©2014 CliftonLarsonAllen LLP Continuous learning in action NATIONAL INDIAN GAMING ASSOCIATION BOARD GOVERNANCE TRAINING John T. Fisher, CPA, CGFM, Principal

©2014 CliftonLarsonAllen LLP Learning Objectives Defining Accountability and Fiduciary Responsibility –The purpose of this session is to understand the legal and ethical requirements of serving as a council member or commissioner Governance vs. Management –The purpose of this session is to understand the difference between governance and management 2

©2014 CliftonLarsonAllen LLP Part One Accountability and Fiduciary Responsibility 3

©2014 CliftonLarsonAllen LLP Defining Accountability Council members and commissioners are required to: Operate with clarity of purpose Maintain legal knowledge Maintain ethical behavior that extends beyond the requirement of the law Conduct regular self-evaluation of the tribes mission, programs, and operating policies Maintain responsibility for fiscal oversight 4

©2014 CliftonLarsonAllen LLP Purpose of the Governing Council Purposes for the Council/Commission –Provide organizational oversight –Maintain accountability to the tribal members and the law A governing board must ensure that –The organization provides a product or service that reflects the needs of the tribe –The organization is financially, managerially, and programmatically healthy 5

©2014 CliftonLarsonAllen LLP Governance Responsibilities Establish mission and philosophy Planning Selection and supervision of top management Ensuring adequate resources and managing them effectively Setting policies to effectively guide operations and programs Reviewing financial and programmatic performance as compared to objectives Organization of the council/commission to work effectively Ensuring legal and ethical integrity 6

©2014 CliftonLarsonAllen LLP What Does the Law Require? Duty of Care –Diligence and attentiveness to council/commission responsibilities. Act as an “ordinary prudent person” would in a “like position under similar circumstances” Duty of Loyalty –Faithful pursuit of the interest of the tribe rather than personal interest or the interest of another person or organization Duty of Obedience –Act with fidelity, within the bounds of the law and to the tribe’s mission 7

©2014 CliftonLarsonAllen LLP Duty of Care Attend council/commission meetings and actively participate in the work of the council/commission Scrutinize the work of committees that have authorization of the council/commission Participate in council/commission actions. If you are there, you are responsible Know the books and records of the tribe Protect the tribe’s assets consistent with the legal requirements 8

©2014 CliftonLarsonAllen LLP Duty of Care (cont’d) Assist the tribe in obtaining adequate resources Honor your duty to investigate and report potential theft or mismanagement Document decision-making in the minutes Ensure financial accountability –Oversee the Chief Financial Officer –Check that resources are used prudently –Implement procedures to ensure accurate records –Maintain internal controls 9

©2014 CliftonLarsonAllen LLP Duty of Loyalty Avoid conflicts of interest or the appearance of such conflicts. If questions arise, the burden of proof that no conflict exists lies with the council member/commissioner Establish a written policy on avoiding conflicts of interest Do not divert a tribal business opportunity for your own personal gain 10

©2014 CliftonLarsonAllen LLP Duty of Obedience Ensure the tribe remains obedient to its central purpose –Be familiar with tribal, gaming, state, and federal statutes and laws related to the tribe –Comply with every deadline for all tribal, state, and federal fillings –Be familiar with the tribe’s governing documents and follow the provisions of those documents –Where appropriate, obtain the opinion of legal counsel or accountants 11

©2014 CliftonLarsonAllen LLP Fiduciary Responsibility Financial oversight is a core responsibility of the council/commission. This means that all council members/commissioners: −Have equal and shared fiduciary responsibilities for the tribe −Understand the content and significance of financial statements and audit −Ensure the protection and appropriate use of the tribes assets −Establish program revenue and expense objectives which are consistent with the mission of the tribe −Thoroughly discuss and adopt an annual budget that reflects the financial objectives and strategies of the tribe before the beginning of its fiscal year 12

©2014 CliftonLarsonAllen LLP Fiduciary Responsibility (cont’d) −Review financial statements regularity and compare them to the budget. Ensure that you account for significant variances and require timely course adjustments as needed −Ensure that strong and appropriate internal financial controls, processes, and practices are in place −Establish appropriate financial polices to guide tribal operations −Where possible, establish operating reserves to finance cash shortfalls and program growth 13

©2014 CliftonLarsonAllen LLP Finance Committee Responsibilities Oversee financial operations: –Budgeting –Policy development –General financial planning- current and long-term Be alert to signs of financial problems Risk assessment Investments 14

