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The government lost at least $65 million in one year by investing Indian trust funds in shaky financial institutions that later failed, say Interior Department investigators.

The Bureau of Indian Affairs had placed $116 million with 77 institutions that collapsed in the 1990 budget year, according to a report by the department's inspector general.Some of the money was recovered from the failed banks, but the Federal Deposit Insurance Corp. had to cover $65 million in losses, which were passed on to taxpayers, the report said. The Indians and tribes did not lose any money.

"You have to have seen this BIA operation to believe it," the inspector general, James Richards, said in an interview Friday.

"Seven people in the BIA office in Albuquerque were turning all those accounts. They made no efforts to determine the financial viability of the institutions."

The report is the latest in a series of audits and investigations that have accused the BIA of mismanaging for decades 300,000 individual and tribal accounts worth more than $2.1 billion.

A House committee report this week says Congress should give BIA six to nine months to correct its management problems before the funds are turned over to another government agency.

BIA had no policies for deciding whether the institutions it invests in are sound, and in some cases the deposits exceeded FDIC coverage limits, the report says.

"The bureau only looked at the highest return being offered and not at whether the return outweighed the risk of loss to the government," the report said.

BIA has since started checking the financial ratings of banks in which it invests and has stopped putting money in Federal Home Loan Banks, which are collectives of credit unions and savings and loans, said agency spokesman Carl Shaw.

Money that wasn't invested in home loan banks was put into certificates of deposits with financial institutions that bid to offer the highest interest rates.

The trust funds include income from Indian lands, payments of claims against the government and royalties from oil, gas and minerals.

The accounts include small individual funds and more than $250 million owned by the Sioux Nation from its Black Hills claim.