WASHINGTON (AP) — Federally run schools for Native American children have misspent millions of dollars and in one case $1.7 million was illegally transferred to an offshore account, an apparent result of hacking, a government watchdog said Thursday in a report sharply criticizing fiscal oversight of the schools.
The Government Accountability Office said there is "little assurance" that federal funds are properly spent — including for special education.
The Interior Department runs the Bureau of Indian Education, which oversees more than 180 schools for about 41,000 students, primarily on reservations in remote and poverty-stricken places. The schools have a tainted 19th century legacy from when Native American children were taken from their homes and sent to boarding schools. The schools are among the nation's lowest performing, and have struggled with issues such as shoddy facilities.
The GAO said external auditors identified $13.8 million in unallowable spending at 24 schools as of July 2014, but that there was "minimal" follow-up by federal managers.
Since 2011, the GAO said the number of administrators overseeing school expenditures decreased from 22 to 13 — due partly to budget cuts. One administrator interviewed by GAO described being unable to visit schools with "serious financial weaknesses," including a school with an audit that found more than $1 million in questionable costs.
"High staff turnover and reductions in the number of education line office administrators as well as their lack of expertise and training have left them struggling to adequately monitor school expenses," the GAO said.
In response, Kevin Washburn, the assistant secretary of Indian Affairs at the Interior Department, said in enclosed remarks that he agreed with nearly all the GAO's recommendations and the agency is restructuring in a way that would address many of the issues raised.
In a statement, he said its schools operations division, which is being strengthened, will focus on issues such as finance.
"The department understands that providing quality administrative services to assist in the success of Indian youth in Indian country is vital to their individual success and to the future of Indian country," Washburn said.
The Obama administration is seeking to overhaul the schools, in part by streamlining cumbersome bureaucracy and turning the agency from an operator of schools into a school improvement organization. It also wants to turn more control of the schools over to tribes. Already, more than 120 of the schools are tribally controlled, while the others are run directly by the federal government.
The GAO report comes months after a government commission identified $125 million in unspent federal funds by 80 of the tribally controlled schools. It said the law allows them to accumulate the money and spend the interest generated as they choose, which provides an incentive for schools to not spend money as it was intended.
The GAO also addressed the issue of the unspent money. It said that federal officials told GAO that some tribes have a history of placing federal funds for these schools in savings accounts rather than providing intended services.
At one school, GAO said $1.7 million was illegally transferred to an offshore account, an apparent result of "cybercrimes committed by computer hackers and/or other causes." About $500,000 was recovered.
At the same school, an administrator reported that it had at least another $6 million in federal funds in a bank account. But as of June 2014, the federal agency overseeing it had not "yet determined how the tribe accrued that much in unspent federal funds," the GAO said.
The Interior Department identified the school as Rock Point Community School on the Arizona portion of the Navajo reservation. Calls to the school for comment were not returned.
Deswood Tome, an adviser to Navajo Nation President Ben Shelly, said the tribe's education department took control of the school last summer after the money turned up missing. He said the tribe has implemented measures to make sure it doesn't happen again and is working to recover the money.
Among the GAO's other findings:
— One school accumulated over $900,000 in unspent funds intended for special education services for students with disabilities.
—One school went multiple years without submitting an audit, as required.
—One school used $1.2 million in funds to provide a no-interest loan to a local public school district, which was not permitted by law.
—One school had to adjust its financial statements by nearly $1.9 million after financial reports from three years were found to be unreliable.
The GAO did not identify the schools highlighted in its report.
These schools get nearly all their money from the federal government. They received about $830 million in the 2014 budget year.
They cost an average of at least $15,391 per pupil compared with $9,896 on average for a public school student, the GAO said.
Associated Press writer Felicia Fonseca in Flagstaff, Arizona, contributed to this report.
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