Indian Programs: BIA's Management of the Wapato Irrigation Project
(Letter Report, 05/28/97, GAO/RCED-97-124).

Pursuant to a legislative requirement, GAO reviewed the Bureau of Indian
Affairs' (BIA) management of the Wapato Irrigation Project, focusing on:
(1) the key reasons for the project's idle acreage and the steps that
can be taken to return these lands to production; (2) the principal
reasons why operation and maintenance assessments for the project are
past due; and (3) the obstacles that BIA will face in trying to collect
the past due operation and maintenance assessments. GAO did not
independently verify the data BIA provided on the project's idle acreage
and past due assessments.

GAO noted that: (1) BIA officials estimate that approximately 30,000
acres, or 21 percent of the project's acreage, are currently idle; (2)
these lands are out of production for a variety of reasons, including
changing farm economics and poor soil conditions; (3) in addition, BIA
has not often exercised its authority to grant leases on behalf of
Indian landowners who have not leased the lands themselves; (4) in 1996,
BIA decided to exercise its authority to grant leases more often and
began marketing the idle lands more extensively; (5) over the last
decade, uncollected operation and maintenance assessments have
accumulated to a total of $7.3 million, excluding interest, penalties,
and fees; (6) BIA's practice of deferring the collection of operation
and maintenance assessments for idle trust land is the main reason why
assessments are past due; (7) deferred collections on idle trust land
account for $5.5 million in past due assessments; (8) the remaining $1.8
million in past due assessments consists of delinquent payments from
lessees of Indian trust land and from owners of nontrust land; (9) BIA
has not aggressively attempted to recover any of the $7.3 million in
past due assessments; (10) the biggest obstacle to the collection of
past due assessments is BIA's belief that assessments on idle trust land
are not justified; (11) moreover, because BIA has not collected past due
assessments in a timely manner, federal and state statutes of
limitations preclude the agency from using certain methods to collect
the older assessments; (12) for example, the federal statute of
limitations for using administrative offsets, such as deductions from
federal income tax refunds, is 10 years; (13) when BIA has collected
past due assessments through land sales, it has not, since August 1991,
returned the funds to the project as required by law; (14) instead, it
has deposited the funds in special accounts, anticipating that the past
due assessments would eventually be canceled and the funds could then be
returned to the landowners; and (15) as of December 1996, the balance in
the special accounts was about $103,000.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-97-124
     TITLE:  Indian Programs: BIA's Management of the Wapato Irrigation 
             Project
      DATE:  05/28/97
   SUBJECT:  Indian lands
             Native Americans
             Land management
             Land leases
             Debt collection
             Debt subject to statutory limitation
             Fair market value
             Fees
IDENTIFIER:  Wapato Irrigation Project (WA)
             Confederated Tribes of the Yakama Nation
             
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Cover
================================================================ COVER


Report to Congressional Requesters

May 1997

INDIAN PROGRAMS - BIA'S MANAGEMENT
OF THE WAPATO IRRIGATION PROJECT

GAO/RCED-97-124

Wapato Irrigation Project

(141005)


Abbreviations
=============================================================== ABBREV

  BIA - Bureau of Indian Affairs
  GAO - General Accounting Office

Letter
=============================================================== LETTER


B-276157

May 28, 1997

The Honorable Slade Gorton
Chairman
The Honorable Robert C.  Byrd
Ranking Minority Member
Subcommittee on Interior and
 Related Agencies
Committee on Appropriations
United States Senate

The Honorable Patty Murray
United States Senate

The Honorable Richard Hastings
House of Representatives

In the late 1800s, the Congress began authorizing funds for the
construction of Indian irrigation projects.  Such projects were
constructed primarily to enhance the economic development of Indian
reservations or to meet federal legal obligations.  Currently, the
Bureau of Indian Affairs (BIA) administers over 70 projects that
deliver water to about 1 million acres of reservation land. 

The Wapato Irrigation Project is located within the boundaries of the
Yakama\1

Indian Reservation in Yakima County, Washington, and irrigates about
142,000 acres.  Some of the irrigated land is held in trust for
individual Indian landowners and for the Yakama Indian Nation by the
United States, and some is privately owned.  The costs of operating
and maintaining the project, which BIA has designated as
self-sustaining, are to be covered by annual assessments against all
irrigable acres.  Individual Indian landowners may pay the assessment
themselves or lease their lands to lessees who agree to pay the
assessment.  Alternatively, BIA may lease lands on behalf of the
Indian landowners.  Neither the Indian landowners nor BIA is required
to lease Indian trust lands.  BIA does not lease privately owned
(nontrust) land. 

The project has contributed substantially to the local economy.  In
1994, the total market value of crops raised on land irrigated by the
project was $152 million.  Over the years, however, the project has
fallen into disrepair, and many irrigated acres are idle (not in
agricultural production).  Estimates of the costs to repair the
project and bring it up to operating standards range from about $100
million to $200 million. 

The Senate Committee on Appropriations is concerned about the
viability of the project in light of reports issued by the Department
of the Interior's Office of Inspector General that found significant
problems with the project's management.\2 To supplement this work,
you asked us to further investigate (1) the key reasons for the
project's idle acreage and the steps that can be taken to return
these lands to production, (2) the principal reasons why operation
and maintenance assessments for the project are past due, and (3) the
obstacles that BIA will face in trying to collect the past due
operation and maintenance assessments. 


