[Final Audit Report on Acquisition of Surplus Federal Personal Property by the Sisseton-Wahpeton Sioux Tribe (No. 95-I-455) ]
[From the U.S. Government Printing Office, www.gpo.gov]
Report No. 95-I-455
Title: Final Audit Report on Acquisition of Surplus Federal Personal
Property by the Sisseton-Wahpeton Sioux Tribe (No. 95-I-455)
Date: February 10, 1995
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United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240
FEBRUARY 10, 1995
MEMORANDUM
TO: The Secretary
FROM: Acting Inspector General
SUBJECT SUMMARY: Final Audit Report for Your Information - "Acquisition
of Surplus Federal Personal Property by the Sisseton-
Wahpeton Sioux Tribe" (No. 95-I-455)
DISCUSSION: We concluded that neither the Bureau of Indian Affairs nor the
Sisseton-Wahpeton Sioux Tribe adequately controlled over $63 million in excess
Federal property which was acquired by the Bureau for Tribal use. The Bureau
approved Tribal acquisition of Federal excess property for the stated purpose of
using that property on Federally funded contracts and grants. We found that as
much as $59.5 million worth of Federal excess property could not be accounted for
and was presumed to have been sold.
We recommended that the Bureau develop controls to ensure that surplus property
is acquired, used, and accounted for in accordance with appropriate requirements.
In its response to the draft report, the Bureau did not concur with the
recommendations. The Bureau stated that the Indian Self-Determination Act
Amendments of 1994, enacted on October 25, 1994, limited the Bureau's
responsibility and authority regarding the acquisition of surplus Federal property to
ensuring that tribal contractors have screener cards and to assisting the tribes in
obtaining excess property when requested. The Bureau also stated that it would no
longer acquire property for donation to tribes. While we agreed that the
Amendments changed the process relating to the acquisition of surplus property, we
did not believe that the Amendments relieved the Bureau of all of its responsibilities
relating to the acquisition process. However, we revised the recommendations based
on the Amendments and requested the Bureau to respond to the revised
recommendations.
/s/ Joyce N. Fleischman
Joyce N. Fleischman
Attachment
Prepared by: Marvin Pierce
Extension: 208-4252
C-IN-BIA-002-94
United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
Headquarters Audits
1550 Wilson Boulevard
Suite 401
Arlington, VA 22209
FEBRUARY 10, 1995
Memorandum
To: Assistant Secretary for Indian Affairs
From: Acting Assistant Inspector General for Audits
Subject: Final Audit Report on Acquisition of Surplus Federal Personal Property by the
Sisseton-Wahpeton Sioux Tribe (No. 95-I-455)
This report presents the results of our audit of the acquisition of surplus Federal personal
property by the Sisseton-Wahpeton Sioux Tribe of South Dakota. The objective of our
audit was to determine whether surplus Federal personal property acquired by the Tribe
was used on self-determination contracts and grants.
We found that the Tribe had obtained surplus Federal personal property initially valued
at $63.1 million but had used only $3.6 million of the acquired property for self-
determination contracts and grants. The $59.5 million balance of property was presumably
sold, with the Tribe and the individuals authorized to acquire and dispose of the property
sharing the proceeds (estimated to be as much as $15 million). Public Law 93-638, as
amended, the Indian Self-Determination and Education Assistance Act, authorized the
Bureau of Indian Affairs to acquire excess or surplus property and donate it to Indian
tribes when appropriate for use on self-determination contracts or grants. However, the
Bureau did not adequately control the process that allowed the Tribe and its
representatives to obtain and dispose of surplus Federal property.
This report contains two recommendations regarding the development of controls to ensure
that surplus property is acquired, used, and accounted for in accordance with appropriate
requirements. In its October 31, 1994, response (Appendix 2) to the draft report, the
Bureau did not concur with the report's recommendations. The Bureau stated that the
Indian Self-Determination Act Amendments of 1994, enacted on October 25, 1994, limited
the Bureau's responsibility and authority regarding the acquisition of surplus Federal
property to ensuring that tribal contractors have screener cards and to assisting the tribes
in obtaining excess property when requested, The Bureau also stated that it will no longer
acquire property for donation to tribes. While we agree that the Amendments change the
process relating to the acquisition of surplus property, we do not believe that the Bureau
is relieved of all of its responsibilities related to the acquisition process. Nevertheless, we
have revised the report's recommendations based on the Amendments, and the Bureau is
requested to respond to the revised recommendations.
