This is the accessible text file for GAO report number GAO-03-955 
entitled 'Bureau of Indian Affairs Schools: Expenditures in Selected 
Schools are Comparable to Similar Public Schools, But Data Are 
Insufficient to Judge Adequacy of Funding and Formulas' which was 
released on September 04, 2003.

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

On January 2, 2004, this document was revised to add various 
footnote references missing in the text of the body of the document.

Report to Congressional Committees:

United States General Accounting Office:

GAO:

September 2003:

Bureau of Indian Affairs Schools:

Expenditures in Selected Schools Are Comparable to Similar Public 
Schools, but Data Are Insufficient to Judge Adequacy of Funding and 
Formulas:

GAO-03-955:

GAO Highlights:

Highlights of GAO-03-955, a report to congressional committees 

Why GAO Did This Study:

In 2001, Congress directed GAO to examine the adequacy of Bureau of 
Indian Affairs (BIA) school funding and the adequacy of the formulas 
employed by BIA to distribute various types of operating funds. 
Because there is no universally accepted standard for adequacy, for 
this report, GAO examined (1) the sources and amounts of federal 
funding provided for BIA schools and how they are determined, (2) how 
BIA school budgets and expenditures compared to national per-pupil 
expenditures and expenditures for similarly situated public schools, 
and (3) how equitably various formulas distribute funding across BIA 
schools and whether they account for all relevant costs.

To obtain expenditure data for BIA schools GAO reviewed BIA budget and 
financial documents and collected data from 8 BIA and 6 similar public 
schools that were similarly situated in terms of their relative 
isolation and student characteristics. 

What GAO Found:

Most BIA school operating funds are provided by the Department of 
Interior through the standard federal budget process; however, the 
agency has little financial data to inform its school budget 
proposals. In 2002, Interior provided 78 percent of BIA’s operating 
funds, while Education provided 22 percent. To formulate its annual 
budget proposals for BIA schools, Interior uses prior year data with 
updates for enrollment, teacher salaries, and fixed costs. Because BIA 
does not collect detailed expenditure data from its schools, GAO was 
unable to assess the overall adequacy of the funding.

BIA budgeted dollars for its 112 day schools were higher on a per-
pupil basis than the national average expenditure for public schools, 
but expenditures were comparable for selected similar BIA and public 
schools. However, all 8 BIA schools GAO visited spent less on 
instruction and more on facilities than the public schools visited. 
Also, most BIA school officials GAO spoke with reported that their 
budgets for transportation did not cover their actual transportation 
expenditures. About 40 percent of all BIA-operated schools (day and 
boarding) spent more on transportation than they received through 
their transportation budgets in school year 2001-2002.

The six BIA formulas that BIA uses to distribute funds appear to have 
distributed funds fairly, but they did not include certain cost-
related factors associated with BIA schools, and their adequacy cannot 
be determined from BIA’s data. GAO found that the primary formula, the 
Indian School Equalization Program (ISEP) formula, distributed 
instructional funds equitably. The transportation formula for BIA 
schools does not account for costs associated with differences in 
degrees of isolation. Because BIA does not collect complete 
expenditure data, GAO was limited in its ability to assess the overall 
adequacy of the formulas.

What GAO Recommends:

GAO is making recommendations for BIA to (1) collect detailed 
expenditure data comparable to public schools on BIA-operated schools 
in order to better assess the adequacy of both funding and formulas, 
(2) work with tribes to obtain detailed expenditure data from tribally 
operated schools, (3) improve the transportation formula, and (4) 
fully account for administrative services provided to BIA schools.

www.gao.gov/cgi-bin/getrpt?GAO-03-955.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Marnie S. Shaul at 
(202) 512-7215 or shaulm@gao.gov

[End of section]

Contents:

Letter1:

Results in Brief:

Background:

BIA Schools Rely Primarily on Funding from Interior with Additional 
Support from Education; BIA Has Little Financial Data to Inform Budget 
Proposals:

BIA Per-Pupil Budgeted Funds Were Higher Than the National Average 
Expenditure, but Spending Was Comparable for Selected BIA and Similar 
Public Schools:

BIA's Formulas Generally Distributed Money Fairly, but Expenditure Data 
Are Insufficient to Determine Adequacy:

Conclusions:

Recommendations:

Agency Comments:

Appendix I: Scope and Methodology:

Funding:

Formulas--Overview:

Formulas--Descriptions:

Formula Analyses:

Transportation:

Appendix II: Appropriations for BIA Schools, Fiscal Years 1999--2002:

Appendix III: Comments from the Department of Interior:

Appendix IV: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Staff Acknowledgments:

Tables:

Table 1: BIA-Funded School Facilities by Type, School Year 2001-02:

Table 2: Formulas Used by BIA to Distribute Funds to BIA Schools:

Table 3: Selected Characteristics of BIA Schools and Public Schools, 
School Year 2000-01:

Table 4: Average BIA-Operated Day School and U.S. Average PPE for 
School Year 1999-2000 by Category:

Table 5: Average PPE by Category for Selected BIA and Public Schools 
Visited, School Year 2001-02:

Table 6: ISEP and Total Instructional Funding Per WSU:

Table 7: Administrative Cost Grants--the Difference between Calculated 
Need and Distributed Funds in Tribally Operated BIA Schools, School 
Years 1998-99 through 2002-03:

Table 8: BIA and Public Schools We Visited:

Table 9: ISEP Formula Weights for the Instructional Program:

Table 10: ISEP Formula Weights for the Residential Program:

Table 11: Transportation Formula Weights with Examples:

Table 12: Small School Adjustments for Disadvantaged Children (Title I) 
Funds.

Table 13: Small School Adjustments for Title II, Parts A & D Funds:

Table 14: Means, Standard Deviations and Coefficient of Variation of 
Instructional Funding by School Characteristics for On-Reservation 
Boarding Schools, in School Year 2001-02:

Table 15: Means, Standard Deviations, and Coefficients of Variation of 
Instructional Funding by School Characteristics for Day Schools, School 
Year 2001-02.

Table 16: Transportation Regression Results Using Data from School Year 
2001-02.

Table 17: Appropriations for BIA School Operations from the Department 
of Interior and Amounts Received from the Department of Education, 
Fiscal Years 1999-2002:

Table 18: BIA Education Construction Appropriations, Fiscal Years 1998-
2003:

Figures:

Figure 1: BIA Schools Operating Funds, Fiscal Years 1999-2002:

Figure 2: BIA School Operating Funds, Fiscal Year 2002:

Figure 3: Percent of Average PPEs Spent by 8 BIA Schools and for 6 
Similarly Situated Public Schools, School Year 2001-02:

Figure 4: Percentage of BIA Students Identified as Needing Special 
Education Services, School Year 1999-2003:

Abbreviations:

ACG: administrative cost grants:

ADM: average daily membership:  

BIA: Bureau of Indian Affairs:

CCD: Core of Common Data: 

DOD: Department of Defense:

FIS: financial information system:

IDEA: Individuals with Disabilities Education Act:  

ISEP: Indian School Equalization Program:  

NCES: National Center for Education Statistics:  

OMB: Office of Management and Budget:  

PPE: per-pupil expenditure:  

WSU: weighted student unit:

United States General Accounting Office:

Washington, DC 20548:

September 4, 2003:

Congressional Committees:

The federal government spends over $600 million annually to provide 
educational services to approximately 48,000 Indian students in 171 
schools and 14 dormitories funded by the Department of Interior's 
(Interior) Bureau of Indian Affairs (BIA). Although these schools are 
located across the nation, 70 percent are located on or near Indian 
reservations in four states: Arizona, New Mexico, North Dakota, and 
South Dakota. BIA directly operates one-third of the schools, while 
tribes operate the remaining two-thirds through grants and contracts 
with BIA. BIA schools have certain characteristics that make them more 
costly to operate than the average public school, specifically, a high 
proportion of students with special needs and a broader infrastructure 
of sewer, water, utility, and other systems to support.[Footnote 1] In 
addition, some studies have also attributed some of BIA's higher costs 
to their isolation and smaller size, as well as the presence of a 
boarding component in one-third of BIA schools.[Footnote 2]

In 2001, Congress directed us to examine the adequacy of BIA school 
funding and the adequacy of the formulas employed by BIA to distribute 
various types of operating funds.[Footnote 3] Although there is no 
single standard for adequacy, for this report, we examined BIA funding 
in terms of how BIA's budgets are determined, how funding compares with 
public schools, and the equity and relevance of formulas used to 
distribute those funds. Specifically, we examined (1) the sources and 
amounts of federal funding provided for BIA schools and how they are 
determined, (2) how BIA school budgets and expenditures compare to 
national per-pupil expenditures (PPE) and expenditures for similarly 
situated public schools, and (3) how equitably various formulas 
distribute funding across BIA schools and whether they account for all 
relevant costs.

To obtain expenditure information, we reviewed BIA budget and financial 
documents and collected expenditure data at 8 BIA and 6 public schools 
in Arizona, New Mexico, North Dakota, and South Dakota that were 
similarly situated in terms of their relative isolation and the 
characteristics of their student populations. Because BIA does not 
maintain expenditure data on all of the schools it funds--specifically 
those that are tribally operated--we compared the most recent national 
expenditure data (school year 1999-2000) with BIA's budget data for 
that year. BIA does maintain some expenditure data for the 32 day 
schools it directly operated in school year 1999-2000, representing 13 
percent of enrollment at all BIA-funded schools, and we were able to 
compare these schools with national school expenditures in terms of 
instruction, transportation, facilities, and administration for the 
same year. In our study of expenditures, we excluded boarding schools 
when comparing BIA schools with public schools because boarding schools 
have additional costs that are not comparable with those of the average 
public school but included them when we analyzed differences between 
budgeted and expended amounts for transportation. All of our analyses 
exclude funding for food. We obtained budget and expenditure data from 
BIA's financial information system, took steps to assess the 
reliability of the required data, and determined that the data were 
sufficiently reliable for the purposes of this report. To compare 
expenditures for BIA schools (both tribally operated and BIA-operated) 
with similar public schools, we visited and collected expenditure data 
from the 8 BIA and the 6 public schools that had such data. These BIA 
and public schools were selected to be similar as a group, they were 
not matched one-to-one. These results are not generalizable to other 
BIA schools. In our evaluation of the 6 BIA formulas used to distribute 
funds to schools for instruction, transportation, administration, and 
facilities maintenance, we included all BIA schools, including boarding 
schools. We used an accepted measure, the federal range ratio, to 
determine fairness. We interviewed officials from Interior, including 
BIA officials, and the Department of Education (Education). (See 
appendix I for more details on our scope and methodology.):

We performed our work from November 2002 through August 2003 in 
accordance with generally accepted government auditing standards.

Results in Brief:

Most BIA school operating funds are provided by Interior through the 
standard federal budget process; however, the agency has little 
financial data to use in forming the budget that Interior proposes to 
Congress. Through Education, BIA schools also receive a designated 
percentage of major Education program grants that are available to all 
the nation's public schools. In 2002, Interior provided $500 million 
(78 percent) of BIA's operating funds, while Education provided $140 
million (22 percent). Additional funds came primarily from the U.S. 
Department of Agriculture and from the Department of Health and Human 
Services' Indian Health Service. To formulate its annual budget 
proposals for BIA schools, Interior uses prior year data with updates 
for enrollment, teacher salaries, and fixed costs. However, BIA has no 
formal mechanism, such as a needs assessment, for determining how much 
funding is needed for instruction or transportation, although it does 
have such mechanisms for facilities maintenance and administration. 
Moreover, BIA does not collect detailed expenditure data from all 
schools from which such determinations could be made.

BIA budgeted dollars for all its day schools were higher on a per-pupil 
basis than the national average expenditure for public schools; 
however, expenditures were comparable for selected BIA and public 
schools with similar levels of isolation and poverty. In school year 
1999-2000, the average amount BIA budgeted for day school students was 
$9,167 per pupil, while the national average PPE was $6,617. When we 
conducted site visits to 8 BIA and 6 public schools, we found their 
expenditures to be similar overall. On average, the BIA school PPE was 
$10,140, while the public school PPE was $10,358 in school year 2001-
02. However, all the BIA schools we visited spent less on instruction 
and more on facilities than their public school counterparts. Also, six 
of the eight BIA school officials we spoke with reported that their 
budgets for transportation did not cover their actual expenditures. To 
compensate, BIA school officials said they typically spend funds from 
other budget categories to cover transportation shortfalls, while three 
of the four tribally operated school officials told us they were able 
to use other sources--such as administrative funds or earned interest-
-not available to BIA-operated schools. Both the BIA and public school 
officials said that isolation affected their operating costs, 
particularly for instruction and transportation.

The six formulas that BIA uses to distribute funds to the schools 
appear to have distributed funds fairly, but they did not include 
certain cost-related factors associated with BIA schools; and their 
adequacy cannot be determined from BIA's data. We found that the 
primary formula, the Indian School Equalization Program (ISEP) formula, 
distributed instructional funds equitably among schools based on 
student enrollment adjusted for grade level and certain student 
characteristics. We also found that a recent change in the ISEP formula 
that eliminated weights for special education students was followed by 
a reduction in the number of students identified as needing special 
education. We found that with regard to the transportation formula for 
BIA schools, it does not account for costs associated with differences 
in degrees of isolation. The other formulas, which determine overall 
amounts needed to support administration and also facilities 
maintenance and operations, have been funded at about 80 percent 
annually. Because BIA does not collect complete expenditure data, we 
were limited in our ability to assess the overall adequacy of the 
formulas.

We are making several recommendations for BIA to collect additional 
expenditure data in order to better assess the adequacy of both funding 
and formulas, to improve the transportation formula, and to allocate 
all costs of administering BIA schools.

Background:

While most Indian children attend regular public schools, about 10 
percent attend the 171 BIA schools that are funded by BIA and operated 
either by the bureau or by various tribes through grants or contracts 
(see table 1). BIA schools are found in 23 states but are highly 
concentrated in 4--Arizona, New Mexico, North Dakota, and South Dakota. 
In school year 2002-03, BIA was responsible for the education of 
approximately 48,000 children in 171 schools scattered across 63 
reservations.[Footnote 4] The bureau's responsibility for Indian 
schools is somewhat similar to the responsibility of a state for public 
schools, although its responsibilities include more areas, such as 
facilities. To help manage the schools, BIA has 24 regional agencies, 
called education line offices, that are similar to public school 
district offices, although each regional agency has responsibility for 
a larger geographic area than most school districts.

