Detailed Information on the
Bureau of Indian Affairs - Economic Development Guaranteed Loans Assessment

Program Code 10003705
Program Title Bureau of Indian Affairs - Economic Development Guaranteed Loans
Department Name Department of the Interior
Agency/Bureau Name Bureau of Indian Affairs and Bureau of Indian Education
Program Type(s) Credit Program
Assessment Year 2005
Assessment Rating Adequate
Assessment Section Scores
Section Score
Program Purpose & Design 100%
Strategic Planning 62%
Program Management 89%
Program Results/Accountability 33%
Program Funding Level
(in millions)
FY2007 $6
FY2008 $6
FY2009 $8

Ongoing Program Improvement Plans

Year Began Improvement Plan Status Comments

Schedule independent review(s) to identify program strengths and weaknesses to guide program improvements.

Action taken, but not completed Two independent reviews are in process, one contracted through Chickasaw Nation to evaluate overall mission strategy, personnel and performance. Another review through a group of Presidents Management Fellow team assessment identified the top five most useful marketing recommendations to be implemented by a two-person team. These improvements will reach the first stage of completion by June 30, 2008.

Develop performance measures to assess parity between the Tribal community and U.S. national average on several factors.

Action taken, but not completed Recent statuatory changes have impacted factors upon which we assess parity. Draft Regulations have cleared the Office of Indian Energy and Economic Development, Office of the Solicitor and Indian Affairs Regulatory Management:, and are being forwarded to OMB's Office of Internal Regulatory Affairs' desk officer for review on 6-26-08

Completed Program Improvement Plans

Year Began Improvement Plan Status Comments

Program Performance Measures

Term Type  
Long-term/Annual Outcome

Measure: Percent of ceiling based upon appropriated funds that obligated by the end of the fiscal year (New measure, added August 2007).


Year Target Actual
2007 Establish Baseline 100%
2008 TBD
2009 TBD
Annual Efficiency

Measure: Maintain loss rates of DOI guaranteed and insured loans of less than 4%


Year Target Actual
2009 <4%
2008 <4%
2007 4% 2%
2006 2% 2%
2005 2% 2%

Questions/Answers (Detailed Assessment)

Section 1 - Program Purpose & Design
Number Question Answer Score

Is the program purpose clear?

Explanation: The program provides access to financial markets to eligible Indian borrowers - federally recognized American Indian Tribe or Alaska Native Group or an enrolled member of such tribe or group, or a business organization with 51 percent or more eligible Indian ownership - on a reimbursable basis, to help develop and market Indian natural resources; to encourage eligible borrowers to develop viable Indian businesses; to provide credit enhancement of the borrower; and reduce risk to lenders so borrowers can secure conventional financing that would otherwise not be available or be available at extemely high interest rates and payment terms.

Evidence: The Indian Financing Act of 1974 as amended; 25 USC 1451, Section 2 states it is declared to be the policy of Congress to provide capital on a reimbursable basis to help develop and utilize Indian resources, both physical and human, to a point where the Indians will fully exercise responsibility for the utilization and management of their own resources and where they will enjoy a standard of living from their own productive efforts comparable to that enjoyed by non-Indians in neighboring communities. The Indian Financing Act of 1974 as amended; 25 USC 1481, Section 201 states that in order to provide access to private money sources which otherwise would not be available, the Secretary is authorized to guaranty or insure up to 90 percent of unpaid principal and interest due on any loan made to any organization of Indians having a form or organization satisfactory to the Secretary.

YES 20%

Does the program address a specific and existing problem, interest, or need?

Explanation: The program assists in strengthening Indian communities by helping Indian business owners gain access to capital, a specific and unique challenge in Indian country because many lenders are not yet willing to take the risk of financing Indian businesses. National research indicates a severe lack of access to capital, credit and other financial services in Indian communities for small business development. A First Nations Development Institute study in 1998 of tribes in the Northwest revealed the second most commonly expressed need of tribes in this region (after home mortgages) was access to credit and financing for both tribal and individual busineses. This program works to narrow that gap. Many lenders consider Indian businesses a higher risk due to lack of tribal government continuity, lack of separation of business from tribal government, and lack of access to collateral.