In accordance with the Departmental Manual (360 DM 5.3), we are requesting a written
response to this report by April 10, 1995. The response should provide the information
requested in Appendix 3.
The legislation, as amended, creating the Office of Inspector General requires semiannual
reporting to the Congress on all audit reports issued, actions taken to implement audit
recommendations, and identification of each significant recommendation on which
corrective action has not been taken.
CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
OBJECTIVE AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
PRIOR AUDIT COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
FINDING AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . .3
SURPLUS PERSONAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . .3
APPENDICES
1. OFFICES VISITED OR CONTACTED DURING AUDIT . . . . . . .7
2. BUREAU OF INDIAN AFFAIRS RESPONSE
TO DRAFT REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3. STATUS OF AUDIT REPORT RECOMMENDATIONS . . . . . . . . 10
INTRODUCTION
BACKGROUND
In 1975, the Congress enacted Public Law 93-638, the Indian Self-Determination and
Education Assistance Act. The Act authorized tribes to enter into contracts with
the Bureau of Indian Affairs to administer tribal programs previously administered
by the Bureau. In 1988, the Act was amended by Public Law 100-472. One of the
amendments authorized the Secretary of the Interior to obtain surplus Federal
personal property for donation to Indian tribes and organizations in conjunction
with self-determination contracts and grants.
Since enactment of Public Law 100-472, about 170 Indian tribes and organizations
have used this authority to obtain surplus Federal property. In that regard, tribes
employed individuals, called screeners, to visit surplus property locations and identify
property that could be used for Federal contracts and grants. The screeners, who
were not always tribal members, were authorized by the Bureau to identify and
obtain surplus property on behalf of the tribes they represented. To take possession
of surplus property, the screeners are required to present Standard Form 122,
"Transfer Order, Excess Personal Property," approved by a Bureau official (usually
an area office property officer, contracting officer, or procurement specialist), to the
General Services Administration property officer.
For fiscal years 1991 through 1993, the General Services Administration reported
that surplus personal property acquired at a cost of $210 million was transferred to
the Bureau. The Sisseton-Wahpeton Sioux Tribe of South Dakota had the largest
surplus property program, with tribal screeners acquiring over $63 million in
property.
The Sisseton-Wahpeton Sioux Tribe has 9,255 enrolled members, of which
3,200 reside on the Lake Traverse Reservation. The Reservation, which was
established by treaty with the United States in 1867, is located in northeastern South
Dakota and southeastern North Dakota and totals about 920,000 acres. The Tribe
had 22 self-determination contracts and grants, which had expenditures totaling
$6.3 million, with the Bureau during fiscal years 1991 through 1993.
OBJECTIVE AND SCOPE
The audit objective was to determine whether surplus Federal property acquired by
the Sisseton-Wahpeton Sioux Tribe was used for the Tribe's self-determination
contracts or grants.
1
To accomplish our objective, we visited the Tribe's office in Sisseton, South Dakota;
the Bureau's Aberdeen (South Dakota) Area Office; and the Bureau's headquarters
office in Washington, D.C. We contacted other Bureau offices, General Services
Administration offices, and Department of Defense property offices to obtain
information relating to tribal acquisitions of surplus property (Appendix 1).
The audit was conducted in accordance with the "Government Auditing Standards,"
issued by the Comptroller General of the United States. Accordingly, we included
such tests of records and other auditing procedures that were considered necessary
under the circumstances. In addition, we reviewed the Secretary's Annual Statement
and Report to the President and the Congress for fiscal years 1992 and 1993,
required by the Federal Managers' Financial Integrity Act of 1982, to determine
whether any reported weaknesses were within the objective and scope of our audit.
We determined that none of the reported weaknesses were directly related to the
objective and scope of our audit.
PRIOR AUDIT COVERAGE
Neither the General Accounting Office nor the Office of Inspector General has
issued any audit reports concerning tribal acquisition of surplus Federal personal
property during the past 5 years.
2
FINDINGS AND RECOMMENDATIONS
SURPLUS PERSONAL PROPERTY
The Sisseton-Wahpeton Sioux Tribe acquired surplus Federal personal property in
excess of its needs for use on Tribal self-determination contracts and grants. The
Indian Self-Determination and Education Assistance Act, as amended, authorizes
the Secretary of the Interior to acquire and donate to Indian tribes surplus Federal
personal property for use by Indian tribes on self-determination contracts and
grants, and the Bureau Manual (20 BIAM Supplement 1, Section 2.2H) requires the
Bureau to maintain records of property donated to tribes. However, the Bureau of
Indian Affairs did not monitor the surplus property program or exercise adequate
control over the acquisition process. For example, Bureau officials provided the
Tribe with pre-signed authorization forms and did not account for property once it
was obtained from the General Services Administration. As a result of the lack of
adequate controls, the Tribe obtained $63.1 million (original acquisition value) of
surplus Federal property, of which only $3.6 million was accounted for. The
$59.5 million balance of unneeded property was presumably sold by screeners at an
estimated price of $14.9 million, of which proceeds of approximately $2 million
could be accounted for in Tribal records.