--------------------
\1 P.L.  103-434, title XII, section 1204(g), dated Oct.  31, 1994,
changed the spelling of the Yakima Indian Nation back to the original
spelling of Yakama.  The spelling of the county's name was not
changed. 

\2 Indian Irrigation Projects, Bureau of Indian Affairs (Rpt.  No. 
96-I-641, Mar.  29, 1996), Wapato Irrigation Project, Bureau of
Indian Affairs (Rpt.  No.  95-I-1402, Sept.  30, 1995), and Operation
and Maintenance Assessments of Indian Irrigation Projects, Bureau of
Indian Affairs (Rpt.  No.  88-42, Feb.  3, 1988). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

BIA officials estimate that approximately 30,000 acres, or 21 percent
of the project's acreage, are currently idle.  These lands are out of
production for a variety of reasons, including changing farm
economics and poor soil conditions.  In addition, BIA has not often
exercised its authority to grant leases on behalf of Indian
landowners who have not leased the lands themselves.  In 1996, BIA
decided to exercise its authority to grant leases more often and
began marketing the idle lands more extensively. 

Over the last decade, uncollected operation and maintenance
assessments have accumulated to a total of $7.3 million, excluding
interest, penalties, and fees.  BIA's practice of deferring the
collection of operation and maintenance assessments for idle trust
land is the main reason why assessments are past due.  Deferred
collections on idle trust land account for $5.5 million in past due
assessments.  The remaining $1.8 million in past due assessments
consists of delinquent payments from lessees of Indian trust land and
from owners of nontrust land.  BIA has not aggressively attempted to
recover any of the $7.3 million in past due assessments. 

The biggest obstacle to the collection of past due assessments is
BIA's belief that assessments on idle trust land are not justified. 
Moreover, because BIA has not collected past due assessments in a
timely manner, federal and state statutes of limitations preclude the
agency from using certain methods to collect the older assessments. 
For example, the federal statute of limitations for using
administrative offsets, such as deductions from federal income tax
refunds, is 10 years.  When BIA has collected past due assessments
through land sales, it has not, since August 1991, returned the funds
to the project as required by law.  Instead, it has deposited the
funds in special accounts, anticipating that the past due assessments
would eventually be canceled and the funds could then be returned to
the landowners.  As of December 1996, the balance in the special
accounts was about $103,000. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Wapato Irrigation Project is one of the oldest and largest
irrigation projects operated by BIA.  The project consists of three
units--Wapato-Satus, Toppenish-Simcoe, and Ahtanum--and irrigates
approximately 142,000 acres.  The Wapato-Satus Unit accounts for
about 95 percent of the total acreage within the project.  Ownership
of the 142,000 acres is split between Indians and non-Indians;
Indians own 55 percent, and non-Indians own the remaining 45 percent. 
The title to the Indian-owned land is held in trust for individual
Indians and the Yakama Indian Nation by the United States.\3 Most of
the project's acreage held in trust is leased to non-Indians for
agricultural purposes.  See appendix I for a map of the project. 

The project is operated and maintained by BIA's Wapato Irrigation
Project Office, located in Wapato, Washington.  BIA's Yakama Agency
Office, Branch of Real Estate Services, located in Toppenish,
Washington, has the authority to lease Indian trust land within the
project on behalf of individual Indians.  See appendix II for an
organizational chart showing these BIA offices.  The Yakama Indian
Nation handles the negotiation of leases for tribal trust land. 
Private landowners farm or lease nontrust land within the project. 

In 1960, BIA classified the project as self-sustaining; that is, BIA
considered the project's lands capable of supporting the full amount
of the project's annual operation and maintenance costs.  Therefore,
BIA's regulations require that all irrigable lands within the project
be assessed annual operation and maintenance charges that cover the
full costs of delivering water, including the day-to-day operation
and maintenance costs plus an allowance for rehabilitation and
replacement as necessary.  The total estimated annual costs are to be
divided by the total number of irrigable acres to determine the
annual assessment rate.  The base assessment rate for the
Wapato-Satus Unit for 1996 was $40 per acre.\4

The project's operation and maintenance problems are well documented. 
Since 1990, BIA, the Yakama Indian Nation, the Bureau of Reclamation,
and the Department of the Interior's Office of Inspector General have
issued at least seven reports on the project's deteriorated physical
condition.  In its 1995 report on the project, the Inspector General
recommended, among other things, that BIA (1) develop assessment
rates for the project that fully cover the costs of properly
operating and maintaining it and of rehabilitating or replacing its
infrastructure; (2) comply with the Department of the Interior's
billing regulations and procedures, which require that all owners or
users of water on the project's lands be billed an annual assessment
charge; and (3) enforce debt collection procedures.  BIA generally
concurred with these recommendations and, in August 1995, established
a task force to address the Inspector General's findings and
recommendations, set forth in reports that go back to 1988.  The task
force is implementing these recommendations at 3 BIA power projects
and 18 Indian irrigation projects, including the Wapato Irrigation
Project.  As of March 31, 1997, the task force's work was still
ongoing. 


