[Survey Report on Investments and Deposits of Public Law 100-297 Grant Funds by Schools Operated by Indian Tribes and Tribal Organizations]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 99-i-126

Title: Survey Report on Investments and Deposits of Public Law
       100-297 Grant Funds by Schools Operated by Indian Tribes
       and Tribal Organizations

Date:  December 11, 1998




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U.S. Department of the Interior
Office of Inspector General




SURVEY REPORT


INVESTMENTS AND DEPOSITS OF PUBLIC LAW 100-297
GRANT FUNDS BY SCHOOLS OPERATED BY INDIAN TRIBES
AND TRIBAL ORGANIZATIONS


REPORT NO. 99-I-126

DECEMBER 1998




MEMORANDUM

TO:               The Secretary

FROM:             Eljay B. Bowron
                  Inspector General

SUBJECT SUMMARY:  Final Survey Report -
                  "Investments and Deposits of Public
                  Law 100-297 Grant Funds by Schools
                  Operated by Indian Tribes and Tribal
                  Organizations" (No. 99-i-126)

Attached for your information is a copy of the subject final
survey  report of investments and deposits of Federal  grant
funds made  by  schools  that were operated by Indian tribes
and tribal organizations under  grants  authorized by Public
Law 100-297.  The objective of the survey  was  to determine
whether  these  schools  invested  Bureau  of Indian Affairs
grant  funds  in  accordance  with the requirements  of  the
statute.

We found that at least 18 of the 41 schools reviewed did not
invest  Bureau  grant funds in accordance  with  Public  Law
100-297,   which   states   that   grant   funds   "may   be
. . . invested only  in  obligations of the United States or
in obligations or securities  that are guaranteed or insured
by the United States, or . . . deposited  only into accounts
that  are  insured  by an agency or instrumentality  of  the
United States."  School  personnel stated that they were not
aware of the requirements  of   Public Law 100-297; were not
knowledgeable of the insurance limits ($100,000) on checking
and  savings  accounts;  and  were  not   knowledgeable   of
obligations,  securities,  and accounts that were guaranteed
or insured by the Government.  In addition, we noted that 12
of  the  single audit reports for  the  18 schools  did  not
identify the  investment  of funds in unsecured or uninsured
obligations and accounts as  a reportable audit finding.  As
a result, at least three schools  lost grant funds of  about
$691,000 that were invested in obligations,  securities, and
accounts which were not adequately insured or guaranteed.

In  its  response, the Bureau agreed with our recommendation
to address  this issue. Based on the response, we considered
the recommendation resolved but not implemented.

If  you have  any  questions  concerning this matter, please
contact  me at (202) 208-5745 or  Mr.  Robert  J.  Williams,
Assistant Inspector General for Audits, at (202) 208-4252.


Attachment




December 11, 1998                           C-IN-BIA-006-97


SURVEY REPORT


Memorandum

     To:  Assistant Secretary for Indian Affairs

   From:  Robert J. Williams
          Assistant Inspector General for Audits

Subject:  Survey Report on Investments and
          Deposits of Public Law 100-297 Grant Funds by
          Schools Operated by Indian Tribes and Tribal
          Organizations (No. 99-i-126)

      INTRODUCTION

      This  report  presents  the  results  of our survey of
      investments and deposits of Federal  grant  funds made
      by  schools  that  were operated by Indian tribes  and
      tribal organizations under grants authorized by Public
      Law 100-297.   The objective  of  the  survey  was  to
      determine whether  these  schools  invested  Bureau of
      Indian  Affairs  grant  funds  in accordance with  the
      requirements of the statute.

