The Bureau Relies Mostly on Appraisals to Establish the Lease Value of Indian Trust Land

Bureau officials are responsible for ensuring that leases of Indian trust land  reflect a fair annual rental, and they rely primarily on appraisals to estimate  that value. However, the Bureau has not defined fair annual rental and  does not have a clear policy on how that amount should be estimated. However, we found no statutory or regulatory  requirement that appraisals be used to estimate fair market rental, and, in  fact, some area offices use other methods in addition to appraisals to  establish lease values. Agricultural Leases

The Bureau’s method for establishing the lease value of land for agriculture  varied depending on the crops grown and, in some cases, on the number of  appraisers employed in the area. Federal, State, and Private Lease Values Are Established by Other Methods in Addition to Appraisals

The Bureau’s appraisers are held to the same general standards and use  similar appraisal techniques as other federal appraisers, state appraisers,  and private appraisers. However, these land managers also use other  methods to establish lease values. The Bureau’s Appraisals and Processes for Appraising and Leasing Land Were Named as Impediments to Leasing

There are several reasons that any land—including Indian land—might not  be leased. The Bureau Could Use Methods Other Than Appraisals to Establish Lease Values for Indian Land

In addition to appraisals, a number of other methods may be used to  establish lease values. These other methods include advertising for competitive  bids, conducting market surveys, and applying fee schedules or formulas. Alternative approaches that are already in use in some Bureau offices  include competitive bidding and the use of market surveys:
Under its regulations, the Bureau is allowed to advertise tracts of  unleased trust land for competitive lease bids if the landowner wishes to  explore the market and is required to do so for leases that are not  negotiated or for which a fair annual rental cannot be obtained through  negotiations. Changes in current laws or regulations would not be necessary for the  Bureau to adopt these or other alternative methods. A representative of  the Deputy Commissioner’s office emphasized that this position has not  been adopted by the Bureau and that a legal review that examines laws and  court cases that apply Bureau-wide would be required before it would  consider doing so. According to the improvement plan,  these tracking systems are designed to provide the Bureau with  information on when most of the appraisals are needed and to enable  Bureau management to use appraisal resources (funding and staff) more  effectively. Conclusions

Under its regulations, the Bureau of Indian Affairs is required to ensure that  Indian land is leased for a fair annual rental. The Bureau often relies on  appraisals, which must be prepared in conformance with professional  appraisal standards—the same standards that apply to all professional  appraisers, including other federal, state, and private appraisers. However, we  believe that, in addition to appraisals, other methods are available to  Bureau officials for estimating a fair annual rental for Indian land and could  be used under certain circumstances. Recommendations

In addition to concurring with the Department of the Interior’s ongoing  efforts to review and revise the Bureau’s appraisal program, we  recommend that the Secretary of the Interior direct the Commissioner of  the Bureau of Indian Affairs to do the following:
Develop a clear policy on how fair annual rental can be estimated using  other methods in addition to appraisals, such as market surveys, fee  schedules, and formulas, where appropriate. We identified alternative methods of  establishing the rent value of land through discussions with Bureau and  other land-management officials and with private appraisers and  landowners, as well as through a review of prior GAO reports on  land-management practices.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the Bureau of Indian Affairs' methods of establishing the lease value of Indian land, focusing on: (1) how the Bureau uses appraisals and other methods to establish the lease value of Indian land; (2) how its appraisal methods compare to those of other federal and state agencies and of private appraisers and what other methods are used to value federal, state, and private leases; (3) what impediments to leasing Indian trust land have been identified; (4) what alternatives to appraisals could be used to establish the lease value of Indian land, including any changes in federal laws and regulations that would be required; and (5) what efforts the Bureau has made to improve its appraisal methods.

What GAO Found

GAO noted that: (1) the Bureau relies mostly on appraisals to ensure that Indian land is leased for a fair annual rental; (2) however, the Bureau has not defined fair annual rental and does not have a clear policy on how that amount should be determined; (3) GAO found no statutory or regulatory requirement that appraisals be used to establish lease values; (4) under certain circumstances, some Bureau offices use other methods in addition to appraisals; (5) the standards and methods that apply to Bureau appraisers also apply to other appraisers, including other federal, state, and private appraisers; (6) however, managers of other lands also use other methods to establish lease values; (7) according to several private appraisers GAO spoke to, the rents for agricultural leases on private land are often not set by appraisal; (8) however, leases for other uses on private land, such as business uses, may be valued by appraisal; (9) appraisal amounts were considered a particular problem because of Bureau officials' reluctance to approve leases for less than the appraised value; (10) in addition, while Bureau and other appraisers stated that there is no standard for the amount of time it should take to prepare or review an appraisal, some Indian communities expressed frustration with the time taken by the Bureau's processes; (11) in addition to appraisals, other methods are available for establishing lease values in some circumstances; (12) such other methods include advertising for competitive lease bids, conducting market surveys, and applying fee schedules or formulas; (13) laws and regulations do not require the use of appraisals to establish lease values and would not need to be changed for the Bureau to adopt these or other alternative methods to establish rents for leases; (14) Bureau officials said a more comprehensive review of laws, regulations, and court cases would need to be conducted before Bureau-wide changes would be considered; (15) the Department of the Interior is reviewing the Bureau's use of appraisals and is considering improvements to the Bureau's processes; (16) proposed improvements include training realty staff on the circumstances under which appraisals should be requested to limit the number of unnecessary appraisals and automating and thus streamlining the valuation processes for certain types of real estate transactions; and (17) the improvement plan also includes a recommendation that the Bureau develop a system for tracking appraisals to allow more effective use of appraisal resources.