--------------------
\3 Originally, all of the Yakama Indian Reservation was owned by the
Yakama Indian Nation.  Over time, portions of the reservation were
allotted to individual Indians or sold to non-Indians.  For more
detailed information on land ownership on Indian reservations,
including the Yakama Indian Reservation, see Indian Programs: 
Profile of Land Ownership at 12 Reservations (GAO/RCED-92-96BR, Feb. 
10, 1992). 

\4 Because of the lower cost of providing irrigation water for the
two smaller units--Toppenish-Simcoe and Ahtanum--the 1996 assessment
rate for these two units was $10 per acre. 


   FACTORS CONTRIBUTING TO IDLE
   TRUST LAND
------------------------------------------------------------ Letter :3

BIA officials estimate that approximately 21 percent of the project's
acreage is idle.  Changing farm economics, poor soil conditions,
BIA's past leasing practices, and high appraised rental values have
contributed to keeping these lands out of productive use.  BIA
revised its leasing practices in 1996, in an effort to move the idle
lands into productive use. 


      CHANGING FARM ECONOMICS AND
      PHYSICAL DEFICIENCIES
---------------------------------------------------------- Letter :3.1

Over time, the project's farm economy has deteriorated.  In the early
to mid-1980s, high interest rates and low crop prices further
depressed the project's farm economy.  Some farmers had to reduce
operations, while others--particularly small "mom and pop"
operators--quit farming altogether.  According to project officials,
about 30,000 acres--or about 21 percent of the land served by the
project--were idle in 1996, including 24,000 acres of Indian trust
land and 6,000 acres of nontrust land. 

The inventory of idle trust land includes small and isolated parcels,
parcels with poor-quality soil, and parcels with poor drainage--all
of which limit their leasing potential.  The size of a typical parcel
on the reservation is 80 acres for irrigated agricultural land.  The
farmable area of some parcels is reduced by features such as
irrigation canals, residences, and uneven terrain (gullies and steep
slopes). 

Over the project, the soil varies in quality, depth, and drainage,
from shallow, gravelly soil in the floodplain of the nearby Yakima
River to richer, deeper soil near the foothills.  Several studies
issued during the past 10 years have found severe soil limitations
associated with portions of the project's idle land.  BIA has
identified about 8,000 acres of idle trust land with high alkaline or
saline content or excessive gravel that would preclude the growth of
some crops or require reclamation practices to make the land
productive.  Where remediation is feasible, repeated leaching and
draining would be required to reduce the soil's alkalinity or
salinity. 


      BIA'S LEASING AND APPRAISAL
      PRACTICES
---------------------------------------------------------- Letter :3.2

Although BIA generally has no control over the economic and physical
factors that have contributed to the idling of trust land, it does
have more authority than it has exercised, until recently, over the
leasing process.  Specifically, the Superintendent of BIA's Yakama
Agency Office has the authority to grant leases on behalf of
individual Indian landowners, but former superintendents did not
often exercise this authority.  The current superintendent, appointed
in October 1996, plans to exercise his authority more often. 
However, the lands' unrealistically high appraised rental values pose
an obstacle to leasing.  BIA has also expanded its advertising of
idle lands available for lease. 

Individual Indian landowners have the authority to grant leases on
their land.  A new lease agreement can be entered into starting 1
year before an existing lease expires.  If, after 3 months, the
individual landowner or landowners have not negotiated a new lease,
BIA can begin acting on the landowner's or landowners' behalf,
advertising the available land and trying to find a lessee.  If a
lessee is found, the superintendent can choose either to obtain the
consent of the landowner(s)--who thereby grant the lease--or to grant
the lease on behalf of the landowner(s).  Former superintendents
sought to obtain the consent of Indian landowners rather than
exercise their authority to grant leases. 

Obtaining the consent of a parcel's Indian landowner(s) can be
burdensome because the ownership of many parcels on the Yakama Indian
Reservation is highly fractionated.  As we reported in February 1992,
over one-third (2,236) of the reservation's parcels had multiple
owners, while just under two-thirds (3,823) had a single
owner--usually the Yakama Indian Nation.\5 For example, the most
highly fractionated parcel had 162 owners.  To lease fractionated
parcels, BIA formerly obtained the approval of owners representing a
majority of the interests in the parcel.  To prevent land from
remaining idle when BIA is unable to locate enough landowners to
obtain their consent to lease a parcel, the current superintendent
has decided to exercise his authority to grant a lease on behalf of
the Indian landowners. 

The superintendent is generally required to lease Indian trust land
at its "present fair annual rental value." According to the
superintendent, he relies on appraisals prepared by BIA's Portland
Area Office's Real Estate Service Team to determine the property's
present fair annual rental value.  However, the appraisals for idle
trust properties do not take into account the fact that some idle
lands require rehabilitation.  For example, land that is idle for a
number of years becomes overgrown with weeds and other vegetation;
such land requires work before it can be cultivated.  Nevertheless,
BIA appraises the idle land at the same value as land that is being
actively farmed, not taking into account the investment needed to
reclaim the land.  As a result, the appraised values for idle lands
often exceed the rents that farmers are willing to pay.  The
superintendent stated that he is reluctant to grant or approve leases
at significantly less than the appraised values and noted that the
current appraised rental values for idle lands present an obstacle to
his leasing these lands in the future. 

