Key areas of concern we should keep in mind as we make spending decisions
The tide of regulatory scrutiny from the NIGC has risen recently. More casinos are undergoing “Internal Control Assessments” from the NIGC. The level of regulatory scrutiny seemed to ebb during the Obama administration. This is not wholly unusual. Each new presidential administration has its own philosophy as to how vigorous regulation should be. In April and May of last year, the NIGC issued three Notices of Violation (NOV). Two of these NOVs included violations related to how gaming revenues are used. IGRA provides five broad, acceptable purposes for which revenues generated from a tribe’s gaming activities can be used.
The five purposes are:
- To fund tribal government operations or programs;
- To provide for the general welfare of the Indian tribe and its members;
- To promote tribal economic development;
- To donate to charitable organizations; and
- To help fund operations of local government agencies.
Tribal governments are used to receiving funds that can only be used for certain purposes and usually adhere to these purposes with gaming revenues. Where things usually go south is the use of funds by the casino or through the casino. Aside from the five purposes named in IGRA, there are some key areas of concern that we should keep in mind as we make spending decisions.
If the tribe has a Revenue Allocation Plan (RAP) approved by the BIA, it must be followed. Spending gaming revenues in ways that are inconsistent with the RAP will result in an NOV. The last thing we want are payments being deemed unauthorized Per Capita payments (whether we make Per Capita payments or not). We don’t want the IGRA violation and we don’t want the uproar from the members who didn’t receive the unauthorized payment or benefit. Funny thing about this type of violation is that we’re violating our own policy passed by our own governing body. If we want to change it, we can submit for BIA approval.
Tribal leadership may sometimes direct or influence spending by the casino in ways that can violate both the RAP and IGRA. Knowing that spending by the tribal government is scrutinized, some think that they can accomplish their agenda by having the casino make payments to or on behalf of individuals who are disguised as casino operating expenses. If it is wrong at the government level, it’s wrong at the casino level too. NOVs have questioned whether some payments were legitimate operating expenses. We need to remember that proper spending of gaming revenues includes how the casino spends.
Saying certain casino payments are on behalf of or in support of tribal “programs” is another thing to watch. Does a formal program exist? Should a tribal program benefit come directly from the casino? If the payment comes from the government, is it documented and qualified under the terms of the program? Payments that aren’t part of an actual program or don’t meet that program’s criteria will be deemed unauthorized Per Capita payments. As discussed above, we don’t want that.
Use or misuse of credit cards, travel and per diems are areas to watch. Personal use of credit cards is not a good idea, period. Whether reimbursed or not. Such use is, in essence, a loan that isn’t part of a formal program. Similarly, travel that isn’t for legitimate business reasons and per diem allowances in excess of amounts set by the GSA are improper payments. Paying for family members to accompany leaders on business trips is also inappropriate, whether reimbursed or not. Travel and expense reimbursements can not only violate IGRA, but can have negative consequences should the IRS audit the tribe or casino’s taxable income reporting.
Use of tribal members as consultants, team members or contracted assistance should be handled carefully. We want to use tribal members and their families whenever we can, but any such transactions should be done properly. Contracts should be in writing. Contract terms should be no more favorable than for an unrelated tribal member or a non-tribal member. The contract award process should comply with our own procurement policies. Entering into arrangements with tribal members or their families where there is no evidence of work performed or payment at excessive rates can be construed as unauthorized Per Capita payments.
Payments, loans and perks for tribal leaders or other select tribal members are risky. This can be a very sensitive subject. Our tribal leaders and elders certainly deserve our respect for the positions they hold, but any perks should be limited in their nature and amount. They shouldn’t be a “blank check” for use of the gaming property’s facilities and amenities. These benefits have to be available to all who meet the criteria or hold the same or comparable position. We can’t do for a few elders or council members what we wouldn’t do for all of them. Again, such payments can be deemed unauthorized Per Capita payments.
Gaming has provided opportunities for many tribes to become more self-sufficient and improve the lives of our people. The law that gave us the right to game also came with some loose strings on how we can use the gaming money. We need to make sure that we aren’t acting in violation of the law and jeopardizing a significant source of revenue. While we don’t like the idea of being told what we can do with the money we earn, many of the things mentioned above are common sense and good business practices. If applying those practices and common sense helps us comply with the law, doesn’t that make it the right thing to do?
25 USC § 2710(b)(2)(B); see also 25 U.S.C. §§ 2710(d)(1)(A)(ii) and 2710(d)(2); 25 C.F.R. §§ 522.4, 522.6. The term “net revenues” is defined in IGRA as “gross revenues of an Indian gaming activity less amounts paid out as, or paid for, prizes and total operating expenses, excluding management fees.” 25 U.S.C. § 2703(9); 25 C.F.R. § 502.16.