Indian Programs: BIA Should Streamline Its Processes for Estimating Land Rental Values
Published: 1999-06-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Pursuant to a legislative requirement, GAO reviewed the Bureau of Indian Affairs' methods of establishing the lease value of Indian land, focusing on: (1) how the Bureau uses appraisals and other methods to establish the lease value of Indian land; (2) how its appraisal methods compare to those of other federal and state agencies and of private appraisers and what other methods are used to value federal, state, and private leases; (3) what impediments to leasing Indian trust land have been identified; (4) what alternatives to appraisals could be used to establish the lease value of Indian land, including any changes in federal laws and regulations that would be required; and (5) what efforts the Bureau has made to improve its appraisal methods.
section_title: What GAO Found
paragraphs: GAO noted that: (1) the Bureau relies mostly on appraisals to ensure that Indian land is leased for a fair annual rental; (2) however, the Bureau has not defined fair annual rental and does not have a clear policy on how that amount should be determined; (3) GAO found no statutory or regulatory requirement that appraisals be used to establish lease values; (4) under certain circumstances, some Bureau offices use other methods in addition to appraisals; (5) the standards and methods that apply to Bureau appraisers also apply to other appraisers, including other federal, state, and private appraisers; (6) however, managers of other lands also use other methods to establish lease values; (7) according to several private appraisers GAO spoke to, the rents for agricultural leases on private land are often not set by appraisal; (8) however, leases for other uses on private land, such as business uses, may be valued by appraisal; (9) appraisal amounts were considered a particular problem because of Bureau officials' reluctance to approve leases for less than the appraised value; (10) in addition, while Bureau and other appraisers stated that there is no standard for the amount of time it should take to prepare or review an appraisal, some Indian communities expressed frustration with the time taken by the Bureau's processes; (11) in addition to appraisals, other methods are available for establishing lease values in some circumstances; (12) such other methods include advertising for competitive lease bids, conducting market surveys, and applying fee schedules or formulas; (13) laws and regulations do not require the use of appraisals to establish lease values and would not need to be changed for the Bureau to adopt these or other alternative methods to establish rents for leases; (14) Bureau officials said a more comprehensive review of laws, regulations, and court cases would need to be conducted before Bureau-wide changes would be considered; (15) the Department of the Interior is reviewing the Bureau's use of appraisals and is considering improvements to the Bureau's processes; (16) proposed improvements include training realty staff on the circumstances under which appraisals should be requested to limit the number of unnecessary appraisals and automating and thus streamlining the valuation processes for certain types of real estate transactions; and (17) the improvement plan also includes a recommendation that the Bureau develop a system for tracking appraisals to allow more effective use of appraisal resources.

section_title: Letter
paragraphs: The Department of the Interior’s Bureau of Indian Affairs has jurisdiction  over roughly 56 million acres (about 87,500 square miles) of Indian-owned  land that is held in trust by the federal government.  In 1997, tribes and  individual Indians received over $104 million from about 102,000 leases  covering almost 8 million acres of land.  This land is leased for a variety of  uses, including farming, livestock grazing, business development, and  residential use.  The Bureau is required to approve leases on Indian land  held in trust by the federal government and to ensure that the landowners  receive a fair annual rental for their leases.
Concerned about how the amount of rent for this land is established and  how rent appraisals may affect the ability of Indians to lease their land and  of lessees to rent it, you asked us to review the Bureau’s method of  establishing the lease value of Indian land.  On the basis of language in  Senate Report 105-56 and discussions with your offices, we agreed to  provide information on (1) how the Bureau uses appraisals and other  methods to establish the lease value of Indian land; (2) how its appraisal  methods compare to those of other federal and state agencies and of  private appraisers and what other methods are used to value federal, state,  and private leases; (3) what impediments to leasing Indian trust land have  been identified; (4) what alternatives to appraisals could be used to  establish the lease value of Indian land, including any changes in federal  laws and regulations that would be required; and (5) what efforts the  Bureau has made to improve its appraisal methods.  We also provide  information on the leasing of Indian trust land in appendix I, on issues  surrounding residential leases of Indian trust and other land in appendix II,  and on acreage in Indian irrigation projects in appendix III.
To respond to these objectives, we contacted or visited officials in Bureau  area offices in Portland, Oregon; Billings, Montana; Phoenix, Arizona;  Muskogee, Oklahoma; and Aberdeen, South Dakota; and we visited several  agency offices within the areas we visited.  We also contacted officials with  the Department of the Interior’s Bureau of Land Management and the  Department of Agriculture’s Forest Service to discuss surface-lease  valuation on federally managed land.  In addition, we contacted officials  with the states of Colorado, Minnesota, Montana, and Washington to  discuss their methods of establishing rents for leases on state-owned land  held in trust for public institutions such as schools.  Finally, we contacted  private appraisers representing two professional appraisal associations.
subsections: section_title: Background
paragraphs: The Bureau’s budget for real estate appraisals of Indian trust land is about  $4.1 million for fiscal year 1999, and the agency estimates that  approximately 27,000 appraisals will be completed this year.  The Bureau  does not maintain data on the number of appraisals that are prepared for  leases, but appraisal logs from four area offices—Aberdeen, South Dakota;  Muskogee, Oklahoma; Phoenix, Arizona; and Portland, Oregon—show that  43 percent of about 6,900 appraisals approved in those offices in calendar  years 1997 and 1998 were for leases.  Appraisers may be either Bureau  employees or contractors, and all appraisals—regardless of who prepares  them—must be reviewed and approved by Bureau review appraisers.
Current Bureau guidance on appraisals requires that appraisers adhere to  professional appraisal standards when preparing appraisals, regardless of  whether they are for the sale, lease, exchange, or other disposition of the  land.  The standards that are the basis for the Bureau’s policies are the  Uniform Standards of Professional Appraisal Practice (USPAP), the  Uniform Appraisal Standards for Federal Land Acquisitions, and the  standards set forth in the Uniform Relocation Assistance and Real Property  Acquisitions Act.  USPAP, which reflects the appraisal profession’s current  standards for preparing and communicating the results of appraisals, is  published by the Appraisal Standards Board of the Appraisal Foundation.   The Uniform Appraisal Standards for Federal Land Acquisitions contain  guidelines for determining fair market value and are intended to promote  uniformity in the appraisal of real property among the various agencies  acquiring property on behalf of the United States.  The objectives of the  Uniform Relocation Assistance and Real Policy Acquisitions Act include  promoting public confidence in federal and federally assisted land  acquisition programs.
section_title: The Bureau Relies Mostly on Appraisals to Establish the Lease Value of Indian Trust Land
paragraphs: Bureau officials are responsible for ensuring that leases of Indian trust land  reflect a fair annual rental, and they rely primarily on appraisals to estimate  that value.  However, the Bureau has not defined fair annual rental and  does not have a clear policy on how that amount should be estimated.  The  Bureau’s appraisal handbook, revised in October 1998, states that the  policies it contains apply to all real estate transactions and makes no  exception for leases, and Bureau officials have said they believe that fair  annual rental can be determined only through an appraisal.  In effect, fair  annual rental has come to mean no less than “fair market rental” as  estimated in an appraisal.  However, we found no statutory or regulatory  requirement that appraisals be used to estimate fair market rental, and, in  fact, some area offices use other methods in addition to appraisals to  establish lease values.
