Financial Management: Recommendations on Indian Trust Fund Strategic Plan
Proposals (Letter Report, 11/26/97, GAO/AIMD-98-37).
GAO presented recommendations to the Secretary of the Interior, focusing
on its review of the: (1) Special Trustee for American Indians'
strategic plan for Indian Trust Fund accounting and asset management
improvement; and (2) Secretary of the Interior's August 22, 1997,
memorandum that outlined plans for implementing several of the
initiatives in the strategic plan.
GAO noted that: (1) GAO's July 1997 testimony identified implementation
issues related to several of the strategic plan's proposed initiatives;
(2) the August 1997 memorandum outlined plans that relate to several of
the initiatives for which GAO had identified implementation issues; (3)
there remain some implementation issues not addressed by the memorandum,
including the timing of record cleanup and conversion in connection with
acquiring the proposed automated accounting system module and the need
for additional coordination and planning for proposed major information
technology investments; and (4) addressing those issues will enhance the
opportunity for successful implementation.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: AIMD-98-37
TITLE: Financial Management: Recommendations on Indian Trust Fund
Strategic Plan Proposals
DATE: 11/26/97
SUBJECT: Strategic planning
Federal agency accounting systems
Information resources management
Native Americans
Trust funds
Native American claims
Funds management
Accounting procedures
Information technology
Management information systems
IDENTIFIER: Indian Trust Fund
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Cover
================================================================ COVER
Report to the Secretary of the Interior
November 1997
FINANCIAL MANAGEMENT -
RECOMMENDATIONS ON INDIAN TRUST
FUND STRATEGIC PLAN PROPOSALS
GAO/AIMD-98-37
Indian Trust Fund Strategic Plan
(913813)
Abbreviations
=============================================================== ABBREV
CIO -
IIM -
OST -
Letter
=============================================================== LETTER
B-278410
November 26, 1997
The Honorable Bruce Babbitt
The Secretary of the Interior
Dear Mr. Secretary:
Our July 1997 testimony, Financial Management: Indian Trust Fund
Strategic Plan, prepared for the Senate Committee on Indian Affairs,
provides an analysis of the Special Trustee for American Indians'
Strategic Plan for Indian trust fund accounting and asset management
improvement. The testimony (GAO/T-AIMD-97-138, July 30, 1997, a copy
of which was provided to your office) (1) describes the trust asset
management problems that the Strategic Plan proposes to resolve, (2)
provides a high-level summary of the Strategic Plan, (3) explains the
basis for the cost estimates included in the Strategic Plan, and (4)
identifies implementation issues. The testimony also contains our
assessment of needed actions related to the implementation issues
that we identified. These needed actions concern the implementation
timing of certain initiatives, additional planning for some
proposals, and issues relating to establishing two new organizations.
Subsequent to our testimony, on August 22, 1997, you issued to
certain high-level Interior officials who have Indian trust
responsibilities a memorandum that outlines plans that relate to
several of the initiatives for which we had identified implementation
issues. In that memorandum, you indicated that you and the Special
Trustee for American Indians have reached agreement on some of the
initiatives proposed in the Strategic Plan. Your memorandum outlined
the Department's approach for improving Indian trust management and
engaging affected Interior bureaus and offices in planning and
implementing activities for a "trust improvements project."
The objective of this report is to officially transmit
recommendations to you based on our assessment of implementation
issues contained in our testimony and the related actions
contemplated in your August memorandum. Our work was done in
accordance with generally accepted government auditing standards from
April through October 1997. Our scope and methodology are in
appendix I. We requested comments on a draft of this report from the
Secretary of the Interior or his designee. On November 24, 1997,
Interior officials provided us with oral comments, which are
discussed in the "Agency Comments" section.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
Our July 1997 testimony identified implementation issues related to
several of the Strategic Plan's proposed initiatives. Your August
1997 memorandum outlined plans that relate to several of the
initiatives for which we had identified implementation issues. There
remain, however, some implementation issues not addressed by your
memorandum, including the timing of record cleanup and conversion in
connection with acquiring the proposed automated accounting system
module and the need for additional coordination and planning for
proposed major information technology investments. Addressing those
issues will enhance the opportunity for successful implementation.
