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.

It’s hard to assess the accuracy of the
approach. The consultants performing the
sampling work, a University of Chicago
offshoot called NORC, declined to be
interviewed for this article. Neal Hitzig, a
professor of accounting at Queens College
(New York), says statistical sampling is
“the way to go when the target population
is so large you can’t audit all the transactions.”
Certainly, a blow-by-blow corroboration
of every IIM transaction would be
prohibitively expensive. Most estimates
peg the cost of such a full-on reckoning at
$13 billion — equal to all the money that
has gone into the accounts since 1910.

But sampling has drawn heavy fire from
various quarters. Some question whether
the sample population is truly random or
whether it has been skewed to limit the
government’s liability. Others say a commercial
trustee would never rely on sampling
to verify the accuracy of account balances. In a report given
on behalf of the Cobell plaintiffs, Richard Fairchild, a former director
of trust policy at the OST, claimed that statistical sampling has “no place in a fiduciary accounting.” Indeed, some in Indian country
think the substitution of sampling for transaction verification
borders on racism. Says Harper, who heads law firm Kilpatrick
Stockton’s Native American rights practice: “The Interior Department
is saying that Indian beneficiaries don’t deserve the same
kind of accounting that any fiduciary would provide to any trustee.”

This Is Not Attest

Then again, accounting engagements rarely examine 120 years of
activity, involve 320,000 accounts, and cover 100 million transactions.
What’s more, an industry standard for fiduciary accounting
doesn’t exist. Auditors and trust managers
tend to follow the Uniform Principal and
Income Act of 1997. But that code was
developed by the insurance industry and
has not been adopted by every state. Says
Ira Herman, director of the estate and trust
practice at J.H. Cohn: “There is no such
thing as GAAP for fiduciary accounting.”

Even critics of the OST’s approach
acknowledge the unusual circumstances
surrounding the Historical Accounting
Project. “This is obviously not a traditional
audit,” says Geoffrey Rempel, a former
Price Waterhouse CPA working for the
Cobell litigants. But, Rempel asserts, “you
can still take the principles in GAS [governmental
accounting standards] and
GAAP and apply them here.”

In truth, it’s tough to tell what accounting
standards the OST is applying. The
DoI touts the phalanx of consulting firms
working on the project, including five
accounting firms. (All declined to be interviewed
for this story.) But the firms are not
performing an audit. Instead, the Historical
Accounting Project more closely
resembles an “agreed-upon-procedures”
engagement. Indeed, internal DoI documents
show that the agency has instructed
the accounting firms to refrain from
using the word audit or even attestation
when discussing their roles in the project.


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