Property Acquisition
Bureau control of property acquired by the Tribe was uncoordinated and ineffective.
At least a dozen Bureau officials approved the acquisition of surplus Federal
personal property by the Tribe. The Bureau officials were located in Washington,
D. C.; Albuquerque, New Mexico; and Aberdeen and Sisseton, South Dakota.
However, none of these officials knew how much Federal surplus property each of
the other officials had approved. Also, four Bureau officials provided SF 122s
("Transfer Order, Excess Personal Property") to Tribal screeners with only the
ordering agency approval block signed. The remaining blocks on the forms,
including the property ordered and description blocks, were not completed. In these
cases, Tribal screeners completed the forms for the identification and quantity of
property to be acquired. In a March 1993 letter to the Aberdeen Area Director, the
U.S. Attorney for South Dakota reported that "the use of presigned, blank forms
appears to be an area ripe for potential abuse." Overall, Bureau officials did not
ensure that the surplus property acquired by the Tribe was for use on its Public
Law 93-638 contracts and grants. This led to extensive and unreasonable
acquisitions of property by the Tribe. For example:
3
- Over 6,300 equipment items with an original acquisition cost of about
$20.9 million were obtained for a $391,000 aid to tribal government contract,[1] which
did not require any equipment. The equipment obtained for this contract included
588 engines, 76 transmissions, 68 trucks, 14 cranes, 27 forklifts, 17 generators,
10 road graders, 272 communication radios, 8 welders, 12 tractors, and 1,224 tires.
- In another instance, over 6,000 items of equipment with an original
acquisition cost of $12.5 million were obtained for a 3-year, $100,000 contract to
remove snow and maintain 7 miles of road. The equipment obtained for this
contract included 128 engines, 36 trucks, 21 cranes, 100 generators, 14 forklifts,
6 front-end loaders, 11 tractors, 4 water purification units, 2 rock crushing plants,
and 14 compressors.
The Tribe paid, to sellers of the surplus property, commissions varying from 13 to
26 percent of the sales price of property they acquired and sold, whereas the sellers
were not paid a commission on the property obtained for use on Tribal contracts
and grants. This practice encouraged the screeners to obtain property on the basis
of its marketability instead of on its use on Tribal contracts. The types of items
selected by the screeners for resale included earth moving equipment, farm
machinery, engines, generators, military surplus items, automobiles and light trucks,
cranes, and mining equipment. The screeners deposited sales proceeds into their
personal bank accounts before remitting the proceeds to the Tribe. When the
screeners sold property, neither Bureau nor Tribal officials knew what was sold or
how much it was sold for. Consequently, we could not determine the total amount
of property sold or the disposition of the sales proceeds. This and other matters
related to the misuse of Federal personal property are the subjects of an ongoing
Federal investigation.
Property Accountability
According to the Federal Property Management Regulations, each Federal agency
should develop and maintain an effective system for the prevention and detection
of situations involving the nonuse, improper use, or unauthorized disposal or
destruction of surplus personal property received by the agency. However, the
Bureau did not account for any of the property that was obtained by the Tribe
because, according to the Aberdeen Area Office Contracting Officer, Bureau
officials believed that accountability requirements applied only to property acquired
with Bureau-appropriated funds. Consequently, the Contracting Officer did not
record property acquisitions in the contract files or require Tribal officials to
[1]A contract to provide professional assistance to tribal administrators with regard to overall
direction
for administration, contracting, and socio-economic strategy, especially with regard to the natural
and
human resources of the organization.
4
inventory the property (as required by the Bureau Manual, 20 BIAM Supplement
1, Section 2.2H).
Of the $63.1 million (original acquisition costs) of surplus property acquired by the
Tribe, only $3.6 million was accounted for in the Tribal property inventory. This left
$59.5 million of property that could not be accounted for and which presumably has
been sold. Based on two documented sales of 30 diesel engines, we estimated that
surplus property sold for about 25 percent of the original acquisition cost.