Table 1: BIA-Funded School Facilities by Type, School Year 2001-02:

School type: Day schools; Responsibility for operations: BIA: 33[A]; 
Responsibility for operations: Tribes: 84; Total: 117.

School type: Boarding schools; Responsibility for operations: BIA: 30; 
Responsibility for operations: Tribes: 24; Total: 54.

School type: Subtotal schools; Responsibility for operations: BIA: 63; 
Responsibility for operations: Tribes: 108; Total: 171.

School type: Dormitories; Responsibility for operations: BIA: 1; 
Responsibility for operations: Tribes: 13; Total: 14.

School type: Total; Responsibility for operations: BIA: 64; 
Responsibility for operations: Tribes: 121; Total: 185.

Source: GAO analysis of BIA data.

[A] In school year 1999-2000, there were 32 BIA-operated day schools. 
This was the year we used for comparison to national averages, the 
latest data available.

[End of table]

A high percentage of the student population in the BIA system is 
characterized by factors that are generally associated with higher 
costs in education. Almost all students live in poverty, and more than 
half are limited in their English proficiency. A substantial number 
have disabilities. The academic performance of many BIA students is 
below that of public school students.[Footnote 5]

Funding for BIA schools is determined through an iterative budget 
development process. The Office of Management and Budget (OMB) gives 
Interior a planning allowance to work with and also reviews Interior's 
final budget submission. The major parties involved at Interior are 
BIA's Office of Indian Education Programs; Interior's Office of Policy, 
Management and Budget; and the Assistant Secretary for Indian Affairs. 
Periodically, the Office of Indian Education Programs meets with tribes 
to discuss the needs and priorities of their schools. That office also 
solicits priorities from education line officers--BIA regional 
administrators whose role is somewhat analogous to school district 
superintendents.

Funding for BIA schools is distributed in several ways. Funds from 
Interior are distributed through four formulas:[Footnote 6] one 
primarily for instruction (ISEP), one for transportation, one for 
administration, and another for facilities maintenance. Two of these 
formulas calculate needed amounts to fulfill their respective 
functions. One calculates administrative cost grants for tribally 
operated schools and the other calculates funding for facilities 
maintenance and operation for all schools. The ISEP formula distributes 
the largest amount of Interior funds, 68 percent. In addition to funds 
from Interior, funds from Part A of Titles I, II, and IV of the No 
Child Left Behind Act are distributed by formulas, as well as funds for 
Part D of Title II. [Footnote 7] (See table 2.) Title I, II, and IV 
funds are among Education's funds that flow through BIA. (See app. 
II.):

Table 2: Formulas Used by BIA to Distribute Funds to BIA Schools:

Formula for: ISEP[A]; Department/agency allocating funds: BIA; Purpose 
of funding: Education[B]; Basis for distribution: Weighted student 
units[C].

Formula for: Transportation; Department/agency allocating funds: BIA; 
Purpose of funding: Student transportation; Basis for distribution: 
Daily miles[D].

Formula for: Operations and maintenance of facilities[E]; Department/
agency allocating funds: BIA; Purpose of funding: Facilities 
maintenance and operations; Basis for distribution: Characteristics of 
facilities[F].

Formula for: Administrative cost grants for Indian schools; Department/
agency allocating funds: BIA; Purpose of funding: Administration and 
indirect costs of tribally operated schools; Basis for distribution: 
Program cost[G].

Formula for: Safe and Drug-Free Schools and Communities (Title IV, Part 
A)[H]; Department/agency allocating funds: Education; Purpose of 
funding: Education[C]; Basis for distribution: WSU[I].

Formula for: Titles I and II (Parts A & D)[J]; Department/agency 
allocating funds: Education; Purpose of funding: Education[C]; Basis 
for distribution: Enrollment[K].

Source: GAO analysis.

[A] The ISEP formula includes funds for school-level administration, 
such as principals' salaries and administrative assistance, in addition 
to salaries for teachers, teacher aides, and the cost of materials.

[B] Education includes functions such as teaching, professional 
development, and school-level administration. 

[C] Weighted student units (WSU) are calculated by adjusting enrollment 
counts by student characteristics such as grade, bilingual 
classification, gifted and talented designation, and residency status 
at the school. For example, students who reside at the school receive a 
higher weight and therefore are given additional funds to cover their 
boarding expense.

[D] BIA distributes money for transportation across schools by 
adjusting miles traveled by road condition; i.e., whether the roads are 
improved or unimproved.

[E] The formula used for projecting funding for facilities maintenance 
and operations was not used for a couple of years.

[F] The facilities operations formula generates an amount needed for 
each school based on such factors as the age of the school, the square 
footage of the school, the technology at the school, and other 
characteristics of the school.

[G] The formula for administrative cost grants calculates an 
administrative rate based on the cost of the program being administered 
by the tribe. The 'program' may just be the school operations, or it 
may be the school along with other entities operated by the tribe.

[H] The Safe and Drug-Free Schools and Communities program is Title IV, 
Part A, of the No Child Left Behind Act of 2001.

[I] The WSU used to distribute "Safe and Drug Free Schools and 
Communities" funds are based on grade and residency.

[J] Title I and Title II, Parts A and D, of the Elementary and 
Secondary Education Act of 1965 as amended. Title I is entitled 
"Improving the Academic Achievement of the Disadvantaged" and will be 
referred to as "Disadvantaged Children" throughout this report. Title 
II, Part A, is entitled "Teacher and Principal Training and Recruiting 
Fund." Title II, Part D is entitled "Enhancing Education through 
Technology." We refer to both parts of Title II as "Title II" in this 
report.

[K] Disadvantaged Children and Title II, Parts A & D program funds use 
an enrollment measure as the basis for distributing funds, with a 
special adjustment (more money) given to small schools.

[End of table]

Additionally, BIA distributes other funds from Education without 
formulas. For example, funds for Individuals with Disabilities 
Education Act (IDEA), Part B--providing the largest amount of Education 
funding to BIA--are distributed based on proposals documenting the 
school's exhaustion of the ISEP special education set-aside.[Footnote 
8] The proposals must also be consistent with each school's 
consolidated school reform plan. BIA distributes funds from other 
Education programs, such as Title I, Part F and Title IV, Part B, by 
either dividing the money equally among the schools or by granting 
funds to schools based on proposals (also consistent with the school's 
consolidated school reform plan).

In general, formulas are designed to distribute funds efficiently and 
equitably by taking real cost differences, factors that have been 
identified as having a significant effect on costs incurred, into 
consideration. For example, some research, though not definitive, shows 
that children with special needs--low-income students, students with 
disabilities, and students with limited English proficiency--may 
require additional educational resources to succeed at the level of 
their nondisadvantaged peers. Because these additional resources 
require higher spending, some researchers have adjusted PPE by 
"weighting" these students to account for the additional spending that 
may be required.[Footnote 9] Two of the three instructional formulas 
used by BIA are based on such weights. They account for differences 
among students by creating WSUs based on grade level, bilingual 
designation, gifted and talented designation, level of disability, and 
residency at the school. For example, in the ISEP formula fourth 
graders were assigned a weight of 1.15, while first graders were 
assigned a weight of 1.38.[Footnote 10] Recently, BIA officials removed 
the weights for student disability and placement in the ISEP 
formula[Footnote 11] in response to a finding by Education that BIA was 
out of compliance with the provision of IDEA that students be educated 
in the least restrictive environment possible.[Footnote 12]

BIA maintains a financial information system that contains data on 
budgeted (appropriated and obligated) funds and expenditures by school. 
However, these data contain actual expenditures for only the 32 BIA-
operated schools. The "expenditure" data on tribally operated schools 
in this financial system are proposed expenditures. Tribally operated 
schools are not required to report actual expenditures to BIA.

In the budget proposal for fiscal year 2004,[Footnote 13] OMB found 
that BIA does not yet have a financial management system that fully 
allocates program costs and associates those costs with specific 
performance measures. However, OMB noted that this requirement might be 
met through a new accounting system that Interior is adopting. OMB 
found that BIA did not have adequate academic performance and cost-
efficiency measures that provide valid comparisons with public schools 
in rural areas with high concentrations of Indian students. In response 
to this finding, BIA said that it will develop academic performance and 
cost-efficiency measures that are comparable to similarly situated 
public schools.

To help districts develop useful, comparable accounting systems, 
Education has developed cost categories for use in school districts and 
states nationwide.[Footnote 14] This publication was designed as a 
national standard for state departments of education to use in 
reporting financial data to ensure that education fiscal data can be 
reported in a comprehensive and uniform manner.

BIA Schools Rely Primarily on Funding from Interior with Additional 
Support from Education; BIA Has Little Financial Data to Inform Budget 
Proposals:

Interior provides most of the funding for BIA schools, but the agency 
has little financial data to inform its budget proposals. Additional 
funds are provided by Education in the form of grants for 
disadvantaged, disabled, and other targeted students. (See fig. 1.) BIA 
school operations funding provided through Interior along with 
Education's funds constitute almost all operating funds available for 
BIA schools. Interior appropriations for BIA school operations, 
excluding facilities, grew 11.9 percent (in nominal dollars) between 
fiscal years 1999 and 2002, primarily through growth in the ISEP 
funds.[Footnote 15] However, when inflation is taken into account, the 
growth was 3.6 percent. During the same period, there was a slight 
decline in enrollment. In formulating its annual budget proposals, 
Interior uses prior year funding as a basis and considers projected 
changes in enrollment as well as teachers' salaries and other fixed 
costs. However, the agency has no cost basis for determining the level 
of its funding requests for some parts of its operating budget.

Figure 1: BIA Schools Operating Funds, Fiscal Years 1999-2002:

[See PDF for image]

[End of figure]

Interior Provided about 78 Percent of BIA School Operating Funds While 
Major Education Programs Provided 22 Percent:

In fiscal year 2002, Interior provided about 78 percent of BIA school 
operating funds ($500 million), while Education provided about 22 
percent ($140 million) through programs that are available to all 
public schools in the nation. Interior's appropriations for BIA school 
operations grew 5.9 percent between fiscal year 1999 and 2002, 
primarily through growth in ISEP funds.[Footnote 16] The majority of 
educational funds came from ISEP and Education.[Footnote 17] Education 
primarily funded grants supporting disadvantaged and disabled students. 
(See fig. 2.) The program funds from Education have constituted an 
increasing share of BIA school operating budgets since fiscal year 1999 
(from 18.2 percent to 22 percent in fiscal year 2002), in part, due to 
large increases since 1999 in two major education programs under which 
BIA receives funds.[Footnote 18] BIA Title I funds for disadvantaged 
students increased by 21 percent from 1999-2002, while funds for 
students with disabilities under the IDEA increased by 50 percent.

Figure 2: BIA School Operating Funds, Fiscal Year 2002:

[See PDF for image]

Note: Percentages may not add to 100 due to rounding.

[End of figure]

Interior Formulated Its Budget Proposals Based on Prior Year Funding 
with Only Limited Financial Data:

In formulating the annual budget request for BIA schools, Interior 
officials we spoke with said the agency strives to maintain current 
levels of educational service to BIA schools. However, we found the 
agency had limited historical expense data for determining the level of 
its funding request, consistent with OMB's findings. BIA officials said 
they generally consider prior year funding to which they request some 
increases. Agency officials reported that they take into account 
changes in projected enrollment and estimated increases in teachers' 
salaries and fixed costs. They also consider input from tribal leaders 
and regional agency officials. Although BIA collects and maintains some 
expenditure information from the schools it operates, it does not 
collect expenditure data from the tribally operated schools that 
comprise two-thirds of the schools it funds. In addition, while its 
formulas for administration and for facilities operations make some 
funding projections, it is unclear whether such projections inform 
BIA's budget proposals. Moreover, BIA has no formal mechanism, such as 
a cost-based formula or needs assessment, or expenditure data for 
determining how much funding is needed for instruction or 
transportation. For example, the ISEP formula distributes the available 
funds and is not based on the actual cost of educating children.

BIA Per-Pupil Budgeted Funds Were Higher Than the National Average 
Expenditure, but Spending Was Comparable for Selected BIA and Similar 
Public Schools:

BIA budgeted more for its day schools, per pupil, than the national 
average expenditure for public schools; but for a selected group of BIA 
and public schools with similar levels of poverty and isolation, PPEs 
were comparable. BIA does not have expenditure data for all of its 
schools, so to make a national comparison, we compared BIA per-pupil 
budgeted dollars for 112 day schools with national PPEs, and found that 
BIA's budgeted funds were higher.[Footnote 19] BIA has expenditure data 
for 32 schools that it directly operates, and when we compared these 
data for school year 1999-2000, we found that spending for these 
schools was higher than the national average in three of four 
categories: instruction and related activities, transportation, and 
administration.[Footnote 20] Finally, we conducted field work to 
compare a small number of BIA schools and public schools whose student 
makeup and environments were similar and we found their expenditures to 
be on par, overall. For the 8 BIA schools and 6 public schools where we 
collected data there was comparable spending, although the BIA schools 
spent less on instruction than their public school counterparts. Most 
BIA school officials (6 out of 8) we spoke with reported budget 
shortfalls for transportation. Both BIA and public school officials 
told us that isolation affected their operating costs, particularly for 
instruction and transportation.

BIA Per-Pupil School Budget Was Higher Than National Average Spending:

BIA budgeted more per pupil for its 112 day schools, on average, than 
public schools spent in fiscal year 1999-2000--$9,167 budgeted[Footnote 
21] versus $6,617 spent for public schools.[Footnote 22] However, per-
pupil funding among BIA day schools and among all public schools varied 
widely. The BIA day schools' budgets ranged from $5,937 per pupil to 
$24,531.[Footnote 23] Among public school districts nationwide, the PPE 
range was greater-from $2,350 per pupil to $39,032.[Footnote 24]

BIA schools and their students have a number of characteristics that 
may account for some of the higher budget levels in their funding. They 
are generally smaller than public schools and are more geographically 
dispersed, making it more difficult for them to achieve economies of 
scale. Unlike public schools, many BIA schools are also responsible for 
more infrastructure, such as sewer and water systems.[Footnote 25] 
Finally, BIA schools have a much higher degree of poverty and special 
needs students than public schools nationally, factors associated with 
higher resource needs. (See table 3.):

Table 3: Selected Characteristics of BIA Schools and Public Schools, 
School Year 2000-01:

Characteristic: Average enrollment for elementary & secondary schools; 
BIA schools (n=171): 265; Public schools (n=84,596): 546[B].

