Indian Affairs: Bureau of Indian Education Needs to Improve Oversight of School Spending
Published: 2014-11-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: BIE, within Interior's office of Indian Affairs, oversees 185 schools, serving about 41,000 students on or near Indian reservations. BIE's mission is to provide students with a quality education. However, BIE student performance has been consistently below that of public school students, including other Indian students. Given these challenges, GAO was asked to review BIE school funding and expenditures.
This report examines how funding sources and expenditures of BIE schools compare to those of public schools; the extent to which BIE has the staff and expertise needed to oversee school expenditures; and the extent to which BIE's processes for oversight adequately ensure that school funds are spent appropriately.
GAO reviewed relevant federal laws, regulations and agency documents, and analyzed BIE and public school expenditure data for school year 2009-10, the most recent year for which data were available. GAO also visited select BIE schools and nearby public schools in four states based on location, school and tribal size, and other factors.
section_title: What GAO Found
paragraphs: Unlike public schools, Bureau of Indian Education (BIE) schools receive almost all of their funding from federal sources. BIE directly operates about a third of its schools, and tribes operate two-thirds. According to BIE data, all of the BIE schools received a total of about $830 million in fiscal year 2014: about 75 percent from the Department of the Interior (Interior), 24 percent from the Department of Education (Education), and 1 percent from the Department of Agriculture and other agencies. Public schools nationwide receive about 9 percent of their funding from federal sources and rely mostly on state and local funding.
GAO found that some BIE schools spend substantially more per pupil than public schools nationwide. Specifically, GAO estimates that the average per pupil expenditures for BIE-operated schools—the only BIE schools for which detailed expenditure data are available—were about 56 percent higher than for public schools nationally in school year 2009-10, the most recent year for which data were available at the time of GAO's review. Several factors may help explain the higher per pupil expenditures at BIE-operated schools, such as their student demographics, remote location, and small enrollment.
BIE lacks sufficient staff with expertise to oversee school expenditures. Since 2011, the number of BIE full-time administrators located on or near Indian reservations to oversee school expenditures decreased from 22 to 13, due partly to budget cuts. As a result, the 13 administrators have many additional responsibilities and an increased workload, making it challenging for them to provide effective oversight of schools. Additionally, these administrators have received less training in recent years. Further, the three administrators GAO spoke with said they do not have the expertise to fully understand the school audits they are responsible for reviewing. BIE's staffing of these positions runs counter to federal internal controls standards and key principles for effective strategic workforce planning, such as having sufficient, adequately-trained staff. Without adequate staff and training, BIE will not be able to ensure that school funds are spent appropriately.
BIE's processes for oversight do not adequately ensure that funds are spent appropriately. BIE lacks written procedures for how and when staff should monitor school spending and does not use a risk-based approach to prioritize how it should use its limited resources for oversight. Instead, BIE told GAO that it relies primarily on ad hoc suggestions by staff regarding which schools to oversee more closely. Meanwhile, some schools have serious financial problems. Notably, external auditors identified $13.8 million in unallowable spending at 24 schools as of July 2014. Further, in March 2014, an audit found that one school lost about $1.2 million in federal funds that were improperly transferred to an off-shore account. Without written procedures and a risk-based approach to overseeing school spending—both integral to federal internal control standards—there is little assurance that federal funds are being used for their intended purpose to provide BIE students with needed instructional and other educational services.
section_title: What GAO Recommends
paragraphs: Among other things, GAO recommends that Indian Affairs develop a workforce plan to ensure that BIE has the staff to effectively oversee school spending and written procedures and a risk-based approach to guide BIE's oversight of school spending. Indian Affairs generally agreed with GAO's recommendations.

section_title: Letter
paragraphs: In fiscal year 2014, the Departments of the Interior (Interior) and  Education (Education) provided about $830 million to Bureau of Indian  Education (BIE) schools. BIE, within Interior, administers 185 elementary  and secondary schools that serve approximately 41,000 students on or  near Indian reservations in 23 states. Of the 185 schools, 58 are directly  operated by BIE (BIE-operated), and 127 are operated by tribes (tribally- operated) mostly through federal grants. These schools serve about 7  percent of the Indian student population, mostly low-income students in  rural communities.
Student performance at BIE schools has been consistently below that of  public school students, including other Indian students attending public  schools. In addition, high school graduation rates at BIE schools are  lower than the national average. Given these longstanding challenges  that BIE schools face, questions have been raised about the amount of  resources available to them as compared to public schools. GAO was  asked to review BIE school funding and expenditures. This report  examines: (1) how sources of funding for BIE schools compare to those  of public schools; (2) how BIE school expenditures compare to those of  public schools; (3) the extent to which BIE has the staff and expertise  needed to oversee school expenditures; and (4) the extent to which BIE’s  processes are adequate for ensuring that school funds are spent  appropriately.
To address these objectives, we used multiple data collection  methodologies. For all four objectives, we reviewed relevant federal laws  and regulations, and Interior, BIE, and Education documents, including  guidance, internal correspondence, and reports. In addition, we  interviewed officials from Interior and Education.
To compare the sources of BIE and public schools’ funding, we analyzed  BIE budget documents and related information, and data from  Education’s Common Core of Data, School District Finance Survey. To  compare BIE school expenditures with those of public schools, we  analyzed data from Interior, including the Federal Financial System, and  BIE’s Native American Student Information System. Because BIE has  very limited data on tribally-operated school expenditures and  expenditures at boarding schools would not be comparable to those of  typical public schools, we generally analyzed data for the 32 BIE- operated day schools. The expenditure data was for school year 2009-10,  the most recent year for which Education data were available at the time  of our analysis. To determine the extent to which BIE has the staff and  expertise needed to oversee school expenditures, we analyzed BIE data  on the number and location of staff currently responsible for overseeing  these expenditures as well as data on staff training. To determine the  extent to which BIE’s processes are adequate for ensuring that school  funds are spent appropriately, we reviewed available oversight  procedures and protocols for BIE schools, and reviewed the summary  results of all tribally-operated schools’ single audits and the single audits  of select tribally-operated schools, selected based on audit opinions of  their poor compliance with program requirements for a 3 year period  (fiscal year 2010 to fiscal year 2012) and information from BIE officials.  We assessed the reliability of Education’s Common Core of Data,  Interior’s Federal Financial System, BIE’s Native American Student  Information System, and the Federal Audit Clearinghouse audit data by,  among other things, (1) reviewing existing information about the data and  systems that produced them and (2) obtaining information from agency  officials knowledgeable about the databases. We determined that these  data were sufficiently reliable for the purposes of this report.
Additionally, we conducted site visits to 16 BIE-operated and tribally- operated schools that varied by school and tribal size, and location. For  comparison, we also visited or spoke by telephone with officials from four  public school districts that we selected based on their geographic  proximity to the BIE schools and their student demographics. The views  of the officials we spoke with at these locations are not generalizable to  all administrators at BIE or public schools nationwide.
We compared BIE’s oversight of expenditures for all of its schools to the  criteria on key practices for Standards for Internal Control in the Federal  Government, and for strategic workforce planning. (See appendix I for  more detail on the scope and methodology.)
We conducted this performance audit from January 2014 through  November 2014 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions.
subsections: section_title: Background
subsections: section_title: Student Population
paragraphs: BIE’s mission is to provide Indian students with quality education  opportunities starting in early childhood. Its Indian education programs  derive from the federal government’s trust relationship with Indian tribes,  a responsibility established in federal statutes, treaties, and court  decisions. Students attending BIE schools generally must be members of  federally recognized Indian tribes, or descendants of members of such  tribes, and reside on or near federal Indian reservations. About one-third  of BIE schools serve students from the Navajo Nation.
section_title: Federal Grants and Single Audits
paragraphs: BIE schools are primarily funded through Interior, but like public schools,  they also receive annual formula grants from Education. Like state  educational agencies that oversee public schools in their respective  states, BIE administers and oversees the operation of these Education  grants, including grants through two Acts: the Elementary and Secondary  Education Act of 1965 (ESEA) and the Individuals with Disabilities  Education Act (IDEA). Title I, Part A of ESEA (Title I)—the largest funding  source for kindergarten through grade 12 under ESEA—provides funding  to expand and improve educational programs in schools with students  from low-income families and may be used for supplemental services to  improve student achievement, such as instruction in reading and  mathematics. BIE schools receive IDEA funding for special education and  related services, such as physical therapy or speech therapy, for children  with disabilities.
