Summary

The Indian Self-Determination and Education Assistance Act was passed in 1975 to encourage tribes to manage programs that for years had been run on their behalf by the departments of the Interior and Health and Human Services. These programs include social services, health care, law enforcement, road maintenance, and forestry. Tribal contractors must receive funding equal to what each of the agencies would have provided had they run the programs. Contractors are also to receive funding for activities that they must perform to manage a program's contract. These contract support costs have grown considerably during the past 25 years. GAO found that tribes' allowable contract support costs tripled from 1989 through 1998--rising from $125 million to $375 million. This increase occurred for two reasons. First, the total amount of program dollars contracted by tribes--upon which contract support costs are based--has increased. Second, the total cost of tribes' administration of contracts has increased. Congressional funding has not kept pace with these increases. The resulting shortfalls have caused financial problems and frustration for tribes administering the programs. To make up for the shortfalls, tribes have reported using program funds, which reduced services to tribal members, and using tribal resources, which precluded the use of that money to supplement program funds or to develop tribal business ventures. The contract support policies and practices of the Bureau of Indian Affairs, the Indian Health Service, and Interior's Office of Inspector General have been inconsistent, which may cause some tribes to receive more contract support funding than they are allowed and others to receive less. The impasse between providing full funding for contract support costs and limiting those expenses continues in Congress. GAO presents four alternative funding approaches to help Congress resolve this issue.

GAO noted that: (1) tribes' allowable contract support costs have tripled from 1989 through 1998--increasing from about $125 million to about $375 million; (2) the total amount of program dollars contracted by tribes--upon which contract support costs are based--has increased; (3) the total cost of tribes' administration of contracts has increased; (4) although the amounts appropriated for contract support costs have increased, Congress has not funded contract support to keep pace with these increases, resulting in funding shortfalls; (5) in fiscal year (FY) 1998, almost $280 million of the about $375 million that was allowable for contract support costs was appropriated, resulting in a shortfall of about $95 million; (6) projections of future contract support costs are difficult to calculate because the number of programs tribes will elect to contract and the amount of funding they will receive are uncertain; (7) for the forseeable future, tribes' allowable contract support costs are unlikely to dip below the FY 1998 level of $375 million and will likely increase, as they have done in the past; (8) according to the 94 tribes that GAO communicated with during its review, shortfalls in funding for contract support costs have caused financial difficulties and frustration for the tribes administering the programs; (9) they have had to take a number of steps to cope with shortfalls in contract support funding; (10) reducing their contract support costs to within the amount of funding provided has been one such step; (11) however, the tribes noted that this has decreased the efficiency and productivity of their tribal administrative functions; (12) to make up for the shortfall, the tribes reported using program funds, which reduced services to tribal members, or using tribal resources, which precluded the use of those resources to supplement program funds or to develop tribal business ventures; (13) the contract support policies and practices of the Bureau, the Health Service, and the Department of the Interior's Office of Inspector General have been inconsistent, which may result in some tribes receiving more contract support funding than they are allowed and in others receiving less; (14) GAO also found some inconsistencies in the calculation and the application of indirect cost rates that were used to determine tribes' allowable contract support costs; and (15) the impasse between providing full funding for contract support costs and limiting these costs continues in Congress.