Characteristic: Percent students eligible for free or reduced lunch; 
BIA schools (n=171): >80%; Public schools (n=84,596): 39%[C].

Characteristic: Percent students identified with disabilities; BIA 
schools (n=171): 21%; Public schools (n=84,596): 13%[D].

Characteristic: Percent students with language needs; BIA schools 
(n=171): 58%; Public schools (n=84,596): 5%.

Source: GAO analysis of BIA and Education data.

[A] BIA enrollment data.

[B] U.S. Department of Education, National Center for Education 
Statistics (NCES), Overview of Public Elementary and Secondary Schools 
and Districts: School Year 2000-2001.

[C] U.S. Department of Education, NCES, Common Core of Data, Local 
Education Agency Universe Survey, 1999-2000.

[D] U.S. Department of Education, NCES, Condition of Education, 2002, 
Indicator 28 (data presented is from 1998-99).

[End of table]

Expenditures for BIA-Operated Day Schools Were Higher Than U.S. Average 
but Comparable for Selected BIA and Similar Public Schools:

Expenditures at BIA-operated day schools were higher than the U.S. 
average but comparable for selected similarly isolated BIA and public 
schools. Spending in three of four categories--instruction and related 
activities, student transport, and administration--for the 32 BIA-
operated schools was greater than the national per-pupil averages in 
school year 1999-2000; facilities operations spending was lower. (See 
table 4.):

Table 4: Average BIA-Operated Day School and U.S. Average PPE for 
School Year 1999-2000 by Category:

Category: Instruction and related activities[A]; BIA-operated school 
PPE (n=32 schools): $5,924; U.S. average PPE (n=85,000 schools): 
$5,140.

Category: Student transportation; BIA-operated school PPE (n=32 
schools): 773; U.S. average PPE (n=85,000 schools): 278.

Category: Facilities operations[B]; BIA-operated school PPE (n=32 
schools): 352; U.S. average PPE (n=85,000 schools): 665.

Category: Administration[C]; BIA-operated school PPE (n=32 schools): 
694; U.S. average PPE (n=85,000 schools): 535.

Category: Total PPE for four areas[D]; BIA-operated school PPE (n=32 
schools): $7,743; U.S. average PPE (n=85,000 schools): $6,617.

Source: GAO analysis of BIA and NCES data.

[A] Includes salaries and benefits for teachers and instructional 
aides, supplies, purchased services such as instructional television, 
instructional staff training, educational media (library and 
audiovisual), and other support services.

[B] Includes supervision of operations and maintenance, operation of 
buildings, the care and upkeep of grounds and equipment, security, and 
utilities.

[C] Includes board of education, local education agencies, school 
administration, district administration (including BIA regional 
offices), graduation expense, and clerical support staff. BIA does not 
identify all administrative costs for BIA-operated schools; therefore, 
administrative costs may be higher than stated.

[D] Total PPEs excludes food expenditures and may not add due to 
rounding.

[End of table]

However, the 2001-02 school year expenditures for the 14 similarly 
situated BIA and public schools we visited were similar. In school year 
2001-02 PPEs averaged $10,140 for BIA students compared with $10,358 
for public school students. Specifically, we found that expenditures 
for both groups--BIA schools and public schools--were higher than the 
national average in all categories, as shown in table 5.

Table 5: Average PPE by Category for Selected BIA and Public Schools 
Visited, School Year 2001-02:

Category: Instruction and related activities[B]; BIA day schools: BIA-
operated schools PPE (n=4): $7,016; BIA day schools: Tribally operated 
schools PPE: (n=4): $7,307; BIA day schools: Total BIA schools PPE 
(n=8): $7,162; Similar public schools PPE (n=6): $7,628; U. S. average 
PPE[A] (n=85,000): $5,140.

Category: Student transport; BIA day schools: BIA-operated schools PPE 
(n=4): 504; BIA day schools: Tribally operated schools PPE: (n=4): 863; 
BIA day schools: Total BIA schools PPE (n=8): 684; Similar public 
schools PPE (n=6): 643; U. S. average PPE[A] (n=85,000): 278.

Category: Facilities operations[C]; BIA day schools: BIA-operated 
schools PPE (n=4): 1003; BIA day schools: Tribally operated schools 
PPE: (n=4): 1,147; BIA day schools: Total BIA schools PPE (n=8): 
1,075; Similar public schools PPE (n=6): 916; U. S. average PPE[A] 
(n=85,000): 665.

Category: Administration[D]; BIA day schools: BIA-operated schools PPE 
(n=4): 969; BIA day schools: Tribally operated schools PPE: (n=4): 
1,470; BIA day schools: Total BIA schools PPE (n=8): 1,220; Similar 
public schools PPE (n=6): 1,171; U. S. average PPE[A] (n=85,000): 535.

Category: Total PPE for four areas[E]; BIA day schools: BIA-operated 
schools PPE (n=4): $9,492; BIA day schools: Tribally operated schools 
PPE: (n=4): $10,787; BIA day schools: Total BIA schools PPE (n=8): 
$10,140; Similar public schools PPE (n=6): $10,358; U. S. average 
PPE[A] (n=85,000): $6,617.

Source: GAO analysis.

Note: The PPEs listed were calculated by dividing each total category 
expenditures by the average enrollment of the study schools. We used 
BIA enrollment for the BIA schools and Core of Common Data (CCD) 
enrollment for the public schools.

[A] For school year 1999-2000.

[B] Includes salaries and benefits for teachers and instructional 
aides, supplies, purchased services such as instructional television, 
instructional staff training, educational media (library and 
audiovisual), and other support services.

[C] Includes supervision of operations and maintenance, operation of 
buildings, the care and upkeep of grounds and equipment, security, and 
utilities.

[D] Includes board of education, local education agencies, school 
administration, district administration (including BIA regional 
offices), graduation expense and clerical support staff. BIA does not 
identify all administrative costs for BIA-operated schools; therefore, 
administrative costs may be higher than stated.

[E] PPEs exclude food expenditures. Numbers may not add due to 
rounding.

[End of table]

Instruction and Related Activities:

In school year 1999-2000 the 32 BIA-operated day schools spent more 
($5,924) than the national average ($5,140) for instruction and related 
activities--typically the largest portion of any school budget. Teacher 
salaries in the BIA-operated schools (but not the tribally operated 
schools) are determined by the Department of Defense's (DOD) teacher 
salary scale, which, according to our recent study, is higher than the 
national average for public schools. For example, in school year 2000-
01, the average salary in DOD overseas schools was $47,460 while the 
national average was $43,250.[Footnote 26] BIA officials reported that 
teacher training costs were also higher than average because of the 
relative isolation of the schools on reservations and their distance 
from training sites. Consequently, funding for advanced teacher 
training for many BIA school teachers must include travel and lodging.

In the 14 schools we visited, all schools were substantially above the 
national average. However, we found that both the tribally operated and 
the BIA-operated schools spent lower amounts for instruction ($7,307 
and $7,016, respectively) than the public schools ($7,628). 
Additionally, a smaller proportion of their overall budget was spent on 
instruction. The BIA schools spent approximately 70 percent of their 
expenditures on instruction, while the public schools spent 74 percent. 
(See fig. 3.) Two of the public schools and two tribally operated 
schools said they did not have enough money for instruction.

Figure 3: Percent of Average PPEs Spent by 8 BIA Schools and for 6 
Similarly Situated Public Schools, School Year 2001-02:

[See PDF for image]

[End of figure]

Isolation of BIA and public schools had an impact on the recruitment 
and retention of teachers, according to 12 of 14 school officials. Four 
public and 5 BIA school officials told us they offered low-cost housing 
to the teaching staff as an added incentive because housing is 
extremely limited on or near Indian reservations. The attrition rate of 
teachers, measured by the percent of the teachers employed in school 
year 2001-02 who did not return the next school year, was higher for 
the 4 tribally operated schools we visited (26 percent) and for the 6 
selected public schools (14 percent) than the national average (7 
percent). In contrast, the 4 BIA-operated schools experienced a lower 
attrition rate (4 percent), which may be due to the higher teacher 
salary scale of BIA-operated schools. According to officials we spoke 
with at 5 of the 8 BIA schools and 3 of the 6 public schools, isolation 
affected their ability to recruit or retain teachers.

Student Transportation:

The average per-pupil spending for transportation at the 32 BIA-
operated schools ($773) was more than twice the national average ($278) 
in school year 1999-2000. BIA officials we interviewed said most BIA 
schools are in remote areas and the buses travel long distances 
frequently on unpaved roads to pick up students. Unlike public school 
districts that service their vehicles locally, BIA buses often have to 
travel long distances to be serviced at government service centers. 
Also unlike public schools, which generally own their buses and share 
them throughout a district, the geographically dispersed BIA schools 
usually lease their buses and shoulder transportation costs 
individually. In addition, we found that almost 40 percent of the 63 
BIA-operated day and boarding schools spent more on transportation than 
they received through their transportation budgets in school year 2001-
02.

In the 14 schools we visited, the tribally operated schools spent more 
on transportation than their public school counterparts, while the BIA-
operated schools spent less. School officials gave us similar 
explanations to the four listed above by BIA officials for the higher 
than average cost of transportation. They also provided us with 
examples.

* The percent of unimproved roads buses traveled for the 14 schools we 
visited ranged from 0 to 100 percent.

* Two of the 14 schools paid parents to bring children to feeder routes 
to avoid further bus travel on difficult roads.

* BIA buses traveled greater distances (an average of 465 miles/day) 
than the public school buses (an average of 379 miles/day), putting 
more wear and tear on the buses.

* Most of the BIA school officials also reported that they had to 
travel longer distances for maintenance of their buses than their 
public school counterparts.

* Most of the BIA school officials reported that they leased their 
buses from the government service center,[Footnote 27] while most of 
the public schools reported owning their buses and maintaining them in 
the local district or with local service contractors. The capital costs 
incurred for owning buses are not paid out of the transportation line 
of public school budgets, so they are not included in the PPEs of 
public schools; however, they are costs incurred through the leasing 
rates that BIA schools pay. Therefore, BIA schools likely spend more on 
their leased buses from transportation funds than the public schools 
spend on those they own.

Officials from both groups of BIA schools told us they have 
transportation budget shortfalls and their spending reflects transfers 
from other budget categories. Three of the 4 tribally run schools 
reported making up the shortfalls by using other sources of funding 
available to them, such as administrative funds and interest 
income.[Footnote 28] For example, one tribal school official reported 
the school received just under $200,000 and spent close to $300,000 for 
transportation by using administrative funds and also interest income. 
BIA-operated schools, which have no investment funds or administrative 
funds, reported using only instructional funds to make up their 
transportation shortfalls. The 6 public schools we visited did not 
report shortfalls in transportation.

Facilities operations:

The average PPE for facilities maintenance for the 32 BIA-operated 
schools ($352) was lower than the national average of $665 in school 
year 1999-2000, despite the fact that BIA has a backlog[Footnote 29] of 
deferred maintenance for its nearly 2,200 buildings at 171 elementary 
and secondary schools. For school year 1999-2000, 65 percent of BIA 
schools were reported in less than adequate condition.[Footnote 30] In 
contrast, only 24 percent of public schools were reported to be in less 
than adequate condition.[Footnote 31] In February 2001, this backlog 
totaled $962 million in needed work, but by October 2002, the backlog 
dropped to $642 million. Until recently, BIA has not had adequate 
information to determine the funding needed at each school site for 
heating, lighting, and other operating expenses. However, a new 
facilities management information system has been recently implemented 
to address the shortcomings of the old system.[Footnote 32]

In the 14 schools we visited, we found that the BIA schools spent more 
per pupil on facilities operations ($1,003 for BIA-operated; $1,147 for 
tribally operated) than the public schools ($916). However, none of the 
BIA school officials reported the condition of their school as good. In 
contrast, officials at 5 of the 6 public schools described their 
facilities as good or excellent. Officials at 7 of the 8 BIA schools 
rated their facilities as fair to poor and complained about a long-
standing lack of investment in operation and repair. Unlike their 
public school counterparts, many of the local BIA school officials said 
that routine preventive maintenance and repairs are frequently deferred 
in favor of other, more critical needs. This has resulted in higher 
costs for repairs and a negative impact in the functionality of the 
facilities, according to these officials. They said some of these 
problems affected the safety of children and the educational climate of 
their schools, citing a nonfunctional fire hydrant and fire alarm 
system, inoperable emergency generator, an eroded bathroom floor, 
problems with heating/air-conditioning systems, a fuel tank spill, and 
problems with sewer lines and water pipes.

Administration:

In the 32 BIA-operated day schools, we found that BIA distributes 
administrative dollars differently than public schools do and does not 
use accounting categories that are nationally comparable. For example, 
BIA budgets money for program management (including principals' 
salaries) to all its schools through instructional funds (ISEP) rather 
than treating them as administrative costs. Therefore, on a national 
level it is difficult to compare or evaluate administrative funding for 
BIA schools. After adjusting for as many of these differences as 
possible, we found the 32 BIA-operated schools spent more on 
administration ($694) than the public schools nationwide ($535). 
However, it is likely that administrative expenditures for BIA-operated 
schools are understated for several reasons. First, BIA itself provides 
administrative services to the schools it operates but does not 
necessarily recognize in its accounting records the full cost of those 
services, as required by federal accounting standards.[Footnote 33] 
Second, administrative funds that BIA provides to its regional agencies 
(education line offices), which are counterparts to public school 
district offices, are not systematically allocated and tracked to the 
schools.[Footnote 34]

In the 14 schools we visited, the 8 BIA schools had higher 
administrative costs than the 6 similar public schools, $1,220 and 
$1,171, respectively. There was a notable difference between the BIA-
operated and tribally operated schools. Tribally operated schools had 
higher expenditures for administration than the public schools while 
BIA-operated schools had lower expenditures for administration.