In the past, BIA's limited advertising of idle trust land also
restricted leasing opportunities.  The agency's former marketing
strategy was limited to "word of mouth" and advertising in local
newspapers.  In 1996, BIA's Yakama Agency Office expanded its
advertising of trust land available for lease to newspapers in
Seattle, Portland, and Spokane.  However, the 1996 bid cycle still
produced very limited results.  Only about 88 of the 632 advertised
irrigated parcels within the Wapato-Satus Unit received bids.  The
office is planning to continue expanding its advertising, perhaps to
additional newspapers, trade journals, and the Internet. 


--------------------
\5 See footnote 3. 


   FACTORS CONTRIBUTING TO PAST
   DUE ASSESSMENTS
------------------------------------------------------------ Letter :4

BIA's practice of deferring the collection of operation and
maintenance assessments from the owners of idle trust land is the
main reason why assessments for the project are past due.  In
addition, some lessees of Indian trust land and some owners of
nontrust land have not paid their assessment bills.  Finally, BIA has
not aggressively attempted to collect the assessments owed.  As a
result, past due assessments have accumulated, totaling $7.3
million--excluding interest, penalties, and fees--over the life of
the project.  However, through 1984, the project received annual
appropriations from the Congress to cover the uncollected
assessments.  Since fiscal year 1984, when the Congress authorized
the establishment of an interest-bearing account for collections, the
project has earned $3.6 million in interest from its operation and
maintenance collections to partially offset the uncollected
assessments.  However, neither the appropriations nor the interest
earnings canceled the past due assessments. 


      BIA'S DEFERRAL OF
      COLLECTIONS AND PRACTICE OF
      NOT TAKING AGGRESSIVE
      COLLECTION ACTION
---------------------------------------------------------- Letter :4.1

Deferred collections on idle trust land account for $5.5 million of
the total $7.3 million in past due assessments, some of which date as
far back as 1926.  BIA assumed that because the land was not being
leased, the Indian landowners would not be able to pay their
assessments.  According to BIA's manual, when assessable Indian trust
land is idle and assessments are "impossible" to collect during the
current irrigation season, bills "shall be prepared and kept on
file." The Department of the Interior's Inspector General reported in
1995 that BIA did not provide any analysis to support its assumption
that operation and maintenance assessments for idle trust land were
uncollectible.\6 BIA prepares assessment bills for the idle trust
land but does not mail them to the Indian landowners.  Past due
assessments become a lien against the Indian trust land, and their
collection is deferred until the land is sold. 

The remaining $1.8 million of the total $7.3 million in past due
assessments consists of delinquent payments from lessees of Indian
trust land and from owners of nontrust land.  Currently, the lessees
of Indian trust land owe about $1.2 million and the owners of
nontrust lands owe about $0.6 million.  Table 1 breaks down the past
due assessments owed by the owners of idle trust land, the lessees of
trust land, and the owners of nontrust land. 



                                Table 1
                
                  Past Due Assessments at the Project
                        Through Fiscal Year 1996

                         Owners of               Owners of
                        idle trust  Lessees of    nontrust
Year                          land  trust land        land       Total
----------------------  ----------  ----------  ----------  ----------
1926-84                   $555,761     $84,629      $8,937    $649,327
1985-96                  4,977,065   1,071,351     567,616   6,616,032
Total                   $5,532,826  $1,155,980    $576,553  $7,265,359
----------------------------------------------------------------------
Note:  Data are as of Feb.  28, 1997. 

Source:  BIA. 

BIA has not aggressively attempted to collect the $7.3 million in
past due assessments.  BIA has collected past due assessments only
when idle trust land has been sold but has not, since August 1991,
applied these collections to the project's operation and maintenance. 
Additionally, BIA has made little effort to collect past due
assessments from delinquent lessees or nontrust landowners. 


--------------------
\6 See footnote 2. 


      FUNDS RECEIVED TO MITIGATE
      PAST DUE ASSESSMENTS
---------------------------------------------------------- Letter :4.2

Through 1984, the Congress annually appropriated funds to cover
uncollected assessments at the project.  However, after 1984, the
Congress stopped appropriating supplemental operating funds for
Indian irrigation projects that were classified as fully
self-sustaining.  To replace these appropriations and enable the
projects to cover their unpaid assessments, the Congress authorized
BIA to deposit the annual operation and maintenance collections from
the projects into interest-bearing accounts.\7 These deposits were to
earn interest until they were withdrawn and expended for operation
and maintenance purposes. 

BIA first began depositing operation and maintenance collections from
Indian irrigation projects into interest-bearing accounts on November
10, 1983.  Over the 13-year period from fiscal year 1984 through
fiscal year 1996, these deposits generated approximately $3.6 million
in interest for the project.  However, the deposits have not earned
enough interest to cover all of the past due assessments.  See
appendix III for a graph comparing the cumulative past due
assessments with the cumulative interest earned on the collected
assessments from 1984 through 1996. 