Appraisals are opinions, or estimates, of the fair market value of property,  and the Bureau uses them to estimate property values for such transactions  as sales, exchanges, leases, gifts, or inheritances.  The value may be  estimated using one or more of three approaches—comparable sales, cost,  or income capitalization.  The approach the Bureau’s appraisers most often  use is the comparable sales approach, in which a property’s value is  inferred from recent transactions involving properties similar to the one  being appraised.  In the cost approach, the appraiser estimates the value of  the property on the basis of costs that would be incurred to replace an  existing structure or improvement.  In the income capitalization approach,  the appraiser estimates a property’s capacity to generate benefits (usually  income) and uses these benefits to derive the property’s present value.  The  appraised value of real property is estimated on the basis of its “highest and  best use.”  The highest and best use is that which is legally permissible,  physically possible, and financially feasible and results in the highest value  consistent with the market.  While an appraisal is a tool to estimate the  value of a property, its actual value is established only when it is sold or  leased.
Because of such practical considerations as land uses and staffing levels,  different approaches are sometimes used to establish lease values in some  areas.  Officials in the Aberdeen and Billings offices told us that they do not  have enough appraisers to appraise all leases and that they sometimes use  other methods to determine the lease value of land.  Some expressed  concern that if appraisals are indeed required for all lease transactions,  they are out of compliance with the Bureau’s requirements by using these  other methods.  An official from the office of the Bureau’s Deputy  Commissioner emphasized that it is not the Bureau’s policy that staffing  levels should dictate the methods used to establish the fair annual rental  for trust land.  The official said that the Bureau needs to have consistent  procedures that apply to all offices.
The Bureau has identified three general types of Indian trust land leases:   agriculture, business, and other.  Figure 1 shows the percentage of leases of  trust land by type of use and the percentage of total leased acreage by type  of use as of December 31, 1997.  It also shows the percentage of total rent  revenue by type of use for the year ending December 31, 1997.
subsections: section_title: Agricultural Leases
paragraphs: The Bureau’s method for establishing the lease value of land for agriculture  varied depending on the crops grown and, in some cases, on the number of  appraisers employed in the area.  For example, on the Yakama Reservation  in Washington (served by the Portland Area Office) and along the Colorado  River in California (served by the Phoenix Area Office), the crops are high  in value and of many varieties, such as fruits and vegetables.  Those area  offices employ seven and eight appraisers, respectively, and each tract being leased receives an appraisal.  In contrast, on reservations served by  the Aberdeen and Billings area offices, the crops are lower in value and  more homogeneous, such as wheat and grass for grazing livestock.  Those  area offices employ fewer appraisers—two in Aberdeen and four in  Billings—and often establish lease values by such methods as market  surveys, which provide a range of prevailing rents in an area, and  competitive bidding, which allows parties interested in leasing the land to  submit bids for the tracts they wish to rent.
section_title: Business Leases
paragraphs: Establishing the value of leases for business use is more complex than for  agricultural use, according to Bureau officials.  In each of the Bureau’s  areas where we contacted officials, business leases were valued by  appraisal.  In addition to using sales of comparable properties to estimate  their value, appraisers may consider a business enterprise’s gross or net  return on sales (combining elements of the sales comparison and income  capitalization approaches) to establish a lease rate.
The areas we visited had different levels of business leasing activity.  For  example, in the Phoenix area, business leases make up about 13 percent of  all leases.  Two of the tribes in the area—the Salt River and Gila River  Pima-Maricopa Indian Communities—have properties with opportunities  for business development because of their proximity to Phoenix, Arizona.   The Salt River community leases its property for a 140-acre retail center  (described as the nation’s largest business development ever built on  Indian land), two golf courses, and a solid waste disposal operation that  serves the community and nearby cities.  The Gila River community leases  property for several tribal enterprises, including three industrial parks, a  retail store, a billboard company, an airfield, a telephone company, and a  marina.  In contrast, there are comparatively fewer business opportunities  for trust land in the Billings area:  Only about 3 percent of all leases are  issued for business use.
section_title: Other Leases
paragraphs: Leases are also issued for uses of trust land other than agriculture and  business.  These leases typically have nominal rents; they include leases of  homesites for tribal members (which can be leased to tribal members for as  little as $1 per year) and special-use permits for temporary uses, such as  fireworks stands.  According to the Portland Area Office’s realty officer, the  values for these leases are sometimes established by appraisals (especially  when the landowner and lessee are unrelated individuals), and sometimes  the values are more arbitrary (when the landowner and lessee are related  or when the tribe owns the land and the lessee is a tribal member).
This category can also include leases for residential use, when lessees rent  property under a long-term lease (generally up to 25 years) and build a  home on the land.  The rent for these leases is established by appraisal, and  appraisers use market data for comparable residential ground leases when  such data are available.  However, when comparable lease information is  not available—as in the Portland Area Office--appraisers first estimate the  market value of the land on the basis of sales of comparable residential  properties, after adjusting the value to reflect that of the land only (without  buildings or other improvements).  Once that value has been determined, a  rate of return is applied to the property’s estimated market value to arrive  at the annual rental.  In real estate markets where land values are rising,  this method can result in increasing rental rates.  These changes in rents  are reflected in adjustments to the leases that, under the Bureau’s  regulations, must occur at least once every 5 years.  We provide  information in appendix II on issues surrounding residential leases.
section_title: Federal, State, and Private Lease Values Are Established by Other Methods in Addition to Appraisals
paragraphs: The Bureau’s appraisers are held to the same general standards and use  similar appraisal techniques as other federal appraisers, state appraisers,  and private appraisers.   However, these land managers also use other  methods to establish lease values.  For example, while Interior’s Bureau of  Land Management (BLM) primarily uses appraisals to estimate the value of  public land, it also uses administrative fee schedules to establish the price  for such land uses as linear rights-of-way (e.g., for oil and gas pipelines or  power lines) and communication sites (e.g., for broadcasting and  transmitting television and radio signals).  Managers of state-owned land— held in trust for such public institutions as schools—use a range of  methods including market surveys and competitive bidding for cropland  and appraisals for residential and business uses.  Private farmers usually do  not use appraisals to establish rent values but rely, instead, on their  knowledge of the local market and on common practices in the area.
subsections: section_title: Federal Land Management Agencies
paragraphs: BLM and the Forest Service are required to obtain fair market value for  real-estate transactions and use appraisals in many—but not all—cases.   While appraisers for both agencies are governed by the profession’s  standards and by the Uniform Appraisal Standards for Federal Land  Acquisitions and the Uniform Relocation Assistance and Real Property  Acquisition Policies Act, both agencies are also bound by land-use  authorizations and requirements in the Federal Land Policy and  Management Act and by other statutes authorizing uses of federal land.   For example, grazing fees on federal land (whether managed by BLM or the  Forest Service) are established by a statutorily defined formula.