BIA's Formulas Generally Distributed Money Fairly, but Expenditure Data 
Are Insufficient to Determine Adequacy:

The six formulas generally allow for equitable distribution of funds 
among schools, but we did not have enough expenditure data to fully 
assess the formulas' adequacy in terms of how well they account for 
relevant costs. Overall, we found that the three instructional formulas 
resulted in a fair distribution of funds; that is, students and schools 
with similar characteristics were treated similarly in terms of 
funding. A recent change to the largest of the instructional formulas 
was followed by fewer students being identified as having disabilities, 
but it is too early to determine the impact of the change on the 
distribution of funds among the BIA schools. With regard to the 
transportation formula, we found that it may not account for certain 
differences among schools. The remaining formulas, which project needed 
amounts for facilities operations and for administration, adequately 
accounted for relevant costs, but they were funded at levels below 
their projections. Whether the formulas are more or less than adequate 
is not clear due to the lack of expenditure data. See appendix I for 
further discussion of these formulas.

BIA's Primary Formulas for Instruction Distributed Funds Fairly:

Our analysis indicates that in school year 2001-02, instructional funds 
were distributed fairly among schools based on student enrollment 
adjusted for grade level and certain other student characteristics, 
such as English proficiency and disability level.[Footnote 35] ISEP 
allocations ranged from $3,291 to $4,344 per WSU, which is a small 
variation according to the federal range ratio, an accepted measure for 
assessing equity.[Footnote 36] When considering all instructional funds 
combined except for disability-related funds from Education, the 
variation was greater, ranging from $3,849 to $5,619 per WSU; but this 
is still an acceptable variation according to the federal range ratio. 
(See table 6.) The greater range in instructional funds per WSU can be 
attributed to two factors: (1) the funds for Disadvantaged Children and 
Title II, Parts A and D are distributed on a per-pupil basis rather 
than a WSU basis and (2) both programs also include extra money for 
small schools. We found no substantial difference between BIA-operated 
and tribally operated schools in instructional funding per WSU.

Table 6: ISEP and Total Instructional Funding Per WSU:

ISEP funding per WSU; Average: $3,767; Range: $3,291 to $4,344; Federal 
range ratio[A]: 4.5%.

Total instructional[B] funding per WSU; Average: $4,570; Range: $3,849 
to $5,619; Federal range ratio[A]: 20%.

Source: GAO Analysis of BIA financial and enrollment data.

[A] The federal range ratio is calculated by dividing the difference 
between the 95th and 5th percentile of funding per WSU by the 5th 
percentile. For example for ISEP funding per WSU: (3,902 - 3,733)/3,733 
= .045 or 4.5%.

[B] For this analysis, total instructional funding includes ISEP 
formula funds as well as funds for "Disadvantaged Children" (Title I), 
Title II, Parts A & D, and Safe and Drug Free Schools and Communities, 
(Title IV) funds, but not IDEA Part B funds.

[End of table]

The Elimination of Weights for Special Education from the ISEP Formula 
Was Followed by a Large Reduction in the Number of Students Enrolled in 
Special Education:

Students requiring special education are more costly to educate than 
students who do not need such services. To account for this difference, 
until recently, the ISEP formula used weights for severity of special 
education needs of students and on disability and amount of time per 
day spent in a special education program. Because such weights could 
create an incentive to educate students in overly restrictive 
environments, Education found BIA out of compliance with IDEA. To 
comply with IDEA, BIA eliminated these weights and went to a different 
method of financing the additional costs of special education in school 
year 2002-03 in order to reduce the incentive to place students in 
overly restrictive environments.[Footnote 37] It is too soon to assess 
the impact this method had on the equity of the funding for special 
education students, that is, whether this new system gives schools 
sufficient funds to cover the costs of educating students with 
disabilities. In the first year of the change, BIA reported about 3,000 
fewer special education students than in the previous year, a 29 
percent decline in special education enrollment. As can be seen in 
figure 4, the percentage of students identified as needing special 
education services had been increasing slightly since 1999 (the years 
of this study). BIA officials said that a study was under way to 
account for the large drop in special education enrollment.

Figure 4: Percentage of BIA Students Identified as Needing Special 
Education Services, School Year 1999-2003:

[See PDF for image]

[End of figure]

The Transportation Formula May Not Account for Isolation:

Our analysis of the limited expenditure data (only BIA-operated schools 
report their expenditures) showed that the current weighting scheme for 
road conditions in the transportation formula seems appropriate, but 
some cost factors may be missing. BIA uses two cost factors in this 
formula: miles driven transporting students to and from school and road 
condition. To capture the increased cost of transporting students on 
very poor roads, BIA officials have assigned a weight of 1.2 for every 
mile traveled on "unimproved" roads in the transportation formula. 
While this formula may appropriately account for road conditions, there 
are other relevant costs for BIA schools associated with degrees of 
isolation. Isolation is included in BIA's formula for facilities 
management, but not for transportation. In contrast, the transportation 
formula used by New Mexico accounts for isolation by factoring in the 
density[Footnote 38] of the school district. Not having an isolation 
factor could result in schools receiving less in funding than they 
incur in costs.[Footnote 39] Another noteworthy feature of New Mexico's 
transportation funding is that it includes an incentive to promote 
efficient use of funds (efficiency incentive). The efficiency incentive 
allows schools to keep 50 percent of any unused transportation funds 
for the following year. These funds can be used to cover transportation 
services, including school activities such as field trips. BIA's 
transportation formula does not offer any kind of efficiency incentive.

Other Formulas Calculate Funding Need That Exceeds the Current Funding 
Level:

To determine funds needed to operate and maintain facilities, BIA 
utilizes a comprehensive formula to project the dollar amount that 
schools will need.[Footnote 40] BIA also determines an administrative 
rate for the administration of the tribally operated schools under a 
statutorily prescribed formula.While each of these formulas calculate a 
dollar amount needed for each school, both programs are funded at about 
80 percent of calculated need.[Footnote 41] While much has been done to 
improve the reliability of the facilities data and to improve the 
accuracy of projections, similar work has not been done to assess the 
efficiency or accuracy of the administrative cost grant program. To 
determine whether the administrative cost grants are underfunded, one 
could conduct an efficiency study comparing the cost of administration 
to industry standards of schools of similar size. However, BIA does not 
currently collect any data about how the administrative cost grants are 
used, which makes such a study problematic.

In the case of facilities maintenance, the formula projects amounts 
needed by taking into account specific factors related to the cost of 
maintaining the facilities. The backlog of maintenance for facilities 
across BIA's system indicates a historic problem in funding levels. Our 
previous study found that funding for the maintenance and repair of BIA 
facilities was at the low end of national guidelines set forth by the 
National Research Council and below rates recommended by experts in the 
facilities field.[Footnote 42] However, since we did not study how 
efficiently the schools were using the money allotted for facilities 
maintenance and operations, we cannot draw conclusions about the 
adequacy of the formula's projection or the appropriateness of funding 
facilities maintenance at 80 percent of calculated need. We have noted, 
however, that BIA is taking steps to improve the facilities maintenance 
and operations program. In school year 2001-02, BIA budgeted $293 
million to replace and renovate schools and is currently updating the 
facilities database to ensure more reliable data.[Footnote 43]

With regard to the administrative cost grants for tribally operated 
schools, we were unable to assess the effect of their having less than 
100 percent of formula projected funds.[Footnote 44] The administrative 
cost grant formula calculates an administrative rate related to program 
cost to fund administrative duties such as payroll processing. In 
school year 2001-02, this rate ranged from 12 percent to 38 percent of 
program funds. As a percentage of calculated need, distributed funds 
have decreased from 90 percent in school year 1998-99 to 72 percent in 
school year 2002-03 (see table 7), a decline that was due to the 
formula projections for increased costs without similar increases in 
appropriations. However, without expenditure data, we are unable to 
assess whether the calculated need is valid and the formula accurate. 
Moreover, leaders of tribally operated schools can request more 
administrative funds from another Interior source, but BIA officials in 
the Office of Indian Education Programs did not know whether the tribes 
used this option, or whether tribally operated schools had received 
more for administration than they needed.

Table 7: Administrative Cost Grants--the Difference between Calculated 
Need and Distributed Funds in Tribally Operated BIA Schools, School 
Years 1998-99 through 2002-03 :

Calculated need; School year: 1998-99: $47,082,549; School year: 1999-
2000: $51,384,395; School year: 2000-01: $53,228,957; School year: 
2001-02: $56,888,738; School year: 2002-03[A]: $59,708,500.

Distributed funds; School year: 1998-99: $42,160,000; School year: 
1999-2000: $42,160,000; School year: 2000-01: $42,160,000; School year: 
2001-02: $43,065,048; School year: 2002-03[A]: $43,065,048.

Distributed funds as a percentage of calculated need; School year: 
1998-99: 90%; School year: 1999-2000: 82%; School year: 2000-01: 79%; 
School year: 2001-02: 76%; School year: 2002-03[A]: 72%.

Source: BIA financial system.

[A] BIA has not yet issued the final administrative cost grant funds.

[End of table]

Evaluation of BIA Formulas for Adequacy Is Limited by the Lack of 
Expenditure Data:

The lack of expenditure data limited our ability to fully evaluate the 
formulas in terms of adequacy. While we were able to assess the 
distributional equity of those used for instruction and transportation, 
we were not fully able to assess whether the weighting schemes were 
appropriate or whether they accounted for any intrinsic cost 
differences that may exist among schools. For example, the ISEP formula 
has weights for residency; we would need detailed expenditure data to 
capture the costs of operating boarding schools on such items as after 
school activities, increased food costs, counseling, and supervision 
and to determine the appropriateness of the weights. Intrinsic 
differences among schools could also be captured in expenditure data 
that would reflect differences in pay scale for the tribally operated 
schools according to region or degree of isolation, whether or not a 
school provides housing for its teachers, and amounts spent on 
recruitment or retention of staff. The presence of such differences in 
cost could affect the services and resources available for each 
student. OMB recommended to Interior that it develop academic 
performance and cost-efficiency measures that are comparable to 
similarly located public schools. Interior has agreed to implement this 
recommendation.

Conclusions:

BIA schools contend with very high poverty rates, large numbers of 
students with limited English proficiency, isolation, and many less 
than adequate facilities, all of which are associated with the high 
costs of education. While BIA's budgeted per-pupil funding exceeds the 
national average PPE, PPEs at selected BIA schools appear to be on par 
with that of selected public schools with similar characteristics. This 
similarity, however, does not ensure adequacy. Although we did not do a 
cost-effectiveness study, the funding allocated for transportation may 
not have been sufficient, since some schools made up shortfalls by 
spending money from funds primarily intended for instruction. It is 
unknown how this shift of funds may have affected instruction, but in 
an educational system characterized by higher than average costs for 
instruction, the use of such funds for any other purpose seems 
problematic. We could not make similar calculations to see how BIA 
schools made up for any shortfalls in facilities operations or 
administrative costs because these numbers were not available.

Because BIA does not collect complete expenditure data for two-thirds 
of its schools that are tribally operated, it is difficult to determine 
the overall adequacy of BIA's per-pupil funding other than by comparing 
it to similar selected public schools, which is a limited measure of 
adequacy. The expenditure data BIA collects does not reveal in detail 
how funds are actually spent. For example, the current system does not 
have data on how much was spent on components of instruction (teacher 
and paraprofessional salaries, instructional materials, and computers) 
or local administrative expenditures. Hence, Interior cannot use 
expenditure data to formulate its budget requests. Moreover, what 
expenditure data the agency does collect are not in categories that 
would permit comparisons with public schools. However, Interior's 
recent decision to implement an OMB recommendation to develop cost-
efficiency measures that are comparable to similarly located public 
schools may capture some of these data. Similarly, any assessment of 
the adequacy of distributional formulas would require expenditure data. 
As to the removal of special weights for special education students 
from the ISEP formula, Education found, and we concur, that this change 
has reduced the incentive to place students in overly restrictive 
environments. However, it is too soon to know the long-term effects on 
resources available for educating children who require special 
education.

Because it lacks an isolation factor in the transportation formula, BIA 
may not be providing enough transportation funding for students who 
live in remote areas. As a result, some BIA-operated schools may be 
shortchanging instruction. In addition, the lack of an efficiency 
incentive in the formula may limit opportunities for making the best 
use of available resources.

Finally, because BIA does not identify and track the total amount of 
overhead functions such as payroll, facilities management, and 
procurement, we could not assess the total funding supporting the 
administration of BIA schools. Moreover, without this information, 
Interior cannot account for the full costs of administration of BIA-
operated schools as federal accounting standards require.

Recommendations:

To better assess BIA funding and formulas for their adequacy and to 
ensure that budgeted funds are spent as intended and well managed, the 
Secretary of the Interior should direct the Assistant Secretary for 
Indian Affairs to collect expenditure data for the schools the agency 
directly manages in greater detail so that the data can be compared 
with public schools. For example, BIA should consider adopting the 
expenditure classifications, particularly the function and object 
codes, listed in Education's Financial Accounting for Local and State 
School Systems, 1990.

To better assess BIA funding and formulas for their adequacy, the 
Secretary of the Interior should also consider entering into 
negotiations with tribal entities to acquire detailed expenditure data 
for the schools they manage so they can compare it with public schools.

To improve the transportation formula so that it more accurately 
reflects costs and encourages efficiency, the Secretary of Interior 
should direct the Assistant Secretary of Indian Affairs to include an 
isolation index and an efficiency incentive in addition to an 
adjustment for road conditions.

To better manage Interior's funds, the Secretary of the Interior should 
direct the Assistant Secretary for Indian Affairs to identify and 
allocate all costs of administering BIA-funded schools, including the 
costs of (1) administrative services provided by BIA to BIA-operated 
schools and (2) central office services provided by headquarters and 
regional offices.

Agency Comments:

We provided a draft of this report to the Departments of the Interior 
and Education for their review and comment. Interior's comments are 
provided in appendix III. In its written comments, Interior generally 
agreed with our findings and recommendations.