--------------------
\7 P.L.  98-146, 97 Stat.  929, dated Nov.  4, 1983. 


   OBSTACLES TO COLLECTING PAST
   DUE ASSESSMENTS
------------------------------------------------------------ Letter :5

The major obstacle to collecting the past due assessments for the
project is BIA's belief that the charges are not justified. 
Furthermore, by not collecting past due assessments in a timely
manner, BIA has severely limited its ability to collect older
assessments, whose collection may be unenforceable under federal and
state statutes of limitations.  Because BIA has viewed the past due
assessments as not justified or not collectible, it has occasionally
forgiven portions of these assessments.  Finally, when BIA has
collected past due assessments through Indian land sales, it has
deposited these collections into special accounts, rather than
returning the funds to the project as required by federal law. 


      BIA'S BELIEF THAT CHARGES
      FOR IDLE TRUST LAND ARE NOT
      JUSTIFIED
---------------------------------------------------------- Letter :5.1

BIA has chosen not to collect past due assessments for idle trust
land because it believes the charges are not justified.  BIA argues
that assessments for idle trust land are not justified because, in
its view, (1) Indian landowners with idle trust land are not able to
pay their assessments and (2) land that is physically incapable of
producing crops should have been removed from the project's
assessable acreage and not assessed in the first place. 

BIA maintains that Indian landowners are not able to pay their
assessments when their lands are idle.  The 1914 law that authorized
BIA to fix annual operation and maintenance assessments states that
they "shall be reimbursable where the Indians have adequate funds to
repay the Government.  .  .  ." For idle trust land, BIA has
concluded that the Indian landowners do not have "adequate funds" to
pay their assessments, and it has therefore deferred any collection
action until such time as funds become available.  However, as the
Department of the Interior's Inspector General reported in 1995, BIA
has not documented its assumption that the owners of idle lands are
unable to pay their assessments. 

In addition, BIA argues that some of the charges are not justified
because idle land physically incapable of producing crops has not
been removed from the project's assessable acreage.  According to
BIA's manual, land physically incapable of producing crops through
the use of irrigation water provided by the project should not be
assessed an operation and maintenance charge.  The manual requires
the temporary or permanent removal of such land from the project's
assessable acreage.  BIA's Yakama Agency Office has identified about
8,000 acres of idle trust land that have physical deficiencies that
would limit their ability to produce crops.  However, these lands
continue to be assessed operation and maintenance charges. 

Because the project received annual appropriations from the Congress
through 1984 to offset the uncollected assessments, BIA had no
incentive to remove from the project the idle acreage that was
incapable of producing crops.  Keeping the project's assessable
acreage at the highest possible level meant that the assessments for
all landowners were lower because the project's costs were spread
over more acres.\8

Although BIA received congressional appropriations to offset the
uncollected assessments, the assessments owed by the project's
landowners remained as debts on their lands.  Under legislation
passed in 1961, land within the Wapato-Satus Unit cannot be
redesignated or removed for a "higher use" until all debts on it have
been paid in full.\9 According to BIA's Portland Area Office's
policy, no land within the project can be redesignated or removed for
any purpose until all debts on it have been paid in full.  Because
landowners have generally refused to pay the past due assessments,
idle land incapable of producing crops remains in the project,
accumulating more debt.  In some cases, the assessments owed on idle
property exceed the property's value.  BIA and the landowners are at
a standoff.  BIA will not remove the land from the project until the
debts have been paid. 


--------------------
\8 BIA has also been reluctant to remove land from the project's
assessable acreage for fear that the removal might eventually result
in a decrease in the water entitlement for the Yakama Indian
Reservation. 

\9 P.L.  87-316, section 6 (75 Stat.  680), dated Sept.  26, 1961. 


      STATUTES OF LIMITATIONS FOR
      DEBT COLLECTION
---------------------------------------------------------- Letter :5.2

Delays in the collection of past due assessments have severely
limited BIA's ability to recover about $1.8 million in older
assessments, or about 25 percent of the total $7.3 million owed.  BIA
is still carrying past due assessments on the project's books from as
far back as 1926.  To collect past due assessments from the owners of
idle trust land, BIA has the option of using administrative offsets,
such as deductions from federal income tax refunds or from the
paychecks of federal employees.  However, the federal statute of
limitations for collecting debts by using administrative offsets is
10 years.  Of the $5.5 million in past due assessments on idle trust
land, $1.2 million, or over 20 percent, is 10 years old or older. 

To collect past due assessments from a lessee, BIA can take the
lessee to court.  However, the federal statute of limitations for
enforcing collections in court against a lessee under a lease
contract is 6 years.  Of the $1.2 million in past due assessments on
leased trust land, almost $0.5 million, or over 40 percent, is more
than 6 years old. 

Finally, to collect past due assessments from a private landowner,
BIA can foreclose to enforce a lien on the property.  In the state of
Washington, the statute of limitations for foreclosing on privately
owned land is 6 years.  Of the $0.6 million in past due assessments
on nontrust land, about $0.1 million, or over 15 percent, is more
than 6 years old. 

