[Federal Register Volume 87, Number 182 (Wednesday, September 21, 2022)]
[Rules and Regulations]
[Pages 57595-57598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20230]


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DEPARTMENT OF THE INTERIOR

National Indian Gaming Commission

25 CFR Part 571

RIN 3141-AA72


Audit Standards

AGENCY: National Indian Gaming Commission.

ACTION: Final rule.

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SUMMARY: The National Indian Gaming Commission (NIGC) is amending its 
Audit standards regulations. The amendments eliminate the Commission 
waiver requirement for reviewed financial statements and allow all 
operations grossing less than $2 million in the previous fiscal year to 
submit reviewed financial statements provided that the tribe or tribal 
gaming regulatory authority (TGRA) permits the gaming operation to 
submit reviewed financials. The amendments also create a third tier of 
financial reporting for charitable gaming operations with annual gross 
revenues of $50,000 or less where, if permitted by the tribe, a tribal 
or charitable gaming operation may submit financial information on a 
monthly basis to the tribe or the TGRA and in turn, the tribe or TGRA 
provides an annual certification to the NIGC regarding the gaming 
operation's compliance with the financial reporting requirements. The 
amendments also add a provision clarifying that the submission of an 
adverse opinion does not satisfy the regulation's reporting 
requirements.

DATES: This rule is effective October 21, 2022.

FOR FURTHER INFORMATION CONTACT: Michael Hoenig, National Indian Gaming 
Commission; Telephone: (202) 632-7003.

SUPPLEMENTARY INFORMATION:

I. Background

    The Indian Gaming Regulatory Act (IGRA or Act), Public Law 100-497, 
25 U.S.C. 2701 et seq., was signed into law on October 17, 1988. The 
Act establishes the National Indian Gaming Commission (NIGC or 
Commission) and sets out a comprehensive framework for the regulation 
of gaming on Indian lands. On January 22, 1993, the Commission 
promulgated Sec.  571.12 establishing audit standards for tribal gaming 
facilities. On July 27, 2009, the Commission amended the regulation to 
allow tribes with multiple facilities to consolidate their audit 
statements into one and to allow operations earning less than $2 
million in gross gaming revenue to file an abbreviated statement.

II. Development of the Rule

    On June 9, 2021, the National Indian Gaming Commission sent a 
Notice of Consultation announcing that the Agency intended to consult 
on several topics, including proposed changes to the Audit standards. 
Prior to consultation, the Commission released proposed discussion 
drafts of the regulations for review. The amendments to the Audit 
standards are designed to reduce the financial hurdles that small and 
charitable gaming operations face regarding the audit requirement. They 
also clarify which types of audit opinions satisfy the audit submission 
requirements. The Commission held two virtual consultation sessions in 
September and one virtual consultation in October of 2021 to receive 
tribal input on any proposed changes.
    The Commission then published a proposed rule for notice and 
comments on June 1, 2022 at 87 FR 33091 and extended the comment period 
to August 1, 2022 on July 13, 2022 at 87 FR 41637.

III. Review of Public Comments

    The Commission received several general and specific comments on 
the proposed amendments.
    Comment: One commenter proposed changes to eliminate the ``prepared 
by a certified public accountant'' language from the financial 
statements element of audit submissions.
    Response: Commission agrees and has revised the rule accordingly.
    Comment: One commenter proposed changes to clarify that the 
independent certified public accountant is the entity that may issue an 
adverse opinion and that any adverse opinions must still be submitted 
to the Commission.
    Response: Commission agrees and has revised the rule accordingly.
    Comment: One commenter expressed appreciation for the Commission's 
proposal to continue accepting adverse opinions that result from 
financial statements prepared in accordance with generally accepted 
accounting principles as promulgated by the Financial Accounting 
Standards Board rather than the Governmental Accounting Standards 
Board.
    Response: Commission appreciates the comment and has maintained the 
exception in this rule.
    Comment: Two commenters noted that the discussion draft circulated 
during the consultation rounds addressed disclaimed audits, but the 
proposed rule did not. They asked what the Commission's position is on 
disclaimed audits.
    Response: At this time, the Commission has chosen to continue to 
accept disclaimed audit opinions, but may revisit the issue in the 
future. The Compliance Division will continue to carefully review each 
disclaimed opinion and the circumstances behind them.
    Comment: One commenter expressed concern that tribes who go to the 
effort and expense of conducting an audit only to receive an adverse 
opinion are now subject to the same violation as a tribe that failed to 
submit anything at all.
    Response: The reasons for receiving an adverse opinion and the 
difference in circumstances is more appropriately