Interior also made three comments on specific statements in our report: 
(1) BIA asked for clarification of "regional agencies" and we added 
that regional agencies are education line offices. (2) The second 
comment referred to our statement that similar spending does not imply 
adequate spending in the case of similar BIA and public schools and our 
statement "because the BIA does not collect complete expenditure data, 
we were limited in our ability to assess the overall adequacy of the 
formulas." The former statement was a clarification that the graph 
shows a comparison of spending at BIA and similar public schools and 
that no conclusions should be drawn regarding adequacy of funding. In 
contrast, the latter statement is specific to the adequacy of the 
formulas used by BIA and does not have implications for the adequacy of 
expenditures for public schools. (3) The third comment is about PPE 
comparisons and has two parts. The first part states that the report 
does not indicate what was included or considered as part of the PPE. 
Table 4 identifies what was included in our definition. The second part 
of the comment refers to the omission of a discussion about the 
inadequate amount spent on facilities in the past. Although our report 
indicates spending on facilities operations was more in the BIA-funded 
schools we visited than in similar public schools, we also stated that 
officials at 7 of the 8 BIA schools we visited rated their facilities 
as fair to poor and complained about a long-standing lack of investment 
in operation and repairs.

Education did not provide written comments but provided technical 
comments that were incorporated as appropriate.

We are sending copies of this report to the Secretary of the Interior, 
the Secretary of Education, relevant congressional committees, and 
other interested parties. Please contact me on (202) 512-7215 or 
Eleanor Johnson on (202) 512-7209 if you or your staff have any 
questions about this report. In addition, the report will be available 
at no charge on GAO's Web site at http://www.gao.gov. Other GAO 
contacts and staff acknowledgments are listed in appendix IV.

Marnie S. Shaul, 
Director: 
Education, Workforce and Income Security Issues:

Signed by Marnie S. Shaul:

List of Congressional Committees:

The Honorable Judd Gregg 
Chairman 
The Honorable Edward Kennedy 
Ranking Minority Member 
Committee on Health, Education, Labor and Pensions 
United States Senate:

The Honorable John A. Boehner 
Chairman 
The Honorable George Miller 
Ranking Minority Member 
Committee on Education and the Workforce 
House of Representatives:

[End of section]

Appendix I: Scope and Methodology:

This appendix discusses in more detail the scope and methodology for 
examining the funding and formulas used for funding Bureau of Indian 
Affairs (BIA) schools.

Funding:

To determine the sources and amounts of federal funding for all BIA 
schools, we reviewed BIA annual reports and budget justification 
documents, the President's Budget, Office of Management and Budget 
(OMB) reports, Department of Interior (Interior) appropriations 
summaries, and Department of Education (Education) financial reports. 
We talked with officials from Interior and Education. We conducted 
interviews with BIA officials at headquarters and the Office of Indian 
Education Programs in Albuquerque, New Mexico.

To determine how BIA school funding compares to national benchmarks, we 
analyzed BIA financial databases and national public school expenditure 
data from the Education's Core of Common Data (CCD) maintained by the 
National Center for Education Statistics (NCES), which uses the 
national average per-pupil expenditure (PPE) as an indicator of 
education funding. The national average PPE is determined by taking the 
total annual expenditures for all categories of current funding, except 
capital funds and debt service, and dividing it by the average school 
enrollment.[Footnote 45]

Because BIA does not maintain expenditure data on all of the schools it 
funds, specifically, tribally operated schools, we compared BIA annual 
budget allocations with national expenditures for the most recently 
available school year 1999-2000 to get an overall PPE comparison, 
excluding food. Similar to the PPE, the BIA per-pupil budget allocation 
is calculated by dividing the total dollar amount of annual budget 
allocations, excluding capital funds and debt service, by the student 
enrollment.[Footnote 46] BIA does maintain some expenditure data for 
the 32 day schools it directly operated in school year 1999-2000, 
representing 13 percent of enrollment at BIA-funded schools, and we 
were able to compare these schools with national school expenditures in 
terms of instruction, transportation, facilities, and administration 
for the same year.

We used budget and expenditure data from BIA's Financial Information 
System (FIS). We assessed the reliability of these data by (1) 
performing electronic testing for obvious errors in completeness, 
accuracy, and consistency; (2) reviewing existing information about the 
data and the system; and (3) interviewing agency officials 
knowledgeable about the data and the system. We determined that the 
budget data were sufficiently reliable for the purposes of this report. 
However, as stated in the report, FIS only contains limited expenditure 
data for the 32 BIA-operated day schools, which represent only 14 
percent of the total BIA enrollment. We determined that these data were 
sufficiently reliable for describing certain expenditure categories for 
the 32 BIA-operated schools. We have discussed completeness issues 
related to this data (including the lack of data on certain expenditure 
categories and the lack of data on the tribally operated schools) in 
the body of the report.

To determine how BIA school funding compares to that of similarly 
situated schools, we selected 10 BIA and 10 public schools based on 
location, school size, grade levels, relative isolation, and poverty 
indicators. These BIA and public schools were selected to be similar as 
a group; it was not a one-to-one match. We visited 9 public schools; 
the tenth was unreachable because of weather. We dropped 1 public 
school because it was not, in fact, similar and we dropped 2 other 
public schools because they did not have complete data. In addition, 2 
tribally operated BIA schools were eliminated because they could not 
provide necessary data. The BIA-operated schools also could not provide 
us with expenditure data. We obtained expenditure data for the 4 BIA-
operated schools we visited from the financial management system. We 
obtained data from 8 BIA (4 tribally operated, 4 BIA-operated) and 6 
public schools in Arizona, New Mexico, North Dakota, and South Dakota. 
(See table 8.) These results are not generalizable to other BIA 
schools. We selected these 4 states because they have 70 percent of the 
BIA schools.

Table 8: BIA and Public Schools We Visited:

BIA-funded day schools:

School: BIA-1; State: Arizona; Type: BIA; Enrollment: 155.

School: BIA-2; State: New Mexico; Type: BIA; Enrollment: 246.

School: BIA-3; State: New Mexico; Type: BIA; Enrollment: 137.

School: BIA-4; State: New Mexico; Type: Tribal; Enrollment: 398.

School: BIA-5; State: New Mexico; Type: BIA; Enrollment: 261.

School: BIA-6; State: South Dakota; Type: Tribal; Enrollment: 368.

School: BIA-7; State: South Dakota; Type: Tribal; Enrollment: 42.

School: BIA-8; State: South Dakota; Type: Tribal; Enrollment: 668.

Similar public schools:

School: P-1; State: Arizona; Type: Public; Enrollment: 271.

School: P-2; State: New Mexico; Type: Public; Enrollment: 360.

School: P-3; State: New Mexico; Type: Public; Enrollment: 56.

School: P-4; State: South Dakota; Type: Public; Enrollment: 387.

School: P-5; State: South Dakota; Type: Public; Enrollment: 181.

School: P-6; State: North Dakota; Type: Public; Enrollment: 192.

Source: GAO analysis.

[End of table]

In these schools, we interviewed public school principals and cognizant 
district officials, such as superintendents and business managers. We 
obtained and reviewed budget and financial documents from these schools 
and requested data from school officials regarding costs and issues 
related to their (1) instruction and related activities, (2) 
transportation, (3) facilities maintenance, and (4) administration in 
school year 2002. We also interviewed BIA school principals and 
business officials and a limited number of regional administrators who 
directly oversee BIA schools.

With regard to disaggregated data, we are not able to isolate the total 
amount of federal funding supporting the administration of BIA schools 
because some overhead functions, such as payroll, facilities 
management, and procurement, are handled regionally and the costs are 
not consistently identified and allocated to the schools. However, we 
did identify the administrative overhead that BIA reports for the 
administrative cost grants and the regional administrators. In 
addition, we found that BIA distributes administrative dollars 
differently than public schools do and does not use accounting 
categories that are nationally comparable. We adjusted the BIA data so 
that program management (which includes principals' salaries) was 
accounted for as an administrative, rather than as an instructional 
expense.

Formulas--Overview:

Formulas can be evaluated in terms of their equity and their adequacy. 
One notion of equity recognizes that students with similar 
characteristics should be treated similarly in terms of funding. For 
this measure of formula equity, the distribution of funds across 
weighted student units (WSU) is used to determine whether the range of 
differences in resources available to students is acceptable. There are 
several measures of the equity of the distribution of educational 
funds, including the federal range ratio. The federal range ratio would 
have a value of zero if the distribution were completely equitable. To 
evaluate the adequacy of a formula, one would assess how well the 
formula reflects relevant cost factors, such as teachers' salaries, by 
analyzing expenditure data. However, these data were not available or 
available at the level of detail needed.

To determine how the various formulas were used to distribute funds and 
how formula changes affected the funding of BIA schools, we conducted 
several analyses. First, we analyzed distributive formulas for 
instruction and transportation by determining the equity of the 
distribution. In the case of the transportation formula, we also 
compared the resulting distribution (budgeted amounts) to expenditures 
for the BIA-operated schools that report expenditures. To determine how 
well the Indian School Equalization Program (ISEP) formula and other 
formulas distributed instructional funds, we examined the equity of the 
distribution of such funds across pupils, WSU, and schools. In doing 
so, we examined the amount of variation in per-pupil funding across 
different categories of schools, such as size, control of school 
(tribally or BIA-operated), whether the school has a boarding 
component, and grades served by the school.

With regard to the facilities maintenance and operations formula and 
the administrative cost grant formula, we describe the formulas but do 
not evaluate their adequacy. It should be noted that at the time of the 
study, the facilities formula was in flux. We compared the amounts 
calculated by these two formulas to the amounts distributed by BIA for 
their respective programs.

To determine the extent to which changes to the ISEP formula have 
affected the funding of individual schools, we reviewed laws, as well 
as school enrollment data and preliminary funding data, and existing 
literature.

Formulas--Descriptions:

BIA uses six different formulas to distribute the majority of the 
operational funds. Each formula is associated with a program or 
function, such as instruction or transportation, and, each formula is 
comprised of variables that are relevant to that program or function. 
Ideally, any such set of formulas would work together to distribute 
funds efficiently and fairly based on real cost components relevant to 
the functions of the formulas.

ISEP Formula:

Formula details. The ISEP formula is BIA's primary formula for 
distributing funds for instruction. ISEP funds are distributed to 
schools based on WSU, or school enrollment adjusted for certain school 
and student characteristics. The weighting scheme for the ISEP formula 
recently changed, such that all weights based on special education 
needs were eliminated. Prior to the change, the ISEP formula included 
weights based on grade, bilingual designation, gifted and talented 
classification, as well as exceptional child categories, which were 
eliminated. The change in August 2002 increased all grade-based weights 
by a factor of 15 percent. The ISEP formula also has weights for BIA's 
residency program. The instructional weights and the residential 
weights are in tables 9 and 10.

Formula distribution. The ISEP formula is a distributional formula. The 
distribution of ISEP funds begins in July, when schools receive 80 
percent of funds (calculated by using the prior year's enrollment). 
Schools have a count week in September during which they determine 
their current enrollment and the number of students requiring 
exceptional education services. School administrators report their 
average daily membership (ADM) to BIA. The education line officers 
certify these counts. ISEP also has a small school adjustment that is 
intended to help defray some costs associated with relatively small 
schools whose enrollment is less than 50 ADM. Each small school 
receives an additional 12.5 WSU. In addition, each school that has 
between 50 and 100 ADM receives extra WSU as follows:

[See PDF for formula]

[End of formula]

After calculating the WSU for each school (including small school 
adjustments), officials at BIA calculate the dollar amount per WSU by 
dividing the amount appropriated for ISEP by the total number of WSU. 
They then compute the amount that each school receives by multiplying 
the total WSU for each school by the ISEP per WSU amount. The schools 
then receive the difference between that product and the amount they 
were given in July. The BIA disburses the final amount by December 1st.

Table 9: ISEP Formula Weights for the Instructional Program:

ISEP formula instructional programs: 

Basic program:

Kindergarten; 
Prior to August 2002: Base weight: 1.00; 
Prior to August 2002: Add on weight: N/A; 
Since August 2002: Base weight: 1.15; 
Since August 2002: Add on weight: N/A.

Grades 1 to 3; 
Prior to August 2002: Base weight: 1.20; 
Prior to August 2002: Add on weight: N/A; 
Since August 2002: Base weight: 1.38; 
Since August 2002: Add on weight: N/A.

Grades 4 to 6; 
Prior to August 2002: Base weight: 1.00; 
Prior to August 2002: Add on weight: N/A; 
Since August 2002: Base weight: 1.15; 
Since August 2002: Add on weight: N/A.

Grades 7 to 8; 
Prior to August 2002: Base weight: 1.00; 
Prior to August 2002: Add on weight: N/A; 
Since August 2002: Base weight: 1.38; 
Since August 2002: Add on weight: N/A.

Grades 9 to 12; 
Prior to August 2002: Base weight: 1.30; 
Prior to August 2002: Add on weight: N/A; 
Since August 2002: Base weight: 1.50; 
Since August 2002: Add on weight: N/A.

Supplemental programs: 

Intense bilingual; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.2; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: 0.2.

Deaf: Gifted and talented; 
Prior to August 2002: Base weight: Deaf: N/A; 
Prior to August 2002: Add on weight: Deaf: 2 - base weight; 
Since August 2002: Base weight: Deaf: N/A; 
Since August 2002: Add on weight: Deaf: 2 - base weight[A].

Supplemental programs: Disabilities programs (full time – high 
service): 

* Deaf; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 3.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Blind; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 3.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Severely multi- handicapped; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 3.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Severely and profoundly retarded; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 3.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Hospital/ homebound instruction required; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 3.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Severely emotionally disturbed; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 3.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Emotionally disturbed; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 1.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Specific learning disabled; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 1.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Mentally retarded; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 1.00; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

Supplemental programs: Disabilities programs (full time – moderate 
service):

* Emotionally disturbed; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.50; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Specific learning disabled; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.50; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Mentally retarded; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.50; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Multihandicapped; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.50; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Hard of hearing; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.25; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Visually handicapped; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.25; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Orthopedically impaired; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.25; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Other health impaired; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.25; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A.

* Speech impaired; 
Prior to August 2002: Base weight: N/A; 
Prior to August 2002: Add on weight: 0.25; 
Since August 2002: Base weight: N/A; 
Since August 2002: Add on weight: N/A. 

Source: For the column entitled " Prior to August 2002 ISEP weights," 
the source was 25 C.F.R. 39.12, revised as of April 1, 2002. For the 
column "Since August 2002 weights," the source was 25 C.F.R. 39.12 (e) 
and (g) (1) and (2), revised as of April 1, 2003.