©2014 CliftonLarsonAllen LLP Audit Committee Responsibilities Select audit firm and define service expectations Discuss scope and timing of work with the auditor Respond to audit findings and recommendations Present the annual financial statements Review conflicts between auditors and management Review audit letters that are received in addition to the audit report 15

©2014 CliftonLarsonAllen LLP Management Carry out council policy and directives Administer internal controls Monitor financial goals and objectives Process financial information Prepare budgets and financial information Provide accurate, timely, and meaningful information Keep council/commissioners appropriately informed 16

©2014 CliftonLarsonAllen LLP Part Two Management vs. Governance Modes of Governance 17

©2014 CliftonLarsonAllen LLP Governance In the government setting, the purpose of governance is to “ensure, usually on behalf of others, that an organization achieves what it should achieve, while avoiding those behaviors and situations that should be avoided.” - John Carver Boards That Make A Difference,

©2014 CliftonLarsonAllen LLP Governing Functions Strategic Direction – setting a direction for the tribe that reflects its members needs Resource Development – developing financial resources that support program activities Financial Accountability – managing financial resources that ensure honesty and cost-effectiveness Leadership Development – developing the human resources that lead the tribe today and in the future 19

©2014 CliftonLarsonAllen LLP Management Functions Program Planning and Implementation – taking the strategic directions to the next level of detail and putting it into action Administration – ensuring the effective management of the details behind the program 20

©2014 CliftonLarsonAllen LLP Determining Different Roles Governance is the ultimate responsibility of the council/commission, while the responsibility of the staff is management Rather than seeing the council’s/commission’s job as a function of management, it is first and fundamentally a responsibility for ownership Council/commission should ask, in regards to programs and initiatives, “Why are we doing this?” rather than “how can we do this?” 21

©2014 CliftonLarsonAllen LLP Governance Triangle Three modes of governance based on best practices of organizations and behavioral theory Type I: Fiduciary Type II: Strategic Type III: Generative GOVERNANCE AS LEADERSHIP 22

©2014 CliftonLarsonAllen LLP Type I: Fiduciary Mode Fiduciary accountability, integrity, and oversight “Essential but if that is all a board does, its focus is to prevent trouble rather than promote success” - Richard Chiat, William Ryan and Barbara Taylor Governance as leadership: reframing the work of nonprofit boards (2006) 23

©2014 CliftonLarsonAllen LLP Type II: Strategic Beyond annual strategic planning, is to have continuous strategic thinking “Until a board learns to use ideas rather than plans to drive strategy, the full range of the board members talents will be vastly underutilized.” “Boards are better suited to think together than to plan together, to expand the essence of a great idea, rather than elaborate the details of a plan” - Richard Chiat, William Ryan and Barbara Taylor Governance as leadership: reframing the work of nonprofit boards (2006) 24

©2014 CliftonLarsonAllen LLP Type III: Generative Drivers for continually moving the organization forward. Knowledge of the broader landscape REAL WORLD EXAMPLE –Problem - voluntary turnover of staff –Technical solution - increase compensation –Strategic solution - create a great place to work for professional staff where quality work, not money, is the deciding factor. –Generative solution - create an environment where employees learn the skills needed to build a career in the tribal industry – whether at your tribe or another. 25

©2014 CliftonLarsonAllen LLP Oversight (Fiduciary) Foresight (Strategic) Insight (Generative) Unleashing Your Potential 26

©2014 CliftonLarsonAllen LLP Emphasize Modes, Not Tasks, of Governance FiduciaryStrategicGenerative Council’s Commission's purpose Stewardship of tangible assets Strategic partnership with management Source of leadership for the organization Chief roleStewardStrategistSense Maker Core workSet mission, oversee operations, deploy resources, ensure compliance Scan environment, shape strategy, create comparative advantage Find and frame challenges, reconcile values and choices Conducive processStanding committees Task forces, ad hoc work groups Inclusive conversations Power baseLegal authorityTechnical expertiseIdeas, insights 27

©2014 CliftonLarsonAllen LLP Discussion/Questions 28

©2014 CliftonLarsonAllen LLP 29 ©2014 CliftonLarsonAllen LLP twitter.com/ CLAconnect facebook.com/ cliftonlarsonallen linkedin.com/company/ cliftonlarsonallen John T. Fisher Principal