      BACKGROUND

      The  Bureau's Office of Indian Education  Programs  is
      responsible   for  providing  comprehensive  education
      programs  and  services   for   approximately   50,000
      students   enrolled  in  Bureau-funded  schools.   The
      Director, Office of Indian Education Programs, reports
      directly  to   the   Assistant  Secretary  for  Indian
      Affairs.  The Indian Self-Determination  and Education
      Assistance  Act  (Public  Law 93-638,  as   amended  )
      ensured  Indian  participation  in  the  direction  of
      educational  and  other  Federal  services  to  Indian
      communities in order to make these services responsive
      to  the needs and desires of the communities.   Public
      Law 93-638   authorized   Indian   tribes  and  tribal
      organizations to enter into contracts  with the Bureau
      to  operate Indian education and other programs.   The
      Tribally  Controlled  Schools  Act of 1988 (Public Law
      100-297, as amended) provided Indian tribes and tribal
      organizations with greater control of the education of
      Indian   children   by   "assuring   maximum    Indian
      participation in the direction of educational services
      so  as to render such services more responsive to  the
      needs and desires of those communities."
      Public Law 100-297 states that its objective is to

           . . . provide  the resources, processes, and
           structures  which  will  enable  tribes  and
           local communities to effect the quantity and
           quality   of   educational    services   and
           opportunities   which  will  permit   Indian
           children to compete  and  excel  in the life
           areas  of  their choice, and to achieve  the
           measures of  self-determination essential to
           their social and economic well-being.

      Public Law 100-297  authorizes  the  Bureau to provide
      grants  to  Indian tribes and tribal organizations  to
      operate tribally  controlled  schools and requires the
      Bureau to release grant funds to schools in advance of
      their needs as follows: one payment  equal to one-half
      of the school's prior year funding is  to  be  made by
      July  15  of each year, and the remainder of the grant
      funds are to  be  paid by December 1.  Public Law 100-
      297 allows schools  to  invest and deposit grant funds
      received from the Bureau  and  to  keep any investment
      income or interest that was earned on  the grant funds
      advanced.  Public Law 100-297  states that grant funds

           . . . may    be   (A)   invested   only   in
           obligations  of  the  United  States  or  in
           obligations   or    securities    that   are
           guaranteed or insured by the United  States,
           or  (B) deposited only in accounts that  are
           insured  by  an agency or instrumentality of
           the United States.

      Section 112 of the  Department  of  the  Interior  and
      Related  Agencies  Appropriations Act of 1998 provided
      more specific guidance  on  the investment and deposit
      requirements  for Federal funds  advanced  to  "Indian
      tribes, tribal  organizations,  and  tribal  consortia
      pursuant   to   the   Indian   Self-Determination  and
      Education Assistance Act (25 U.S.C.  450  et  seq.) or
      the Tribally Controlled Schools Act of 1988 (25 U.S.C.
      2501  et  seq.)."  The  Appropriations Act states that
      advanced funds

           . . . may be invested  by  the Indian tribe,
           tribal  organization,  or consortium  before
           such funds are expended  for  the purpose of
           the   grant,   compact,  or  annual  funding
           agreement so long  as  such  funds  are  (a)
           invested   by   the   Indian  tribe,  tribal
           organization,   or   consortium    only   in
           obligations  of  the  United  States, or  in
           obligations    or   securities   that    are
           guaranteed or insured  by the United States,
           or mutual (or other) funds  registered  with
           the  Securities  and Exchange Commission and
           which  only invest  in  obligations  of  the
           United  States   or   securities   that  are
           guaranteed or insured by the United  States,
           or (b) deposited only into accounts that are
           insured  by an agency or instrumentality  of
           the   United    States,    or    are   fully
           collateralized to ensure protection  of  the
           Funds, even in the event of a bank failure.

      Further  guidance  on  the use of funds advanced under
      Public Laws 93-638 and 100-297  was  provided  by  the
      Associate Solicitor, Division of Indian Affairs, in  a
      February  4,  1998, memorandum to the Acting Inspector
      General.   The memorandum affirmed that funds provided
      under  these  public   laws  are  available  only  for
      authorized purposes as specified  in  legislation  and
      the  funding  agreements.   Regarding  the  investment
      provision   of   Public  Law 100-297,  the  memorandum
      states:

           This  provision  clarifies  three  important
           issues: (1) that tribally controlled schools
           grantees are to expend grant funds only "for
           the  purposes  for  which  such  funds  were
           provided,"  (2)  that  the manner in which a
           grantee may invest these  funds  is limited,
           and  (3)  that  the  interest  or investment
           income   that  accrues  on  the  appropriate
           investment of such funds are the property of
           the grantee  and  may  be  used for purposes
           beyond those stated in the grant.