[A] For example, in school year 2002-03, a gifted and talented 
kindergartener receives an add on weight of 2 - 1.15 = 0.85.

[End of table]

Table 10: ISEP Formula Weights for the Residential Program:

Basic program: 

ISEP formula residential program: Basic program; Kindergarten; Prior to 
August 2002: Add on weight: 0; Since August 2002: Add on weight: 0.

Grades 1 to 3; Prior to August 2002: Add on weight: 1.4; Since 
August 2002: Add on weight: 1.4.

Grades 4 to 6; Prior to August 2002: Add on weight: 1.25; Since 
August 2002: Add on weight: 1.25.

Grades 7 to 8; Prior to August 2002: Add on weight: 1.25; Since 
August 2002: Add on weight: 1.25.

Disabilities programs (full time - high service): Grades 9 to 12; Prior 
to August 2002: Add on weight: Disabilities programs (full time - high 
service): 1.25; Since August 2002: Add on weight: Disabilities programs 
(full time - high service): 1.25.

ISEP formula residential program: Disabilities programs (full time - 
high service); All full-time handicapped students; Prior to August 
2002: Add on weight: 0.5; Since August 2002: Add on weight: N/A.

ISEP formula residential program: Disabilities programs (part time - 
moderate service); Mentally retarded; Prior to August 2002: Add on 
weight: 0.25; Since August 2002: Add on weight: N/A.

Multihandicapped; Prior to August 2002: Add on weight: 0.25; Since 
August 2002: Add on weight: N/A.

Emotionally disturbed; Prior to August 2002: Add on weight: 0.25; 
Since August 2002: Add on weight: N/A.

Orthopedically impaired; Prior to August 2002: Add on weight: 0.25; 
Since August 2002: Add on weight: N/A.

Intense residential guidance: Other health impaired; Prior to August 
2002: Add on weight: Intense residential guidance: 0.25; Since August 
2002: Add on weight: Intense residential guidance: N/A.

ISEP formula residential program: Intense residential guidance; 
Prior to August 2002: Add on weight: 0.50; Since August 2002: 
Add on weight: 0.50.

Source: For the column entitled "Prior to August 2002 ISEP weights ," 
the source was 25 C.F.R. 39.13, revised as of April 1, 2002. For the 
column entitled "Since August 2002 weights," the source was 25 C.F.R. 
39.13, revised as of April 1, 2003.

[End of table]

Student Transportation Formula:

Formula details. BIA uses a formula for the distribution of funds for 
student transportation. The transportation formula itself is 
straightforward. It distributes funds based on miles driven, weighted 
by the road condition. Basically, improved miles get a weight of 1 
while unimproved miles get a weight of 1.2. Improved roads are paved 
roads or graded roads, including gravel roads. Unimproved roads consist 
of those roads that are not graded, and not really maintained. (See 
table 11.):

Formula distribution. Like the ISEP formula, the transportation formula 
is purely distributive. The schools report to BIA the number of miles 
driven in 1 day transporting students to and from school on improved 
and on unimproved roads. BIA officials then calculate the total miles 
for boarding schools and day schools as described in table 11.

Since some students live very far away from their schools or dorms, 
they have to use planes, trains, or buses (other than school buses) to 
get to school. BIA pays for two roundtrip tickets for such students 
each school year. Therefore, the transportation costs for such students 
are based on the costs of two roundtrip tickets (per school year). 
Before calculating the per mile rate (based on school bus miles 
driven), BIA officials first subtract any student transportation 
expenses for airfare, charter buses, train fare, and bus fare from the 
transportation allocation. The remainder of the transportation is 
divided by the sum of day and boarding adjusted total miles, generating 
a "per mile" rate. The transportation funds are then distributed to the 
schools accordingly.

Table 11: Transportation Formula Weights with Examples:

Definition: Example 1: Standing Rock Community School; Improved miles 
[M]: Number of miles driven on improved roads in 1 day: 1,346.8; 
Unimproved miles [U]: Number of miles driven on unimproved roads in 1 
day: 212.5; Adjusted total miles [T]: T = M + 1.2U: 1,346.8 + 
1.2(212.5) = 1601.8; Total boarding miles: 4T: N/A[A]; Total day miles: 
180T: 180(1601.8) = 288,324.

Definition: Example 2: Navajo Preparatory School[B]; Improved miles 
[M]: Number of miles driven on improved roads in 1 day: 2,459; 
Unimproved miles [U]: Number of miles driven on unimproved roads in 1 
day: 17; Adjusted total miles [T]: T = M + 1.2U: 2,459 + 1.2 (17) = 
2,479.4; Total boarding miles: 4T: 4(2,479.4)= 9917.6; Total day miles: 
180T: N/A[A].

Source: GAO analysis.

[A] BIA day schools are in session and transport their students to and 
from school 180 days per year. BIA boarding schools are in session 180 
days, but need to transport their students to and from school only 4 
times each year.

[B] This school is a boarding school with no day students that need 
transportation. Many boarding schools have students who live at home in 
addition to those who board.

[End of table]

Formula Used to Distribute "Safe and Drug Free Schools and Communities-
State Programs" (Title IV, Part A) Funds from Education:

Formula description. The formula used in the distribution of Title IV 
funds has the same weights as those in the ISEP Base Program, that is, 
weights based on the grade the student is in, with additional "add on" 
weights for students who reside at one of the dorms or boarding schools 
(see tables 9 and 10).

Formula distribution. Every school gets a base of $5,000. The rest of 
the funds are distributed by WSU using only the basic grade--related 
and basic residential weights. In other words, after giving each school 
$5,000, BIA officials divide the rest of the funds by WSUs derived from 
the base programs and obtain an amount per base WSU.

Formula Used to Distribute "Disadvantaged Children" (Title I) and Title 
II, Parts A & D Funds from Education:

Formula description. Funds for these two programs are distributed 
primarily based on enrollment, with adjustments made only for school 
size. The adjustments for school size are different for the two 
programs, but each one gives a larger base to smaller schools (see 
tables 12 and 13). In the text of this report, the two programs were 
treated as being distributed by one formula.

Formula distribution. After distributing the base amounts, BIA divides 
the remaining funds by the total ADM and distributes the funds to each 
school accordingly.

Table 12: Small School Adjustments for Disadvantaged Children (Title I) 
Funds.

School enrollment: < 50; Base amount (Title I): $15,000.

School enrollment: 50 - <100; Base amount (Title I): $10,000.

School enrollment: 100 - < 200; Base amount (Title I): $5,000.

School enrollment: 200 & up; Base amount (Title I): $0.

Source: BIA officials.

[End of table]

Table 13: Small School Adjustments for Title II, Parts A & D Funds:

School enrollment: < 51; Base amount: (Title II): $5,000.

School enrollment: 51 - 100; Base amount: (Title II): $3,000.

School enrollment: 101 - 200; Base amount: (Title II): $1,500.

School enrollment: 201 & up; Base amount: (Title II): $0.

Source: BIA officials.

[End of table]

Formula Used for the Operations and Maintenance of Facilities:

Formula description. The facilities maintenance and operations formula 
is handled in the Office of Facilities Management and Construction 
through the Facilities Management Information System. The facilities 
maintenance formula calculates the amount needed to operate and 
maintain facilities based on size of facilities (in square feet), age 
of the facilities, and technology currently in place at the facilities 
(i.e., public announcement system, boiler, electric system, etc.). The 
formula calculates amount needed for on-location costs, such as 
utilities, custodial services, preventive maintenance, and unscheduled 
maintenance. In addition, it calculates program support costs such as 
program administration, leave, vehicle leases, communication, site 
operations, site maintenance, guard services, pest control, refuse 
collection, expendable equipment, and work supervision. The formula 
incorporates an isolation factor, a variable that represents the 
distance from the school to the nearest repair or parts center. We did 
not collect information on the actual weights used in the formula.

Formula distribution. The amount each school is supposed to receive to 
fully operate and maintain its facilities is generated by the formula. 
In general, however, facilities maintenance and operations have been 
funded below 100 percent of "calculated need." To determine funding 
level, BIA considers the proportion of appropriated funds to the level 
of funding determined by the formula and then scales each school's 
facilities maintenance and operations budget accordingly. For example, 
if appropriated funds could cover 84 percent of formula determined 
funds, then each school would receive 84 percent of its calculated 
facilities maintenance and operations need.

Administrative Cost Grants Formula:

Formula detail. This grant applies only to tribally operated schools. 
Like the facilities maintenance and operations formula, the 
administrative cost grant (ACG) formula generates a "needed" amount. In 
the case of the ACG formula, it generates an administrative rate. The 
administrative rate has an inverse relationship to program costs; the 
larger the program, the smaller the administrative rate will be. It 
could range from 11 percent to 50 percent. Program dollars from 2 years 
previous are used in the ACG formula. A program may consist of the 
school by itself; however, if the tribe operates several institutions 
under one grant, then the program consists of all such institutions. 
For example, the program dollars used to calculate the ACG rate for one 
school could consist of funds for not only the school, but for the 
preschool and some health facilities as well, while the program dollars 
used to calculate the ACG rate for another school could consist solely 
of the funds for the school.

The administrative rate is calculated using the following formula:

[See PDF for image]

[End of formula]
 
where [See PDF for formula] represents the program dollars 2 years 
previously.

Formula distribution. To distribute ACGs, BIA officials multiply the 
administrative rate by program dollars for each school's operations in 
the current year to generate the amount needed for ACGs for the current 
school year. Thus, while the administrative rate is based on program 
dollars for all programs administered by the tribe, the ACG itself is 
the formula generated rate applied to the school program.

In general, the ACGs have been funded below 100 percent of the rate 
generated by the formula. To determine funding level, BIA considers the 
proportion of appropriated funds to the level of funding determined by 
the formula and then scales each school's ACG accordingly. For example, 
if appropriated funds could cover 84 percent of formula determined 
funds, then each school would receive 84 percent of its calculated ACG.

Formula Analyses:

Instructional Formulas:

We analyzed the instructional formulas[Footnote 47] in several ways to 
determine the equity of the distribution of funds. We evaluated the 
equity of the instructional formulas by comparing funding per pupil and 
per WSU. In making these comparisons, we accounted for differences in 
student and school characteristics. To capture differences between 
students, we conducted our analysis across WSU, which account for 
differences such as bilingual instruction and degree of disability. 
(Table 9 presents a full description of the ISEP weights.) We accounted 
for differences in school characteristics by controlling for type of 
administration (BIA or tribal), grades served (elementary, secondary, 
or combined), school size (small, medium, or large), and whether or not 
the school has a boarding component. Together, these characteristics 
yielded 36 school categories. All of these features had been used in at 
least one prior study of BIA schools and are directly related to costs. 
For example, boarding schools receive more money than day schools, and 
in general, small schools received more money per pupil than larger 
schools. (See tables 14 and 15.):

First, to determine the equity of instructional funding across schools 
with different characteristics, we compared average funding per student 
(weighted and unweighted). We calculated the means (and standard 
deviations) of per-pupil instructional funds for different categories 
of schools. We found substantial variation in the per-pupil means 
across categories. (See tables 14 and 15.) As expected, boarding 
schools received more funding per pupil then did day schools, 
regardless of size, administration, and grades served. When we analyzed 
instructional funding per pupil and per weighted student counts by 
administration to determine if there were any differences in funding 
between tribally operated and BIA-operated schools, we found no 
systematic differences.

Table 14: Means, Standard Deviations and Coefficient of Variation of 
Instructional Funding by School Characteristics for On-Reservation 
Boarding Schools, in School Year 2001-02:

[See PDF for image]

Source: GAO analysis.

Note: N is the number of schools.

SD is the standard deviation.

CV is the coefficient of variation.

[A] This analysis does not include the 7 off-reservation boarding 
schools.

[End of table]

Table 15: Means, Standard Deviations, and Coefficients of Variation of 
Instructional Funding by School Characteristics for Day Schools, School 
Year 2001-02.

Day school size[A] and grade level: Small, K-8: 

Statistics: N; Instructional funds per pupil: BIA operated: 9; 
Instructional funds per WSU: 9; Instructional funds per pupil: 
Tribally operated: 12; Instructional funds per WSU: 12.

Statistics: Mean; Instructional funds per pupil: BIA operated: 
$8,155.87; Instructional funds per WSU: $4,835.84; Instructional funds 
per pupil: Tribally operated: $8,999.87; Instructional funds per WSU: 
$4,895.00.

Statistics: SD; Instructional funds per pupil: BIA operated: 
$1,437.35; Instructional funds per WSU: $209.77; Instructional funds 
per pupil: Tribally operated: $3,192.28; Instructional funds per WSU: 
$359.40.

Statistics: CV; Instructional funds per pupil: BIA operated: 18; 
Instructional funds per WSU: 4; Instructional funds per pupil: 
Tribally operated: 35; Instructional funds per WSU: 7.

Day school size[A] and grade level: Small, 9-12: 

Statistics: N; Instructional funds per pupil: BIA operated: 0; 
Instructional funds per WSU: 0; Instructional funds per pupil: 
Tribally operated: 1; Instructional funds per WSU: 1.

Statistics: Mean; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: $8,146.93; Instructional funds per WSU: $4,535.56.

Statistics: SD; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: N/A; Instructional funds per WSU: N/A.

Statistics: CV; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: N/A; Instructional funds per WSU: N/A.

Day school size[A] and grade level: Small, K-12: 

Statistics: N; Instructional funds per pupil: BIA operated: 0; 
Instructional funds per WSU: 0; Instructional funds per pupil: 
Tribally operated: 4; Instructional funds per WSU: 4.

Statistics: Mean; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: $7,359.08; Instructional funds per WSU: $4,744.14.

Statistics: SD; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: $77.04; Instructional funds per WSU: $91.04.

Statistics: CV; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: 1; Instructional funds per WSU: 2.

Day school size[A] and grade level: Medium, K-8: 

Statistics: N; Instructional funds per pupil: BIA operated: 16; 
Instructional funds per WSU: 16; Instructional funds per pupil: 
Tribally operated: 20; Instructional funds per WSU: 20.

