principle, the federal government recognizes Indian tribes as  “distinct, independent political communities” with inherent powers of self- government. Therefore, Indian tribes have sovereign immunity as well as  plenary and exclusive power over their members and territory subject only  to the limitations imposed by federal law. However, sovereign immunity  may influence a private company’s decision to contract with an Indian  tribe and the limitations imposed by federal law on Indian tribes’ civil  jurisdiction over non-Indians on Indian reservations may create  uncertainties regarding where lawsuits arising out of those contracts can  be brought.
Like the federal and state governments, Indian tribes are immune from  lawsuits unless they have waived their sovereign immunity in a clear and  unequivocal manner or a federal treaty or law has expressly abrogated or  limited tribal sovereign immunity. For example, the Indian Tribal  Economic Development and Contracts Encouragement Act of 2000  requires the Secretary of the Interior to approve any agreement or contract  with an Indian tribe that encumbers Indian lands for 7 or more years;  however, it prohibits the Secretary from approving the agreement or  contract unless it provides remedies for breaching the agreement or  contract, references a tribal law or court ruling disclosing the tribe’s right  to assert sovereign immunity, or includes an express waiver of sovereign  immunity. If the tribe does not waive its sovereign immunity in the  agreement or contract, private companies might be hesitant to undertake  the work because they will not be able to sue the tribe if any disputes  arise. In addition to waiving sovereign immunity in agreements or  contracts on a case-by-case basis, some tribes have formed separate  entities to conduct business that are not immune from lawsuits.
The Supreme Court has ruled that, as a general proposition, the inherent  sovereign powers of an Indian tribe do not extend to the activities of non- tribal members. However, the Court has also recognized two exceptions  to this general proposition: (1) tribes may regulate the activities of  nonmembers who enter into consensual relationships with the tribe or its  members through commercial dealing, contracts, leases, or other  arrangements and (2) tribes may exercise civil authority over the conduct  of non-Indians on fee lands within the reservation when that conduct  threatens or has some direct effect on the political integrity, economic  security, or the health or welfare of the tribe. In 2008, the Supreme Court  ruled that a tribal court did not have jurisdiction to adjudicate a  discrimination claim against a non-Indian bank brought by a company  owned by tribal members because neither of the exceptions applied. The  court’s opinion focuses on the tribe’s authority to regulate the bank’s sale  of fee land it owned within the reservation rather than addressing whether  the tribal court had authority to hear the discriminatory lending claim  under the consensual relationship exception. However, some private  companies believe that this decision may not eliminate all of the  uncertainty as to the nature and extent of tribal court jurisdiction that  makes off-reservation businesses reluctant to trade on Indian reservations  or with tribal members who live on reservations. For example, the brief  filed by a railroad association asked the court to adopt a brightline rule  that tribal courts may not exercise jurisdiction over claims against  nonmembers absent clear and unequivocal consent to tribal court  jurisdiction. The association argued that such a rule would ensure that  litigation against nontribal members will be addressed by a forum that the  nonmember has agreed affords acceptable law, procedure, and  fundamental safeguards of process and fairness.
section_title: Special Provisions for Gaming and Small Business Contracting
paragraphs: In contrast to the unique issues that can cause uncertainty or pose  challenges to economic activity in Indian country, tribes can take  advantage of special provisions for gaming and small business contracting.  Indian gaming, a relatively new phenomenon, started in the late 1970s  when a number of Indian tribes began to establish bingo operations as a  supplemental means of funding tribal operations. In 1987, the U. S.  Supreme Court ruled that state regulation of tribal gaming would  impermissibly infringe on tribal governments, thereby barring state  regulation of tribal gaming in states which did not prohibit all forms of  gaming. In response, the Indian Gaming Regulatory Act of 1988 was  enacted, which established a regulatory framework to govern Indian  gaming operations. In section 2(4) of the act, Congress found that a  principle goal of federal Indian policy is to promote tribal economic  development, tribal self-sufficiency, and strong tribal government. To that  end, the act generally requires that the net revenues from tribal gaming  operations be used to (1) fund tribal government operations or programs,  (2) provide for the general welfare of the Indian tribe and its members,  (3) promote tribal economic development, (4) donate to charitable  organizations, or (5) help fund operations of local government agencies. A  tribe may distribute its net revenues directly to tribal members, provided  that the tribe has a revenue allocation plan approved by BIA and meets  certain other conditions.
According to the final report of the National Gambling Impact Study  Commission, gambling revenues have proven to be a critical source of  funding for many tribal governments, providing much needed  improvements in the health, education, and welfare of Indians living on  reservations across the United States. The National Indian Gaming  Commission reports that for 2009    233 tribes operating 419 gaming operations generated $26.5 billion in  revenue (233 tribes represents about 40 percent of the 565 federally  recognized tribes),  the top 21 operations (or about 5 percent of all the operations) generated  38.7 percent of all the revenues, and  the top 71 operations (or about 17 percent of all the operations) generated  69.5 percent of all the revenues.