Evidence: The Native American Lending Study in 2001 indicates reasons for inadequate access to business capital as a lack of financial institutions and equity resources and limited use of trust land as collateral. Only 14% of Indian land in the United States has a financial institution in the community and two-thirds of non-tribally affiliated financial institutions do not offer start up business loans on or near reservations. The 1997 Economic Census Survey of Minority - Owned Business Enterprises - "Summary of Findings" indicates a disparity of Indian owned businesses to the non-Indian community. Indians constitute 1.5 percent of the population, but only 0.9 percent of the nonfarm business ownership. This ratio indicates Indians have achieved only a 60 percent parity position of business ownership to non-Indians. Further research by the Program is in progress on determining the disparity in the number of business loans of Indians to non-Indians.

YES 20%

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: While the SBA and USDA offer guarenteed loan programs, the BIA program offers a unique solution for tribal economic develop by requiring that capital is spent on reservations to improve reservation economy. To promote reservation economic development the program removes the barriers between Indians and financial markets. For example, Indians have limited use of trust land as collateral and lenders perceive lending based on trust related collateral as high risk. Despite credit worthiness, Indians are often unable to access credit with these and other issues of sovereign immunity, tribal government stability and separation of business from tribal government. The program offers solutions such as the ability to help structure limited waivers of sovereign immunity on collateral, establishing conditions to separate tribal government from business operations and overcoming concerns with changes in tribal government, thereby reducing the perceived risk by lenders.

Evidence: The Native American Lending Study, November 2001 states the use of trust land for collateral is limited and frustrates lenders from offering collateral based lending on reservations due to perceived high risk. Loan documents are prepared by the Program which allows the use of trust collateral through mortgages or leasehold mortgages and of loan conditions which establishes control of funds by the lender to allow business operational needs and loan payments to be accomodated prior to disbursement of funds to the borrower, thereby limiting governmental interference.

YES 20%

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The program's delivery method is consistent with program objectives, with low subsidy costs, and there is no evidence of any other approach or mechanism that would be more effective in assisting Indian tribes to obtain loans to sustain economic development on reservations. Lenders submit timely loan payment histories to BIA to allow loan performance monitoring and must require borrowers to submit periodic financial statements at least annually to monitor performance of the business. In event of payment default, lenders have an option to make a timely workout and can request BIA assistance if needed. Time limits are placed on lenders to act in the event of default and failure to do so can result in reductions on claims for loss or possible loss of the guarantee itself.

Evidence: Default rates for the BIA Loan Program for the past three years have been below 2% and the OMB budget subsidy rate has decreased from 6.13% to 4.75% for the latest three year period of performance, thereby increasing the available loan ceiling by over 25% with no increase in funding.

YES 20%

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: The program is designed to provide eligible borrowers access to capital that will contribute directly to the economy of a reservation and individual owners through creation and retention of jobs, purchase of goods and services from the reservation economy, and utilization of Indian owned natural resources. Lenders are required to provide a written explanation indicating why the guaranty is needed, and the program may not guarantee a loan that it believes the Lender would be otherwise willing to extend. Once eligible business have equal access to credit, thereby achieving parity with non-Indian borrowers, the program will be unnecessary and should be terminated. However, this will take a number of years to achieve.

Evidence: 25 CFR 103.4 requires that the business must contribute to the economy of a reservation. 25 CFR 103.25 limits eligible borrowers to tribes, Alaska Native Groups, their members, and organizations 51% or more owned by eligible tribes, groups or members. 25 CFR 103.12 requires lenders to provide written explanation of its necessity for a guarantee.

YES 20%
Section 1 - Program Purpose & Design Score 100%
Section 2 - Strategic Planning
Number Question Answer Score

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: The program works toward the accomplishment of long-term outcomes which is to achieve parity between the Tribal community and the U.S. national average on rural unemployment rates, per capita income, and business ownership. The parity goals are new goals for the BIA, but they support the Department's Strategic Goal -- "Meet our trust responsibilies to Indian Tribes and Commitments to Island Communities In addiition, new measures have been developed."