           It is extremely important to note that grant
           funds are not appropriated as part of tribal
           priority account base, and in  no way become
           part of the tribe's overall funding.   Grant
           funds,  therefore, cannot be transferred  or
           used  for   purposes   outside  of  enabling
           legislation.

      Indian tribal organizations that  receive  Public  Law
      93-638  or  Public  Law  100-297 funds are required to
      submit  to  the Bureau annual  or  biannual  financial
      audits conducted  pursuant  to the Single Audit Act of
      1984.  The scope of these single  audits  includes the
      testing of internal controls over major programs and a
      determination  by the auditor of "whether the  auditee
      has  complied  with   laws,   regulations,   and   the
      provisions  of  contracts or grant agreements that may
      have a direct and material effect on each of its major
      programs."  The Bureau  uses  the single audit reports
      as its principal tool to monitor  the  use of funds by
      contract and grant recipients.

      For  the  1995-1996  school year, the Bureau  received
      about  $352  million  in  Indian  School  Equalization
      Formula, student transportation,  facilities operation
      and maintenance, and Administrative  Costs Grant funds
      to  operate 187 schools.  The funds consisted  of  the
      following:  $206.6 million  for  80  schools that were
      operated  by  Indian  tribes  and tribal organizations
      under Public Law 100-297 grants  and  for  18  schools
      that   were  operated  by  Indian  tribes  and  tribal
      organizations  under  Public  Law 93-638 contracts and
       $145.7 million for 89 schools  that  were operated by
      the  Bureau. (Bureau-operated schools do  not  receive
      Administrative Costs Grants.)

      SCOPE OF SURVEY

      Our  survey  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.  We  judgmentally
      selected 41 of the  80  grant  schools and focused our
      review on the most recent audit  reports (fiscal years
      1994 through 1996) required by the Single Audit Act of
      1984  to determine whether grant funds  were  invested
      and deposited  in  accordance with the requirements of
      Public Law 100-297.

      We  also  reviewed  the   Department's  Accountability
      Report   for   fiscal   year  1996,   which   includes
      information   required   by  the   Federal   Managers'
      Financial Integrity Act of  1982,  and  the  Bureau of
      Indian  Affairs annual assurance statement for  fiscal
      year 1996 to determine whether any reported weaknesses
      were within  the  objective  and  scope of our review.
      Neither  the  Accountability Report nor  the  Bureau's
      assurance  statement   addressed  the  investment  and
      deposit of Public Law 100-297  grant  funds  by tribal
      schools.

      PRIOR AUDIT COVERAGE

      Neither  the  Office  of  Inspector  General  nor  the
      General  Accounting  Office has issued a report during
      the  past 5 years on the  investment  and  deposit  of
      Public Law 100-297 grant funds.

      RESULTS OF SURVEY

      We found  that  at least 18 of the 41 schools reviewed
      invested  Bureau of  Indian  Affairs  grant  funds  in
      obligations and securities that were not guaranteed or
      fully insured by the Government and/or deposited grant
      funds into  accounts  that  were  not  insured  by the
      Government.   Public  Law  100-297  states  that grant
      funds  "may  be . . . invested only in obligations  of
      the United States or in obligations or securities that
      are guaranteed  or  insured  by  the United States, or
      . . . deposited only into accounts that are insured by
      an  agency or instrumentality of the  United  States."
      However,  school  personnel  stated that they were not
      aware of the requirements of  Public Law 100-297; were
      not knowledgeable of the insurance  limits  ($100,000)
      on   checking  and  savings  accounts;  and  were  not
      knowledgeable of obligations, securities, and accounts
      that were  guaranteed or insured by the Government. In
      addition, we noted that 12 of the single audit reports
      for the 18 schools  did not identify the investment of
      funds  in  unsecured  or   uninsured  obligations  and
      accounts as a reportable audit  finding.  As a result,
      at  least  three schools lost grant  funds  of   about
      $691,000   that    were   invested   in   obligations,
      securities, and accounts  which  were  not  adequately
      insured or guaranteed.