BACKGROUND
------------------------------------------------------------ Letter :2
As we have reported in the past,\1 Interior's Indian trust fund
accounting and asset management problems are long-standing and
permeate all facets of the trust fund management business cycle.
They include (1) the lack of accurate, up-to-date information on
ownerships to ensure that revenue is distributed to the correct
account and the increasing workload associated with fractionated
ownerships, (2) inadequate management of natural resource assets
resulting in a lack of assurance that all earned revenues are
collected, (3) weaknesses in trust fund management systems and
internal controls and policies and procedures that result in a lack
of assurance about the accuracy of trust fund balances, and (4) the
failure, in the past, to invest trust funds consistently and
prudently and pay interest to accountholders. These overall
weaknesses preclude accountholders from having assurance that their
account balances are accurate and that their assets are being
prudently managed. The purpose of the Special Trustee's Strategic
Plan was to address these long-standing problems.
The following sections contain a brief description of the Strategic
Plan implementation issues raised in our testimony, the related
actions contemplated in your August 1997 memorandum, our observations
on those related actions, and our recommendations.
--------------------
\1 Financial Management: Focused Leadership and Comprehensive
Planning Can Improve Interior's Management of Indian Trust Funds
(GAO/AIMD-94-185, September 22, 1994).
IMPLEMENTATION TIMING ISSUES
------------------------------------------------------------ Letter :3
As noted in our testimony, the Strategic Plan proposes that the
commercial trust fund accounting and investment system--which is
currently used for tribal accounts--be expanded to include a module
for Individual Indian Money (IIM) accounts. In determining the
appropriate timing for acquiring an IIM commercial trust accounting
system module, certain questions need to be addressed, including
whether to (1) convert all IIM accounts to the new system module
immediately, or convert them as they are cleaned up, (2) identify and
archive inactive accounts before conversion, and (3) convert
small-balance or pass-through accounts (zero-balance accounts where
receipts are immediately withdrawn) to the new system module or
maintain them separately. Your August 1997 memorandum states that
the Office of the Special Trustee (OST), in coordination with the
Department's Chief Information Officer (CIO), is to acquire, pilot,
and install a core trust accounting system module suitable for both
tribal and IIM accounts. However, the memorandum does not address
the above IIM record cleanup and conversion questions.
PROPOSALS THAT NEED DETAILED
PLANNING
------------------------------------------------------------ Letter :4
Our testimony also noted that the Strategic Plan proposes upgrading
or acquiring trust-related systems for land ownership and lease and
minerals asset management. However, the Strategic Plan does not
adequately address all interrelated business functions and systems
within Interior. Further, the Strategic Plan does not provide
evidence that sufficient input was obtained from affected Interior
agencies. In order to appropriately assess the accounting and asset
management systems initiatives proposed in the Strategic Plan, more
information and analysis are needed to ensure that all related
business functions and information requirements are identified.
Also, before proceeding with the major information technology
investments proposed by the Strategic Plan, the processes and
structures required by the Paperwork Reduction Act of 1995, the
Clinger-Cohen Act of 1996, and Office of Management and Budget
guidance for funding information systems investments, including an
Information Resources Management Plan, need to be put in place.\2
Your August 1997 memorandum directs the Office of the Special
Trustee, in coordination with the Department's CIO, and the heads of
the Bureau of Indian Affairs, the Bureau of Land Management, and the
Minerals Management Service, to evaluate, acquire, and pilot
standardized, commercial off-the-shelf general trust management
system technology. It also directs that supporting land title and
records and minerals royalty systems be evaluated and upgraded as
appropriate. The memorandum directs that all trust systems
acquisitions be accomplished in compliance with the Clinger-Cohen Act
and Office of Management and Budget guidance. We believe it is
imperative that Interior follow through with these actions and
implement the required processes, structures, and Information
Resources Management Plan mentioned previously before proceeding with
the major information technology investments contemplated in the
Strategic Plan.
--------------------
\2 These requirements and other information systems investment
guidance are discussed in attachment IV of the testimony.
