The Long Trail

The government's tallying of Indian trust money may well be the most ambitious accounting project in U.S. history. It's also the most controversial.

Accountants have issued qualified opinions on audits of the
Indian trust funds every year since 1996, citing, among other
things, weaknesses in controls and processes. And while lax
internal controls are not unheard of at federal agencies, few
departments have been skewered like the BIA — and fewer serve
as trustees. Even Swimmer, a former principal chief of the
Cherokee Nation of Oklahoma, acknowledges that previous systems
“were not appropriate for the work that needed to be done
for the majority of the time of the trusts.”

Nevertheless, officials at the DoI say the historical accounting
is uncovering few mistakes. They claim that less than one
percent of all transactions reconciled to date have been in error.
Swimmer says he’s not surprised by the results. “It was a manual
system,” he notes, “but it worked.” He adds that the weak link
in the old system was the agency’s reliance on BIA field offices
to handle lease proceeds flowing into the system. “Accountants
found risk,” he grants, “but not losses.”

Critics contend that the department hasn’t found losses
because it isn’t looking for them. The Office of the Special Trustee,
for example, has yet to tackle most transactions dating from the
agency’s “paper era” — that is, before Interior moved to an electronic
ledger system in 1985. The agency also appears to be stacking
the deck in its favor when calculating error rates. It notes that
the absence of sufficient supporting documentation for a transaction
does not imply an error — and “it does not plan to include
such occurrences in the calculated national error rates.”

Fractured Nation

Classifying uncorroborated transactions as accurate does little to
mollify critics. In addition, the OST’s initial work zeroed in on the
types of trust accounts that are easiest to reconcile. These large,
often lump-sum payments (such as court awards) are made to native nations and later distributed to individual tribal members.
“They are the simplest [transactions], the least likely to be subject
to error or fraud,” claims Cobell. In short, “the low-hanging fruit.”

Reconciling land-based leases — for logging rights and the like —
could prove even thornier. Payments into those accounts, which
currently make up more than 75 percent of the individual Indian
accounts, often show up sporadically and in varying amounts. And
thanks to the handing down of land allotments to heirs, the
accounts often have a lot of beneficiaries (a process called fractionation). Currently, beneficial ownership of the more than 320,000
individual accounts is divided among 4 million interests, with some
allotments boasting a thousand beneficiaries or more. Deposits
into these accounts sometimes amount to just 3 or 4 cents.

The OST had planned to perform a broader transaction-by-transaction
reconciliation of individual Indian accounts, including
the badly fractionated land-based
accounts. But, facing time and funding
constraints, the OST has scaled back the
scope of the Historical Accounting Project.
Under the latest scheme, the agency ended
up performing statistical sampling on
land-based transactions valued at under
$100,000. With sampling, the OST takes a
small number of transactions and applies
the error rate to all accounts within specified
“strata.” Those accounts are then categorized
as reconciled.


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