1. A Legacy of Integrity and Trust State Compliance Audits What Can We Expect? Stephen Hart Lewis and Roca LLP

2. www.lewisandroca.com 2 Compact and Regulatory Provisions 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

3. www.lewisandroca.com 3 Compact Compliance Review Exit Conference Response by Tribe Follow-up and Referral of Objections to SGA Final Report to Tribe Tribal Action Plan Monitor Findings Notice and Planning Fieldwork Draft Compliance Inspection Report 1 2 3 4 5 6 7 8 9 Stages CCR

4. www.lewisandroca.com 4 Audit 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.

5. www.lewisandroca.com 5 Compact Compliance Review Who May Be Involved CCR Machine Compliance Intelligence Unit Investigation Unit Vendor Licensing Audit Unit Administration Employee Licensing

6. www.lewisandroca.com 6 Pre-Audit Documentation Annual Outside Audit – Agreed Upon Procedures Reports, Management Letters and work-papers Internal Audit Reports and work-papers Compact Compliance Reports

7. www.lewisandroca.com 7 Audit 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.”

8. www.lewisandroca.com 8 Audit 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”

9. www.lewisandroca.com 9 Audit 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

10. www.lewisandroca.com 10 Audit 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

11. www.lewisandroca.com 11 Recommendations 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.

12. www.lewisandroca.com 12 Recommendations 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.

13. www.lewisandroca.com 13 Questions? Questions? Contact Information: Stephen Hart (602) 262-5796 SHart@lrlaw.com