Evidence: 2000 U.S. Census Rates for Unemployment and U.S. Census Per Capita Income. 1997 Economic Census-Minority-Owned Business Enterprise "Summary of Findings". For long-term goals - DOI Strategic Plan; Budget Justifications. Indian Financing Act , as amended; 25 USC 1451, 3 year GPRA Reports.

YES 12%

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: Baselines and targets are begin developed for new several measures including the long-term outcome measures. These will help identify ambitious targes and timeframes for these measures. It is uncertain at this point what targets will be established, but the economic condition on reservations lags significantly behind national averages. For example, the 1997/2000 U.S. Census Bureau and Treasury Department found: 1) the Indian unemployment rate is 43% versus the National average of 6%; 2) the per capita annual income for Indians is $14,267 versus the non Indian of $21,587; and 3) the Non-Farm Indian business ownership is 4.8% versus the non-Farm business ownership of 7.6% for the total population.

Evidence: Same evidence as 2.1.

NO 0%

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: The new long-term parity goals are also tracked on an annual basis along with overall loan opertations.

Evidence: 2005 GPRA Report Form.

YES 12%

Does the program have baselines and ambitious targets for its annual measures?

Explanation: Baselines are being developed for several new measures. These will help to identify ambitious targets and timeframes for these measures.The

Evidence: FY 2004 GPRA report and DOI Strategic Goal Intermediate Outcome.

NO 0%

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: The Program works with tribes and lenders to increase the number of businesses financed and the number of jobs created and sustained. Lenders are required to submit payment histories on loans and financial statements on borrowers to report on loan performance and performance of the business. Jobs reports are required of borrowers. Additionally, the program works with the Small Business Adminisration, Housing and Urban Development, US Department of Agriculture, Rural Development Agency, Federal Reserve Board, Farm Service Agency and tribal organizations such as the National Congress of American Indians, United South and Eastern Tribes, Inc., and the Tribal/Budget Advisory Council to implement Economic Summits that focus on promoting access to capital for economic excellence and creating a path to prosperity to help reduce unemployment rates, increase per capita income and Indian business ownership that will help achieve parity in comparison with national levels.

Evidence: FY 2004 GPRA report; DOI Strategic goals; Workshop Flyers, Brochures and Marketing materials from the Reno Summit; and Res 2005.

YES 12%

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: The program has not had an independent evaluation on its effectiveness. However, the program is working to develop a statement of work to contract an independent review to identify program strengths and weaknesses which will support program improvements.

Evidence: Draft Statement of Work.

NO 0%

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: Some annual and long-term goals are cited in budget narratives and newly created measures under this review will be used in future budget requests. Past Budget justifications are tied to several annual performance and long term goals as reflected in the Budget Justification for Loan Accounts. The program has fully utilized it's resources to accomplish targets and goals. As budget requests have increased so have the numbers for businesses funded and for jobs created and/or sustained.

Evidence: Budget justifications , Performance Summary Tables; GPRA; FY 2002/2003/2004 reports.

YES 12%

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The Program addressed strategic planning deficiencies two years ago with the development of performance measures for inclusion in the DOI strategic plan. The program has continued to improve strategically by tracking and monitoring default and subsidy rates and developing additional measures to monitoring Indian business ownership.

Evidence: Congressional Budget Performance Summary; 1997/2000 US Census Reports; and November 2001 Native American Lending Study.

YES 12%
Section 2 - Strategic Planning Score 62%
Section 3 - Program Management
Number Question Answer Score

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Lender's reports or loan history, per BIA loan conditions to lenders, are collected from banks that indicate loan performance. These reports and financial statements and those from the borrower's business are collected quarterly and are used to monitor performance of the loan and business. BIA reviews the information and indentifies problems such as slow payments or underpayments and contacts lenders or borrowers through correspondence or verbal communication as necessary in order to take corrective action and preserve the debt.

Evidence: Lender reports include loan histories that indicate how loan payments are applied. BIA reviews financial statements from lenders to monitor how well businesses are performing and to identify problem areas that reduces the likelihood of default claims.