BIE has access to some detailed, real-time expenditure data for BIE- operated schools since they are operated directly by BIE. For example,  BIE has direct access to these schools’ costs for transportation,  instruction, and operations. Access to these data enables BIE officials to  closely track BIE-operated school spending. However, certain costs for  administrative services to operate BIE schools, such as procurement or  human resources, are not performed or tracked by BIE. As we reported in  September 2013, BIE is part of the Office of the Assistant Secretary- Indian Affairs (Indian Affairs), and Indian Affairs performs many  administrative functions to support BIE-operated schools that a school  superintendent’s office or school district typically would. However, Indian  Affairs does not currently identify all its costs to support BIE schools,  despite our 2003 report in which we recommended that it do so, in  accordance with federal accounting standards.
Meanwhile, the Tribally Controlled Schools Act of 1988 limits the financial  information that most tribally-operated schools are required to submit to  BIE. Tribal school grantees must complete an annual report that  includes, among other things, an annual financial statement reporting  revenue and expenditures as well as a financial audit in accordance with  the Single Audit Act of 1984. This law, as implemented by the Office of  Management and Budget, requires a financial audit of grantees who  expend at least $500,000 in federal grants and other assistance in a  fiscal year. These audits are commonly called “single audits.” The audits  are carried out at the end of a school’s fiscal year and are conducted by  independent auditors who are contracted by the grantee. They include  both the entity’s financial statements and the records of spending of  federal grant awards for each program. Auditors determine whether the  grantee met the compliance requirements listed in the Office of  Management and Budget’s Circular No. A-133 Compliance Supplement  for each program. Auditors also report on the entity’s internal control  over compliance for these programs and report identified control  deficiencies or noncompliance in the single audit report. It is the grantee’s  responsibility to follow up and take corrective actions on the audit  findings. Auditors also must follow up on findings from past years’ audits,  as reported by the grantee. According to Indian Affairs’ policy manual,  BIE has several responsibilities that pertain to single audit reporting,  including ensuring that audits are completed and reports submitted;  providing technical advice and counsel to grantees as requested; and  issuing a management decision on audit findings within six months after  receipt of the audit report.
section_title: Organization and Oversight
paragraphs: BIE is under Indian Affairs, and the BIE director is responsible for the  direction and management of education functions, including the formation  of policies and procedures, supervision of all program activities, and  approval of the expenditure of funds for education purposes. BIE has a  central office in Washington, D.C.; a major field service center in  Albuquerque, New Mexico; three regional offices (one in the east and two  in the west, including one serving only schools in the Navajo Nation); and  22 education line offices located on or near Indian reservations, 17 of  which currently have responsibilities for financial oversight.
On June 13, 2014, the Secretary of the Interior issued an Order  restructuring BIE. The reorganization is to occur in two phases, with the  first phase becoming operational before the start of the 2014-15 school  year. The second phase is anticipated to be operational by the end of the  2015-16 school year. Additionally, the Order states that Interior will  strengthen and support the efforts of tribal nations to directly operate BIE  schools.
At the time of our review, several offices were responsible for oversight of  BIE school expenditures (see fig. 1).
BIE’s local education line offices have been responsible for providing  oversight and technical assistance to both BIE- and tribally-operated  schools. Education line office administrators are the lead education  administrators for these offices and have responsibilities similar to  school district superintendents for BIE-operated schools.  Additionally, education line office administrators serve as grant  officers to tribally-operated schools, allowing or disallowing costs  questioned in BIE schools’ single audits.
BIE’s Division of Performance and Accountability (Performance and  Accountability), located in Albuquerque, administers and oversees  Education-funded programs for BIE schools and develops strategies  to improve academic achievement. Staff are responsible for  overseeing BIE- and tribally-operated schools’ IDEA and ESEA  programs.
BIE’s Division of Administration (Administration), also in Albuquerque,  implements budget policies, procedures, processes, and systems for  all fiscal and accounting functions for education programs and  schools. According to senior BIE officials, Administration staff oversee  expenditures for Interior and Education-funded programs for both BIE-  and tribally-operated schools, but their main focus is on BIE-operated  schools.  Indian Affairs’ Office of Internal Evaluation and Assessment—staffed  mainly by accountants and auditors—is responsible for providing  guidance and oversight to BIE to ensure that internal controls are  established and maintained. The office maintains an automated  tracking system to provide Administration and line office management  with information on the status of tribally-operated schools’ single  audits; notifies Administration and line office management when  schools have failed to submit the audits; reviews all audits submitted  to Administration; and is responsible for providing technical assistance  to line office administrators. This office provides these and many other  services to all Indian Affairs organizations. According to the office’s  director, BIE represents a very small portion of the office’s overall  portfolio.
section_title: BIE Schools Receive Most of their Funding from Federal Sources, Unlike Public Schools
subsections: section_title: BIE Schools Receive Funding Mainly from Interior and Education
paragraphs: All BIE schools—both BIE-operated and tribally-operated—receive almost  all of their funding to operate from federal sources, namely, Interior and  Education. Specifically, these elementary and secondary schools  received approximately $830 million in fiscal year 2014—including about  75 percent, or $622 million from Interior and about 24 percent, or  approximately $197 million, from Education. BIE schools also received  small amounts of funding from other federal agencies, mostly the  Department of Agriculture (see fig. 2).
The largest source of funding for BIE schools is Interior’s Indian School  Equalization Program (ISEP). ISEP provides funding for basic  instruction; supplemental instruction, such as language development and  gifted and talented programs; staffing to oversee student residences and  dormitories; and food service, among other services. The second and  third largest sources of funding for BIE schools are from Education’s Title  I and IDEA programs, respectively. Funding under Title I accounted for  about $93.2 million of the $120.9 million that BIE received in fiscal year  2014 under ESEA programs.
Except for a 2-year infusion of $149 million of funding in 2009 and 2010  through the American Recovery and Reinvestment Act of 2009 (Recovery  Act) and a related act, according to BIE documents, total annual  funding from Interior and Education fluctuated slightly from fiscal year  2009 to fiscal year 2014. Excluding Recovery Act funding, annual  funding for BIE schools increased overall from fiscal year 2009 to fiscal  year 2014 by about 6 percent in nominal terms, which does not account  for inflation. However, adjusting for inflation, we estimate that funding  during that period actually decreased slightly, by about 1 percent.  Meanwhile, for public schools, funding data from Education were  generally not available for the full period from fiscal year 2009 to fiscal  year 2014.
According to BIE officials, very little funding for BIE schools comes from  non-federal sources. BIE-operated schools received very little tribal, state,  or other revenue in fiscal year 2014, according to BIE. However, some  tribally-operated schools received a small amount of revenue from other  sources, such as tribes. Of the schools we visited that serve tribes in four  states, officials from one tribe, which operated casinos, reported  contributing a small amount of funding to its schools.
section_title: Public Schools Receive Limited Federal Funding
paragraphs: Unlike BIE schools, the vast majority of funding for public schools  nationwide comes from state and local sources, while a relatively small  proportion comes from federal sources. For example, in school year  2009-10, public schools nationwide received about 87 percent of their  funding from state and local sources—43 percent from state sources and  44 percent from local sources. In contrast to BIE schools, federal funding  has generally comprised about 9 percent of public schools’ funding from  school year 2002-03 to 2008-09. Subsequently, in school year 2009-10,  federal funding for public schools comprised about 13 percent, which was  slightly higher than in previous years due in part to the Recovery Act.  (See fig. 3.) For public schools nationally, Education’s Title I and IDEA  programs provide the largest amounts of federal funding.