      Based  on  our review of the single audit reports  for
      fiscal years 1994 through 1996 (most recent available)
      of the 41 schools  that  had  unexpended  grant  funds
      provided pursuant to Public Law 100-297 at the end  of
      each  of  the  fiscal  years,  we found the following:
      audit   reports   for  22 schools  did   not   provide
      sufficient information  for us to determine the amount
      of grant funds that was invested  and/or  deposited in
      accordance  with  the requirements of Public  Law 100-
      297; 1 school had invested and/or deposited all of its
      grant funds (about  $1.2 million)  in  accordance with
      the  requirements  of   Public  Law  100-297;  and  18
      schools   (Appendix  2)  had  grant  funds  of   about
      $11.9 million  as  of September 30, 1996,  invested in
      securities and/or deposited  into  accounts which were
      not  insured  by  the Government, as required  by  the
      public law.  We determined  that uninsured investments
      of 3 of the 18 schools resulted  in  losses  of  grant
      funds totaling about $691,000 as follows:

     -  In  fiscal  years  1994  and 1995, Sicangu Oyate Ho,
      Inc., St. Francis,  South Dakota,  lost grant funds of
      $450,000 that were invested in mutual funds which were
      not  insured  by  the Government.  These  losses  were
      charged   to   Public   Law 100-297    Grant   Numbers
      GTA07X32802   ($399,000)  and  GTA07X32804  ($51,000).
      Therefore, we question   the costs of $450,000 because
      the  grant does not contain  provisions  for  charging
      investment  losses.   According  to the school's audit
      report, the school, at the end of  fiscal  year  1995,
      had   Public   Law 100-297  grant  funds  of  $435,000
      invested in securities  and  accounts  that  were  not
      insured by the Government.

     -  In  fiscal  years  1994  and  1995,  the Crazy Horse
      School,  Wanblee,  South Dakota, lost grant  funds  of
      $192,000 that were invested  in  securities which were
      not insured by the Government.  The  investment losses
      were charged to the School board's trust  fund  rather
      than to Public Law 100-297 grants.  The School board's
      trust  fund,  which  was  used  to  supplement  school
      operations,  received most of its revenues from income
      earned  on investments  of  Public  Law 100-297  grant
      funds.  According  to  the  School's audit report, the
      School,  at the end of fiscal  year  1995,  had  grant
      funds of about $1.5 million invested in securities and
      deposited  into  accounts that were not insured by the
      Government.

     -  In  fiscal  year  1995,  the  White  Shield  School,
      Roseglen, North Dakota,  lost  grant  funds  of  about
      $49,000  that  were  invested in securities which were
      not insured by the Government.   The investment losses
      were charged to the School's Public  Law 100-297 grant
      (grant number not disclosed by the single  audit).  We
      question costs of $49,000 because the grant  does  not
      contain  provisions  for  charging  investment losses.
      According  to  the  School's  fiscal year  1995  audit
      report, the School had changed its investments so that
      all Public Law 100-297 grant funds  were in securities
      that were insured by the Government.

      School personnel said that grant funds  were  invested
      in  obligations  and  securities  and  deposited  into
      accounts  which  were not guaranteed or insured by the
      Government because  they  were  not  aware  of (1) the
      Public  Law  100-297  requirements  for investing  and
      depositing grant funds; (2) the insurance  limitations
      ($100,000)  of Federally insured checking and  savings
      accounts;   and   (3) what   constituted   securities,
      obligations,  and  deposits  which  were guaranteed or
      insured  by  the  Government.   For  example,  at  the
      Mescalero Apache School in Mescalero,  New Mexico, the
      finance  director,  who was responsible for  investing
      grant funds, stated that  he  thought that grant funds
      could be invested only in Federally  insured  checking
      and savings accounts.  At the end of fiscal year 1996,
      this  school  had  Public  Law 100-297 grant funds  of
      about  $1.9 million  in  a  checking   account,  which
      significantly exceeded the $100,000 that is insured by
      the  Government.   At  the Santa Fe Indian  School  in
      Santa Fe,  New  Mexico,  the   comptroller,   who  was
      responsible for investing grant funds, stated that  he
      believed  that  mutual  funds  which  invested only in
      Federally insured obligations and securities  and  any
      investment  which  was  collateralized  with Federally
      insured securities were considered to be in compliance
      with  the investment requirements of Public  Law  100-
      297, even  though  the investments (mutual funds) were
      not guaranteed or insured  by  the Government.  At the
      end of fiscal year 1996, this school  had  Public  Law
      100-297  grant funds of about $1.6 million invested in
      mutual  funds  that  consisted  of  Federally  insured
      securities  ($1.4 million) and in uninsured securities
      that  were  collateralized   with   Federally  insured
      securities  ($217,000).   Although  these  investments
      were  not in accordance with the requirements  of  the
      Act, they are appropriate under the revised investment
      requirements     included    in    the    Department's
      appropriations act for 1998.

