1).Interior was also required to enroll into a region every Alaska Native alive  when the Settlement Act was enacted on December 18, 1971, generally  according to residence. Each region in the 1970s established a regional corporation as directed  by the Settlement Act, and the Alaska Natives enrolled into the region  became its shareholders. The Corporations Have Adopted a Variety of Governance Practices

Incorporated under Alaska state law, regional corporations share  fundamental characteristics, although they have chosen a variety of  governance practices. Like any other Alaska corporation, the regional  corporations are subject to the state’s corporate laws, with a few limited  exceptions, and are run by a board of directors elected by shareholders. The Corporations Are Subject to Some Federal and State Financial Reporting Requirements and Limited State Oversight

The regional corporations are subject to some financial reporting  requirements under federal and state law, although oversight of the  reporting is limited. The Settlement Act generally exempts the  corporations from complying with federal securities laws while requiring  them to annually transmit a report to their shareholders that contains  “substantially all the information” required to be included in an SEC  registrant’s annual report to shareholders. The act does not provide a  federal role for monitoring the corporations’ compliance with this  requirement, and the state’s oversight is generally limited to enforcement  of state securities laws and proxy regulations. Monetary Benefits

The 12 regional corporations provide a variety of monetary benefits to  their shareholders and others, including dividends, elder benefits,  scholarships, memorial benefits, shareholders’ equity, and charitable  donations, as follows:
Dividends. Nonmonetary benefits offered by the regional corporations—often in  partnership with village corporations, tribal organizations, and nonprofit  organizations within the region—include employment opportunities;  cultural preservation; land management; economic development; and  advocacy on behalf of Alaska Natives and their communities. We identified questions regarding the  ambiguity of existing federal financial reporting requirements for the  corporations, the role of the federal government in maintaining the  corporations’ solvency, and the implications of defining who is eligible to  be a shareholder—this last question specifically for the corporations and  their shareholders to consider. Should the “Substantially All” Federal Reporting Requirement Be Clarified and Overseen? What Is the Appropriate Role of the Federal Government in Maintaining the Solvency of Alaska Native Corporations? Who Should Be a Shareholder? In addition, amendments to the Settlement Act allowed the corporations’  shareholders to vote to amend the articles of incorporation to authorize  the issuance of shares to Alaska Natives born after December 18, 1971,  or to descendants of Alaska Natives; to eligible Alaska Natives who  missed enrollment; or to Alaska Native shareholders who are 65 years old  or older. In evaluating the decision whether to offer new shares in the corporation  to more people, the corporations and their shareholders face a number of  considerations and potential future challenges, including the following:
Reduced dividends. Our report notes, however, that because the  “substantially all” reporting requirement in the Settlement Act, as  amended, is not defined or overseen, it is not clear what information must  be included in the regional corporations’ annual reports to shareholders. Appendix I: Objectives, Scope, and Methodology

This report examines (1) governance practices of the regional Alaska  Native corporations, (2) requirements for and oversight of the  corporations’ financial reporting practices, (3) benefits provided by the  corporations to their shareholders and other Alaska Natives, and  (4) questions to consider for the future. To examine the governance practices of the regional Alaska Native  corporations, we reviewed the Alaska Native Claims Settlement Act, as  amended; the Alaska Corporations Code; other relevant federal and state  laws and regulations; the regional corporations’ articles of incorporation,  bylaws, and corporate proxy statements provided to shareholders during  2011 (the most recent year for which consistent information was available  across the corporations); and other documentation from the corporations  on their board composition and operations, executive and board  compensation, board elections, and methods for involving shareholders. Finally, on the basis of our analysis of federal and state laws and  regulations; interviews with federal and state officials, regional corporation  officials, and shareholders; and past congressional actions and bills  addressing Alaska Native corporation issues, we developed questions  that may warrant consideration and discussion by the federal  government, the state, the regional corporations, shareholders, or a  combination of these entities.
Why GAO Did This Study

In 1971, the Alaska Native Claims Settlement Act was enacted to resolve long-standing aboriginal land claims and to foster economic development for Alaska Natives. This federal law directed that corporations be created under Alaska state law, which were to be the vehicles for distributing the settlement. As directed by the act, 12 for-profit regional corporations were established, representing geographical regions in the state. Later, a 13th regional corporation was formed to represent Alaska Natives residing outside of Alaska. Eligible Alaska Native applicants who were alive on December 18, 1971, became shareholders in the corporations. The Settlement Act, as amended, authorizes the corporations to provide benefits to shareholders and to other Alaska Natives.
GAO was asked to review these corporations. This report examines (1) governance practices of the regional Alaska Native corporations, (2) requirements for and oversight of the corporations' financial reporting practices, (3) benefits provided by the corporations to their shareholders and other Alaska Natives, and (4) questions to consider for the future. GAO reviewed relevant federal and state laws and regulations, as well as the corporations' annual reports, proxy materials, and other documents. GAO interviewed representatives from each of the 13 regional corporations and visited seven of the Alaskan regions.

What GAO Found

Incorporated under Alaska state law, regional Alaska Native corporations share fundamental characteristics, although they have chosen a variety of governance practices. Like other Alaska corporations, the regional corporations are subject to the state's corporate laws (with limited exceptions) and are run by an elected board of directors. Nevertheless, each regional corporation has chosen its own organization and governance approach in terms of board operations, executive and board compensation, board elections, and shareholder involvement.
Alaska Native corporations are subject to some financial reporting requirements under federal and state law, but oversight of the reporting is limited. The Alaska Native Claims Settlement Act generally exempts the corporations from complying with federal securities laws while requiring them to annually provide a report to their shareholders that contains "substantially all the information" required to be included in an annual report to shareholders by U.S. Securities and Exchange Commission registrants. The Settlement Act does not provide for a federal role to monitor the corporations' compliance with this requirement, and oversight by the state of Alaska is generally limited to enforcement of state securities laws and proxy regulations.
GAO found that the corporations provide a wide variety of monetary and nonmonetary benefits to their shareholders and other Alaska Natives. Monetary benefits include shareholder dividends, elder benefits, scholarships, memorial benefits, shareholders' equity, and charitable donations. Nonmonetary benefits-- often offered in partnership with village corporations, tribal organizations, and nonprofit organizations within the region--include employment opportunities, cultural preservation, land management, economic development, and advocacy on behalf of Alaska Natives and their communities.
During this review, GAO identified three questions regarding the ambiguity of existing federal financial reporting requirements, the role of the federal government in maintaining the corporations' solvency, and the implications of defining who is eligible to be a shareholder. These questions may warrant consideration and discussion by the federal government, the state, the regional corporations, shareholders, or a combination of these entities.
Should the "substantially all" federal reporting requirement be clarified and overseen? GAO was unable to determine whether the corporations are meeting the "substantially all" requirement in the Settlement Act because the phrase is not defined.
What is the appropriate role of the federal government in maintaining the solvency of Alaska Native corporations? The federal government has intervened in the past to help maintain the financial solvency of the corporations. The 13th Regional Corporation has been insolvent since 2007.
Who should be a shareholder? As authorized by amendments to the Settlement Act, shareholders of 5 of the 13 regional corporations have voted to issue shares to Alaska Natives born after December 18, 1971, who meet certain criteria. In deciding to offer new shares to more people, corporations and shareholders face a number of considerations such as, potential effects on dividends and shareholder involvement.

What GAO Recommends

GAO is making no recommendations in this report. Responses provided on behalf of the corporations made several points about their financial reporting and operations that are more fully discussed in the report.