The percent of federal funding of public schools varies across states and  local school districts. For example, in one district we visited, which was  located near BIE schools, federal funding accounted for about 35 percent  of its funding, and in another district about 68 percent. A key reason for  the larger amount of federal funding for these districts was their funding  from a federal formula grant program known as Impact Aid. Impact Aid is  intended to compensate school districts for funding losses resulting from  federal activities. These funds were in addition to the districts’ Title I and  IDEA funding.
section_title: BIE-Operated Schools Spent Substantially More Per Student than Public Schools Nationwide Due to Several Factors
subsections: section_title: BIE-Operated Day Schools Spent at Least 50 Percent More Per Pupil than the National Average for Public Schools
paragraphs: Average per-pupil expenditures for the 32 BIE-operated day schools were  at least 56 percent higher than in public schools nationally in school year  2009-10, and were higher in the four categories of operating expenditures  that we analyzed. According to our analysis, BIE-operated day schools  spent an estimated average of at least $15,391 per pupil, while public  schools nationwide spent an estimated average of $9,896, excluding food  service. (See fig. 4). When Recovery Act spending was excluded, per- pupil expenditures for these BIE-operated schools were at least 61  percent greater than at public schools. Similarly, we found higher per- pupil expenditures at BIE-operated day schools in the categories of  instruction (the largest category), transportation, facilities operations and  maintenance, and administration. For example, transportation  expenditures were more than twice as much at BIE-operated schools  than at public schools nationwide.
Unlike the national averages, per-pupil expenditures at 4 of the 16 BIE  schools that we visited appeared similar to those at nearby public school  districts. Like the BIE schools we visited, these nearby rural public school  districts served students who were mostly Indian and low-income. Thus,  certain student demographics as well as the geographic location of the  schools were comparable. In one state, two tribally-operated schools  spent an estimated $17,066 per pupil, and the nearby public school  district spent $17,239 per pupil. In another state, per-pupil expenditures,  excluding facilities operations and maintenance, were $12,972 at two  BIE-operated schools and $11,405 at the nearby public school district.  However, the findings from this sample are not generalizable to all BIE  and nearby public schools. Also, data limitations prevented us from  comparing the other 12 BIE schools that we visited with nearby public  schools.
section_title: Several Factors Contribute to Higher Per-Pupil Expenditures at BIE- Operated Schools
paragraphs: Several factors help to explain higher per-pupil expenditures at the 32  BIE-operated schools relative to public schools nationwide (see table 1).
Student demographics. Students in BIE schools—both tribally- operated and BIE-operated—tend to have different demographic  characteristics than students in public schools nationally. These  characteristics, including higher poverty rates and a higher percent of  students with special needs, are among the factors yielding higher  per-pupil expenditures on average, as we have noted in previous  reports. In BIE schools, students tend to be from lower income  households than public school students. For example, all BIE schools  were eligible for Title I funding on a school-wide basis because they  all had at least 40 percent of children from low income households in  school year 2009-10, according to an Education study. In contrast,  half of all public schools were eligible for Title I funds on a school-wide  basis. In addition, BIE-operated day schools have a higher  percentage of students receiving special education services than  public schools nationwide, according to BIE and Education data.  Students in special education generally need additional services, such  as physical, occupational or speech therapy, so expenditures tend to  be higher for these students.
Smaller enrollment and remote location. The smaller enrollment and  isolated location of many BIE schools contribute to their higher  expenditures. In school year 2009-10, BIE schools, including BIE- operated schools, generally had smaller average enrollment than  public schools nationwide. For example, over 85 percent of BIE- operated day schools (28 of 32 schools) had fewer than 300 students  according to our analysis, as compared to about 30 percent of public  schools nationwide. Along with smaller size, the remote location of  many BIE schools hinders their ability to benefit from economies of  scale, as we have previously reported. For example, expenditures  for facilities operations and maintenance may be higher, to the extent  that many schools are geographically dispersed and unable to share  facilities personnel, supplies, or services.
Other factors may help explain higher per-pupil expenditures at BIE- operated schools, including the higher costs of instruction, transportation,  facilities operations and maintenance, and administration.
subsections: section_title: Instruction
paragraphs: Instructional expenditures were greater at BIE-operated schools than at  public schools nationwide, due partly to teacher salaries. Teacher salaries  were typically higher in BIE-operated schools than in public schools,  according to BIE salary schedules and an Education study of school year  2011-12. For example, in school year 2011-12, the yearly base salary  for a teacher with a bachelor’s degree and no experience at BIE-operated  schools was $39,775, compared to averages of $35,500 at public schools  nationwide and $33,200 at rural public schools nationwide. The higher  salaries at BIE-operated schools are mainly due to a federal law which  requires BIE to pay teachers using the same pay scale as teachers at  Department of Defense schools located overseas. The law requires  similar pay, in part, to help recruit and retain teachers at BIE-operated  schools.
Although our analysis of per-pupil expenditures focused on BIE-operated  schools, teacher salaries at tribally-operated schools—which set their  own salary amounts—generally were lower than teacher salaries at public  schools. According to an Education study of school year 2007-08 (the  most recent study that included tribally-operated schools), all BIE  schools—two-thirds of which were tribally-operated—paid teachers, on  average, an estimated base salary of $41,500. By contrast, public schools  nationwide paid, on average, an estimated base salary of $49,600,  including an average of $44,000 in rural public schools. According to  Education’s study of school year 2007-08, teachers at BIE schools and  public schools nationwide generally appeared to have similar years of  experience, but a slightly lower percentage of teachers at BIE schools  had a master’s degree as their highest degree compared to public school  teachers nationally.
In addition, BIE schools had lower median student-teacher ratios than  public schools in school year 2009-10, which makes per-pupil spending  higher. The median ratio was 11.4 students per teacher at all BIE  schools and 15.5 students per teacher at public schools, according to an  Education study. This lower ratio mainly relates to the smaller average  enrollment at BIE schools than at public schools, which limits BIE schools’  ability to benefit from economies of scale.
section_title: Transportation
paragraphs: BIE reported that the remote locations of its schools and poor road  conditions contributed to higher transportation expenditures than those of  public schools, among other factors. For example, daily round-trip bus  routes averaged about 80 miles for all BIE schools and ranged from a few  miles to more than 320 miles, according to BIE officials. Also, the poor  road conditions, including dirt or unimproved roads, lead to wear and tear  on vehicles transporting students, according to BIE budget documents  and administrators at schools we visited (see fig. 5). By contrast, slightly  more than half of public schools are located in cities or suburbs, and  therefore may be unlikely to face such long bus routes or poor road  conditions. As transportation expenditures increase, BIE reported that  schools are trying to contain costs in various ways, such as combining or  reducing bus routes or using more appropriate vehicles for the number of  students or road conditions.
Facilities-related expenditures may be higher at BIE-operated schools  than public schools because a greater proportion of schools that BIE  manages are in poor condition than public schools. BIE reported that  about one-third of its schools were in poor condition as of the end of  school year 2012-13, while two-thirds were in fair or good condition. At  one school we visited that BIE identified as in poor condition, the main  classroom building was built in the 1930s, and several other school  buildings no longer had functioning heat. Conversely, an estimated 3  percent of public schools nationwide with permanent buildings reported  that they were in poor condition in school year 2012-13, excluding  temporary, or portable, buildings.
