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WEDNESDAY, APRIL 3, 2002

The Department of Interior is sitting on top of $67 million in trust funds for Indian beneficiaries who cannot be properly identified, according to a recently released independent audit.

Based on data for fiscal year 2001, which ended last September, the amount of money held in the "special deposit" accounts is growing, reported KPMG. The firm, a certified public accountant, was hired to review the department's financial statements.

KPMG, whose talks with Arthur Andersen to purchase the embattled firm's foreign unit have fallen apart, was not required to express an opinion on the Interior's fiscal well being. Based on the company's report of the funds held in trust for 300,000 Indians and more than 315 tribes, it is practically impossible to do so.

For instance, KPMG's audit disclosed the following:

"Interior is unable to reconcile the Indian Trust Fund cash balances that are disclosed in the footnotes to Interior's financial statements with the cash balances reported by the U.S. Department of the Treasury," KPMG wrote on February 25.
According to KPMG, Interior reports $33 million more in the Indian trust system than the Treasury. Further, $12.6 million in trust accounts remains unreconciled, the firm found.

"Interior is unable to provide accounting records to properly support the Indian Trust Fund balances," reported KPMG.
The firm found a negative balance of $44 million in the Individual Indian Money (IIM) trust.

"A significant number of special deposit accounts have remained inactive for the past several years and new accounts continue to be established," KPMG wrote.
The Office of Trust Funds Management (OTFM), an entity within the Office of the Special Trustee, is charged with identifying the proper owners of the funds.

The problems reported are nothing new to the management of the Indian trust. The Bush administration's response to KPMG's recommendation to implement better financial and other controls was to say it was working to correct known deficiencies.

"A variety of actions are underway within the Office of the Special Trustee to address management control deficiencies in coordination with direction from senior policy officials of Interior and the December 1999, court decision," the department said.

But the special deposit accounts, which typically represent high dollar transactions, many in excess of $1 million, highlight an issue which has baffled just about everyone involved. "That's one of the areas of disclosure that's been lacking," said Dennis Gingold, an attorney representing the IIM beneficiaries in the Cobell class action.

"There could be a few special deposit accounts that could be [erased] and nobody would know," he said.

The accounts are supposed to be temporary place holders for lease, royalty or other payments owed to Indian beneficiaries. As part of its trust responsibility, the Interior is supposed to transfer the money to the rightful owner or owners.

By the department's admission, it has failed miserably, although a pilot project is being started to address the problem. "Numerous findings have cited the significant misuse of special deposit accounts for purposes other than those established," OTFM officials said in a recent court report.

The special deposit issue is separate from the status of inactive accounts. The department is moving to close as many as 18,000 low balance accounts based on a pending opinion from Solicitor Bill Myers.

Additionally, the department has to resolve the number of accounts lacking current addresses. There were more than 62,000 "whereabouts unknown" accounts as of December 31, 2001.

KPMG's audit was included a package prepared for Secretary Gale Norton by the Office of the Inspector General.

Get the Audit:
TEXT | PDF

Relevant Links:
KPMG - http://www.kpmg.com
Indian Trust, Department of Interior - http://www.doi.gov/indiantrust
Indian Trust: Cobell v. Norton - http://www.indiantrust.com
Trust Reform, NCAI - http://130.94.214.68/main/pages/
issues/other_issues/trust_reform.asp

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Trust accounting looms for tribes (3/20)
Bush administration bets on accounting (3/18)
Interior considering a limited trust fund (3/15)
Norton: No 'dollar amount' on trust fund mess (3/14)
Trust fund accounting tests federal judge (3/13)
Interior still without trust reform plan (2/27)