Because BIA believes that the past due assessments are not justified
or not collectible, it has occasionally chosen to forgive rather than
collect some of these assessments.  Past due assessments were
canceled selectively four times for Indian landowners under a 1932
act and three times for non-Indian landowners under a 1936 act.  For
example, under these actions past due assessments were canceled
because (1) the quality of the soil was poor, (2) drainage of the
land was inadequate, or (3) the older assessments were uncollectible. 
Since 1942, a total of almost $360,000 in past due assessments has
been canceled.  See appendix IV for more information on the
cancellation actions taken. 

Starting in about 1991, BIA began planning a fifth cancellation
request for Indian landowners, which was officially submitted to the
Deputy Commissioner of Indian Affairs in July 1995.  In this request,
BIA's Portland Area Director proposed to cancel about $2.3 million in
assessments that were more than 6 years old, plus accrued interest,
penalties, and fees.  The request was returned to the Portland Area
Office in August 1995.  It will be reconsidered after the BIA task
force established to implement the Inspector General's
recommendations has finished reconciling the project's past due
accounts. 


      ASSESSMENTS COLLECTED
      THROUGH LAND SALES NOT
      RETURNED TO THE PROJECT
---------------------------------------------------------- Letter :5.3

When Indian trust land with past due assessments is sold, BIA is
required to collect the past due assessments from the proceeds of the
sale and apply the collections to the project.  Under federal law,
the funds collected from the sale proceeds of Indian trust land must
be used to satisfy the project's debt.  In August 1991, BIA stopped
complying with this requirement when it began depositing such
collections in a special account, anticipating that the past due
assessments would eventually be canceled and that it would then
return the funds to the landowners.  BIA had no authority to make
these deposits.  As of December 1996, the balance in two such special
accounts was about $103,000. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

The project's idle acreage, past due assessments, and insufficient
collections have contributed to, but are not the main cause of, the
project's deteriorated condition.  Even if all of the past due
assessments were collected, they would constitute only a small
fraction of the estimated $100 million to $200 million needed to
repair the project.  The Department of the Interior's Inspector
General has already recommended, in its 1995 report, that BIA develop
appropriate assessment rates, bill annual assessment charges, and
enforce debt collection procedures. 

Implementing the Inspector General's recommendations can go a long
way toward correcting the project's problems; however, our work
disclosed additional problems.  The appraised rental values for idle
trust land, which do not recognize the costs of rehabilitation, pose
an obstacle to leasing and discourage the economic activity that is
ultimately necessary to support the project.  The project can no
longer afford to assess operation and maintenance charges on land
that is physically incapable of producing crops and then cancel the
unpaid assessments as has been done seven times in the past. 
Removing this land from the project's assessable acreage is an
essential step in developing appropriate assessment rates. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

To facilitate the leasing of idle trust land, we recommend that the
Secretary of the Interior direct the Assistant Secretary for Indian
Affairs to develop a process that estimates the fair market rental
value for the idle land, taking into account the cost of the
rehabilitation required to bring the land back into productive use. 

To ensure that the costs of operating and maintaining the project are
assessed against acreage that is physically capable of producing
crops, we recommend that the Secretary of the Interior direct the
Assistant Secretary for Indian Affairs to remove land that is
incapable of producing crops from the project's assessable acreage. 

We also recommend that the Secretary of the Interior direct the
Assistant Secretary for Indian Affairs to apply the past due
assessments collected through land sales to the project as required
by law and to liquidate the special accounts. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

We provided copies of a draft of this report to BIA for its review
and comment.  We met with BIA officials, including the Deputy
Commissioner for Indian Affairs, and other Department of the Interior
officials, who agreed with the report's recommendations.  However,
they said that the draft report did not acknowledge BIA's progress in
implementing the Inspector General's recommendations.  They also
provided some minor clarifications, which we incorporated into the
report where appropriate. 

We agree that BIA has begun implementing a number of corrective
actions to address the Inspector General's recommendations and other
management weaknesses at Indian irrigation projects.  However, fully
implementing these corrective actions will be a multiyear effort, and
the agency's efforts have not yet resulted in any significant changes
in the project's management.  BIA has worked hard over the past year
to obtain current information on landownership and addresses for the
project's billing system, but bills were not mailed to Indian
landowners with idle trust land for the 1997 irrigation season.  BIA
plans to mail bills to all of the project's landowners for the 1998
irrigation season.  BIA still does not plan to collect the $7.3
million in past due assessments.  The task force implementing the
Inspector General's recommendations plans to recommend that all of
the past due assessments be canceled either because they are
uncollectible or because trying to collect them would not be
cost-effective. 


---------------------------------------------------------- Letter :8.1

We conducted our review from October 1996 through April 1997 in
accordance with generally accepted government auditing standards.  We
did not independently verify the data BIA provided on the project's
idle acreage and past due assessments.  A detailed discussion of our
scope and methodology is contained in appendix V. 

We are sending copies of this report to the appropriate congressional
committees, the Secretary of the Interior, the Assistant Secretary
for Indian Affairs, and other interested parties.  We will also make
copies available to others upon request. 

Please call me at (202) 512-3841 if you or your staff have any
questions about this report.  Major contributors to this report are
listed in appendix VI. 