BIE-operated schools may also have higher facilities-related expenditures  than public schools because some BIE schools are responsible for  funding the operations and maintenance of many services that public  school districts typically are not, such as water and sewer service or trash  and snow removal. For example, at another BIE school we visited in poor  condition, the 50-year old building lacked a sprinkler system and was  located in a remote area. As a result, school officials said that they  provide a fire truck and supplies for the school as well as for the local  vicinity, contributing to higher operations and maintenance expenditures.
section_title: Administration
paragraphs: As with other categories of spending, higher per-pupil spending on  administration at the 32 BIE-operated day schools relates partly to their  smaller average enrollment than enrollment at public schools. As we  reported in 2003, expenditure categories for administration are not  comparable for BIE and public schools in light of their different  organizational structures. At BIE-operated day schools in school year  2009-10, about $1,502 of the $15,391 in per-pupil expenditures, or about  10 percent, was for administration. Of the $1,502 per pupil for  administration, $1,149 was spent on school-level administration, such as  principals’ salaries; $47 was allotted for the school board; and an  estimated $306 was spent by BIE education line offices. These offices  provide academic and financial guidance, similar to a school district’s  office of the superintendent. Meanwhile, public schools in school year  2009-10 spent per pupil, on average, $1,088, or about 10 percent, for  administration: about $568 for school-level administration, $186 for the  school board and the office of the superintendent, and $334 for additional  administration, such as procurement, finance, and payroll.
However, the costs for administering BIE-operated schools are greater  than $1,502 per pupil since our estimate excludes the costs of the  administrative services that Indian Affairs provides to BIE. Indian Affairs  performs many administrative functions to support BIE-operated schools  that a school or school district typically would, such as procurement,  finance, and human resources. However, Indian Affairs does not currently  identify all the costs associated with supporting these schools. These  costs and services are to shift from Indian Affairs to BIE by the end of  school year 2015-16, according to a June 2014 Order from the Secretary  of the Interior.
section_title: BIE Lacks Sufficient Staff with Expertise to Oversee School Expenditures
paragraphs: Line office administrators are integral to overseeing school expenditures,  but the number of full-time administrators who oversee school  expenditures decreased from a total of 22 in 2011 to 13 in 2014, 6  permanent and 7 acting. The workload of the vacant administrator  positions has been absorbed by the remaining administrators.
Besides key responsibilities in academic and other aspects of school  administration, line office administrators’ responsibilities include: overseeing and evaluating schools’ expenditures; ensuring that tribally-operated schools submit their annual single  audits and providing them to the Federal Audit Clearinghouse and  BIE’s Administration office; approving or disapproving costs that are questioned in tribally- operated schools’ single audits, and working with tribes and schools  to ensure that any single audit findings are resolved; and  collaborating with BIE’s Performance and Accountability officials to  identify schools that may need additional oversight because of failure  to comply with Education program requirements, such as Title I and  IDEA fiscal requirements.
Beginning in 2012, when BIE officials announced plans to reorganize and  possibly close line offices, staff began resigning and retiring. Staff  departures increased further when Indian Affairs announced Voluntary  Early Retirement Authority and Voluntary Separation Incentive Payments  in 2013. From fiscal years 2011 to 2014, funding for management of BIE  schools, including for line office staff, decreased by about 38 percent.
As a result of having fewer line office administrators, the remaining  administrators have been assigned additional responsibilities and their  workload has increased, making it challenging for them to conduct  needed oversight. For example, administrators in two of the three line  offices we interviewed reported that over the last 2 years their  responsibilities have increased significantly, and they are now overseeing  and providing technical assistance to a greater number of schools. One  official told us that in addition to the 7 schools he usually monitors, he is  responsible for 11 additional schools that two other line offices had been  responsible for overseeing. According to an administrator in a third line  office, located in the Navajo Nation, responsibilities in that office have  also changed significantly, and currently one line office administrator is  responsible for overseeing 65 Navajo schools’ financial matters, including  the tribally-operated schools’ annual single audits.
With increased responsibilities and travel budgets constraints, line office  administrators in all three BIE regions reported that conducting site visits  and maintaining regular interaction with school personnel is difficult. In  particular, line office administrators said, among other things, it is  challenging to obtain and review school documents, develop working  relationships with school officials, and provide technical assistance to  schools, all of which are activities that contribute to oversight. For  example, one line office administrator reported that she reviews hard- copy special education files during site visits to ensure that funding is  used to provide students with needed services. She explained that she is  only able to access these files when visiting schools.
According to a high-ranking BIE official, increased line office  responsibilities can include working outside of one’s assigned region in  geographically dispersed areas. For example, a line office administrator in  North Dakota also serves as the acting administrator for a line office in  Tennessee and is responsible for overseeing and providing technical  assistance to schools in five states—Florida, Louisiana, Maine,  Mississippi, and North Carolina. Similarly, a line office administrator in  New Mexico and another in Arizona are responsible for overseeing school  expenditures to schools in Montana.
The challenges line office administrators confront in overseeing school  expenditures are further exacerbated by a lack of financial expertise and  training. For example, although line office administrators make key  decisions about single audit report findings, such as whether funds are  being spent appropriately, they are not auditors or accountants.  Additionally, the administrators responsible for the three line offices we  visited said that they did not have the financial expertise to understand  the content of single audits. Although Indian Affairs has offered  occasional webinars pertaining to single audits in the last two years,  some line office administrators have not received this training. In fact, the  majority of BIE’s acting line office administrators (4 out of 7), have not  attended these webinars, though they may especially need training on  their new job responsibilities. Additionally, no BIE staff have attended any  in-person single audit training since at least 2011.
Although BIE officials reported in September 2013 that eliminating line  office positions would create problems if appropriate plans are not  developed and implemented, the agency has not developed a plan for  meeting its workforce needs. According to BIE officials, they have not  hired new line office administrators for 4 years due to budget cuts. As a  result of these cuts, Interior had a hiring freeze for about 1.5 years and  currently has a cap on hiring. Although BIE can request waivers to hire  additional staff, it has not done so for line office positions in this fiscal  environment.
BIE has a responsibility to employ the staff needed to adequately oversee  school expenditures. To the extent that line office administrators are  currently stretched thin without an effective plan for realigning staff  responsibilities, BIE’s efforts to fulfill its mission of educating Indian  students are impaired. BIE’s approach to staffing line offices runs counter  to federal internal control standards and key principles for effective  strategic workforce planning. Federal internal control standards state that  staff need to possess and maintain a level of competence that allows  them to accomplish their assigned duties. Additionally, key principles for  workforce planning include: (1) aligning an organization’s human capital  program with its current and emerging mission and programmatic goals  and (2) developing long-term strategies for acquiring, developing, and  retaining staff to achieve programmatic goals. The appropriate number  and geographic distribution of employees can further support  organizational goals and strategies and enable an organization to have  sufficient, adequately trained staff. Absent a comprehensive workforce  plan that responds to staff shortages, BIE is jeopardizing its ability to  oversee both BIE-operated and tribally-operated schools to ensure their  funds are being used for their intended purpose to provide students a  quality education.
Strategic workforce planning for oversight of school expenditures is  especially important for BIE as it implements a recently announced  restructuring. On June 13, 2014, the Secretary of the Interior issued an  Order to restructure BIE using existing resources for the 2014-15 school  year. The Order emphasizes the importance of improving academic  achievement at BIE schools and creates new offices in BIE as well as  transferring responsibilities for certain school support services from other  Indian Affairs offices to BIE. However, the Secretarial Order does not  address any issues regarding the oversight of school expenditures. For  example, although line offices are discussed within the context of  restructuring and will still be responsible for providing technical assistance  to schools, it is unclear whether they will continue to have a role in  monitoring school expenditures. Further, the Order is silent on the status  and roles of Performance and Accountability and the Administration  office, the two other BIE entities currently involved in monitoring school  expenditures. In addition, the Order does not address concerns about the  shortage of staff responsible for overseeing school expenditures or gaps  in their expertise and training. In late June 2014, a senior BIE official  said that the status of Performance and Accountability is still unclear and  that the Administration office will become BIE’s School Operations  Division, responsible for acquisition and grants, among many other  duties.