      To clarify the limitations  on  investments and on the
      uses  of  advance funds, the Assistant  Secretary  for
      Indian  Affairs   issued,  on  February  20,  1998,  a
      memorandum to all area  office directors, the Director
      of the Office of Self-Governance,  the Director of the
      Office of Indian Education Programs, and other senior-
      level officials.  The memorandum provided  a  copy  of
      the    Associate   Solicitor's   February   4,   1998,
      memorandum,    which   highlighted   the   legislative
      restrictions  on   investments   and   instructed  the
      officials  to  provide  the  opinion to "all  awarding
      officials and to all tribes, tribal organizations, and
      school boards which receive awards."  Regarding single
      audits,  the  Director  of  the Office  of  Audit  and
      Evaluation issued a memorandum  on  February 23, 1998,
      to  all  auditors  from whom the Office  had  received
      audit reports during fiscal years 1996, 1997, and 1998
      to provide "information in several areas to assist you
      in  future  audits."    Regarding   investments,   the
      memorandum stated:

           Congress has placed statutory limitations on
           the securities that can be purchased and the
           accounts   in   which   the   funds  can  be
           deposited.   These limitations ,  which  are
           found in section  112  of  the Department of
           the    Interior    and    Related   Agencies
           Appropriations Act, 1998, P.L.  [Public Law]
           105-83, are discussed on pages 7  and  8  of
           the   enclosed   Solicitor's   Opinion  [the
           Associate Solicitor's memorandum of February
           4, 1998]. . . .  Any deviations  from  these
           investment  limitations  are not allowed and
           should  be  reported  as  an audit  finding.
           Losses  on  any type of investment  activity
           may not be charged  to BIA [Bureau of Indian
           Affairs]-funded programs.

      In  addition,  the Office of  Inspector  General  will
      issue a supplemental  letter  to  Indian organizations
      and  to  area  directors  which  will  highlight   the
      directions  for  investments  and  fund  transfers  as
      stated   in   the  Associate  Solicitor's  February  4
      memorandum.  Finally,  based on a preliminary draft of
      this report, the Assistant  Secretary,  in  a July 13,
      1998,  memorandum  to  the  Director, Office of Indian
      Education  Programs,  directed  that  "education  line
      officers  amend the grant  documents  with  respective
      school boards  to  include the investment restrictions
      contained  in  the  Department   of   the   Interior's
      Appropriations  Act for Fiscal Year 1998" by September
      30, 1998.  We believe  that  these  actions  will help
      ensure  compliance with the limitations on investments
      and deposits.

      On September  4,  1998, we met with representatives of
      the  Office  of  Audit   and   Evaluation,   Assistant
      Secretary  for  Indian Affairs, and the Office of  the
      Solicitor, Division  of Indian Affairs, to discuss the
      time  frame  for  recovering   the  investment  losses
      charged  to the Public Law 100-297  grants.   In  that
      regard, Section  106(f)  of Public Law 93-638[1] seems
      to   indicate    that  the  Secretary   can   disallow
      grant/contract costs  only  if  the action to do so is
      initiated  within  1  year of receipt  of  the  annual
      single audit report.  Section 106 (f) states:

           Any right of action  or  other remedy (other
           than  those relating to a criminal  offense)
           relating  to any disallowance of costs shall
           be barred unless  the  Secretary  has  given
           notice of any such disallowance within three
           hundred and sixty-five days of receiving any
           required  annual  single agency audit report
           or,  for  any  period   covered  by  law  or
           regulation in force prior  to  enactment  of
           Chapter  75  of  title 31 ["Requirements for
           Single  Audits"], United  States  Code,  any
           other  required  final  audit  report. . . .
           For the  purpose  of determining the 365-day
           period specified in this paragraph, an audit
           report shall be deemed to have been received
           on  the  date  of  actual   receipt  by  the
           Secretary,   if,   within   60  days   after
           receiving the report, the Secretary does not
           give  notice  of  a  determination   by  the
           Secretary to reject the single-agency report
           as  insufficient  due  to noncompliance with
           Chapter 75 of title 31,  United States Code,
           or noncompliance with any  other  applicable
           law.