Leasing is a small part of BLM’s appraisal workload—officials’ estimates  ranged from 5 to 30 percent in the BLM state offices we contacted.  BLM  officials said that the agency rarely leases land for agricultural or  residential use.  These leases usually occur only when farms or residences  have inadvertently extended onto public land and BLM allows the use to  continue pending an exchange or sale of the land.
The Forest Service issues special-use authorizations, including leases, for a  variety of uses, including vacation homes and such business activities as  ski areas and guide services.  It is generally required to obtain fees that  reflect the fair market value, as determined by appraisal or “other sound  business management principles,” for the rights and privileges authorized.   In 1996, we reported that most of these permits—about 15,200—were for  lots where individuals could build recreation homes or cabins.  The Forest  Service’s method of establishing the value of land leased for vacation  homes is similar to that used for Indian land—the market sales value is  estimated by an appraisal, and the fees are computed by applying an annual  rate-of-return to the market sales value. However, we reported that, in  many instances, the fees the Forest Service charged did not reflect fair  market value because, while the fees were adjusted annually for inflation,  the appraisals on which the fees were based had not been updated in nearly  20 years.
Both BLM and the Forest Service use fee schedules to determine the rent  amounts for communication sites (for television and radio, for example)  and certain rights-of-way (for oil and gas pipelines and power lines).  We  have reported on weaknesses in BLM’s and the Forest Service’s use of fee  schedules in cases where they did not reflect fair market value.   Specifically, in July 1994, we reported that many of BLM’s fees for  communication sites were established on the basis of out-of-date  appraisals and that the Forest Service’s fees were established on the basis  of a 40-year-old, outdated formula.  In April 1996, we reported that  although the fee schedules for rights-of-way were established on the basis  of rates for those uses on private land, they were subsequently adjusted  downward because the industry and the agency’s management viewed the  rates as too high. In both reports, we stated that the fee schedules could  be updated to reflect fair market value through periodic appraisals or  market surveys.
section_title: State Trust Land Management Agencies
paragraphs: The four states we contacted—Colorado, Minnesota, Montana, and  Washington—use various methods to establish the value of leases on their  trust land, depending on the use.  For example, in Washington, agricultural  leases are offered through a competitive public auction.  Minimum rents  for land used for crops, whether irrigated or not, are established on the  basis of a “fair market value assessment,” that considers such factors as  crop options, soil type, and water availability.  The rents for the state leases  in Washington reflect the private lease terms identified in the market value  assessment.  However, they may be lower than the rents for private leases  because, unlike private landowners, the state does not provide such  improvements as fences and water, and lessees pay certain state taxes on  operations on state land.  Rents for crops that are not irrigated, such as  wheat and other small grains, are generally paid by crop-share; that is, the  state takes possession of a percentage of the crop harvested and sells it at  market.  Rents for irrigated crops, such as corn, potatoes, and alfalfa, are  generally paid in cash.  Both the crop-share percentages and the cash rent  amounts are established on the basis of market surveys of private leasing  practices.  Taking a different approach, Colorado establishes rents for  agricultural leases by using income-based formulas—that is, the rents  reflect the amount of income the land is expected to generate.
The states we contacted that lease land for residential use generally  establish a minimum acceptable rent by applying a rate of return to the  property’s estimated market value.  For example, Minnesota leases  lakeshore property for residential purposes; establishing leases for 10 years  with rents of 5 percent of the land’s appraised fair market sales value.   Rents for business leases most often are established by using an appraisal  to estimate the land’s sales value and then applying an annual rate of return  to that value, although, according to a Colorado official, business rents  sometimes also assess lessees a percentage of the business’ revenues.
section_title: Private Landowners
paragraphs: Private landowners may or may not use appraisals to value land leases,  depending on the intended use of the land.  According to several private  appraisers we spoke to, rents for agricultural land are rarely set by  appraisal:  Landowners and lessees are generally familiar with prevailing  lease rates and may informally negotiate the rent to be paid for a tract of  land.  The rent for a tract of land may be affected by the presence of such  improvements as fences or water delivery systems, which could increase  the market rent (if the landowner pays for them) or result in a rent credit (if  the lessee pays for them).  For business uses, lease rates are more likely to  be estimated by appraisal.  In those cases, appraisers often estimate the  sales value of the property on the basis of recent sales of comparable  properties and then apply a rate of return that reflects the risk inherent in  the lease agreement.
section_title: The Bureau’s Appraisals and Processes for Appraising and Leasing Land Were Named as Impediments to Leasing
paragraphs: There are several reasons that any land—including Indian land—might not  be leased.  The landowners may choose not to lease the land or there may  be no demand for the land because of poor soil quality, a slow farming  economy, inaccessibility, or lack of water.  However, in cases where trust  land is in demand because, for example, it is near other valuable land (such  as in Phoenix) or it can support valuable crops, there may be other  impediments to leasing the land if it has not been leased.  Bureau officials,  tribal representatives, and lessees cited appraisal amounts, the time taken  to prepare and review appraisals, and the Bureau’s cumbersome  bureaucracy.
Some lessees and Bureau realty officials asserted that Indian trust land  remains unleased in some areas because the land is appraised at values  higher than lessees want to pay.  Bureau officials often will not approve a  lease if the negotiated or offered rent is less than the appraised value.   These officials interpret the requirement to obtain a fair annual rental to  mean that the appraised amount is the minimum acceptable lease amount  and told us they fear approving leases for less would cause the Indian  landowners to submit appeals or file lawsuits challenging their decisions.   However, Bureau officials told us that they can and do approve leases for  less than the appraised value if the Indian landowners agree to accept less.   According to Bureau and other appraisers, appraisals are estimates of a  property’s value and should be used as a management tool for making  informed leasing decisions.  In our opinion, the estimates are not intended  to be a “floor price” any more than a “ceiling price.”
Concern over this issue is not new.  According to a December 1987 report  of the National Indian Agriculture Working Group, “the unswerving  application of the appraised market rental rates has frequently resulted in  the complete loss of income to Indian landowners when their land sits  unleased due to the lack of flexibility in determining rental rates.” While a  prospective lessee may believe that the appraised value of a tract of land is  too high, the owner of that same tract of land may believe that it is too low.   In the words of an administrative judge with the Interior Board of Indian  Appeals (IBIA), “the determination of ‘fair annual rental’ requires the  exercise of judgment and . . . reasonable people may differ in their  calculation of ‘fair annual rental.’”
Timing is an important factor affecting the accuracy of appraisals because,  as land values increase or decrease over time, appraisals become outdated.   For this reason, according to Bureau and other appraisers, appraisals have  a limited useful life.  The longer it takes to prepare and review an appraisal,  the more likely it is that the data used in it to estimate a property’s value are  too old to accurately reflect the current market.