In addition, in 1986, a law was enacted that allowed Alaska Native  corporation (ANC)-owned businesses to participate in the Small Business  Administration’s (SBA) 8(a) program—one of the federal government’s  primary means for developing small businesses owned by socially and  economically disadvantaged individuals. This program allows the  government to award contracts to participating small businesses without  competition below certain dollar thresholds. Since 1986, special  procurement advantages have been extended to ANC firms beyond those  afforded to other 8(a) businesses, such as the ability to win sole-source  contracts for any dollar amount. In April 2006, we reported on the use of  special procurement advantages by ANCs, and found that 8(a) obligations  to firms owned by ANCs increased from $265 million in fiscal year 2000 to  $1.1 billion in 2004. In fiscal year 2004, obligations to ANC firms  represented 13 percent of total 8(a) dollars. Sole-source awards  represented about 77 percent of 8(a) ANC obligations for the six procuring  agencies that accounted for the vast majority of total ANC obligations over  the 5-year period.
ANCs use the 8(a) program to generate revenue with the goal of providing  benefits to their shareholders, but the ANCs we reviewed did not track the  benefits provided to their shareholders specifically generated from 8(a)  activity. Thus, an explicit link between the revenues generated from the  8(a) program and benefits provided to shareholders is not documented.  Benefits vary among corporations, but include dividend payments,  scholarships, internships, burial assistance, land gifting or leasing,  shareholder hire, cultural programs, and support of the subsistence  lifestyle. The special procurement advantages for ANCs also generally  apply to tribes and Native Hawaiian organizations (NHO). To obtain more  information on the benefits these entities receive from participation in the  8(a) program, SBA recently promulgated regulations that require each 8(a)  program participant owned by an ANC, tribe, or NHO to submit  information showing how the ANC, tribe, or NHO has provided benefits to  tribal or Native communities or tribal or Native members due to its  participation in the 8(a) program. The data submitted should include  information relating to funding cultural programs, employment assistance,  jobs, scholarships, internships, subsistence activities, and other services  provided by the ANC, tribe, or NHO to the affected community. We have  ongoing work looking at the use of these special procurement advantages  by ANCs, tribes, and NHOs.
Chairman Lankford, Ranking Member Connolly, and Members of the  Subcommittee, this concludes my prepared statement. I would be pleased  to answer any questions that you may have at this time.
section_title: GAO Contacts and Acknowledgments
paragraphs: For further information about this testimony, please contact Anu K. Mittal  at (202) 512-3841 or mittala@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. Jeffery D. Malcolm, Assistant Director; Jeanette Soares,  and Joe Thompson also made key contributions to this statement.
section_title: Related GAO Products
paragraphs: Department of the Interior: Major Management Challenges.  GAO-11-424T. Washington, D.C.: March 1, 2011.
Indian Country Criminal Justice: Departments of the Interior and  Justice Should Strengthen Coordination to Support Tribal Courts.  GAO-11-252. Washington, D.C.: February 14, 2011.
Tax Expenditures: Available Data Are Insufficient to Determine the Use  and Impact of Indian Reservation Depreciation. GAO-08-731.  Washington, D.C.: June 26, 2008.
Federal Tax Policy: Information on Selected Capital Facilities Related to  the Essential Governmental Function Test. GAO-06-1082. Washington,  D.C.: September 13, 2006.
Indian Issues: BIA’s Efforts to Impose Time Frames and Collect Better  Data Should Improve the Processing of Land in Trust Applications.  GAO-06-781. Washington, D.C.: July 28, 2006.
Contract Management: Increased Use of Alaska Native Corporations’  Special 8(a) Provisions Calls for Tailored Oversight. GAO-06-399.  Washington, D.C.: April 27, 2006.
Indian Irrigation Projects: Numerous Issues Need to Be Addressed to  Improve Project Management and Financial Sustainability. GAO-06-314.  Washington, D.C.: February 24, 2006.
Telecommunications: Challenges to Assessing and Improving  Telecommunications For Native Americans on Tribal Lands.  GAO-06-189. Washington, D.C.: January 11, 2006.
Indian Tribes: EPA Should Reduce the Review Time for Tribal Requests  to Manage Environmental Programs. GAO-06-95. Washington, D.C.:  October 31, 2005.
Indian Economic Development: Relationship to EDA Grants and Self- determination Contracting Is Mixed. GAO-04-847. Washington, D.C.:  September 8, 2004.
Alaska Native Allotments: Conflicts with Utility Rights-of-way Have Not  Been Resolved through Existing Remedies. GAO-04-923. Washington,  D.C.: September 7, 2004.
Welfare Reform: Tribal TANF Allows Flexibility to Tailor Programs, but  Conditions on Reservations Make it Difficult to Move Recipients into  Jobs. GAO-02-768. Washington, D.C.: July 5, 2002.
Economic Development: Federal Assistance Programs for American  Indians and Alaska Natives. GAO-02-193. Washington, D.C.:   December 21, 2001.
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