Although the Secretarial Order requires the Assistant Secretary-Indian  Affairs to complete an analysis of new work functions and develop  workforce plans, it is unclear if the workforce plans will address whether  BIE has an adequate number of staff with the required knowledge and  skills to oversee BIE school spending. Moreover, the timeframe for  completing these activities is limited. Specifically, the Order directs BIE  and the Assistant Secretary-Indian Affairs to complete these activities in  less than 3 months—from mid June through August 2014. As of mid- August, high-ranking officials reported that BIE was unlikely to meet these  timeframes. This compressed timeframe makes it extremely challenging  to conduct effective workforce planning. According to our prior work, as  part of workforce planning an agency should first identify current and  future needs, including the appropriate number of employees, the key  competencies and skills for mission accomplishment, and the appropriate  deployment of staff across the agency. After completing these activities,  the agency should then create strategies for identifying and filling gaps.
While BIE is restructuring to improve operational support to schools and  enhance school performance, it must also ensure that federal funding to  the schools is used for its intended purposes. Therefore, it is critical to  ensure that there are sufficient staff assigned to oversee school  expenditures and that they have the appropriate expertise and training to  do so. If BIE does not develop a detailed workforce plan for staff  overseeing school expenditures, its ability to effectively provide technical  assistance to tribes and build tribal capacity to operate schools will be  impaired.
section_title: BIE’s Processes Are Not Adequate to Ensure that School Funds Are Spent Appropriately
subsections: section_title: BIE Lacks Consistent Processes for Documenting and Sharing Findings and Overseeing Major Programs
subsections: section_title: Single Audits
paragraphs: BIE oversees tribally-operated school spending primarily through  information provided in the schools’ annual single audits; however, it does  not have a process in place for consistently documenting actions it takes  to respond to audit findings. For example, when we requested documents  describing actions BIE had taken in response to audit findings at six  tribally-operated schools, BIE could only produce documents for one of  the schools. BIE officials told us they could not produce documents for  the remaining five schools because the line office staff assigned to  oversee the schools’ spending had either retired or were unavailable. As  a result of not having a process to document what steps BIE took to  address the issues identified at the schools, BIE staff newly assigned to  oversee these schools’ expenditures have no way to determine how their  schools’ audit findings were resolved. Consequently, they must start  anew when following up on future single audit findings and other  oversight activities. Without a mechanism to ensure sustained oversight  of school expenditures, BIE is not well-positioned to improve financial  management at these schools and ensure they are spending Interior and  Education funds to provide Indian students a quality education. According  to internal control standards, oversight activities should ensure that the  findings of audits are promptly resolved and they should be recorded in  an accurate and timely manner. In addition, documents should be readily  available for examination.
Similarly, BIE does not have a mechanism in place to ensure that tribally- operated schools’ single audits are shared with all of the officials  responsible for overseeing school expenditures. Specifically, officials from  Performance and Accountability—who are tasked with overseeing  schools’ spending for Education programs—reported they do not have  access to schools’ single audits, which include information about their use  of ESEA and IDEA funds. Performance and Accountability officials told us  they have requested access to single audits from Administration officials  in the past, but they told us their requests were not honored because of  technological challenges related to BIE’s computer network. However,  Indian Affairs staff said that if BIE sends them a list of individuals who  should have access to the single audits, they can accommodate their  requests.
Performance and Accountability officials reported that access to these  audits would give them a more comprehensive view of tribally-operated  schools’ finances. This would help them determine whether schools are  complying with Education program requirements, such as whether IDEA  funds are being used to provide special education services for students  with disabilities. Additionally, the officials said the audits would help them  identify tribally-operated schools that have large unexpended IDEA  balances from year to year and may not be using funds to provide needed  services to students. To the extent that Performance and Accountability  staff do not have access to needed documents, it hinders BIE’s ability to  hold others accountable for use of government resources. According to  internal control standards, program managers need both operational and  financial data to meet their goals for accountability for effective and  efficient use of resources.
section_title: Indian School Equalization Program
paragraphs: BIE does not have written procedures for overseeing BIE-operated and  tribally-operated schools’ Indian School Equalization Program (ISEP)  expenditures, which is particularly significant since ISEP is the schools’  largest source of funding—about $402 million in fiscal year 2014.  Although BIE Administration and line office staff are responsible for  overseeing these expenditures, they do not have complete or detailed  procedures to guide their work. For example, they do not have a specific  procedure for how and when they should conduct desk audits of schools  or on-site monitoring visits. Further, the staff lack written procedures— such as a uniform list of documents and other items to review—to help  guide their oversight efforts and ensure they are consistent across  schools. According to federal internal control standards, management is  responsible for developing the detailed policies, procedures, and  practices to fit their agency’s operations and to ensure they are built into  and an integral part of operations.
Instead of using written procedures to oversee expenditures,  Administration officials told us they use a case-by-case approach and rely  on the “practice history” of staff. Absent written oversight procedures, BIE  is at risk of obtaining and relying on varied and incomplete information to  determine whether its schools are using funds as intended. Written  procedures are particularly important for BIE’s oversight of tribally- operated schools since BIE plans to increase their number in coming  years and the Tribally Controlled Schools Act limits the amount of  information that tribes must submit to BIE. If funds are not used for their  intended purpose, students in BIE schools may not receive the services  they need, such as tutoring and other forms of instruction.
In contrast to the lack of written procedures for overseeing ISEP  expenditures, Performance and Accountability staff have developed draft  procedures for overseeing schools’ IDEA spending and are in the process  of developing them for ESEA-funded programs (see table 2). The draft  procedures for overseeing IDEA funds include detailed written  instructions for conducting both fiscal desk audits of schools and on-site  oversight reviews. For example, the desk audit instructions include a list  of all the financial documents that staff will review, outline a detailed  process for determining the risk level of each school for meeting IDEA  fiscal requirements, and describe follow-up actions to be taken depending  on the schools’ level of risk.
In addition to not having comprehensive written procedures for oversight,  Administration officials reported they do not consistently document the  results of monitoring, including on-site visits, which is particularly  important given recent staff departures. In addition, BIE officials reported  that a line office administrator had solely conducted monitoring activities  in fiscal years 2010 through 2012 at a school with a history of poor  management of ISEP funds. When we asked BIE for documentation of  the administrator’s activities, we were told that he had retired and that no  records were available. In addition, BIE does not have a standard form or  template for their staff to document their monitoring activities.
Further, when we asked about recent site visits they conducted,  Administration officials provided conflicting information. In a May 1, 2014  written response to a question that we posed, Administration officials  reported that they had not conducted any recent site visits. However, in  an interview on May 2, they stated that a visit had occurred within the  previous month. If the Administration office had a process in place to  consistently document site visits, the office would have had definitive  information on the recent visits that they conducted.
section_title: BIE Lacks a Risk-Based Approach to Oversee School Expenditures
paragraphs: BIE also lacks a process to prioritize oversight activities based on a  school’s risk of misusing ISEP funds. Rather than using a risk-based  approach to guide how it uses limited monitoring resources, BIE officials  use an ad hoc approach. BIE officials said they typically wait for  suggestions from line office staff to determine which schools to monitor  on-site, and they typically visit schools in close proximity to their offices.  This approach is consistent with BIE’s tendency to rely on its practice  history, rather than standard oversight processes. While this approach  may, in isolation, allow BIE to identify some schools that need additional  oversight or assistance, federal internal control standards call for a more  comprehensive analysis, and they state that management needs to  comprehensively identify risks.