Representatives of the Salt River Pima-Maricopa Indian Community  expressed frustration about the slowness of the Bureau’s Phoenix Area  Office in reviewing and approving appraisals prepared by appraisers under  contract to the community.  According to Bureau officials, all appraisals— whether prepared by a Bureau appraiser or a contract appraiser—must be  reviewed and approved by a Bureau review appraiser to ensure that they  are consistent with USPAP.  Community representatives said that it  sometimes takes months to hear back from the area office when the review  appraiser has a problem with their appraisals and that the Bureau’s  slowness jeopardizes the Community’s business deals.
We analyzed records from the Phoenix Area Office’s appraisal tracking  system for the period from January 1, 1997, to December 3, 1998, to see  how long it took to review or prepare appraisals. From the tracking  system, we were able to compute review times for 30 contractor-prepared  appraisals submitted by the Salt River Pima-Maricopa Community to the  area office for review.  Review time is defined as the number of days  between the date a contractor appraisal was received by the Bureau for  review and when it completed the review.  We calculated that the 30 Salt  River appraisals had an average review time of 146 days:
1 was reviewed and approved the same day,
16 were reviewed and approved in between 4 and 77 days,
8 were pending approval after between 297 and 512 days, and
5 were rejected after review periods ranging from 13 to 40 days.
We were also able to compute the preparation time for nine  Bureau-prepared appraisals of tribal land on the Gila River Reservation.   Preparation time is defined as the number of days between the date the  Bureau received an appraisal request and the date it returned the reviewed  appraisal to the requester.  The Gila River community recently hired an  appraiser to estimate the value of some properties because the Bureau was  taking too long.  We calculated that the nine Gila River appraisals had an  average processing time of 82 days:  All were prepared, reviewed, and  approved in between 40 and 126 days.
While we did not specifically determine the reasons for the time required to  prepare and review appraisals, the former chief review appraiser at the  Phoenix Area Office cited workload issues and concern about the quality of  contractor-prepared appraisals as reasons for some delays.  He emphasized  that USPAP requires a review appraiser to do sufficient work to be satisfied  that an appraisal meets the standards and does not limit the time allowed  for review.
Some lessees and Bureau officials identified a variety of problems with the  Bureau’s bureaucracy; for example, the Bureau’s processes were  characterized as more cumbersome than the private sector’s (for example,  the Bureau takes more time, requires more paperwork, and is less flexible).   Some said Bureau staff show a lack of initiative and accountability for such  things as being responsive to lessees and for leasing land on behalf of  landowners.  One lessee complained to us that a Bureau agency office  closes its realty office on Mondays and Fridays.  We also found a related  situation when we attempted to contact a realty officer at one of the agency  offices—twice in one week, we were told that he was not accepting any  calls while he worked on a report.
According to Bureau officials, the primary factor affecting the speed with  which they can approve leases is the prevalence of tracts of land with  multiple owners.  This occurs when an Indian landowner dies without a  will, and the property is divided among the landowner’s heirs in accordance  with the Indian General Allotment Act of 1887, as amended. Over time, the  number of owners of some tracts of land has increased as the ownership  interests have passed through several generations of multiple heirs.  The  landowners may all be individual Indians; sometimes the tribe or  non-Indians also own an interest.  For example, in 1992 we reported that  over one-third of the trust land tracts on the Yakama Reservation had  multiple owners and that 19 percent of these tracts had more than 25  owners. Under the Bureau’s regulations, officials must notify and obtain  concurrence from landowners owning a majority interest before leasing  land; therefore, the more owners a tract of land has, the longer it may take  for the Bureau to obtain their concurrence.
section_title: The Bureau Could Use Methods Other Than Appraisals to Establish Lease Values for Indian Land
paragraphs: In addition to appraisals, a number of other methods may be used to  establish lease values.  These methods do not preclude the use of  appraisals, but appraisals would not necessarily be prepared for every  lease transaction.  These other methods include advertising for competitive  bids, conducting market surveys, and applying fee schedules or formulas.   We did not analyze the costs and benefits of these methods, but they are  used to varying degrees by other federal and state land management  agencies and by private landowners.  While we recognize that the Bureau’s  trust responsibility to Indian landowners is unique and differs from the  relationships of other federal agencies to federal taxpayers and of state  land managers to school trust funds, these other methods may be  appropriate in some circumstances.  In fact, some area offices currently  use some of these methods, in some cases because they do not have  enough appraisers to appraise all tracts of land before leasing them.
Alternative approaches that are already in use in some Bureau offices  include competitive bidding and the use of market surveys:
Under its regulations, the Bureau is allowed to advertise tracts of  unleased trust land for competitive lease bids if the landowner wishes to  explore the market and is required to do so for leases that are not  negotiated or for which a fair annual rental cannot be obtained through  negotiations.  When there is a competitive market, the high bid received  in a competitive auction would establish the market rental value.  The  Bureau would then approve the granting of a lease to the highest bidder.   Two of the agencies we visited (in the Billings and Portland areas) have  advertised unleased trust land for competitive lease bids with mixed  success (see app. I).  Competitive bidding is also used to lease  state-owned trust land in some states, such as Montana (for cabin and  homesite leases) and Washington (for agricultural leases).  In addition,  when the demand for land is high, private landowners may use  competitive bidding techniques by soliciting sealed bids from potential  renters.
Market surveys may be used to identify the range of prevailing lease  rates for land in a specified area, particularly where the land use is  homogeneous.  Some Bureau offices—such as those in Aberdeen and  Billings (for agricultural leases)—already use this method.  Market  surveys result in generalized statements of what rents should be, or  parameters that decisionmakers can use in negotiating leases.  The lease  rate for a specific tract of land is compared with the range of rates  identified in the market survey to determine if the lease rate is within  that range.  The market survey approach differs from an appraisal in that  an appraisal is done for a specific property and is used to estimate the  market value of that property.  Some states also use this method for  determining whether the rent for their trust land is consistent with  prevailing rents in an area.
Other approaches, which are not currently being used for Indian trust land,  include the use of fee schedules and formulas:
As with market surveys, fee schedules could be used where land is used  for homogeneous purposes, such as grazing or the cultivation of some  crops.  Instead of appraising each site, land managers would refer to a  fee schedule to establish the rent.  We have reported on BLM’s and the  Forest Service’s use of fee schedules for communication sites (for  television and radio, for example) and rights-of-way (for oil and gas  pipelines and power lines).  While we support the concept of fee  schedules, we have reported on weaknesses in their implementation in  cases where they did not reflect fair market value.
Some states, such as Colorado, use formulas to determine the  appropriate lease value for cropland.  Formulas can be used where  information is available on expected income and costs associated with  the land.  For example, the Colorado State Land Board determines the  per-acre rent value of irrigated cropland on the basis of the farmer’s  expected per-acre income for the parcel of land.  The board multiplies  the state's share by the per-acre income (the state’s share varies by  agricultural crop and practices) and reduces the total to reflect the  farmer's irrigation costs.  Washington also uses formulas to set rates for  grazing permits on its trust land.