Therefore, based on this percentage rate, proceeds from the sale of the $59.5 million
in property could have been about $14.9 million. However, only $2 million in sales
receipts was deposited into Tribal bank accounts as of November 30, 1992.
Based on documentation we obtained from the General Services Administration, the
Bureau, and the Tribe, we identified approximately 2,500 property transfer forms
showing that Indian organizations obtained, through the Bureau, surplus Federal
personal property with an acquisition cost of $180 million for the period May 1990
through December 1993. Our review of these transfer orders disclosed that many
Indian tribes were obtaining items which appeared to be consistent with contract
needs and appeared to be reasonable when considering quantities.
Recommendations
We recommend that the Assistant Secretary for Indian Affairs:
1. Develop, as part of its process for monitoring Public Law 93-638
contracts, procedures to ensure that surplus property obtained for self-determination
contracts is used and accounted for in accordance with the terms and conditions of
the contracts.
2. Require all surplus Federal personal property obtained by the Bureau
through the General Services Administration and donated to Indian tribes to be
properly accounted for.
Bureau of Indian Affairs Response
The October 31, 1994, response to the draft report from the Assistant Secretary for
Indian Affairs (Appendix 2) expressed nonconcurrence with Recommendations 1,
2, and 3. The reason cited for the nonconcurrence was that the Indian Self-
Determination Act Amendments of 1994 limited the responsibility and authority of
the Bureau in issues pertaining to the acquisition of surplus Federal property. The
response stated, "Given the provisions of the law, the [Bureau's] responsibility with
respect to the acquisition of surplus property by Indian tribes is limited to ensuring
that the contractors have screener cards and to assisting the tribes in obtaining
excess property, if such assistance is required." The response further stated that the
5
Bureau has no authority to determine what property is required to fulfill the terms
of contracts, as that determination is "now placed completely with the contractors."
Recommendation 1. The Bureau nonconcurred with the recommendation,
stating that it believes the 1994 amendments allow the tribes to determine that the
property requested on the SF 122s is "reasonable and necessary" for effective
completion of the contracts or grants.
Recommendation 2. The Bureau nonconcurred with the recommendation,
stating that it believes the 1994 amendments authorize the tribes to approve SF 122
transfers.
Recommendation 3. The Bureau nonconcurred with the recommendation
stating that it will no longer acquire the property for donation to the tribes but that
the tribes will acquire the property directly. The response further stated that the
tribes "are to account for the property based upon their internal procedures."
Office of Inspector General Comments
While we agree that the Indian Self-Determination Act Amendments of 1994
changed the process for tribes to acquire surplus property from the General Services
Administration, we do not agree that the Bureau is relieved of all of its
responsibilities related to the acquisition process. Section 105(f) of the amended
Act still authorizes the Bureau to acquire and donate excess property to Indian
tribes for their use on contracted programs. In that regard, regulations
implementing the donation provisions of the amended Act have yet to be
promulgated. These regulations should clarify the Bureau's role in the process.
Also, the model contract contained in Section 108 of the Amendments and cited by
the Bureau as the basis for reducing its role is not applicable to construction
contracts. Therefore, the Bureau needs to develop the process for acquiring surplus
equipment for use on construction contracts.
In our opinion, the deficiencies described in this report can still occur under the
provisions of the amended Act. Therefore, we believe that the Bureau should
develop necessary controls within the goals of Indian self-determination to ensure
that surplus property acquired under Public Law 93-638 is needed and utilized on
the contracts. To this end, we have replaced Recommendations 1 and 2 from our
draft report with a new recommendation (No. 1) and revised Recommendation 2
(formerly Recommendation 3). Therefore the Bureau is requested to provide a
response to both recommendations (see Appendix 3.)
6
APPENDIX 1
OFFICES VISITED OR CONTACTED DURING AUDIT
Offices Location
Bureau of Indian Affairs:
Headquarters Washington, D.C.
Aberdeen Area Office Aberdeen, South Dakota
Albuquerque Property Management Office[*] Albuquerque, New Mexico
Billings Area Office[*] Billings, Montana
Fort Berthold Agency[*] Fort Berthold, North Dakota
Sisseton Agency Office Sisseton, South Dakota
Ute Mountain Ute Agency[*] Towaoc, Colorado
General Services Administration Washington, D.C., and
Regional Offices[*] other locations
Sisseton-Wahpeton Sioux Tribal Office Sisseton, South Dakota
Ute Mountain Ute Tribal Office[*] Towaoc, Colorado
Department of Defense Property Offices:
Fort Carson[*] Colorado Springs, Colorado
Grand Forks Air Force Base[*] Grand Forks, North Dakota
[*]Contacted only.
