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A Legacy of Integrity and Trust
State Compliance AuditsState Compliance Audits
What Can We Expect?What Can We Expect?
Stephen HartLewis and Roca LLP
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Compact and Regulatory Compact and Regulatory ProvisionsProvisions
• CGCC-8 (9-24-09)
• Compact Section 7 Compliance Enforcement:
– § 7.4 State’s right to inspect– § 7.4.1 and 7.4.2 Public and nonpublic areas– § 7.4.3 Inspection and copying of Gaming
Operation Records– § 7.4.4 State’s right to access to records and
places to ensure compliance with the Compact
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Compact Compliance ReviewCompact Compliance Review
Exit Conferenc
e
Response by TribeFollow-up
and Referral of Objections
to SGA
Final Report to
Tribe
Tribal Action Plan
Monitor Findings
Notice and
Planning
Fieldwork
Draft Complianc
e Inspection
Report
1 2
3
4
567
8
9
Stages
CCR
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Audit Cycle PlanningAudit Cycle Planning
• State schedules the CCR and provides 30 day notice
• State requests documentation • The State Gaming Agency may be sending
Tribal Gaming Agencies very comprehensive document requests
• See Handouts• Compliance inspection limited to “subject
areas listed in Tribal MICS.” This will be expansive if the NIGC MICS have been adopted by a Tribe.
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Compact Compliance ReviewCompact Compliance ReviewWho May Be InvolvedWho May Be Involved
CCR
Machine Compliance
Intelligence Unit
Investigation Unit
Vendor Licensing
Audit Unit
Administration
Employee Licensing
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Pre-Audit DocumentationPre-Audit Documentation
• Annual Outside Audit – Agreed Upon Procedures Reports, Management Letters and work-papers
• Internal Audit Reports and work-papers• Compact Compliance Reports
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Audit CycleAudit Cycle
Field Work• Meet with TGA• Review documentation • Observe activities and processes • Perform compliance tests. Interview
employees. “The SGA may conduct an on-site compliance inspection at the Tribe’s Gaming Facility that the SGA reasonably determines is necessary to ensure compliance with the Compacts.”
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Audit CycleAudit Cycle
Draft Report and Response by Tribe
• Document each “exception”• Draft Report – “exceptions” from audit – 60
days from completion of on-site work• Sent to TGA – 60 days to respond• Written response from Tribe must be
included in Final Report. CGCC-8(h)(6)• If no response, all potential issues become
“findings”
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Audit CycleAudit Cycle
• Opportunity to resolve potential issues– Good faith efforts
• Additional on-site work, no limit to the number of State compliance inspections. CGCC-8(g)(3).
• Final Report
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Audit CycleAudit Cycle
• Tribal Action Plan, 45 days after Final Report• Tribe implements remedial procedures – 3
months after Plan• State follow-up• Referral to CGCC Commissioners• Dispute Resolution – Compact Section 9• Beware – Compact Section 11.2.1(c) –
material breach of the Compact
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RecommendationsRecommendations
1. Make sure you have a rigorous compliance audit process in place, including work steps spanning all subjects raised in the MICS.
2. Training/refresher courses for TGA and Gaming Operation auditors and personnel.
3. Have TGA auditors visit other jurisdictions and observe their audit procedures.
4. Study the outside CPA annual audits, including work-papers, management letters, and agreed upon procedures reports. Interview the outside auditors and catalog weaknesses.
5. Do the same with internal audit reports and work papers.
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RecommendationsRecommendations
6. Figure out what kind of records the CGCC (or Bureau) will request and study those records.
7. Make sure you have worked through the logistics of the State’s compliance audit:
a. What work space will you make available?b. Which operations employees will you refer the State auditors to for given subjects?c. At a minimum, have TGA employees accompany the State auditors to the highly restricted areas of the casino.
8. Keep Tribal Council informed if the CGCC auditors start asking about issues and documents beyond the MICS.
9. Assign TGA personnel to coordinate and prepare a response to the State’s draft report.
10. If problems appear during the compliance audit, be ready with a Tribal Action Plan that will address the issues.
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Questions?Questions?
Questions?
Contact Information:
Stephen Hart(602) 262-5796