Barry T.  Hill
Associate Director, Energy,
 Resources, and Science Issues


MAP OF THE WAPATO IRRIGATION
PROJECT
=========================================================== Appendix I



   (See figure in printed
   edition.)

Source:  GAO's adaptation of a map provided by the Bureau of Indian
Affairs (BIA). 


ORGANIZATION CHART FOR BIA'S
PORTLAND AREA
========================================================== Appendix II



   (See figure in printed
   edition.)

Note:  Bolding added to emphasize offices discussed in the report. 

Source:  GAO's adaptation based on information provided by BIA. 


CUMULATIVE INTEREST EARNED VERSUS
CUMULATIVE PAST DUE OPERATION AND
MAINTENANCE ASSESSMENTS
========================================================= Appendix III



   (See figure in printed
   edition.)

\a BIA's estimate of the interest earned by the project is based on
the total interest earned for all Indian irrigation projects. 

\b The $649,327 in cumulative past due assessments for 1926 through
1984 is not included in this graph.  The Congress annually
appropriated funds through 1984 to cover uncollected assessments at
the project. 

\c P.L.  102-497, section 7, authorized the Secretary of the Interior
to spend up to $1.3 million to operate and maintain the project from
funds originally collected to repay the project's construction costs. 
This $1.3 million emergency operation and maintenance authorization
is not included in the graph. 

Source:  BIA. 


CANCELLATION ACTIONS FOR THE
WAPATO IRRIGATION PROJECT
========================================================== Appendix IV

Portions of the project's past due assessments have been canceled
seven times.  Table IV.1 shows the four cancellation orders for past
due assessments on Indian lands that were issued under a 1932 act. 
Table IV.2 shows the three cancellation orders for past due
assessments on non-Indian lands that were issued under a 1936 act. 


   CANCELLATION ACTIONS FOR
   INDIANS
-------------------------------------------------------- Appendix IV:1

An act of July 1, 1932 (25 U.S.C.  386a), referred to as the Leavitt
Act, provided the authority for canceling past due operation and
maintenance assessments owed by Indians.  Specifically, the act
authorized and directed the Secretary of the Interior to "adjust or
eliminate reimbursable charges of the Government of the United States
existing as debts against individual Indians or tribes of Indians in
such a way as shall be equitable and just in consideration of all the
circumstances under which such charges were made.  .  .  ." The act
also canceled construction charges that had been assessed in
accordance with the provisions of BIA's fiscal year 1921
appropriations act of February 14, 1920 (41 Stat.  409), and deferred
all future construction charges as long as the land remained
Indian-owned.  The Secretary was required to report actions taken
under the act to the Congress.  The actions were not effective until
either they were approved by the Congress or 60 legislative days had
elapsed.  Table IV.1 summarizes the four debt cancellation orders for
past due assessments on Indian lands at the project under the 1932
act. 



                               Table IV.1
                
                    Cancellation Actions for Indians

                                     Operation and
                                       maintenance  Acres removed from
                                       assessments       the project's
Date of cancellation order                canceled  assessable acreage
------------------------------  ------------------  ------------------
January 4, 1957                            $54,796                 210
January 14, 1957                             4,062                  99
June 29, 1961                               83,111                 678
June 27, 1972                              188,644                   0
======================================================================
Total                                     $330,613                 987
----------------------------------------------------------------------
Source:  National Archives and the Department of the Interior. 

Table IV.1 does not show any cancellations for construction charges
or penalties.  The 1932 act permanently deferred the assessment of
all future construction charges on Indian-owned land as long as the
land remained Indian-owned.  The act also canceled past uncollected
construction charges against Indian-owned lands.  Therefore, no
further forgiveness of construction charges was necessary for
Indian-owned lands.  Up through 1991, BIA did not assess penalties on
debts owed by Indians at the project.  Although BIA subsequently
assessed penalties retroactively on uncollected Indian assessments,
all of the assessments shown in table IV.1 were canceled before BIA
started assessing penalties against Indian landowners. 


   CANCELLATION AND DEFERMENT
   ACTIONS FOR NON-INDIANS
-------------------------------------------------------- Appendix IV:2

An act of June 22, 1936 (25 U.S.C.  389, 389a-e), authorized and
directed the Secretary of the Interior to investigate whether
non-Indian landowners were

     "unable to pay irrigation charges, including construction,
     maintenance, and operating charges, because of inability to
     operate such lands profitably by reason of lack of fertility of
     the soil, inadequacy of water supply, defects of irrigation
     works, or for any other causes.  Where the Secretary finds that
     said landowners are unable to make payment due to the existence
     of such causes, he may adjust, defer, or cancel such charges, in
     whole or in part, as the facts and conditions warrant."

The act authorized the Secretary to enter into repayment contracts
for deferred debts, under which payments could be made over 10 years. 
Table IV.2 summarizes the three cancellation orders for past due
assessments on non-Indian lands at the project under the 1936 act. 