Changes in current laws or regulations would not be necessary for the  Bureau to adopt these or other alternative methods.  Consistent with this  view, in December 1998, a workgroup studying appraisal issues reported to  the Deputy Commissioner for Indian Affairs that it found no statutes that  specifically require the Bureau to conduct appraisals. A representative of  the Deputy Commissioner’s office emphasized that this position has not  been adopted by the Bureau and that a legal review that examines laws and  court cases that apply Bureau-wide would be required before it would  consider doing so.  We discuss this workgroup and its results in greater  detail below.
section_title: Interior Is Proposing Several Improvements to the Appraisal Process
paragraphs: The Department of the Interior is currently reviewing the Bureau’s  appraisal process as part of an improvement project begun in 1997 by the  Office of the Special Trustee for American Indians and the Bureau.  The  appraisal program was included in the project because of a lack of  consistency in preparing appraisals across the Bureau’s area offices and  because of a backlog of appraisals requested by agency officials but not yet  completed.  As of June 1998, the Bureau’s area offices reported a total of  almost 1,500 appraisal requests that were more than 60 days old.
The improvement plan included several proposed changes to the Bureau’s  appraisal program at the time we began our review (July 1998); the plan  was updated in the fall of 1998.  Specific initiatives in the improvement  plan, together with their status, follow:
Appraisers must be certified in accordance with title XI of the Financial  Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). By the fall of 1998, 28 of the Bureau’s 43 appraisers were  certified, including all of the area review appraisers, and the remaining  appraisers were completing the certification requirements.
The Bureau was to update its real estate appraisal handbook (issued in  1970), which it did in October 1998.
The Bureau was to hire a Bureau-wide chief appraiser; the position was  filled in April 1999.
The Bureau was to identify the extent of the appraisal backlog.  The  backlog was identified as of June 1, 1998.
The Bureau was to increase funding for the appraisal program.  Funding  is being requested under the Office of the Special Trustee’s budget to  implement improvements in the appraisal program and to eliminate  appraisal backlogs.
The improvement plan was updated in the fall of 1998 to include two  additional initiatives.  The first directed the Bureau’s Office of Trust  Responsibilities, with assistance from Interior’s Office of the Solicitor, to  determine whether and to what extent existing laws, regulations, and court  rulings require appraisals of trust land.  The second directed Bureau offices  to develop and maintain a database for tracking appraisals.  In November  1998, the Bureau convened a workgroup to consider and recommend ways  to reduce the backlog of appraisal requests, which are made for many types  of land transactions, including sales, exchanges, rights-of-way, and leases  of property.  In December 1998, the workgroup made its recommendations  to the Deputy Commissioner for Indian Affairs.
The field solicitor in the Minneapolis Area Field Office reviewed the legal  requirements for appraisals.  He concluded that no laws specifically require  the Bureau to conduct appraisals of property or interests in that property  and that the statutes give the Secretary of the Interior discretion in  determining the fair value of property.  However, Bureau officials stated  that the review was preliminary and that a comprehensive legal review by  Interior’s Office of the Solicitor would be required before the Bureau would  consider making changes to the program on that basis.
The appraisal workgroup also reported that each area or agency office  maintains its own tracking system and that all systems are adequate to  monitor, or track, appraisal requests.  According to the improvement plan,  these tracking systems are designed to provide the Bureau with  information on when most of the appraisals are needed and to enable  Bureau management to use appraisal resources (funding and staff) more  effectively.
However, we obtained appraisal tracking data from four offices and found  wide variability in the usability of the data; in some cases, data on an  individual appraisal were virtually unusable for analyzing the status of the  appraisal. We requested appraisal tracking data from five area offices  (Aberdeen, Billings, Muskogee, Phoenix, and Portland) and obtained such  data from four (Billings did not have an areawide system).  Specifically, in Aberdeen’s system, 100 percent of the tracking records for 54 lease  appraisals were usable for determining the status of the appraisals; in Portland’s system, 99 percent of the tracking records for 1,781 lease  appraisals were usable; in Phoenix’s system, 66 percent of the tracking records for 545 lease  appraisals were usable; and in Muskogee’s system, 39 percent of the tracking records for 585 lease  appraisals were usable.
The workgroup also recommended several short-term and long-term  changes to the appraisal program, both in how appraisals are prepared and  in how they are requested.  Short-term changes include establishing  reservation- or neighborhood-specific computer-generated models for  determining the value of multiple ownership interests in land and training  realty specialists on when to request appraisals and what type of report is  sufficient for the realty action to be taken.
According to Bureau officials, a great deal of their time is spent estimating  the value of each of the multiple ownership interests in tracts of land.  For  homogeneous land such as cropland, grassland, or hayland within a  reservation or neighborhood, the appraisal workgroup has recommended  that Bureau offices use computer-generated models—similar to those used  by tax assessors—to estimate the market value of these multiple interests.   The appraisers would be responsible for collecting and entering  capitalization and market rental rates for the land into the computer  modules on a regular basis.  In a separate initiative, the Department of the  Interior has proposed legislation that would provide a way to consolidate  very small ownership interests in Indian-owned land.  It has requested a  budget increase of $10 million in fiscal year 2000 to expand an ongoing pilot  project to consolidate land ownership interests of 2 percent or less.
According to the workgroup, many appraisals are prepared for transactions  that are never completed (if, for example, the landowner or tribe decides  not to lease the land).  Although the exact number is not known, these  unnecessary appraisals could be canceled—or never requested—if realty  clerks were better trained in evaluating the need for appraisals.  Also, the  workgroup noted, the type and format of appraisal report has a significant  impact on the cost and time required to complete the appraisal, and realty  clerks often request more extensive reports than are called for by the type  of transaction being considered.
Long-term actions the workgroup recommended that the Bureau take  include, among other things, creating appraisal guidelines that address  specific circumstances in different geographic areas.  These guidelines  would give officials the flexibility to request limited—and, thus, less  expensive and time-consuming—appraisal reports when appropriate.
Under USPAP’s “departure” provision, appraisers may agree to prepare an  appraisal that is less detailed or different from the work that would  otherwise be required by USPAP’s guidelines.  The appraiser must be  certain that the resulting report would not be misleading and  must clearly  identify and explain the departure, and the client must agree that a limited  appraisal is appropriate.  Under this long-term action, the Bureau’s area or  agency offices would be allowed to create guidelines on when different  formats may be used for appraisal reports.
section_title: Conclusions
paragraphs: Under its regulations, the Bureau of Indian Affairs is required to ensure that  Indian land is leased for a fair annual rental.  The Bureau often relies on  appraisals, which must be prepared in conformance with professional  appraisal standards—the same standards that apply to all professional  appraisers, including other federal, state, and private appraisers.  However,  fair annual rental has not been defined and the Bureau does not have a  clearly stated policy on how it should be determined.  In some Bureau  offices, methods other than appraisals are used when land uses and staffing  levels make appraisals impractical, but officials have expressed concern  about whether they are complying with the Bureau’s requirements in using  these other methods.  Consistent policies and procedures for deciding how  lease values should be determined would alleviate these concerns and  clarify for realty officials what methods they may rely on for valuing leases.