Statistics: Mean; Instructional funds per pupil: BIA operated: 
$6,925.53; Instructional funds per WSU: $4,668.39; Instructional funds 
per pupil: Tribally operated: $6,878.96; Instructional funds per WSU: 
$4,641.74.

Statistics: SD; Instructional funds per pupil: BIA operated: $635.77; 
Instructional funds per WSU: $117.96; Instructional funds per pupil: 
Tribally operated: $641.53; Instructional funds per WSU: $152.23.

Statistics: CV; Instructional funds per pupil: BIA operated: 9; 
Instructional funds per WSU: 3; Instructional funds per pupil: 
Tribally operated: 9; Instructional funds per WSU: 3.

Day school size[A] and grade level: Medium, 9-12: 

Statistics: N; Instructional funds per pupil: BIA operated: 1; 
Instructional funds per WSU: 1; Instructional funds per pupil: 
Tribally operated: 1; Instructional funds per WSU: 1.

Statistics: Mean; Instructional funds per pupil: BIA operated: 
$6,797.3; Instructional funds per WSU: $4,601.25; Instructional funds 
per pupil: Tribally operated: $8,731.36; Instructional funds per WSU: 
$5,225.01.

Statistics: SD; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: N/A; Instructional funds per WSU: N/A.

Statistics: CV; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: N/A; Instructional funds per WSU: N/A.

Day school size[A] and grade level: Medium, K-12: 

Statistics: N; Instructional funds per pupil: BIA operated: 1; 
Instructional funds per WSU: 1; Instructional funds per pupil: 
Tribally operated: 20; Instructional funds per WSU: 20.

Statistics: Mean; Instructional funds per pupil: BIA operated: 
$7,220.27; Instructional funds per WSU: $3,849.07; Instructional funds 
per pupil: Tribally operated: $7,396.80; Instructional funds per WSU: 
$4,627.26.

Statistics: SD; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: $739.70; Instructional funds per WSU: $204.58.

Statistics: CV; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: 10; Instructional funds per WSU: 4.

Day school size[A] and grade level: Large, K-8: 

Statistics: N; Instructional funds per pupil: BIA operated: 6; 
Instructional funds per WSU: 6; Instructional funds per pupil: 
Tribally operated: 5; Instructional funds per WSU: 5.

Statistics: Mean; Instructional funds per pupil: BIA operated: 
$6,914.55; Instructional funds per WSU: $4,579.50; Instructional funds 
per pupil: Tribally operated: $7,111.31; Instructional funds per WSU: 
$4,492.04.

Statistics: SD; Instructional funds per pupil: BIA operated: $687.60; 
Instructional funds per WSU: $125.31; Instructional funds per pupil: 
Tribally operated: $331.10; Instructional funds per WSU: $54.85.

Statistics: CV; Instructional funds per pupil: BIA operated: 10; 
Instructional funds per WSU: 3; Instructional funds per pupil: 
Tribally operated: 5; Instructional funds per WSU: 1.

Day school size[A] and grade level: Large, 9-12: 

Statistics: N; Instructional funds per pupil: BIA operated: 0; 
Instructional funds per WSU: 0; Instructional funds per pupil: 
Tribally operated: 1; Instructional funds per WSU: 1.

Statistics: Mean; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: $7,443.99; Instructional funds per WSU: $4,418.93.

Statistics: SD; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: N/A; Instructional funds per WSU: N/A.

Statistics: CV; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: N/A; Instructional funds per WSU: N/A.

Day school size[A] and grade level: Large, K-12: 

Statistics: N; Instructional funds per pupil: BIA operated: 1; 
Instructional funds per WSU: 1; Instructional funds per pupil: 
Tribally operated: 14; Instructional funds per WSU: 14.

Statistics: Mean; Instructional funds per pupil: BIA operated: 
$6,764.04; Instructional funds per WSU: $4,673.17; Instructional 
funds per pupil: Tribally operated: $7,209.77; Instructional funds per
WSU: $535.74.

Statistics: SD; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: $421.00; Instructional funds per WSU: $92.93.

Statistics: CV; Instructional funds per pupil: BIA operated: N/A; 
Instructional funds per WSU: N/A; Instructional funds per pupil: 
Tribally operated: 6; Instructional funds per WSU: 2.

Source: GAO analysis.

[A] Most BIA schools are small compared to public schools. In this 
table, small schools have fewer than 100 students, medium schools range 
from 100 to fewer than 300 students, and large schools have 300 or more 
students.

[End of table]

We also considered equity within categories, calculating the 
coefficient of variation, which expresses the ratio of the standard 
deviation to the mean, for each of the categories above. (See tables 14 
and 15.) Again, while there was sometimes substantial variation within 
cells on a per-pupil basis, there was less variation across WSU. For 
example, among the 9 small, K-8, day schools that are operated by BIA, 
the coefficient of variation was 0.18 when considering instructional 
funds across pupils, but was only 0.04 when considering instructional 
funds across WSU.

Finally, we evaluated the overall equity of per WSU distributions 
across all the schools by using a measure of equity, the federal range 
ratio, presented in table 6.

Transportation:

To evaluate the equity of the transportation formula, we considered the 
amount each school received on a per mile basis to determine equity. We 
found no substantial difference in the per mile rates across schools. 
Among the 160 schools for which we had data in for the 2001-02 school 
year, 156 schools had a per mile rate between 2.29 and 2.32.

To evaluate the adequacy of the transportation formula, we performed 
two analyses in which we employed the expenditure data available to us. 
This expenditure data covered only the BIA-operated schools, as BIA 
does not collect such data for the tribally operated schools. Thus, the 
results in this section cannot be generalized to the entire BIA school 
system and should be interpreted only for the BIA-operated schools. In 
the first analysis, we compared expended amounts in transportation to 
budgeted amounts in order to determine whether or not there was any 
evidence of spending greater than the amount budgeted. If some schools 
overspent the transportation budget while others underspent, this would 
indicate a potential problem of misallocation of funds by the formula 
for the BIA-operated schools. We found that about 40 percent of the 
BIA-operated schools overspent their transportation budgets in school 
year 2001-02. To determine how well the formula accounted for actual 
differences in expenditures for the BIA-operated schools, we ran a 
regression of expended amounts for transportation on the number of 
miles traveled on unimproved roads, the number of miles traveled on 
improved roads, and isolation. As BIA uses a weight of 1.2 for every 
unimproved mile, we examined the ratio of the coefficients for 
unimproved miles to improved miles for the BIA-operated schools. A 
ratio different from 1.2 would provide evidence that unimproved miles 
cost more (or less) than 1.2 times an improved mile for the BIA-
operated schools. We found the ratio to be equal to 1.23 and thus 
concluded that BIA's weight of 1.2 was acceptable, at least for the 
BIA-operated schools. We included a variable for isolation, measuring 
miles to a service station, which had a positive correlation to the 
expenditures of the school. This indicated that, for the BIA-operated 
schools, each additional mile to a service station cost the school 
about $241. The results are below in table 16.

Table 16: Transportation Regression Results Using Data from School Year 
2001-02.

Variable: Intercept; Degrees of freedom: 1; Parameter estimate: -12112.

Variable: Isolation; Degrees of freedom: 1; Parameter estimate: 
241.24418.

Variable: Unimproved miles; Degrees of freedom: 1; Parameter estimate: 
2.75684.

Variable: Improved miles; Degrees of freedom: 1; Parameter estimate: 
2.23786.

Variable: R-square; Degrees of freedom: [Empty]; Parameter estimate: 
0.8916.

Variable: Adjusted R-square; Degrees of freedom: [Empty]; Parameter 
estimate: 0.8862.

Source: GAO analysis.

[End of table]

[End of section]

Appendix II: Appropriations for BIA Schools, Fiscal Years 1999--2002:

Table 17: Appropriations for BIA School Operations from the Department 
of Interior and Amounts Received from the Department of Education, 
Fiscal Years 1999-2002:

Dollars in thousands: 

Interior program: 

ISEP formula funds; FY 1999: 
$306,230; FY 2000: $316,502; FY 2001: $330,070; FY 2002: $343,933.

ISEP program adjustments; FY 
1999: 656; FY 2000: 663; FY 2001: 666; FY 2002: 673.

Early childhood development; FY 
1999: 5,503; FY 2000: 5,586; FY 2001: 12,107; FY 2002: 12,210.

Student transportation; FY 
1999: 34,758; FY 2000: 36,099; FY 2001: 36,217; FY 2002: 36,546.

Institutionalized disabled; FY 
1999: 3,740; FY 2000: 3,747; FY 2001: 3,743; FY 2002: 3,813.

Facilities operations and 
maintenance; FY 1999: 75,222; FY 2000: [Empty]; FY 2001: [Empty]; FY 
2002: [Empty].

Facilities operations; FY 1999: 
[Empty]; FY 2000: 54,091; FY 2001: 54,481; FY 2002: 55,473.

Administrative cost grants; FY 
1999: 42,160; FY 2000: 42,160; FY 2001: 43,065; FY 2002: 43,065.

Area/agency technical support; 
FY 1999: 7,117; FY 2000: 7,357; FY 2001: 7,371; FY 2002: 7,604.

School statistics (automatic 
data processing); FY 1999: 700; FY 2000: 700; FY 2001: 698; FY 2002: 
698.

Subtotal: Interior (BIA) School Operations; FY 1999: $476,086; 
FY 2000: $466,905; FY 2001: $488,418; FY 2002: $504,015.

Education funding: 

IDEA, Part B, 611 (a)(1); FY 
1999: 30,414; FY 2000: 37,346; FY 2001: 42,279; FY 2002: 48,939.

IDEA, Part B, 611 (c); FY 1999: 
9,336; FY 2000: 9,336; FY 2001: 10,570; FY 2002: 12,235.

IDEA, Part C, Sec. 684; FY 
1999: 4,284; FY 2000: 4,568; FY 2001: 4,630; FY 2002: 4,735.

IASA[A] , Title I, 
Disadvantaged; FY 1999: 47,019; FY 2000: 49,390; FY 2001: 51,343; FY 
2002: 56,748.

IASA, Title II, Eisenhower Math 
and Science; FY 1999: 1,670; FY 2000: 1,670; FY 2001: 1,673; FY 2002: 
2,423.

IASA, Title III, Technology 
Literacy Challenge Grant; FY 1999: 2,215; FY 2000: 2,125; FY 2001: 
2,125; FY 2002: 2,225.

IASA, Title IV, Drug Free 
Schools and Communities; FY 1999: 5,310; FY 2000: 4,410; FY 2001: 
4,393; FY 2002: 4,393.

IASA, Title VII, Bilingual 
Education; FY 1999: 749; FY 2000: 525; FY 2001: 830; FY 2002: 1,005.

IASA, Title IX - Indian 
Education Act; FY 1999: 2,270; FY 2000: 1,798; FY 2001: 1,819; FY 2002: 
2,770.

Comprehensive School Reform 
Demonstration Program; FY 1999: 0; FY 2000: 896; FY 2001: 2,235; FY 
2002: 1,614.

Class Size Reduction Program; 
FY 1999: [Empty]; FY 2000: 3,467; FY 2001: 3,467; FY 2002: 3,467.

Education of Homeless Children 
and Youth; FY 1999: 100; FY 2000: 100; FY 2001: 100; FY 2002: 100.

Educate America Act; FY 1999: 
2,909; FY 2000: 2,989; FY 2001: 2,875; FY 2002: 0.

Subtotal: Education; FY 1999: 
$106,276; FY 2000: $118,620; FY 2001: $128,339; FY 2002: $140,654.

Total: Interior and Education; 
FY 1999: $582,362; FY 2000: $585,525; FY 2001: $616,757; FY 2002: 
$644,6692.

Source: GAO analysis of BIA Budget Justifications.

[A] Improving America's Schools Act of 1994.

[End of table]

Table 18: BIA Education Construction Appropriations, Fiscal Years 1998-
2003:

Fiscal years.

Replacement school construction; $19,200; Fiscal 
years: 1999: $17,400; Fiscal years: 2000: $62,859; Fiscal years: 2001: 
$141,238; Fiscal years: 2002: $127,799; Fiscal years: 2003[A]: 
$125,223.

Employee housing repairs; 3,000; Fiscal years: 
1999: 3,000; Fiscal years: 2000: 2,507; Fiscal years: 2001: 3,105; 
Fiscal years: 2002: 3,114; Fiscal years: 2003[A]: 3,120.

Facilities improvement and repair; 32,179; Fiscal 
years: 1999: 40,000; Fiscal years: 2000: 67,833; Fiscal years: 2001: 
147,998; Fiscal years: 2002: 161,590; Fiscal years: 2003[A]: 164,374.

Total; $54,379; Fiscal years: 1999: $60,400; 
Fiscal years: 2000: $133,199; Fiscal years: 2001: $292,341; Fiscal 
years: 2002: $292,503; Fiscal years: 2003[A]: $292,717.

Source: GAO analysis.

[A] Amount requested.

[End of table]

[End of section]

Appendix III: Comments from the Department of Interior:

United States Department of the Interior:

OFFICE OF THE SECRETARY Washington, D.C. 20240:

AUG 28 2003:

Mamie S. Shaul, Director:

Education, Workforce and Income Security Issues United States General 
Accounting Office Washington, D.C. 20548:

Dear Ms. Shaul:

Thank you for the opportunity to comment on your proposed report, 
BUREAU OF INDIAN AFFAIRS: Expenditures in Selected Schools.

The attached comments are presented in two major sections. The first 
section responds to the four (4) recommendations on page 31. The second 
section provides our comments on specific pages or statements in the 
draft report.

If you have any questions or require additional information, please 
contact Mr. Ed Parisian, Director, Office of Indian Education Programs, 
at (202) 208-6123.

Sincerely,

Signed by: 

Aurene M. Martin

Acting Assistant Secretary - Indian Affairs:

Enclosure:

Comments on Draft Report: BUREAU OF INDIAN AFFAIRS:

Comments on Draft Report: BUREAU OF INDIAN AFFAIRS: Expenditures in 
Selected Schools......

I. Comments on GAO Recommendations:

1. To better assess BIA funding and formulas for their adequacy and to 
ensure that budgeted funds are spent as intended and well managed, the 
Secretary of the Interior should direct the Assistant Secretary for 
Indian Affairs to collect expenditure data for the schools the agency 
directly manages in greater detail so that the data would allow for 
comparison with public schools. For example, BIA should consider 
adopting the expenditure classifications, particularly the function and 
object codes, listed in Education's financial Accounting for Local and 
State School Systems 1990.