                               Table IV.2
                
                 Cancellation and Deferment Actions for
                              Non-Indians


                                  1942\a    1958\b    1962\c     Total
------------------------------  --------  --------  --------  --------
Debts canceled
----------------------------------------------------------------------
Construction                      $8,673    $1,071      $159    $9,903
Operation and maintenance          4,741    21,023     2,500    28,263
Penalties                          1,959    13,606     1,836    17,401
======================================================================
Total                            $15,372   $35,701    $4,495   $55,568

Debts deferred
----------------------------------------------------------------------
Construction                          $0   $11,937    $5,603   $17,540
Operation and maintenance              0     1,827     3,432     5,260
Penalties                              0        88     1,321     1,409
======================================================================
Total                                 $0   $13,852   $10,356   $24,208
======================================================================
Acres removed from the               386       233        78       697
 project's assessable acreage
----------------------------------------------------------------------
Note:  Totals may not add because of rounding. 

\a Cancellation order dated Sept.  9, 1942.  Approved Dec.  24, 1942,
by 56 Stat.  1081. 

\b Cancellation order dated May 14, 1958.  Approved Sept.  16, 1959,
by P.L.  86-281 (73 Stat.  564). 

\c Cancellation order dated Sept.  12, 1962.  Approved Oct.  28,
1963, by P.L.  88-159 (77 Stat.  278). 

Source:  National Archives. 


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix V

Senate Report 104-319, which accompanied the fiscal year 1997
appropriations bill for the Department of the Interior and related
agencies, directed the General Accounting Office to conduct an audit
and provide recommendations on BIA's operation and management of the
Wapato Irrigation Project.  Subsequently, through discussions with
various congressional offices, we agreed to determine (1) the key
reasons for the project's idle acreage and the steps that can be
taken to return these lands to production, (2) the principal reasons
why operation and maintenance assessments for the project are past
due, and (3) the obstacles that BIA will face in trying to collect
the past due operation and maintenance assessments. 

We conducted audit work primarily at BIA's Portland Area Office,
Yakama Agency Office, and Wapato Irrigation Project Office.  At each
location, we interviewed responsible managers and staff and reviewed
studies, reports, correspondence, and data related to the three
objectives of this report.  We toured the project with project
officials and BIA soil scientists to observe some of the project's
idle acreage and facilities.  We also contacted officials from BIA's
Central Office, the Yakama Indian Nation, the Bureau of Reclamation,
the Department of the Interior's Office of Inspector General and
Office of the Solicitor, and the task force established by BIA to
implement the Inspector General's recommendations--the Power and
Irrigation Reconciliation Team. 

To determine the extent of the project's idle acreage, we obtained
BIA reports estimating the number of idle acres.  We relied on
estimates of the project's idle acreage provided by BIA officials and
did not independently verify the number of idle acres.  To determine
the reasons for the project's idle acreage, we interviewed officials
at BIA's Portland Area Office, Yakama Agency Office, and Wapato
Irrigation Project Office, as well as representatives of the Yakama
Indian Nation.  Because BIA is not involved in managing or leasing
nontrust land within the project, limited information was available
on the number of idle nontrust acres and the reasons for this idle
acreage.  We also reviewed reports on Indian irrigation projects
issued by the Department of the Interior's Office of Inspector
General and by BIA.  We reviewed recommendations from these prior
reports and evaluated the steps that have been taken or proposed to
return the land to productive use. 

To determine the principal reasons why operation and maintenance
assessments for the project are past due, we examined BIA's policies
and procedures for determining operation and maintenance assessment
rates and for billing and collecting assessments from landowners.  We
obtained a summary report of the past due operation and maintenance
assessments from BIA's Irrigation and Power Liaison and Compliance
Section, located in Albuquerque, New Mexico, and asked agency
officials to describe why the unpaid balance had increased to $7.3
million, excluding interest, penalties, and fees.  In addition, we
interviewed the Western Regional Audit Supervisor for the Department
of the Interior's Office of Inspector General, located in Sacramento,
California, and reviewed audit workpapers from the Inspector
General's prior reviews of the project.  We relied on the information
provided by BIA and did not independently verify the accuracy of any
of the accounting data. 

To obtain information on why the Congress stopped appropriating funds
to cover the uncollected assessments for the project, we reviewed
congressional documents for the Department of the Interior's fiscal
year 1984 appropriation.  We also reviewed the budget justifications
that BIA submitted to the Congress from fiscal year 1983 through
fiscal year 1987.  We did not attempt to determine whether each
year's appropriation was sufficient to cover that year's collection
shortfall.  We obtained information on the interest earned from the
project's deposits of operation and maintenance collections from
BIA's Irrigation and Power Liaison and Compliance Section. 

To determine the obstacles that BIA will face in trying to collect
the past due operation and maintenance assessments, we reviewed laws,
regulations, and opinions of the Department of the Interior's Office
of the Solicitor.  We also examined some steps taken to collect past
due assessments and the extent to which these steps have succeeded. 
In addition, we discussed debt collection issues with the Department
of the Interior's Office of the Solicitor in Portland, Oregon, and
our own Office of the General Counsel.  We reviewed project files and
congressional files at the National Archives to obtain detailed
information on the prior actions taken to cancel past due assessments
for the project. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI

ENERGY, RESOURCES, AND SCIENCE
ISSUE AREA

Paul Grace
James Hunt
Sterling Leibenguth
Jeffery Malcolm

OFFICE OF THE GENERAL COUNSEL

Alan R.  Kasdan


*** End of document. ***