Appraisals were cited as an impediment to leasing, both because officials  adhere to the appraised value as a minimum lease value and because the  processes are considered by some to be too time-consuming.  However, we  believe that, in addition to appraisals, other methods are available to  Bureau officials for estimating a fair annual rental for Indian land and could  be used under certain circumstances.  Furthermore, we believe that these  methods could be implemented without legislative or regulatory changes.   This view is consistent with the results of a preliminary legal review  conducted by the Minneapolis Area Office’s field solicitor.  However, before  the Bureau will consider adopting those findings Bureau-wide, officials say  a Bureau-wide review of laws, regulations, and court cases must be  conducted.
The Department of the Interior has begun to review its use of appraisals  and is considering alternatives to the current processes.  One proposed  improvement to the current system included making sure that Bureau  offices have systems for tracking the status of appraisals.  While a Bureau  workgroup found that Bureau offices have adequate tracking systems, we  found that the appraisal tracking records were not consistently usable.   Because these tracking systems could provide the Bureau with information  on when most appraisals are needed and could allow Bureau management  to use appraisal funding and staff more effectively, the data in these  systems should be more consistent and complete.
section_title: Recommendations
paragraphs: In addition to concurring with the Department of the Interior’s ongoing  efforts to review and revise the Bureau’s appraisal program, we  recommend that the Secretary of the Interior direct the Commissioner of  the Bureau of Indian Affairs to do the following:
Develop a clear policy on how fair annual rental can be estimated using  other methods in addition to appraisals, such as market surveys, fee  schedules, and formulas, where appropriate.
Establish consistent standards and guidelines for applying lease  valuation methods.
Review the area offices’ appraisal tracking data and ensure that the data  are consistent and complete so that the Bureau can monitor and make  the most effective use of its appraisal resources.
section_title: Agency Comments
paragraphs: We provided a copy of a draft of this report to the Department of the  Interior for its review and comment.  Interior agreed with our  recommendations that the Bureau evaluate alternatives to appraisals for  estimating fair annual rental, establish consistent standards for applying  lease valuation methods, and ensure that appraisal tracking data are  complete and consistent.  Furthermore, Interior commented that work has  begun to address the recommendations, and the Assistant Secretary for  Indian Affairs stated that he is confident that they will be fulfilled.  Interior  provided technical clarifications on funding for the appraisal program,  which we incorporated as appropriate.  Interior’s comments appear in  appendix IV.
We conducted our review from July 1998 through June 1999 in accordance  with generally accepted government auditing standards.  We did not  independently verify or test the reliability of the data provided by the  Bureau’s offices.  Details of our scope and methodology are discussed in  appendix V.
We will send copies of this report to the Honorable Bruce Babbitt,  Secretary of the Interior; the Honorable Hilda Manuel, Deputy  Commissioner, Bureau of Indian Affairs; and other interested parties.  We  will also make copies available to others upon request.
If you or your staff have any questions, please call me at (202) 512-3841.   Key contributors to this report were Jennifer Duncan, Sue Naiberk, Cynthia  Rasmussen, and Victor Rezendes.
section_title: Leasing Indian Trust Land
paragraphs: The Bureau of Indian Affairs has jurisdiction over roughly 56 million  acres—about 87,500 square miles—which are held in trust by the Secretary  of the Interior for Indian tribes and individuals.  Indian trust land  represents less than 3 percent of the total land base of the United States  (3.5 million square miles) but is, in total, equal to almost twice the area of  Pennsylvania or more than half the area of California.  Over 95 percent of  this trust land is located in states west of the Mississippi River, and much of  it lies within the boundaries of about 280 Indian reservations.  Indian tribes  own the majority of the trust land—about 46 million acres, or 82 percent of  the total—and individual Indians own the remaining 10 million acres, or 18  percent of the total.
subsections: section_title: Information on Leased Trust Land
paragraphs: According to the Bureau’s most recent published data on land use, about  102,000 surface leases were in effect at the end of 1997.  These leases  covered almost 8 million acres (12,000 square miles) and generated over  $104 million in rental income for the landowners.  About 70 percent of the  leased acreage was used for agricultural purposes, but about 65 percent of  the leases were for other, nonbusiness purposes with nominal rents,  including temporary special uses (such as a fireworks stand) and  homesites for tribal members.  Table I.1 presents data on leases and leased  acreage reported by the Bureau as of December 31, 1997, for agricultural,  business, and other surface uses.  Table I.2 shows the revenue these leases  generated in 1997.
section_title: Process to Lease Trust Land
paragraphs: Neither the Bureau nor landowners are required to lease trust land.  For  land that is unleased, the process usually begins with an expression of  interest by either the landowner or a potential lessee.  For land that is  already leased, Bureau realty staff identify which leases will expire within  the next year or so and send a “90 day notice” to the owners to provide 3  months for them to negotiate leases with lessees.  In either case, realty staff  request appraisals for the tracts of land.
If a lease agreement is successfully negotiated, the prospective lessee and  at least one landowner sign and submit a lease application to the  responsible Bureau agency office.  The application is routed to various  Bureau departments for review, including a determination as to whether  the negotiated amount is at least equal to the appraised amount.  For land  with more than one owner, landowners owning a majority interest must  consent to the lease.  The application is then sent to the agency office  superintendent for approval.  If approved, a lease is prepared for the tract  of land and signed by the landowner(s) and lessee; it is then returned to the  agency office and reviewed for signatures, bonding, insurance, and rent  and fee payments and is presented to the superintendent for approval.
If no satisfactory lease agreement has been negotiated for expiring leases  or if landowners wish to advertise their land for competitive bid, Bureau  realty staff prepare, mail, and post lease advertisements.  If sealed bids are  received for the land, the bid amounts are compared with the appraised  amounts.  If the bid is acceptable—that is, if it equals or exceeds the  appraised amount—a lease is prepared.  If it does not equal or exceed the  appraised amount, Bureau officials may either reject the bid or—as we  found at the Fort Peck and Yakama reservations—begin negotiations with  the prospective lessee to reach an acceptable rent amount.  When the  signed lease is returned to the agency office, it is reviewed for  completeness, submitted to tribal officials for action if tribal land is  involved, and submitted to the superintendent for approval.
section_title: Information on Unleased Trust Land
paragraphs: Most Indian trust land—more than 48 million acres (75,000 square miles) at  the end of 1997—is not leased.  This unleased land may be occupied and/or  otherwise used by the various landowners (e.g., for residences or tribal  enterprises such as agricultural operations), or it may be unused.  The  Bureau does not maintain statistics on the use or condition of all the  unleased trust land.  For this reason, the Bureau could not provide us with  information for unleased trust land on (1) the number of acres that are  currently used and the number of acres that are currently unused, (2) the  number of acres of unused land that could be economically productive, or  (3) the number of acres of potentially productive unused land that could be  leased and could generate revenue for the landowners.