[[Page 57596]]

considered in the Civil Fine Assessment process, which requires the 
Chairman to weigh the unique facts and circumstances--including good 
faith efforts toward compliance--for each violation.
    Comment: Two commenters are concerned that this creates a new basis 
for a violation without requiring an intermediate investigative or 
technical assistance step.
    Response: Under the amended rule, if a tribe submits an adverse 
opinion, the Chair must still follow the procedures set forth in IGRA 
and NIGC regulations before taking any enforcement action. The 
Commission has determined that this amendment is necessary for the 
Chairman to protect the tribal gaming industry and its assets.
    Comment: One commenter has requested more detail on how a tribe or 
TGRA must notify NIGC that it has given permission for a gaming 
operation to submit reviewed financial statements.
    Response: Upon reviewing this section of the regulation, the 
Commission determined that notice is not necessary and has revised the 
rule accordingly. The Commission presumes by submission of the reviewed 
financial statements that the tribe or TGRA has given permission for 
the review process. If any questions arise about a gaming operation's 
authority to file reviewed statements, the Compliance Division will 
contact the tribe or TGRA for confirmation.
    Comment: Several commenters asked what constitutes a ``reason to 
believe'' that a gaming operation's assets are at risk or are being 
misused under IGRA, and suggest that it should be more clearly defined.
    Response: The Commission disagrees. Nothing in IGRA or NIGC 
regulations requires the Commission to reduce the audit requirements to 
a review of financial statements or submission of financial records to 
the TGRA. The Commission is taking this step to relieve the burden on 
certain small and charitable gaming operations. That being said, the 
Commission and the Chairman still have the regulatory responsibility 
placed on it under IGRA to ensure that the Tribe is the primary 
beneficiary of its gaming operations and that gaming revenues are used 
for the purposes set forth in IGRA. The Commission believes the 
standard set forth in this rule allows the NIGC to achieve both of 
those goals and adequately limits the Chairman's discretion to a good 
faith belief in a threat to gaming assets.
    Comment: Several commenters noted that draft circulated during 
consultations included changes to the language regarding gaming 
operations consolidating audits for multiple places, facilities, or 
locations, but the proposed rule did not contain these changes.
    Response: In the draft submitted for consultation, the language in 
Sec.  571.12(d) stated: ``If a tribe has multiple gaming facilities or 
operations on the tribe's Indian lands, the tribe may choose to satisfy 
the annual audit requirement of paragraph (b) with a consolidated audit 
if the following requirements are satisfied. . . .'' This change was 
inadvertently left out of the NPRM, and the language reverted back to 
that in the existing regulation, ``If a gaming operation has multiple 
gaming places. . . .'' The Commission is reinstating the language 
proposed in the consultation draft, as it is more accurate.
    Comment: One commenter expressed appreciation for the third tier of 
financial reporting established for operations with gross gaming 
revenue under $50,000.
    Response: Commission appreciates this comment.
    Comment: Several commenters requested that the Commission increase 
the $50,000 threshold for reviewed financial statements to $100,000 or 
higher.
    Response: Commission disagrees. The reviewed financial statements 
submitted to date do not indicate any benefit to raising the threshold 
at this time. The Commission may revisit this in the future if 
circumstances change.

IV. Regulatory Matters

Regulatory Flexibility Act

    The rule will not have a significant impact on a substantial number 
of small entities as defined under the Regulatory Flexibility Act, 5 
U.S.C. 601, et seq. Moreover, Indian tribes are not considered to be 
small entities for the purposes of the Regulatory Flexibility Act.

Small Business Regulatory Enforcement Fairness Act

    The rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. The rule does not have an 
effect on the economy of $100 million or more. The rule will not cause 
a major increase in costs or prices for consumers, individual 
industries, Federal, State, local government agencies or geographic 
regions. Nor will the rule have a significant adverse effect on 
competition, employment, investment, productivity, innovation, or the 
ability of the enterprises, to compete with foreign based enterprises.

Unfunded Mandate Reform Act

    The Commission, as an independent regulatory agency, is exempt from 
compliance with the Unfunded Mandates Reform Act, 2 U.S.C. 1502(1); 2 
U.S.C. 658(1).

Takings

    In accordance with Executive Order 12630, the Commission has 
determined that the rule does not have significant takings 
implications. A takings implication assessment is not required.

Civil Justice Reform

    In accordance with Executive Order 12988, the Commission has 
determined that the rule does not unduly burden the judicial system and 
meets the requirements of section 3(a) and 3(b)(2) of the Order.

National Environmental Policy Act

    The Commission has determined that the rule does not constitute a 
major Federal action significantly affecting the quality of the human 
environment and that no detailed statement is required pursuant to the 
National Environmental Policy Act of 1969, 42 U.S.C. 4321, et seq.