A line office administrator we interviewed reported that given his  increased workload in recent years and travel budget constraints he has  been unable to visit schools for which he is responsible and whose single  audits have identified serious financial weaknesses. For example, he has  been unable to visit one school—which is at a significant distance from  his office—whose audit found $1 million or more in questioned costs over  multiple years.
According to written responses to questions we posed, BIE indicated that  monitoring visits to all schools have been infrequent over the past few  years due to budget constraints and travel restrictions. Given these  budget constraints as well as staff shortages, it is critical for BIE to use its  existing resources to target schools for monitoring that have been  identified in their single audits as at high risk of misusing federal funds.  Internal control standards state that the scope and frequency of  monitoring should depend primarily on the assessment of risks and the  effectiveness of ongoing monitoring procedures.
Absent a risk-based approach, federal funds may continue to be provided  to schools with a history of financial weaknesses. For example, as of July  2014, single audits of tribally-operated schools identified $13.8 million in  costs that were not allowable at 24 schools, but we found minimal follow- up by BIE with the schools that had misused funds or did not adhere to  program or legal requirements. Further, it appeared that BIE took little  action to incentivize schools to adhere to financial and program  requirements. According to Circular A-133, issued pursuant to the Single  Audit Act, if an auditee, such as a tribally-operated school, has not  completed corrective action, the agency awarding the auditee’s grant  should give it a timetable for follow-up. Further, according to Indian  Affairs’ policy manual, if a tribally-operated school fails to take the action  necessary to resolve findings in its single audit, BIE should offer technical  assistance to the school if the audit findings remain unresolved. In serious  situations, BIE may also designate the school as “high risk,” which  subjects the school to additional monitoring and restricted payments. If  BIE determines that there has been gross negligence or mismanagement  in the handling or use of funds, it may initiate procedures to assume  control of the school.
In our review of single audits of six tribally-operated schools whose audits  in fiscal years 2010 through 2012 identified poor financial management of  major program funds, we found some occasions where BIE took little  follow up action to address serious financial problems that auditors  identified at the schools. For example:  In 2010, auditors found that one school used $1.2 million of its ISEP  funds to provide a no-interest loan to a local public school district,  which the auditors found is not permitted by law. In 2011 BIE asked  the school to repay the more than $1 million and is still negotiating  with the school to recoup the funds. Nevertheless, BIE could not  provide us with records that line office staff visited the school or  provided additional oversight of school expenditures or technical  assistance during the past 3 years. In the meantime, a subsequent  audit found that the school has not taken any steps to ensure that its  funds are not misused again and that it is still at risk of comingling  federal funds with the local school district funds. However, BIE has  continued to provide the school its full ISEP funding without additional  monitoring or restrictions on those payments.
At another school that received an adverse audit opinion 3 years in a  row (fiscal years 2010 to 2012), auditors found that the school’s  financial statements had to be materially adjusted by as much as  nearly $1.9 million. As a result, they found that the financial reports  that the school submitted to BIE for those 3 years were unreliable.  Despite these problems, BIE was unable to provide any evidence that  it took action to increase oversight of the school’s expenditures to  ensure that it could accurately account for the federal funds it spends.
More recent examples of financial issues at BIE schools include:  In February 2014, during our review of the Federal Audit  Clearinghouse database, we found that one school had not submitted  its required single audits since fiscal year 2010. Officials with BIE and  the Office of Internal Evaluation and Assessment were not aware of  this, and acknowledged that it was an oversight on their part when we  brought it to their attention. According to Indian Affairs, the Office of  Internal Evaluation and Assessment subsequently updated this  information in its system. However, despite a legal requirement for  tribally-operated schools to submit annual single audits, BIE has not  imposed sanctions on this school.
A March 2014 single audit found that a tribally-operated school lost  $1.7 million in federal funds that were illegally transferred to an off- shore bank account. According to the school’s audit, about $500,000  of these funds were subsequently returned to the school’s account,  making the net loss around $1.2 million. Interior reported in October  2014 that this incident was “…a result of cybercrimes committed by  computer hackers and/or other causes” and that the school is working  with tribal authorities to investigate the incident. Nevertheless, the  school’s single audit stated that its inadequate cash management and  risk assessment procedures contributed to the incident and stated that  the school must strengthen these procedures. Additionally, a school  administrator reported that the school held at least another $6 million  in federal funds in a U.S. bank account. As of June 2014, BIE had not  yet determined how the tribe accrued that much in unspent federal  funds.
Several BIE officials told us that some tribes operating schools have a  history of placing Interior and Education funds in savings accounts  rather than using them to provide educational services as intended.  One official cited an instance of a school accumulating over $900,000  in unspent IDEA funds that were intended to be used to provide  special education services to students with disabilities.
According to a June 2014 study commissioned by the Secretaries of the  Interior and Education, the Tribally Controlled Schools Act provides an  incentive for schools not to spend funds they receive from Interior and  Education because schools are permitted to retain certain unspent federal  funds, and they can also place any current or unspent funds in interest- bearing accounts before they are spent. Based on certain audit  information that was available, the study found that approximately 80  tribally-operated schools have retained a total of about $125 million in  unspent funds that have accumulated over time. According to the study,  BIE has contributed to this problem by not implementing policies that  encourage schools to fully utilize their funding and discourage them from  planning to have unspent funds. The study stated that BIE and Education  should provide tribes with technical assistance and practical guidance  about the activities for which federal funds are allowed to be spent under  current laws. Education is currently developing this type of guidance and,  according to Indian Affairs, it is working with Education to develop this  type of guidance.
Without using a risk-based approach to monitoring and having written  procedures in place to oversee school expenditures, the amount of  misused and unspent funds at BIE schools is likely to grow.
section_title: Conclusions
paragraphs: BIE’s mission is to provide the students attending its schools a quality  education. Most of these students are low-income, many have special  needs, and their performance and graduation rates are below those of  public school students nationwide. These students are in need of  instructional, supplemental, and special education services. To ensure  that students have access to these services, it is imperative that BIE  accurately track and oversee school expenditures to make sure that  federal funds are used for their intended purposes. However, BIE staff  responsible for oversight currently face multiple challenges, and their  monitoring of expenditures is weak. High staff turnover and reductions in  the number of education line office administrators as well as their lack of  expertise and training have left them struggling to adequately monitor  school expenses. In addition, the limited information that BIE officials  have about tribally-operated school expenditures is not shared with the  BIE staff responsible for overseeing schools’ use of Education funds.  Further, BIE does not utilize tools, such as written procedures and a risk- based approach to monitor school expenditures that would help improve  the effectiveness of its oversight. Within this environment, BIE is not well  positioned to oversee schools that may be at high risk for misusing  federal funds. Strong oversight of school expenditures is especially critical  since the number of tribally-operated schools is likely to increase over the  next several years and limited expenditure information is available from  these schools. To this end, BIE’s current restructuring efforts provide  officials with a unique opportunity to develop a workforce plan and adopt  processes and procedures that create an improved control environment.  These actions will help ensure that students receive the quality education  and services they deserve.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of the Interior direct the Assistant  Secretary-Indian Affairs to take the following four actions:
Develop a comprehensive workforce plan to ensure that BIE has an  adequate number of staff with the requisite knowledge and skills to  effectively oversee BIE school expenditures.
Develop a process to share relevant information, such as single audit  reports, with all BIE staff responsible for overseeing school  expenditures to ensure they have the necessary information to identify  schools at risk for misusing funds.
Develop written procedures for BIE to oversee expenditures for major  programs, including Interior’s Indian School Equalization Program.  These procedures should include requirements for staff to consistently  document their monitoring activities and actions they have taken to  resolve financial weaknesses identified at schools.