These data are not available for at least two reasons.  First, much of the  trust land is not considered economically productive and there is therefore  little or no interest in leasing it.  While there are exceptions to this  generalization, Bureau officials said they believe that the trust land that can  support economic production is already leased.   Second, the Bureau has  limited staff resources to manage trust land, and these staff rely mostly on  landowners or potential lessees to express interest and thereby initiate the  Bureau’s leasing process.  Officials said they do not believe that the Bureau  has sufficient staff resources to identify unused and unleased trust land and  actively market it to potential lessees.  However, they also said that a  computer system that would allow the Bureau to have this information is  being developed and will be piloted in the Billings, Montana, area in the  summer of 1999.
The Bureau does not have good information on  the interest or lack thereof  in leasing trust land.  We obtained data from two of the Bureau offices we  visited that advertised tracts of unleased trust land for competitive bids in  1998:  the Fort Peck agency office in Montana advertised 251 tracts, and the  Yakama agency office in Washington advertised 1,425 tracts.  In both cases,  the tracts offered for lease had generally been leased, but the leases were  due to expire.  Responses to the advertisements varied widely between the  two offices, indicating that interest in leasing trust land may also vary  according to local conditions.  The Fort Peck office received bids on 69  percent of its advertised tracts; in contrast, the Yakama office received bids  on only 7 percent of its advertised tracts.  Anecdotal information suggests  that land without a history of being leased tends to remain unleased even  when it is offered for competitive bid.
section_title: Residential Leases
paragraphs: Residential leases can present a variety of issues for the Bureau of Indian  Affairs and for other land managers.  These include controversies over rent  adjustments, which we found at the Swinomish Reservation in Washington  and on state land in Montana.  We were also told of other problems with  residential leases in some places, such as confusion among lessees over  who owns the land.
subsections: section_title: Controversies Over Rent Adjustments
paragraphs: Rent adjustments were controversial on the Swinomish Reservation and on  state trust land in Montana.  The controversy on the Swinomish  Reservation focuses on five allotments of trust land located on Puget  Sound (about 75 miles from Seattle) that are divided into about 250 lots on  or near the water, many of which are leased for residential use.  At one  time, these lots were very primitive—they were considered “camping  lots”—and lessees made only small investments in putting houses or other  structures on the lots.  Given the small amounts they invested, lessees  could choose with relative ease not to renew their leases (thereby losing  their investments) if their rents increased over time.  However, as these lots  became more attractive for permanent residences, lessees built  increasingly expensive homes on them and increased their investments.
In the early 1990s, two events dramatically increased lessees’ costs:  The  lots were reappraised and the rents were increased to reflect the increased  land value, and the Swinomish Community improved the water and sewer  systems in the area.  Annual rents increased from an average of about  $1,200 to between $5,000 and $6,000, and the improvements resulted in  utility assessments that ranged from $8,000 to $11,500 for each of the lots  and, in many cases, were charged to the lessees.  The Community arranged  for funds from Skagit County (under a state block grant) of up to $8,000 per  lot to defray the utility assessment costs for low-income lessees; 30  lessees—about one-third—qualified for the grant.
Lessees asserted that the new appraisals overstated the value of the lots  and that the resulting lease increases were inappropriately high; however,  landowners asserted that the appraisals might have understated the value  of the lots.  Lessees appealed the increased rents, which were upheld by the Interior Board of Indian Appeals. The lessees filed suit in the U.S. District  Court for the Western District of Washington, which dismissed the case in  March 1999.
Following this dismissal, the Community—which has an ownership  interest in two of the allotments—plans to meet with other landowners and  Bureau officials to discuss possible changes that may relieve some of the  lessees’ concerns.  These include changes in the lease term (such as  increasing the term from the current 25 years to 50 years) and alternative  methods for adjusting rents (such as allowing the prepayment of rents or  linking rent increases to a federal Treasury index).
A similar rent adjustment controversy occurred in Montana where,  according to one official, the state leases over 1,000 sites for cabins and  homes.  The controversy began in the late 1980s, when Montana began  setting rental rates at 5 percent of the respective property’s appraised  market value—a 5-percent rate of return.  In response to the change, there  was such an outcry from lessees that, according to the official, the Montana  legislature intervened and directed the state agency to reduce the rate of  return on which the rent was based by 30 percent, to 3.5 percent of the  property’s appraised sales value.
section_title: Other Problems With Residential Leases
paragraphs: Leases of residential properties can pose other problems.  For example,  Bureau officials in the Phoenix Area Office told us of a situation on one  reservation where lessees are confused about who actually owns the land.   According to these officials, the Colorado River Tribe in Arizona and  California leased land to a non-Indian for use as a trailer park; the lessee  then sublet parcels for trailer-home use.  Because these subleases have  tended to be longer-term and, in some cases, were even transferred to a  sublessee’s heirs, some sublessees are confused over who actually owns  the land.  In addition, Bureau officials in the Portland Area Office told us  about a controversy with lessees of oceanfront property on the Tulalip  Reservation in Washington.  Some of the land is eroding, and some lessees  believe the Bureau should reduce their lease rents to cover the costs of  moving their homes away from the eroding banks.  The Bureau disagrees; it  will instead measure each lot, appraise the land, and reduce the rent  accordingly if the lot size has decreased through erosion.  According to  Bureau officials, the existing lease documents include a provision that  warned lessees of the erosion problem and made lessees responsible for  maintaining the banks.
Other land managers told us they avoid leasing property for residential  purposes.  For example, a Minnesota state official told us his agency was  disposing of its residential properties, which are primarily lakeshore  properties.  A Washington state official said his agency has four residential  properties and will sell them if there is an opportunity to do so.
section_title: Trust Land Within Indian Irrigation Projects
paragraphs: About 527,000 acres of trust land (and about 222,000 acres of nontrust land,  primarily owned by non-Indians) lie within the boundaries of 16 Indian  irrigation projects administered by the Bureau.  The costs of operating and  maintaining these projects are supposed to be paid through assessments  that are levied annually against the acres that can be irrigated within each  project (called “assessable” acres).  Landowners are responsible for paying  these assessments (or their lessees may agree to do so), whether the land is  being leased or is being used by the landowner to produce crops.  In  January 1999, the Bureau reported that, in total, about 543,000 acres were  considered to be assessable and about 231,000 of these acres were leased.   Table III.1 provides additional information on the status of trust and  nontrust land within the Indian irrigation projects.
While roughly three-quarters of the total acreage within the irrigation  projects was considered to be assessable, there are striking differences in  the percentages of trust and nontrust assessable acres that were reported  as leased:  61 percent of the assessable trust land was leased, whereas only  1 percent of the assessable nontrust land was leased.  Bureau officials told  us that most of the non-Indian landowners farm their land rather than  renting it out and that the trust land is generally not being farmed unless  the acres are leased.  However, the Bureau does not have data on unleased  trust acreage that is or is not in agricultural production.
In January 1999, the Bureau reported that unpaid assessments totaled more  than $22 million ($15 million in unpaid principal and $7 million in unpaid  interest and penalties).  Whereas 93 percent of the unpaid assessments  related to trust land, trust land represents only 70 percent of the total  assessable acreage.  One project, the Wapato Irrigation Project in  Washington, accounts for about two-thirds of the total unpaid assessments.