YES 11%

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: SES Performance Plans of the Bureau Director and Tribal Services Deputy Director include program performance measures, but the performance requirements have not yet been quantified or included in non-SES postions. Lenders are held accountable for loan schedules, loan agreements, and loan conditions. Failure of lender to comply with these requirements may result in penalties or denials of claims for loss.

Evidence: Director's individual performance plans. Lender's loan documents( loan agreements, loan conditions, loan schedules, lender reports and claim for loss. Default claim that was reduced or denied.

NO 0%

Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: All funds are obligated by Guaranty Certificates into the Federal Financial System by FY end. In FY2004, of the $93 million ceiling available $90 million was obligated. Uncommitted guaranty ceiling is withdrawn from the regions before year end and redistributed to priority loans to ensure the full obligation of the annual loan ceiling. Included in the loan conditions from BIA to lenders are firm and specific requirements for uses of the loan proceeds. For loans over $3 million, Interior's Office of the Solicitor will write the required loan conditions. For example, escrow accounts may be set up by the lender to control the flow of funds from business revenues thereby ensuring repayment capability and may also be set up to make payments for business operations, payment of payables, establish reserve funds, or make loan payments. Funds beyond the escrow requirements are made available to the borrower. If lenders do not comply with the requirements of the conditions, any subsequent claim for loss may result in denial or penalties of the funds.

Evidence: Ceiling allocation and FFS general ledger for FY2004. Example of loan conditions over $3 million.

YES 11%

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: The program has efficiency measures that include the loan default rate and the budgeting cedit subsidy rate. BIA has continued to produce a low default rate in the last few years that allows BIA to make additional loan guarantees for the same about of funding. Based on historical cash flow the program has projected lower cash outflows for default payments. This trend identifies a history of succesful loans and that the program continues to be more efficient in using the funding provided by Congress.

Evidence: Performance measures.

YES 11%

Does the program collaborate and coordinate effectively with related programs?

Explanation: The program collaborates with SBA and USDA's Farm Service Agency through MOU's and MOA's to provide the best support possible to Indian borrowers. BIA works with IRS, SBA, HUD, USDA, and Tribes to provide economic summits, training and seminars. BIA works with the Interagency Native American Financial Access Working Group whose goal is to increase access to credit for Native Americans and to assist in sharing information among federal agencies. The Working Group networks with private lenders in assisting access to capital for Native Americans through referrals for loans, recommendations for business opportunities and economic development.

Evidence: MOU's and MOA's with various lending fedeal agencies; and Workshop flyers and brochures.

YES 11%

Does the program use strong financial management practices?

Explanation: The FY 2004 BIA KPMG Audit indicated that noted prior deficiencies were corrected for the program. In addition, they noted that strict guidelines are required for the analysis that each credit officer initiates on all of the guaranty requests.

Evidence: Memoranda of policy directives.

YES 11%

Has the program taken meaningful steps to address its management deficiencies?

Explanation: The BIA issued interim policy to address a problem with the timelines allowed for lender notification of defaults to BIA. The Division of Credit established a Loan Committee with five members to review and recommend loan requests, default claims, requests for loan compromises and write-offs, policy issues, approval of new BIA lenders, loan workouts, and establish loan conditions for approved guarantees. Interior's Solicitor's Office is closely consulted in structuring loans to reduce defaults and increase repayment ability and to adequately collateralize loans for long term prospects of repayment.

Evidence: 2004 Division of Credit policy memorandum on Loan Committee. Division of Credit Policy on OCC regulation.

YES 11%

Is the program managed on an ongoing basis to assure credit quality remains sound, collections and disbursements are timely, and reporting requirements are fulfilled?

Explanation: The Bureau follows commercial loan underwiriting standards used by commercial lenders. These standards include valuation of collateral, ratios of capital to assets, profitability, and cash flow and debt coverage capacity. The Bureau reviews lender credit memorandums to ensure a complete business review and cash flow analysis has been performed for debt service capability. Credit memorandums for loans over $3 million dollars are sent to the Central Office Loan Committee for further analysis and approval. Bureau staff also prepare a credit memorandum and recommend approval or disapproval of the request to ensure reasonable prospects of repayment which is the Bureau standard for approval of loan guarantees. Bureau loan conditions for reporting require lenders to submit loan history and financial statements from borrowers on a quarterly and annual basis. By reviewing these reports lenders and the Bureau are more likely to identify defaulting loans and work with the borrowers to cure the delinquency. The current default rate has been under 3% the past couple of years.