Paperwork Reduction Act

    The information collection requirements contained in this rule were 
previously approved by the Office of Management and Budget (OMB) as 
required by 44 U.S.C. 3501 et seq. and assigned OMB Control Number 
3141- 0001.

Tribal Consultation

    The National Indian Gaming Commission is committed to fulfilling 
its tribal consultation obligations--whether directed by statute or 
administrative action such as Executive Order (E.O.) 13175 
(Consultation and Coordination with Indian Tribal Governments)--by 
adhering to the consultation framework described in its Consultation 
Policy published July 15, 2013. The NIGC's consultation policy 
specifies that it will consult with tribes on Commission Action with 
Tribal Implications, which is defined as: Any Commission regulation, 
rulemaking, policy, guidance, legislative proposal, or operational 
activity that may have a substantial direct effect on an Indian tribe 
on matters including, but not limited to the ability of an Indian tribe 
to regulate its Indian gaming; an Indian tribe's formal relationship 
with the Commission; or the consideration of the Commission's trust 
responsibilities to Indian tribes.
    Pursuant to this policy, on June 9, 2021, the National Indian 
Gaming

[[Page 57597]]

Commission sent a Notice of Consultation to the public, announcing the 
Agency intended to consult on several topics, including proposed 
amendments to NIGC audit standards. The Commission held two virtual 
consultation sessions in September and one virtual consultation session 
in October of 2021 to receive tribal input on proposed changes.

List of Subjects in 25 CFR Part 571

    Gambling, Indian--lands, Indian--tribal government, Reporting and 
recordkeeping requirements.

    Therefore, for reasons stated in the preamble, 25 CFR part 571 is 
amended as follows:

PART 571--MONITORING AND INVESTIGATIONS

0
1. The authority citation for part 571 continues to read as follows:

    Authority:  25 U.S.C. 2706(b), 2710(b)(2)(C), 2715, 2716.


0
2. Revise Sec.  571.12 to read as follows:


Sec.  571.12  Audit standards.