Trust land represents 56 percent of the Wapato project’s 146,000 total acres  and 145,000 assessable acres and 99 percent of its 44,000 leased acres.   However, 92 percent of the almost $15 million in unpaid assessments  (including interest and penalties) for the Wapato project relate to trust  land.  In 1997, we reported that the main reason for past due assessments  was the Bureau’s practice of deferring the collection of assessments from  owners of trust land that was not in agricultural production.   Specifically,  we found that the Bureau had sometimes declined to mail assessment bills,  had failed to collect assessments from some lessees, and did not  aggressively collect past due assessments.
We reported that changing farm economics and poor soil conditions were  among the reasons that land within the project area was out of production.   In addition, we reported that the Bureau had not often exercised its  authority to grant leases of trust lands on behalf of landowners but that the  superintendent had decided to do so.  For example, in leasing parcels that  have multiple owners, the superintendent of the Yakama agency had  decided to approve the leases on behalf of the owners rather than letting  the land remain idle because the Bureau was unable to locate enough of the  landowners to consent to lease the land.  We also reported that the Yakama  agency had begun marketing unleased trust land more extensively,  expanding its advertising of trust land available for lease to newspapers in  major cities such as Seattle and planning to do more.
section_title: Comments From the Department of the Interior
section_title: Scope and Methodology
paragraphs: We obtained information on the Bureau of Indian Affairs’ methods of  establishing the lease value of Indian land through discussions with  officials from the Department of the Interior and the Bureau at their  headquarters offices in Washington, D.C., and at Interior’s Office of Audit  and Evaluation in Denver, Colorado.  We also met with officials at the  Bureau’s Portland (Oregon) Area Office and its Puget Sound and Yakama  agencies, the Billings (Montana) Area Office and its Northern Cheyenne  and Fort Peck agencies, and the Phoenix (Arizona) Area Office and its Salt  River and Pima agencies.  We spoke by telephone with Bureau officials at  the Aberdeen (South Dakota) and Muskogee (Oklahoma) area offices.  We  obtained and reviewed the Bureau’s guidance on appraising trust land,  including the area offices’ specific guidance, and obtained and examined  examples of appraisals and leases.  We examined various reports on  appraisals and leasing, including reports by Interior’s Office of Inspector  General, the National Indian Agriculture Working Group, and GAO.
Through discussions with officials from Interior’s Bureau of Land  Management (BLM) and the Department of Agriculture’s Forest Service at  their headquarters offices in Washington, D.C.; at BLM field offices in  Colorado, Oregon, Washington, and Idaho; and Forest Service offices in  Colorado and Oregon, we obtained information on how BLM and the  Forest Service value surface leases on the land they manage.  We also  obtained and reviewed documents containing appraisal guidance for BLM  and the Forest Service.  To identify methods used to establish rents for  leases on trust land in various states, we contacted officials in Colorado,  Montana, Minnesota, and Washington, either in person or by telephone.  We  also interviewed, either in person or by telephone, private appraisers and  representatives of the American Society of Farm Managers and Rural  Appraisers and the Colorado chapter of the Appraisal Institute.
To identify impediments to leasing Indian trust land, we met with  representatives of the Swinomish, Yakama, Northern Cheyenne, Sioux and  Assiniboine, Salt River Pima-Maricopa, and Gila River Pima-Maricopa  tribes and spoke with lessees of Indian land at the Yakama and Fort Peck  reservations.  We obtained and examined documents related to the  Bureau’s analysis of its appraisal backlog and obtained appraisal workload  logs from the Portland, Phoenix, Aberdeen, and Muskogee area offices.  We  used the appraisal workload logs to determine the time it takes to prepare  and review appraisals at the various area offices.
To determine whether the Bureau has a legal or regulatory requirement to  appraise trust land for leasing, we reviewed laws and regulations relevant  to the leasing of Indian land.  We identified alternative methods of  establishing the rent value of land through discussions with Bureau and  other land-management officials and with private appraisers and  landowners, as well as through a review of prior GAO reports on  land-management practices.
We identified the Department of the Interior’s efforts to improve the  appraisal process through discussions with Interior and Bureau officials.   We obtained and examined documents describing the ongoing Trust  Management Improvement Project and recommendations of the appraisal  workgroup.
To provide information on the leasing of trust land, we obtained statistics  on leasing and owning Indian land from the Bureau’s headquarters.  We also  obtained information on unleased land within irrigation districts from the  Bureau’s National Irrigation Information Management System in  Albuquerque, New Mexico, and the results of competitive lease auctions in  two Bureau area offices.
We conducted our review from July 1998 through June 1999 in accordance  with generally accepted government auditing standards.  We did not  independently verify or test the reliability of the data provided by the  Bureau’s offices.
section_title: Related GAO Products
paragraphs: Indian Trust Funds:  Interior Lacks Assurance That Trust Improvement  Plan Will Be Effective (GAO/AIMD-99-53, Apr. 28, 1999).
Forest Service:  Barriers to and Opportunities for Generating Revenue  (GAO/T-RCED-99-81, Feb. 10, 1999).
Indian Programs:  BIA’s Management of the Wapato Irrigation Project  (GAO/RCED-97-124, May 28, 1997).
U.S. Forest Service:  Fees for Recreation Special-Use Permits Do Not  Reflect Fair Market Value (GAO/RCED-97-16, Dec. 20, 1996).
Military Bases:  Update on the Status of Bases Closed in 1988, 1991, and  1993 (GAO/NSIAD-96-149, Aug. 6, 1996).
U.S. Forest Service:  Fee System for Rights-of-Way Program Needs Revision  (GAO/RCED-96-84, Apr. 22, 1996).
Federal Office Space:  More Businesslike Leasing Approach Could Reduce  Costs and Improve Performance (GAO/GGD-95-48, Feb. 27, 1995).
Federal Lands:  Fees for Communications Sites Are Below Fair Market  Value (GAO/RCED-94-248, July 12, 1994).
Hawaiian Homelands:  Hawaii’s Efforts to Address Land Use Issues  (GAO/RCED-94-24, May 26, 1994).
Bank and Thrift Regulation:  Better Guidance Is Needed for Real Estate  Evaluations (GAO/GGD-94-144, May 24, 1994).
Forest Service:  Little Assurance That Fair Market Value Fees Are Collected  From Ski Areas (GAO/RCED-93-107, Apr. 16, 1993).
Appraisal Reform:  Implementation Status and Unresolved Issues  (GAO/GGD-93-19, Oct. 30, 1992).
Resolution Trust Corporation:  Better Qualified Review Appraisers Needed  (GAO/GGD-92-40BR, Apr. 23, 1992).
Indian Programs:  Profile of Land Ownership at 12 Reservations  (GAO/RCED-92-96BR, Feb. 10, 1992).
Rangeland Management:  Current Formula Keeps Grazing Fees Low  (GAO/RCED-91-185BR, June 11, 1991).
Farm Programs:  Conservation Reserve Program Could Be Less Costly and  More Effective (GAO/RCED-90-13, Nov. 15, 1989).
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