      For the two schools cited in the report  (page 4), the
      Secretary received the single audit reports  more than
      1  year  ago,  and no action was taken to recover  the
      losses charged against  the  Public Law 100-297 grants
      because the reports did not identify  or  include  the
      losses in a schedule of questioned costs.  An attorney
      from the Office of the Solicitor said that he believed
      that  Section  106(f)  prohibited  the  Secretary from
      attempting  to  recover the investment losses  because
      the Secretary had  not initiated action to recover the
      losses within 1 year  of  receipt  of  the  applicable
      single audit reports.  However, the Office of  General
      Counsel for the Office of Inspector General said  that
      it  is  not  entirely  clear  whether  Section  106(f)
      prohibits  all rights of action, including those based
      on discretionary  audits,  such  as those conducted by
      the  Office  of  Inspector General or  prohibits  only
      those  actions  based   on  a  disallowance  of  costs
      contained in a single audit report.

      Our draft report recommended  that  the Bureau recover
      the  investment losses that were charged  against  the
      grants.  However, because Section 106(f) is subject to
      varying  interpretations, we believe that the issue of
      disallowing/recovering  costs  which are questioned in
      audit reports or other reviews that are conducted 1 or
      more years after the applicable single audit report is
      received  by  the Secretary should  be  resolved.   As
      such, we have revised our recommendation.

      Based on a review of the draft report by the Office of
      Audit and Evaluation,  Assistant  Secretary for Indian
      Affairs,  we  have revised the report  to  incorporate
      that office's comments
      and  to reflect  the  advice  of  the  Office  of  the
      Solicitor regarding disallowed costs.

      Recommendation

      We recommend  that  the Assistant Secretary for Indian
      Affairs request an opinion  from  the  Office  of  the
      Solicitor  to  determine  whether  Section  106(f)  of
      Public  Law  93-638  prohibits  the  Secretary  of the
      Interior  from  recovering disallowed questioned costs
      that are identified  in audit reports or other reviews
      conducted 1 or more years  after the applicable single
      audit report is received.  If  the Solicitor's opinion
      states that the questioned costs can be recovered, the
      Assistant Secretary should ensure  that the investment
      losses  are recovered or returned to  the  appropriate
      grant program.

      **FOOTNOTES**

      [1]:Public Law 100-297 incorporates certain provisions
      of Public Law 93-638, including Section 106(f). Assistant
      Secretary for Indian Affairs Response and Office of
      Inspector General Reply

      In the October 16, 1998, response (Appendix  3) to the
      draft  report,  the  Assistant  Secretary  for  Indian
      Affairs agreed with the recommendation and provided  a
      copy of the October 8, 1998, request for a Solicitor's
      opinion.   Based  on  the  response,  we  consider the
      recommendation    resolved    but   not   implemented.
      Accordingly, the recommendation  will  be  referred to
      the  Assistant  Secretary  for Policy, Management  and
      Budget for tracking of implementation.

      The  response also stated that,  in  addition  to  the
      actions  described  in the report (page 6), the Office
      of Audit and Evaluation is working with our office and
      the  Office  of  Management   and  Budget  to  develop
      "information  for  inclusion  in  the   Single   Audit
      Compliance  Supplement."   In  addition,  the response
      requested that we update the information in our report
      on  the  basis  of  the fiscal year 1996 single  audit
      report for Sicangu Oyate  Ho, Inc., "to the extent the
      additional information falls  within the scope of your
      audit." The fiscal year 1996 single  audit for Sicangu
      Oyate Ho, Inc., had not been issued at the time of our
      audit.  Therefore, we have not revised  our  report on
      the basis of the 1996 single audit.