Develop a risk-based approach to oversee BIE school expenditures to  focus BIE’s monitoring activities on schools that auditors have found  to be at the greatest risk of misusing federal funds.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft copy of this report to the Departments of the Interior  and Education for review and comment. Education chose not to provide  comments. Interior’s comments are reproduced in appendix II. Interior  also provided technical comments that we incorporated in the report as  appropriate.
In its overall comments, Interior stated that our report’s findings and  recommendations will be beneficial as the Department moves forward  with facilitating improvements in BIE schools and improving the oversight  of school spending. For example, Interior noted that strong financial  stewardship is essential to achieving its goal to transform BIE into an  organization that provides direction and services to tribes to help them  attain high levels of student achievement.
Interior concurred with our recommendation to develop a workforce plan  to ensure that BIE has an adequate number of staff to effectively oversee  BIE school expenditures. Interior said that as part of BIE’s restructuring, it  plans to increase the number of staff whose main responsibility is to  oversee school expenditures. Additionally, the Department stated that  new training will be developed for current BIE staff, including line office  administrators, mainly in areas related to budget and finance issues.  While these are positive steps, we believe it is important for Interior to  monitor the manner in which BIE implements these plans to ensure it has  staff with the skills needed to provide appropriate oversight of school  expenditures.
Interior also concurred with our recommendation to develop a process to  share relevant information with all BIE staff responsible for overseeing  school expenditures. According to Interior, BIE has implemented a  process to ensure that relevant information is made available via email to  all cognizant officials, including information on schools’ questioned costs  and cash deficits. The Department also stated that BIE will convene  monthly meetings with high level officials to discuss these issues. While  we believe that these are all positive actions, it is important for Interior to  ensure that BIE periodically review its approach to disseminating  information to make sure that its practices are effective.
Interior partially concurred with our recommendation to develop written  procedures for BIE to oversee expenditures for its major programs.  Interior stated that, in addition to draft Title I and IDEA oversight  procedures, BIE also has written procedures in place related to the Indian  School Equalization Program (ISEP). Specifically, Interior said that BIE’s  newly established School Operations Division has a standard review  process in place that is currently being utilized, referred to as the  Education Management Assessment Tool. We reviewed this document  and found that its main focus is on reviewing Education Line Offices’  operations, management, and program functions. However, none of the  BIE officials we interviewed were aware of the document. While oversight  of line offices’ operations is important, the specific focus of our  recommendation is on BIE’s oversight of school expenditures, including  for ISEP, its largest program. As we noted in our report, although BIE  Administration and line office staff are responsible for overseeing these  expenditures, they do not have complete or detailed procedures to guide  their work. For example, they do not have a schedule for conducting  audits, a uniform list of documents to review, or procedures for staff to  document the actions they have taken to resolve financial weaknesses  identified at schools. We believe that rigorous oversight of school  expenditures is critical to ensure that schools are spending federal funds  for their intended purposes.
Lastly, Interior concurred with our recommendation on the need to  develop a risk-based approach to oversee BIE school expenditures. To  that end, Interior said that BIE, once its restructuring has been fully  implemented, will improve coordination with the Office of Internal  Evaluation and Assessment on matters regarding financial accountability.  In addition, Interior stated that BIE will assign appropriate grant  monitoring protocols to schools and tribal grantees based on questioned  costs and other risk factors identified in their single audits. The  Department further stated that it will use single audits to designate certain  schools and tribes as high risk, along with those that are unresponsive to  repeated requests for corrective action plans. While we believe that these  are all positive steps, it is critical that Interior ensure that BIE follow  through to effectively implement these changes.
We are sending copies of this report to relevant congressional  committees, the Secretaries of the Interior and Education, and other  interested parties. In addition, this report will be available at no charge on  GAO’s website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: Our objectives were to assess (1) how sources of funding for Bureau of  Indian Education (BIE) schools compare to those of public schools; (2)  how BIE school expenditures compare to those of public schools; (3) the  extent to which BIE has the staff and expertise needed to oversee school  expenditures; and (4) the extent to which BIE’s processes are adequate  for ensuring that school funds are spent appropriately.
To address these objectives, we used multiple methodologies. We  reviewed relevant federal laws and regulations. Additionally, we reviewed  agency documents from BIE, the Office of the Assistant Secretary-Indian  Affairs (Indian Affairs), and the Department of Education (Education),  including budget justifications, published reports, annual financial audit  reports, and other documents. We also conducted interviews with officials  at the Department of the Interior (Interior) in Indian Affairs, which includes  BIE, as well as with officials at Education.
A key component of our methodology was a quantitative analysis of data  from various federal sources. For sources of funding, we reviewed budget  justifications as well as other financial information. For expenditures, we  analyzed agency data systems and followed a methodology similar to our  approach in our 2003 report on this topic. Further, we conducted site  visits to select BIE schools and nearby public school districts. For BIE  oversight of school expenditures, we additionally analyzed data from a  federal database on results of annual financial audits. Our methodology is  described below in further detail.
We conducted this performance audit from January 2014 through  November 2014 in accordance with generally accepted government  auditing standards. These standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on our audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.
subsections: section_title: Objective 1: Sources of Funding
paragraphs: To address how sources of funding for BIE schools compare to those of  public schools, we analyzed the federal funding sources of BIE schools  as well as the various sources of funding for public schools. For BIE  schools, we reviewed budget justifications of Indian Affairs—which  includes BIE—and related information. For public schools, we reviewed  data from Education’s National Center for Education Statistics, which  maintains the Common Core of Data, including the School District  Finance Survey’s final F-33 data. This survey collects financial data from  all school districts in the 50 states and the District of Columbia. School  districts provide information on funding, expenditures, and enrollment for  a particular school year. The data that we analyzed generally applied to  school year 2009-10, consistent with our analysis of expenditures, for  which the data were from the most recent year available at the time of our  analysis. According to Education documents, Education conducted  several tests of the data and performed follow-up to ensure that data  were complete and accurate. In addition, we performed tests and  removed a few additional districts from our analysis to increase the  reliability of the data. Thus, we reviewed Education’s data through (1)  electronic data tests; (2) a review of related documents about the data  and the systems; and (3) interviews with knowledgeable agency officials,  and we found that the data were sufficiently reliable for the purposes of  this report. We also interviewed officials from BIE, Indian Affairs, and  Education.
section_title: Objective 2: Expenditures
subsections: section_title: Data Reliability
paragraphs: To examine how BIE school expenditures compare to those of public  schools, we analyzed expenditures of BIE schools and those of public  schools. We began by assessing the reliability of three databases:  Interior’s Federal Financial System was the source of expenditure  data for BIE schools;
BIE’s Native American Student Information System provided  enrollment data for BIE schools; and
Education’s Common Core of Data, School District Finance Survey’s  final F-33 data was the source of data on expenditure and enrollment  for public school districts.
We focused on school year 2009-10, since it was the most recent year for  which data were available from Education at the time of our analysis. We  assessed the reliability of data for this school year from these systems in  several ways, including (1) electronic data tests, (2) reviews of related  documentation about the data and the system, and (3) interviews with  knowledgeable agency officials. Based on our assessment, we  determined that the relevant data were sufficiently reliable for our  purposes.
BIE and DOD are the only two federal entities that directly oversee the  management and operation of elementary and secondary schools. For  this review, we were unable to compare expenditures at schools operated  by the Department of Defense (DOD) schools with those of BIE or public  schools because DOD’s financial system containing school year 2009-10  data was not sufficiently reliable for our purposes of comparing amounts  across departments. Specifically, DOD’s Standard Accounting and  Reporting System-Field Level data system contains expenditure data for  DOD schools that we determined were not sufficiently reliable for our  purposes, based on reviews of related documentation about the data and  the system, as well as interviews with knowledgeable agency officials.
section_title: Nationwide Comparison
paragraphs: To compare expenditures at BIE and public schools, we developed  estimates of per-pupil expenditures at the national level. Although  Interior’s Federal Financial System does not use categories that directly  align with Education’s Common Core of Data, we were able to compare  broad categories, based on reviews of documentation, professional  judgment and interviews with agency officials. We focused our analysis  on operating expenditures of elementary and secondary schools in a  typical year. We classified BIE expenditure data and Education  expenditure data into four broad categories: (1) instruction, (2)  transportation, (3) facilities operation and maintenance, and (4)  administration. Then, we derived per-pupil expenditures by dividing  expenditure amounts by student enrollment. Due to our focus on  operating expenditures, we generally excluded certain amounts such as  expenditures for food service, capital (i.e., construction), and debt service.
Student enrollment is measured differently by BIE and Education. BIE  measures enrollment as an average daily membership, or an average  over the course of the year. We derived student enrollment by adding  average daily membership for students in school year 2009-10 who are  eligible Indian students under the Indian School Equalization Program  (ISEP) and those who are not eligible Indian students but still attend BIE  schools, such as children of BIE staff. Because we used student  enrollment in one particular year and we included students who are not  eligible under ISEP but still attend BIE schools, our enrollment data may  differ somewhat from published data from Interior. Meanwhile,  Education’s Common Core of Data measures student enrollment by  taking a head count at one point in time in the fall.
Consistent with the methodology of our 2003 report, we generally  analyzed expenditures of BIE-operated day schools. Thus, we analyzed  day schools and excluded boarding schools, which have a boarding as  well as an academic component. We also limited our analysis to all 32  day schools that were BIE-operated in school year 2009-10. Of 185 BIE  schools and dormitories, BIE-operated day schools represent about 17  percent of the schools and dormitories. As with our 2003 report and  Education’s publication on its School District Finance Survey for school  year 2009-10, we did not adjust expenditures for geographic variation.
We excluded schools that were tribally-operated because BIE has limited  expenditure data for tribally-operated schools. In our 2003 report, we  recommended, among other things, that the Secretary of the Interior  should consider entering into negotiations with tribal entities to acquire  detailed expenditure data for the schools they manage for comparison  with public schools. However, Indian Affairs, in consultation with the  school boards of tribally-operated schools, concluded that this  recommendation would not be feasible with the school boards’ existing  systems. BIE headquarters officials noted that current law limits the type  or format of information that the agency can require from tribes, including  data on expenditures. For example, one statutory provision requires a  tribal grantee to submit an annual financial statement reporting revenue  and expenditures and an annual financial audit, but the grantee has  discretion on the specifications of the cost accounting of the statement.
Additionally, we reviewed seven reports of Education data on the  characteristics of public and BIE schools. These characteristics helped to  explain differences in per-pupil expenditures between public and BIE  schools. We generally reviewed the most recent version available of  these studies. Estimates obtained from reports that used sample data  collected using random probability samples are subject to sampling error.  We present estimates along with 95 percent confidence intervals to show  the precision of those estimates. Further, we interviewed officials at BIE,  Indian Affairs, and Education, and reviewed agency documents, including  guidance, internal correspondence, and agency-sponsored management  studies.
section_title: Site Visits
paragraphs: We supplemented our analysis of nationwide data with site visits to BIE  schools and nearby public school districts. The information from these  site visits is not generalizable to all BIE schools or public school districts  nationwide. For this and our prior report on BIE management  challenges, we visited 16 BIE schools—6 BIE-operated and 10 tribally- operated—as well as 4 nearby public school districts. We conducted site  visits to BIE schools that serve the Oglala Sioux Tribe in Pine Ridge,  South Dakota; the Mississippi Band of Choctaw Indians; the Navajo  Nation in Arizona, New Mexico, and Utah; and various Pueblo Indians in  New Mexico, where we interviewed school administrators and observed  school conditions. We also requested expenditure data from tribally- operated schools because BIE has limited expenditure data from schools  operated by tribes. Further, we interviewed administrators at public school  districts in close proximity to the BIE schools we visited. We selected  locations to visit to reflect an array of BIE schools that varied in  administration type, school and tribal size, and location. For the nearby  public school districts, we selected school districts that were in close  proximity and also had similar student demographics in terms of the  percent of students who were Indian.
Our expenditure analysis of schools we visited was limited to four BIE  schools—two BIE-operated and two tribally-operated schools—along with  two public school districts, all of which were located in New Mexico and  South Dakota. We compared expenditure data for the schools we visited  with the amount of funding they received to assess the reliability of the  expenditure data. We determined that the data for these four BIE schools  and two public school districts were sufficiently reliable. We excluded data  from the remaining 12 BIE schools and 2 public school districts we visited  because we did not receive any expenditure data or were not able to  obtain reliable expenditure data for both the BIE schools and the nearby  public school districts. In addition, we excluded expenditure data for some  BIE schools we visited because the schools were boarding schools and,  therefore, their expenditures would not be comparable to those of nearby  public schools.
section_title: Objective 3: Staff and Expertise to Oversee School Expenditures
paragraphs: To determine the extent to which BIE has the staff and expertise needed  to oversee school expenditures, we analyzed BIE data on the number  and location of staff currently responsible for overseeing these  expenditures as compared to the number of staff in prior years and the  location of schools for which they are responsible. We also reviewed BIE  data on the types of positions that are currently vacant and interviewed  cognizant BIE officials. In addition, we reviewed Indian Affairs records on  the training on single audits provided since 2012 to line office  administrators and staff. We also interviewed officials at BIE and Indian  Affairs who are responsible for overseeing school expenditures about  their skill sets and the types of training they have received on overseeing  federal grants.
section_title: Objective 4: Oversight of School Expenditures
paragraphs: To determine the extent to which BIE’s processes are adequate for  ensuring that school funds are spent appropriately, we reviewed available  oversight tools, including protocols for desk and onsite audits and tracking  data. In addition, we reviewed the results of all tribally-operated schools’  single audits for a 3-year period (fiscal year 2010 to fiscal year 2012) in  the Federal Audit Clearinghouse. For more analysis of single audit  findings, we selected for further review the single audits of six recipients  of Indian School Equalization Program (ISEP) funding, the largest funding  source of BIE schools. We selected these recipients based on audit  opinions of their compliance with program requirements. Specifically, we  examined all the single audits in which the auditor found that the school’s  records for ISEP compliance either contained significant departures from  generally accepted auditing standards or were in a condition that made it  impossible for them to be assessed in accordance with generally  accepted auditing standards. We also examined the single audits of  select tribally-operated schools based on information from BIE officials.  Although our non-generalizable sample focused on schools with poor  financial management, these schools may have needed the greatest  oversight and technical assistance from BIE to correct the audit findings  and improve their financial management. We assessed the reliability of  the Federal Audit Clearinghouse data on single audits by (1) reviewing  existing information about the data and systems that produced them, and  (2) obtaining information from U.S. Census Bureau officials  knowledgeable about the database. We determined that these data were  sufficiently reliable for the purposes of this report. We also obtained  documents about other select BIE schools. Additionally, we interviewed  officials in Education, Indian Affairs’ Office of Internal Evaluation and  Assessment, as well as BIE’s Division of Performance and Accountability,  Office of Administration, and education line offices.
section_title: Appendix II: Comments from the Department of the Interior
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Elizabeth Sirois (Assistant  Director), Ramona L. Burton (Analyst-in-Charge), Lucas M. Alvarez,  Kathleen M. Peyman, and Matthew Saradjian made key contributions to  this report. In addition, key support was provided by Hiwotte Amare,  James E. Bennett, Deborah Bland, Holly A. Dye, Alexander G. Galuten,  LaToya Jeanita King, Ashley L. McCall, Sheila McCoy, Kimberly A.  McGatlin, Jean L. McSween, Deborah A. Signer, and John S. Townes.