Evidence: Commercial underwriting standards; copies of quarterly financial statements from borrower; memo on Claims for Loss Directive Supplement; credit memorandum from Bureau and lender; and guaranty loan approval conditions.

YES 11%

Do the program's credit models adequately provide reliable, consistent, accurate and transparent estimates of costs and the risk to the Government?

Explanation: The Bureau uses the LOMAS model (Loan Management and Accounting System ) to track guaranteed loan balances and transactions from the lender reports. Should loans become delinquent or default, the lender and the Bureau may restructure loans. The LOMAS model is used to estimate contingent liabilities and risk to the government and to provide debt management reports to the U.S. Treasury as well as internal reports to manage the portfolio. The LOMAS model includes a database of lenders and generates a lender list for current and potential borrowers. Bureau credit officers use a credit memorandum model to assess potential risks to the government and determine repayment capabilities of loan guarantee requests. This credit model is used to insure that the Bureau standard of reasonable prospects for repayment are met before a guarantee is approved. In addition, he Bureau uses the OMB budget subsidy model to develop re-estimates of costs to the government of the total loan guarantee portfolio.

Evidence: Great Plains Region LOMAS contingent liabilities, List of Lenders in LOMAS, Credit Memorandum Model, Credit Tool - Subsidy Model.

YES 11%
Section 3 - Program Management Score 89%
Section 4 - Program Results/Accountability
Number Question Answer Score

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The program annually achieves its employment targets for jobs created. BIA has developed additional measures to better demonstrate the effectiveness of the program. These new measures address parity between Indian and non-Indian communities. They include reducing indian unemployment rate, increasing per capita income, and increasing Indian business ownership. The number of BIA lenders has increased each year as well and this helps to achieve economic parity through improved access to capital. Additional measures are being developed to include job retention targets and leveraging more capital.

Evidence: FY 2002, 2003, and 2004 GPRA reports; and LOMAS lender listing by state, Lomas loan data by purpose/loan amount and balance.


Does the program (including program partners) achieve its annual performance goals?

Explanation: Annual performance goals are achieved as indicated in the GPRA reports on jobs created. In conjunction with other Federal entities and partners, BIA economic summits have contributed to increased Indian and Alaska Native entrepreneurship and tribal economic development. Additional annual measures are being developed to include job retention targets and leveraging more capital.

Evidence: FY 2002, 2003, and 2004 GPRA reports.


Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The program has efficiency measures that include the loan default rate and the budgeting cedit subsidy rate. BIA has continued to produce a low default rate in the last few years that allows BIA to make additional loan guarantees for the same about of funding. Based on historical cash flow the program has projected lower cash outflows for default payments. This trend identifies a history of succesful loans and that the program continues to be more efficient in using the funding provided by Congress.

Evidence: FY 2002, 2003, and 2004 GPRA reports; FY 2002, 2003 and 2004 Default information; and FY2004 Credit Subsidy Model/Credit Tool.


Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: The program's performance appears to be favorable to other the other federal Indian loan programs of SBA and USDA. Prior to SBA changing to a loan program with no government subsidy after FY2004, the default and subsidy rates for BIA were lower than those comparable to the SBA and USDA's Rural Development program (general business and industry guaranteed loans). BIA default rates for FY2002, FY2003 and FY2004 were 1.75%, 1.79% and 1.75% versus SBA rates respectively of 6.24%, 3.38% and 5.11% and USDA rates respectively of 10.29%, 8.46% and 7.71% for guaranteed loan losses.

Evidence: Default rates for SBA's guaranteed loan program and U.S.D.A.'s Business and Industry program.


Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: The program does not have an independent evaluation on its effectiveness. However, the program staff is working to develop a statement of work to contract an independent review to identify strengths and weaknesses and provide an improvement plan.

Evidence: Draft Statement of Work.

NO 0%
Section 4 - Program Results/Accountability Score 33%

Last updated: 09062008.2005SPR