      Since   the   report's  recommendation  is  considered
      resolved,  no  further   response  to  the  Office  of
      Inspector General is required (see Appendix 4).

      The legislation, as amended,  creating  the  Office of
      Inspector   requires   semiannual   reporting  to  the
      Congress  on all audit reports  issued,  the  monetary
      impact of audit  findings  (Appendix 1), actions taken
      to implement audit recommendations, and identification
      of each significant recommendation on which corrective
      action has not been taken.

      We  appreciate the assistance  of  Bureau  and  school
      personnel in the conduct of our survey.
                                                  APPENDIX 1


         CLASSIFICATION OF MONETARY AMOUNTS


------------------------------------------------------------
         Finding                            Questioned Costs


      Investment losses                             $691,000
------------------------------------------------------------
                                                  APPENDIX 2


        SCHOOLS WITH BUREAU OF INDIAN AFFAIRS GRANT FUNDS
         IN NONGUARANTEED OR FULLY INSURED INVESTMENTS*


------------------------------------------------------------
                                                      Amount
      School              Location                  Invested


Alamo Navajo          Magdalena, New                $400,206
School Board          Mexico                         316,904
American Horse        Allen, South                 2,191,265
School                Dakota                         396,900
Cibecue Community     Cibecue,                       223,010
Ed. Board             Arizona                      1,391,000
Crazy Horse           Wanblee, South                 929,067
School                Dakota                         384,884
Grey Hills High       Grey Hills,                    572,445
School                Arizona                      1,894,627
Hannahville           Wilson,                        678,117
Indian Community      Michigan                       220,095
Lac Courte            Hayward,                       255,800
Oreilles              Wisconsin                       52,513
Laguna Pueblo         Laguna, New                  1,232,494
Middle School         Mexico                         435,000
Menominee Indian      Neopit,                        300,515
Tribe                 Wisconsin
Mescalero Apache      Mescalero, New                   5,472
School                Mexico
Navajo                Farmington, New
Preparatory           Mexico
School                Cloquet,
Fon Du Lac            Minnesota
Ojibway School        Oneida,
Paschal Sherman       Wisconsin
Indian School         Porcupine,
Porcupine School      South Dakota
Santa Fe Indian       Santa Fe, New
School, Inc.          Mexico
Sicangu Oyate Ho,     St.  Francis,
Inc.                  South Dakota
Tiospa Zina           Agency Village,
Tribal School         South Dakota
Wa He Lute Indian
Community             Olympia,
    School            Washington

Total                                            $11,880,314
------------------------------------------------------------

*This information is based on data contained in the  most
recent single audit report for each school available at the
time of our review.  This consisted of information from
reports for fiscal years 1994, 1995, and 1996  because some
schools did not have reports for all 3 years.

APPENDIX 3
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APPENDIX 3
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APPENDIX 3
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APPENDIX 3
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APPENDIX 3
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APPENDIX 3
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APPENDIX 4


STATUS OF AUDIT REPORT RECOMMENDATION


-----------------------------------------
 Finding/
Recommendation
Reference   Status        Action Required

-----------------------------------------
1    Resolved;     No further response to the
     not           Office of Inspector General is
     implemented   required.  The recommendation
                   will be referred to the
                   Assistant Secretary for
                   Policy, Management and Budget
                   for tracking of
                   implementation.
-----------------------------------------




ILLEGAL OR WASTEFUL ACTIVITIES SHOULD BE REPORTED

TO THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:



Within the Continental United States

U.S. Department of the Interior
Office of Inspector General
1849 C Street,N.W.
Mail Stop 5341
Washington, D.C. 20240

Calling:

Our 24 hour
Telephone HOTLINE
1-800-424-5081 or
(202) 208-5300

TDD for hearing impaired
(202) 208-2420 or
1-800-354-0996



Outside the Continental United States


Caribbean Region

U.S. Department of the Interior
Office of Inspector General
Eastern Division- Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

Calling:
(703) 235-9221


North Pacific Region

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. F'lores Street
Suite 807, PDN Building
Agana, Guam 96910


Calling:
(700) 550-7428 or
COMM 9-011-671-472-7279