7
APPENDIX 2
Page 1 of 2
United States Department of the Interior
OFFICE OF THE SECRETARY
Washington, D.C. 20240
OCTOBER 31, 1994
Memorandum
To: Acting Assistant Inspector General for Audits
/s/ Hilda A. Manuel Acting for
From: Ada E. Deer
Assistant Secretary - Indian Affairs
Subject: Draft Audit Report on the Acquisition of Surplus Federal Personal Property by the
Sisseton-Wahpeton Sioux Tribe, Bureau of Indian Affairs (Assignment No. C-IN-BIA-
002-94)
The Bureau of Indian Affairs does not dispute the findings contained in the draft audit report on
the
acquisition of surplus federal personal property by the Sisseton-Wahpeton Sioux Tribe. We do
appreciate
the fact that the audit included a statement indicating that based upon your review of transfer
orders for
many other tribes, the items obtained by those tribes appear to be consistent with contract needs.
In early October. Congress passed H.R. 4842. the "Indian Self-Determination Act Amendments
of 1994. "
The legislation has been signed by the President, although we do not yet have a public law
number. The
new law makes significant revisions to the previous provisions regarding the transfer of surplus
Federal
property.
Section 108 requires that each self-determination contract contain or incorporate by reference the
provisions of the model agreement which is also included in the law. With respect to the
acquisition of
property, the model agreement specifies that:
"The Contractor is granted the authority to acquire such excess property as the Contractor may
determine
to be appropriate in the judgment of the Contractor to support the programs, services, functions,
and
activities operated pursuant to this Contract. " (Emphasis added. )
The law goes on to state that:
"A screener identification card (General Services Administration form numbered 2946) shall be
issued
to the Contractor not later than the effective date of this Contract. "
The final provision specifically related to property provides that:
"The Contractor shall determine the capital equipment, leases, rentals, property, or services the
Contractor requires to perform the obligations of the contractor under this subsection, and shall
acquire
and maintain records of such capital equipment, property rentals, leases, property, or services
through
applicable procurement procedures of the Contractor. " (Emphasis added. )
8
APPENDIX 2
Page 2 of 2
One last provision merits mention since it affects all program and administrative operations
under the self-
determination contracts:
"Except as specifically provided in the Indian Self-Determination and Education Assistance Act
(25
U.S.C. 450 et seq.) the Contractor is not required to abide by program guidelines, manuals, or
policy
directives of the Secretary, unless otherwise agreed to by the Contractor and the Secretary, or
otherwise
required by law."
Given the provisions of the law, the Bureau of Indian Affairs' (Bureau), responsibility with
respect to the
acquisition of surplus property by Indian tribes is limited to ensuring that the contractors have
screener
cards and to assisting the tribes in obtaining excess property. if such assistance is required. We
have no
authority to determine what property is required to fulfill the terms of the contract, as that
determination
is now placed completely with the contractor.
With that background, we suggest that when the report is issued in final, the recommendations be
deleted.
as we lack the authority to implement the recommendations.
Recommendation 1. Require that Bureau officials determine that property requested on SF 122s
is
reasonable and necessary for effective completion of self-determination contracts or grants prior
to
approving such requests.
Response: The Bureau does not concur as the law has vested such a determination solely with the
contractors.
Recommendation 2. Allow only those officials responsible for oversight of a contract or grant to
authorize and approve SF 122 transfers for that contract or grant.
Response: The Bureau does not concur as the law has vested this authority solely with the
contractors.
Recommendation 3. Require that all surplus Federal personal property obtained by the Bureau
through
the General Services Administration and donated to Indian tribes be properly accounted for in
accordance
with the Federal Property Management Regulations and inventories in the tribes'
self-determination
contract files.
Response: The Bureau does not concur. The Bureau will no longer acquire the property for
donation
to the tribes; the tribes will acquire the property directly. In addition, the law states that the tribes
are
to account for the property based upon their internal procedures.
Any questions regarding this response may be directed to the Office of Audit and Evaluation.
9
APPENDIX 3
STATUS OF AUDIT REPORT RECOMMENDATIONS
Finding/
Recommendation
Reference Status Action Required
1 and 2 Unresolved. Provide a response to the revised
recommendations. If concurrence is
indicated, provide an action plan that
includes the target dates and the titles of
the officials responsible for
implementation. If nonconcurrence is
indicated, provide the reasons for the
nonconcurrence.
10
U.S. GOVERNMENT PRINTING OFFICE: 1995 301-126/00038
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