Indian Gaming Audit Issues and Challenges

1
Indian GamingAudit Issues and Challenges

• Presented by
• Craig L. Greene
• McGovern Greene LLP
• Richard Ross
• California Gambling Control Commission

2
Current Economy Risks

• Increase in Employee Theft
• Is this being Addressed in Indian Country?
• Downsizing Often Results in
• Loss of Significant Internal Controls
• Removal of Non Revenue Producing Elements May
  Result in Loss of Revenue Protecting Elements
• Loss of Key Employees

3
Current Economy Risks

• Overall Trend Observed by NIGC of Deteriorating
  Financial Condition
• Many New Properties have Large Debt Load
• Risk of Default by Major Gaming Operations
• Large Casino Management Companies, i.e. Stations
  Casino Bankruptcy Petition
• Gaming Vendors
• What is the Level of Due Diligence

4
Improved Corporate Governance

• Many Tribes have Developed into the Equivalent of
  Large Corporations
• Is there a Need to Implement Improved Corporate
  Governance Policies, such as
• Audit Committees
• Codes of Business Conduct
• Fraud Policies
• Risk Assessment Programs
• Management Certifications of Financial Statements

5
Role of Tribal Gaming Regulators

• What is TGRs Role?
• Is there a Blur between Management and TGR?
• Often we have found Management and TGR are at
  Odds is this an Issue?
• If so, how can we Bridge that Gap?
• Understanding the Evolving Electronic Gaming
  Technology.
• Reliance on Industry Manufacturers Testing Labs

6
Lack of Adequate Review of IT Department

• Technology continues to drive Gaming Operations
  Which Leads to Significant Risks
• Access Controls
• Application Controls
• Disaster Recovery
• Archival Issues
• Is the MICS Testing Enough?
• Should there be a Required Security Audit of IT?
• Who are the Right Kind of People?

7
No Required MICS Reviewof Financial Controls

• MICS Emphasizes Gaming Operations, but does not
  Adequately Address Financial Controls.
• Thus, we have Found Significant Deficiencies that
  Provide Opportunities for Fraud Abuse.

8
Inability to Attract Adequate Competent
Internal Auditors

• Locations of Employment
• Demand for Internal Auditors in Other Parts of
  the Economy
• Salary Issues
• Internal Auditors as Trusted Business Consultants

9
Lack of Training ofAccounting Staff Internal
Audit

• Adequate Educational Background
• Technology Challenges
• Changes in Generally Accepted Accounting
  Standards Practices
• AICPA Proposed Audit Accounting Guide for
  Casinos
• International Financial Reporting Standards (IFRS)

10
Lack of Adequate Due Diligence

• Numerous Instances of Tribal Investment in
  Business Ventures with Unethical Business
  Partners
• Issue Seems to be a Lack of Due Diligence on the
  Part of the Tribes

11
Potpourri

• Familial Relationships
• Resentment of External Criticism
• Tribal Politics and Issues
• Audience Concerns

12
Final Questions/Comments

• Craig L. Greene
• McGovern Greene LLP
• Chicago Las Vegas
• 312.692.1000
• Richard Ross
• California Gambling Control Commission
• Sacramento
• 916.263.0700