We agree with the recommendation. For those schools the BIA directly 
manages, the federal accounting system used by the Bureau of Indian 
Affairs (BIA) will be modified to collect school expenditure data in 
greater detail. The BIA will consider the adoption of the expenditure 
classifications listed in Education's Financial Accounting for Local 
and State School Systems 1990. In addition, the Office of Indian 
Education Programs (OIEP) will review the Education Cost Code System to 
determine the feasibility of merging it with the FFS. This system has 
the capability to capture very specific cost and expenditure data.

2. To better assess BIA funding and formulas for their adequacy, the 
Secretary of the Interior should also consider entering into 
negotiations with tribal entities to acquire detailed expenditure data 
for the schools they manage in away that would allow for comparison 
with public schools.

We agree that acquiring detailed data would allow for comparison with 
public schools. However, currently § 5207 of Pub. L. 100-297 states 
that the annual report from tribally controlled schools shall be 
limited to an annual financial statement, a biannual financial audit 
conducted pursuant to the Single Audit Act, the number of students 
served, a brief program description, and a program evaluation conducted 
by an impartial entity. In the past, tribally controlled schools have 
been reluctant to share detailed financial information with the Bureau, 
as they feel that the Single Audit Act provides all the information 
required by the statute. If Congress desires this information, changes 
to Pub. L. 100-297 will likely be necessary. We would be happy to work 
with Congress to develop amendments which would provide appropriate 
information.

3. To improve the transportation formula so that it more accurately 
reflects costs and encourages efficiency, the Secretary of Interior 
should direct the Assistant Secretary of Indian Affairs to include an 
isolation index and an efficiency incentive in addition to an 
adjustment for road conditions..

We agree with the recommendation. This recommendation will be 
considered along with the recommended changes in the Indian School 
Equalization Program (ISEP) regulations to be proposed by the 
Negotiated Rulemaking Committee which is required by the "No Child Left 
Behind Act". Additionally, an old (1984) Office of Indian Education 
Programs (OIEP) survey found that the Student Transportation formula 
used by New Mexico could accommodate the BIA's student transportation 
requirements in that it included factors for road conditions, 
isolation, varying bus driver salaries, size of school enrollment, etc. 
The BIA will review that, or similar formulas, and provide that 
information to the Negotiated Rulemaking Committee.

4. To better manage Interior's funds, the Secretary of the Interior 
should direct the Assistant Secretary for Indian Affairs to identify 
and allocate all costs of administering BIA-fiinded schools, including 
the costs of (1) administering services provided by BIA to BIA-operated 
schools, and (2) central office services provided by headquarters and 
regional offices.

We agree with the recommendation, with modification. The Assistant 
Secretary - Indian Affairs (AS-IA) office staff now, as a result of a 
new reorganization within the Bureau of Indian Affairs (BIA) and the 
Assistant Secretary's office, provides assistance and guidance in the 
areas of Human Resources, Information Technology, Budget Execution, 
Finance, and Public Relations to both the BIA operated and BIA funded 
schools. "therefore, the costs to be identified and allocated will 
include both the AS-IA staff and the BIA headquarters and regional 
offices.

11. Comments on Specific Statements in the Draft Report:

1. Paragraph one, page 23. The term "regional agencies" needs 
clarification. Does it mean the non-education portion of the BIA that 
has regional offices and agency offices? Does it mean the education 
line office portion of the BIA? To which level and what portion of the 
BIA does "regional agencies" refer?

2. The first (un-numbered) page of the draft GAO report has a graph at 
the bottom comparing BIA expenses with those of similar public schools. 
The note accompanying the graph states that "Note: Does not include 
food. Similar spending does not imply adequate spending in either 
case." Further, the report indicates that "because the BIA does not 
collect complete expenditure data, we were limited in our ability to 
assess the overall adequacy of the formulas." Does this imply that the 
public schools do collect complete expenditure data that would allow 
the ability to assess the overall adequacy of expenditures? We are 
unclear as to how the GAO made this comparison given GAO's concern that 
comparable data is not available for the two programs. The implication 
here is that currently public schools collect complete expenditure data 
necessary to assess overall adequacy of expenditures. It is our 
understanding that there is considerable discrepancy among States and 
local communities as to how expenses are captured within their current 
system.

3. The GAO draft report refers to per pupil expenditures, and compares 
those expenditures to those of public schools similarly located and 
with similar student populations. The report does not indicate what was 
included or considered as a part of the per pupil expenditure. There 
are references to facilities costs. There is no recognition of the fact 
that because of past practice where the BIA did not expend an adequate 
amount for facilities operation and maintenance, there is now a great 
increase case in funding for those purposes. This can affect any direct 
comparisons with public schools that have had a more consistent 
spending level for operation and maintenance.

[End of section]

Appendix IV: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Anna Kelley (617) 788-0551 Nagla'a El-Hodiri (202) 512-7279:

Staff Acknowledgments:

In addition to those named above, Susan Bernstein, Jessica Botsford, 
Paul Czerny, Jerry Fastrup, Jeff Malcolm, John Mingus, Robert Owens, 
Nancy Purvine, and Jay Smale made important contributions to this 
report.

FOOTNOTES

[1] U.S. General Accounting Office, BIA and DOD Schools: Student 
Achievement and Other Characteristics Often Differ from Public 
Schools',GAO-01-934 (Washington, D.C.: Sept. 28, 2001).

[2] National Academy of Public Administration, A Study of Management 
and Administration: The Bureau of Indian Affairs (Washington, D.C.: 
Aug. 1999) and Cost Analysis and Feasibility Study of Contracting Out 
Schools Operated by the Bureau of Indian Affairs, Support Services 
International, Inc. (Silver Spring, Md.: Dec. 1997).

[3] The mandate for this review is from Public Law No. 107-110.

[4] BIA also funded 14 dormitories. For this report, schools without 
dormitories are called day schools.

[5] GAO-01-934.

[6] The components of the ISEP formula can be found in 25 C.F.R. 
39.12(g)(1) and (2), 39.13 and 39.14; and the administrative cost 
grants formula in 25 U.S.C. Sec. 2008. The other formulas that BIA uses 
to distribute funds (from both Interior and Education) are primarily 
based on BIA internal policy and not on statutory or regulatory 
guidance.

[7] The No Child Left Behind Act of 2001 was the latest reauthorization 
of the Elementary and Secondary School Act of 1965, as amended. 

[8] IDEA both authorizes federal funding for special education and 
related services (for example, physical therapy) and, for states that 
accept these funds, sets out principles under which special education 
and related services are to be provided. Currently, all states receive 
IDEA funding. BIA also receives IDEA funds and must meet the 
requirements that apply to it.

[9] U.S. General Accounting Office, School Finance: Per-Pupil Spending 
Differences between Selected Inner City and Suburban Schools Varied by 
Metropolitan Area, GAO-03-234 (Washington, D. C.: Dec. 9, 2002).

[10] These figures are based on the ISEP weights for school year 2002-
03.

[11] Removal of the weights was accomplished through a Federal Register 
Notice: 67 Fed. Reg. 52828 (Aug. 13, 2002).

[12] A study conducted by the Center for Special Education Finance 
(part of the American Institutes for Research, Palo Alto, California, 
and supported through a cooperative agreement with the U.S. Department 
of Education, Office of Special Education Programs) found that 17 
states use funding formulas that are primarily based on student 
weights. "State Special Education Finance Systems 1999-2000, Part I" 
(Palo Alto, Calif.: May 2003).

[13] Performance and Management Assessments, Budget of the United 
States Government, Fiscal Year 2004, Department of Interior: Indian 
School Operations. www.whitehouse.gov/omb/budget/fy2004 (accessed 5/
27/03). These are commonly referred to as PART [program assessment 
rating tool] assessments.

[14] National Center for Education Statistics (NCES), U.S. Department 
of Education, Office of Educational Research and Improvement, Financial 
Accounting for Local and State School Systems 1990, NCES-90-096R 
(Washington, D.C.: July 1990). William J. Fowler, Jr. Ed.D., Revisions 
Project Manager.

[15] After 1999, facilities maintenance was funded in part out of 
construction accounts. If facilities operation and maintenance were 
included in the calculation, the growth rate would be 5.9 percent over 
the entire 4-year period. 

[16] BIA also received funding for education-related construction 
through Interior. These funds increased over 400 percent from fiscal 
years 1999 ($60 million) through 2001 ($293 million) and have remained 
steady since then. 

[17] BIA-operated schools do not receive funds specifically designated 
for administration. 

[18] Title I of the Elementary and Secondary Education Act of 1965, as 
amended and IDEA. 

[19] In school year 1999-2000, BIA had 115 day schools, but only 
provided budget data for 112 day schools for school year 1999-2000. 
Although budget and expenditure data are normally not compared, in this 
case we believe this is a viable comparison to make for total budgeted 
and total expenditure, because the total expended would be very close 
to the amount budgeted.

[20] Administrative spending was difficult to analyze because BIA does 
not account for many administrative services provided to BIA-operated 
schools. 

[21] The average for the tribally operated schools ($9,533) was higher 
than for the BIA-operated schools ($8,021). The difference is 
attributable to grants received by tribal entities for administrative 
costs, which agency operated schools do not receive. 

[22] Adding PPEs for food and enterprise, the total PPE becomes $9,274 
for BIA schools and $6,911 for public schools.

[23] A tribally operated school, this was BIA's smallest with 14 
students in school year 1999-2000. It received a 35 percent 
administrative cost grant and a small school adjustment. The next 
highest school had a per-pupil budget of $17,126.

[24] U.S. Department of Education, National Public Education Financial 
Survey: SY 1999-2000. We excluded three schools in this database with 
extremely high PPEs ($47,500, $60,100 and $93,814) because they did not 
meet our criteria of regular elementary and secondary school systems.

[25] GAO-01-934.

[26] U.S. General Accounting Office, DOD Overseas Schools: Compensation 
Adequate for Recruiting and Retaining Well-Qualified Teachers, 
GAO-03-19 (Washington, D. C.: Dec. 12, 2002).

[27] General Services Administration.

[28] Tribally operated schools get administrative cost grants, while 
BIA schools do not. 

[29] This backlog is a catalog of deficiencies that contains a 
description of the work that needs to be done and the estimated costs 
for each item. 

[30] GAO-01-934.

[31] NCES, Condition of America's Public School Facilities: 1999, NCES 
2000-32 (Washington, D.C.: U.S. Department of Education, June 2000).

[32] U. S. General Accounting Office, Bureau of Indian Affairs Schools: 
New Facilities Management Information System Promising, but Improved 
Data Accuracy Needed, GAO-03-692 (Washington, D.C.: July 31, 2003).

[33] Federal Accounting Standards Advisory Board, Statement of Federal 
Financial Accounting Standards No. 4, Managerial Cost Accounting 
Standards (Washington, D.C.: July 31, 1995).

[34] For the purpose of our analysis, we allocated all budgeted funds 
identified to the specific schools.

[35] If instructional funding per pupil were calculated without 
controlling for student and school characteristics, funding levels 
across BIA funded schools would range widely, not inconsistent with the 
findings of previous studies--such as GAO-01-934, September 28, 2001. 
However, our analysis indicates that these differences diminish 
substantially when controlling for specific school characteristics, 
such as grades served, and whether or not the school has a boarding 
component. 

[36] The federal range ratio can be used to measure the degree of 
equity in a school finance system. A federal range ratio of zero would 
imply a fully equitable distribution. Although there is no threshold 
explicitly stated for the ISEP formula, we used the 25 percent level. 
The 25 percent level is described as a disparity limitation in the 
Impact Aid program, 34 C.F.R. 222.162.

[37] Prior to the change, which occurred in August 2002, the ISEP 
formula included weights linked to the level of severity of a student's 
disability and amount of time per day in a special education program. 
For example, a 4th grade student who needed part-time services in a 
special education program for a specific learning disability was given 
an additional weight of 0.5 (for a total weight of 1.5) and a student 
needing full-time services in a special education program for a 
specific learning disability was given an additional weight of 1 (for a 
total weight of 2). According to BIA's Budget Justification, ISEP funds 
were about $3,730 per WSU for school year 2001-02. Thus, a school would 
receive $5,595 for each student that was weighted with a 1.5 and $7,460 
for each student weighted with a 2. When implementing a child's 
individual education program costs less than additional the amount 
provided, then such a weighting scheme creates a financial incentive to 
classify children as needing more time per day in a special education 
program.

[38] Density in the New Mexico transportation formula is the number of 
students in the district divided by the district area in square miles.

[39] Currently, the only measure of isolation that BIA collects for the 
schools is in the facilities management information system, where BIA 
collects data on the distance to the nearest place to obtain services 
for facilities. 

[40] The facilities formula takes into account characteristics such as 
size of the facility, age of the building, number of classrooms, and 
technology (number and age of boilers, public announcement systems, 
etc.) present at the site.

[41] To determine the actual level of funding, BIA takes the formula 
calculated amount and scales it back across the board, i.e., if 
available funds were only 80 percent of calculated need, then BIA would 
scale all schools' funding back to 80 percent of calculated need.

[42] GAO-01-934.

[43] GAO-03-692.

[44] Administrative cost grants are not needed for the BIA-operated 
schools since BIA assumes some of their administrative 
responsibilities, such as payroll processing.

[45] NCES uses the count of students on the current roll taken on the 
school day closest to October 1.

[46] Student enrollment is determined during "count week", generally 
the last full week in September. 

[47] For the purpose of this report, we grouped the ISEP formula and 
the Title I, II, and IV formulas together as "instructional formulas."

GAO's Mission:

The General Accounting Office, the investigative arm of Congress, 
exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony:

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics.

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading.

Order by Mail or Phone:

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to:

U.S. General Accounting Office

441 G Street NW,

Room LM Washington,

D.C. 20548:

To order by Phone: 	

Voice: (202) 512-6000:

TDD: (202) 512-2537:

Fax: (202) 512-6061:

To Report Fraud, Waste, and Abuse in Federal Programs:

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470:

Public Affairs:

Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.

General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.

20548: