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

Letter

Background

Student Population

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.

Federal Grants and Single Audits

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.

Organization and Oversight

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.

BIE Schools Receive Most of their Funding from Federal Sources, Unlike Public Schools

BIE Schools Receive Funding Mainly from Interior and Education

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.

Public Schools Receive Limited Federal Funding

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.

BIE-Operated Schools Spent Substantially More Per Student than Public Schools Nationwide Due to Several Factors

BIE-Operated Day Schools Spent at Least 50 Percent More Per Pupil than the National Average for Public Schools

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.

Several Factors Contribute to Higher Per-Pupil Expenditures at BIE- Operated Schools

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.

Instruction

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.

Transportation

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.

Administration

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.

BIE Lacks Sufficient Staff with Expertise to Oversee School Expenditures

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.

BIE’s Processes Are Not Adequate to Ensure that School Funds Are Spent Appropriately

BIE Lacks Consistent Processes for Documenting and Sharing Findings and Overseeing Major Programs

Single Audits

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.

Indian School Equalization Program

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.

BIE Lacks a Risk-Based Approach to Oversee School Expenditures

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.

Conclusions

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.

Recommendations for Executive Action

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.

Agency Comments and Our Evaluation

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.

Appendix I: Objectives, Scope, and Methodology

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.

Objective 1: Sources of Funding

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.

Objective 2: Expenditures

Data Reliability

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.

Nationwide Comparison

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.

Site Visits

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.

Objective 3: Staff and Expertise to Oversee School Expenditures

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.

Objective 4: Oversight of School Expenditures

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.

Appendix II: Comments from the Department of the Interior

Appendix III: GAO Contacts and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

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.