ISSUES CONCERNING ESTABLISHING
TWO NEW ORGANIZATIONS
------------------------------------------------------------ Letter :5
Our testimony discusses the Strategic Plan's proposals to establish
two new organizations outside the Department of the Interior--the
American Indian Trust and Development Administration, which would be
a government-sponsored enterprise, and the American Indian Trust and
Development Bank. Our testimony stated that the Strategic Plan needs
to provide more information on each of these proposals in order to
support full consideration by the Congress. However, because your
August 1997 memorandum deferred these proposals, we are not making a
recommendation at this time regarding the specific organizational,
funding, and legal information that would be needed for congressional
decision-making on this issue.
OTHER ISSUES
------------------------------------------------------------ Letter :6
Your August 1997 memorandum also stated that the Department will
prepare a high-level implementation plan for its trust improvements
project. Department officials told us that the plan is now being
developed. At the request of the Senate Committee on Indian Affairs,
we plan to monitor Interior's implementation of the improvement
initiatives.
CONCLUSION
------------------------------------------------------------ Letter :7
Your August 1997 memorandum outlined plans that relate to several of
the initiatives for which we had identified implementation issues in
our July testimony. There remain, however, some implementation
issues not addressed by your memorandum, particularly in the areas of
timing of record cleanup and conversion in connection with acquiring
the proposed automated IIM accounting system module and the need for
additional coordination and planning for proposed major information
technology investments. Addressing these concerns is important to
the successful implementation of the improvement initiatives outlined
in the Strategic Plan.
RECOMMENDATIONS
------------------------------------------------------------ Letter :8
We recommend that you direct the Special Trustee to work with the
Department's Chief Information Officer to
-- take immediate action to resolve IIM record cleanup and
conversion timing questions so that the IIM accounting system
module acquisition can move forward;
-- identify all related business functions and obtain input on
information requirements from all stakeholders to (1) provide
adequate evidence of a framework for sharing related business
and functional information and program requirements among the
cognizant organizations and functions and (2) support the design
and development of management and information systems; and
-- comply with legal and regulatory requirements for major
information technology investments by developing a strategic
Information Resources Management Plan, criteria for the
evaluation of major information system investments, and an
information architecture that aligns technology with mission
goals.
AGENCY COMMENTS
------------------------------------------------------------ Letter :9
Interior officials told us that they generally agree with the
conclusions and recommendations in this report.
---------------------------------------------------------- Letter :9.1
This letter contains recommendations to you. The head of a federal
agency is required by 31 U.S.C. 720 to submit a written statement of
actions taken on these recommendations to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform and
Oversight within 60 days of the date of this letter. A written
statement must also be sent to the House and Senate Committees on
Appropriations with the agency's first request for appropriations
made over 60 days after the date of this letter.
We are sending copies of this letter to the Chairman and the Vice
Chairman of the Senate Committee on Indian Affairs and the Chairmen
and Ranking Minority Members of the House Committee on Resources, the
Senate Committee on Governmental Affairs, and the House Committee on
Government Reform and Oversight. We are also sending copies of this
letter to the Director of the Office of Management and Budget and to
interested congressional committees and Members of Congress. Copies
will be made available to others upon request.
Major contributors to this letter were Gayle Fischer, Michael Koury,
and Meg Mills. Please call me at (202) 512-8341 if you or your staff
have any questions regarding this report.
Sincerely yours,
Linda M. Calbom
Director, Civil Audits
SCOPE AND METHODOLOGY
=========================================================== Appendix I
To describe the trust asset management problems that the Strategic
Plan proposes to resolve, we reviewed the problems identified in the
Strategic Plan and relied on our past work and the work of
independent public accountants Interior contracted with to perform
financial statement audits and reviews.
To identify implementation issues, we analyzed the Plan in detail and
relied on our past work on Indian trust fund accounting and asset
management issues. We also met with Department of the Interior
officials; the Special Trustee for American Indians; and officials in
the Bureau of Indian Affairs, the Bureau of Land Management, and the
Minerals Management Service, and contacted the Director of Interior's
Office of American Indian Trust to obtain their views on the Plan.
In addition, we reviewed tribal comments on the Plan, which were
provided to the Special Trustee as a result of his consultation
meetings with the tribes.
We reviewed the contemplated actions outlined in your August 1997
memorandum to determine whether they responded to implementation
issues identified in our testimony and discussed them with Department
officials.
*** End of document. ***