A new federal law will enable tribes to withdraw and bring in-house the assets being managed by the Office of Trust Funds Management of the Bureau of Indian Affairs.
Investment management of the assets has evolved over the years from accounts in the U.S. Treasury to what OTFM officials say will soon be equivalent to a private-sector trust company.
But administration has been hamstrung until recently by a federal law limiting investment options mainly to government-backed fixed-income investments and certificates of deposit. Critics note the limitations have caused the accounts to miss opportunities for appreciation.
"Is a government bond a good investment? Is it an investment, or an IOU from the U.S. government?" asked Dean Parisian, president and chief investment officer of Native American Advisors Inc., Alpharetta, Ga.
The American Indian Trust Fund Management Reform Act 6 of 1994 allows tribes to withdraw their assets from BIA management by submitting a tribal government resolution and an investment plan.
But the withdrawal is complicated by an ongoing effort to reconcile the accounts.
The BIA wants to balance all of the accounts, but the tribes, represented by the Intertribal Monitoring Association, argue the process is impossible and the BIA should just settle directly with the tribes. Many tribes believe the records needed for reconciliation won't be found, said Elouise Cobell, chairwoman of ITMA and former treasurer of the Blackfeet tribe.
However, the tribes don't need to wait for the reconciliation to withdraw their assets, and many want to withdraw now, she said. The ITMA is surveying tribes to quantify how many want to withdraw from BIA.
In New Mexico, the Pueblo of Laguna reached an agreement with the BIA in which the tribe took control of its assets and placed them with Medallion Investment Management, an Albuquerque money manager. The OTFM is custodian.
The 1994 act requires the OTFM give Congress a reconstruction of all account records by Sept. 30 and reconcile them with tribal records, said Donna Irwin, OTFM acting director. The OTFM hopes to present the completed reconciliation process to Congress for its approval May 31, she said.
The congressional deadline was recently extended by the House Appropriations Committee, but the OTFM is still planning to meet its target dates, said Doug Lords, acting deputy director.
The sheer number of accounts makes the accounting task difficult, said Ms. Irwin. Besides the tribal accounts, the OTFM has about 260,000 accounts on behalf of individuals holding a total of $470 million. Many of those accounts are tiny; Ms. Irwin noted her own mother showed her a statement in which she had 6 cents in one account.
The OTFM is restructuring to resemble a private trust company that will offer custodial and settlement services, said Ms. Irwin. The office established an interim core trust system that provides an interface to depositories, custodians and pricing vendors. With the system - from SunGard Omni Trust, Birmingham, Ala. - tribal officers using personal computers and modems can obtain trust information.
The BIA also plans to send a request for proposals for a permanent trust system, probably during the next fiscal year, and wants to issue another RFP for investment advisory services, said Mr. Lords.
The ITMA gained one victory recently in the selection of a special trustee, provided in the 1994 act to oversee trust relationships with the tribes. The ITMA's candidate, Paul Homan, a banking consultant and former president and chief executive of the National Bank of Washington, was appointed by the president, pending congressional approval.
The act also authorizes the Secretary of the Interior to award grants to the tribes to ensure the implementation of the investment plan. According to the act, grants can be awarded for developing an investment plan, to train and educate employees responsible for monitoring the funds' investment, and other operations.
That means tribal governments can use federal funds to hire consultants and investment managers and charge them with developing investment policies.
"What's important about the act is that it's an opportunity for Indian tribes to get involved," said B. Reid Haltom, a partner of Nordhaus, Haltom, Taylor, Taradash & Frye, a law firm in Albuquerque, New Mexico.
There is a new generation of tribal leaders developing that won't accept other people handling their land and their money, he said.