    (a) Each tribe shall prepare comparative financial statements 
covering all financial activities of each class II and class III gaming 
operation on the tribe's Indian lands for each fiscal year.
    (b) A tribe shall engage an independent certified public accountant 
to conduct an annual audit of the financial statements of each class II 
and class III gaming operation on the tribe's Indian lands for each 
fiscal year. The audit and auditor must meet the following standards:
    (1) The independent certified public accountant must be licensed by 
a state board of accountancy.
    (2) Financial statements shall conform to generally accepted 
accounting principles and the annual audit shall conform to generally 
accepted auditing standards.
    (3) The independent certified public accountant expresses an 
opinion on the financial statements. If the independent certified 
public accountant issues an adverse opinion, it still must be 
submitted, but does not satisfy this requirement unless:
    (i) It is the result of the gaming operation meeting the definition 
of a state or local government and the gaming operation prepared its 
financial statements in accordance with generally accepted accounting 
principles (GAAP) as promulgated by Financial Accounting Standards 
Board (FASB); or
    (ii) The adverse opinion pertains to a consolidated audit pursuant 
to paragraph (d) of this section and the operations not attributable to 
the adverse opinion are clearly identified.
    (c) If a gaming operation has gross gaming revenues of less than 
$2,000,000 during the prior fiscal year, the annual audit requirement 
of paragraph (b) of this section is satisfied if:
    (1) The independent certified public accountant completes a review 
of the financial statements conforming to the statements on standards 
for accounting and review services of the gaming operation; and
    (2) The tribe or tribal gaming regulatory authority (TGRA) permits 
the gaming operation to submit a review of the financial statements 
according to this paragraph (c); provided that
    (3) If the Chair of the NIGC has reason to believe that the assets 
of a gaming operation are not being appropriately safeguarded or the 
revenues are being misused under the Indian Gaming Regulatory Act 
(IGRA), the Chair may, at his or her discretion, require any gaming 
operation subject to this paragraph (c) to submit additional 
information or comply with the annual audit requirement of paragraph 
(b) of this section.
    (d) If a tribe has multiple gaming facilities or operations on the 
tribe's Indian lands, the tribe may choose to satisfy the annual audit 
requirement of paragraph (b) of this section with a consolidated audit 
if the following requirements are satisfied:
    (1) The tribe is the owner of all the facilities;
    (2) The independent certified public accountant completes an audit 
conforming to generally accepted auditing standards of the consolidated 
financial statements;
    (3) The consolidated financial statements include consolidating 
schedules for each gaming place, facility, or location; and
    (4) The independent certified public accountant expresses an 
opinion on the consolidated financial statement as a whole and subjects 
the accompanying financial information to the auditing procedures 
applicable to the audit of consolidated financial statements.
    (e) If there are multiple gaming operations on a tribe's Indian 
lands and each operation has gross gaming revenues of less than 
$2,000,000 during the prior fiscal year, the annual audit requirement 
of paragraph (b) of this section is satisfied if:
    (1) The tribe chooses to consolidate the financial statements of 
the gaming operations;
    (2) The consolidated financial statements include consolidating 
schedules for each operation;
    (3) The independent certified public accountant completes a review 
of the consolidated schedules conforming to the statements on standards 
for accounting and review services for each gaming facility or 
location; and
    (4) The independent certified public accountant expresses an 
opinion on the consolidated financial statements as a whole and 
subjects the accompanying financial information to the auditing 
procedures applicable to the audit of consolidated financial 
statements.
    (f)(1) If a tribal or charitable gaming operation has gross gaming 
revenues of less than $50,000 during the prior fiscal year, the annual 
audit requirement of paragraph (b) of this section is satisfied if:
    (i) The gaming operation creates, prepares, and maintains records 
in accordance with Generally Accepted Accounting Principles;
    (ii) At a minimum, the gaming operation provides the tribe or 
tribal gaming regulatory authority (TGRA) with the following financial 
information on a monthly basis:
    (A) Each occasion when gaming was offered in a month;
    (B) Gross gaming revenue for each month;
    (C) Amounts paid out as, or paid for, prizes for each month;
    (D) Amounts paid as operating expenses, providing each recipient's 
name; the date, amount, and check number or electronic transfer 
confirmation number of the payment; and a brief description of the 
purpose of the operating expense;
    (E) All deposits of gaming revenue;
    (F) All withdrawals of gaming revenue;
    (G) All expenditures of net gaming revenues, including the 
recipient's name, the date, amount, and check number or electronic 
transfer confirmation number of the payment; and a brief description of 
the purpose of the expenditure; and
    (H) The names of each employee and volunteer, and the salary or 
other compensation paid to each person;
    (iii) The tribe or TGRA permits the gaming operation to be subject 
to this paragraph (f), and the tribe or TGRA informs the NIGC in 
writing of such permission; and
    (iv) Within 30 days of the gaming operation's fiscal year end, the 
tribe or the TGRA provides a certification to the NIGC that the tribe 
or TGRA reviewed the gaming operation's financial information, and 
after such review, the tribe or TGRA concludes that the gaming 
operation conducted the gaming in a manner that protected the integrity 
of the games offered and safeguarded

[[Page 57598]]

the assets used in connection with the gaming operation, and the gaming 
operation expended net gaming revenues in a manner consistent with 
IGRA, NIGC regulations, the tribe's gaming ordinance or resolution, and 
the tribe's gaming regulations.
    (2) If the tribe or TGRA does not or cannot provide the NIGC with 
the certification required by paragraph (f)(1)(v) of this section 
within 30 days of the gaming operation's fiscal year end, the gaming 
operation must otherwise comply with the annual audit requirement of 
paragraph (b) of this section.
    (3) The tribe or TGRA may impose additional financial reporting 
requirements on gaming operations that otherwise qualify under this 
paragraph (f).
    (4) If the Chair of the NIGC has reason to believe that the assets 
of a gaming operation are not being appropriately safeguarded or the 
revenues are being misused under IGRA, the Chair may, at his or her 
discretion, require any gaming operation subject to this paragraph (f) 
to submit additional information or comply with the annual audit 
requirement of paragraph (b) of this section.
    (5) This paragraph (f) does not affect other requirements of IGRA 
and NIGC regulations, including, but not limited to, fees and quarterly 
fee statements (25 U.S.C. 2717; 25 CFR part 514); requirements for 
revenue allocation plans (25 U.S.C. 2710(b)(3)); requirements for 
individually-owned gaming (25 U.S.C. 2710(b)(4), (d); 25 CFR 522.10); 
minimum internal control standards for Class II gaming and agreed-upon 
procedures reports (25 CFR part 543); background and licensing for 
primary management officials and key employees of a gaming operation 
(25 U.S.C. 2710(b)(2)(F); 25 CFR parts 556, 558); and facility licenses 
(25 CFR part 559).

    Dated: September 14, 2022.
E. Sequoyah Simermeyer,
Chairman.
Jeannie Hovland,
Vice Chair.
[FR Doc. 2022-20230 Filed 9-20-22; 8:45 am]
BILLING CODE 7565-01-P