Coushatta Tribe of Louisiana Governmental Services Department

Transcription

1 Basic Financial Statements, Independent Auditors Report and Single Audit Reporting Package December 31, 2016

2 Table of Contents Independent Auditors Report 1-3 Management s Discussion and Analysis 4-10 Department-Wide Financial Statements Page Statement of Net Position 11 Statement of Activities 12 Fund Financial Statements Balance Sheet Governmental Funds 13 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 14 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds to the Statement of Activities 15 Notes to the Financial Statements Supplementary Information Combining Schedule of Assets, Liabilities and Fund Balance Federal Programs Fund Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance Federal Programs Fund 43-45

3 Table of Contents continued Page Single Audit Information Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards 48 Independent Auditors Reports on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings 60 Corrective Action Plan 61

4 Independent Auditors Report Tribal Council Coushatta Tribe of Louisiana We have audited the accompanying financial statements of the governmental activities and each major fund of the Coushatta Tribe of Louisiana (the Tribe ) (the Department ) as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the Department s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issues by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting polices used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. (505) Fax (505) Hardware Drive NE, Suite E-4 Albuquerque, New Mexico

5 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Coushatta Tribe of Louisiana as of December 31, 2016, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1, the financial statements of the Department are intended to present the financial position, and the changes in financial position of only that portion of the governmental activities and each major fund of the Tribe that is attributable to the transactions of the Department. They do not purport to, and do not, present fairly the financial position of the Tribe as of December 31, 2016, the changes in financial position, or its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Department s basic financial statements. The combining financial statements for the federal programs fund, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. 2

6 The combining financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, based on our audit information and the procedures performed as described above, the combining financial statements for the federal programs fund and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated July 21, 2017, on our consideration of the Department s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Department s internal control over financial reporting and compliance. Albuquerque, NM July 21,

7 Management s Discussion and Analysis For the Year Ended December 31, 2016 This section of the financial report presents our discussion and analysis of the Coushatta Tribe of Louisiana s (the Department ) financial performance during the year ended December 31, Please read it in conjunction with the Department s financial statements, which follow this section. Financial Highlights Total assets exceeded liabilities at December 31, 2016, by $81 million (net position). Of this amount, $29 million is invested in capital assets and $18 million is restricted investments pledged to secure notes payable, for a mitigation plan, and for a workers compensation line of credit. The remaining balance of $34 million (unrestricted net position) may be used to meet ongoing obligations to tribal members and creditors. The total net position of the Department increased by $5.3 million in 2016 to $81.2 million, primarily as a result of a ruling on a legal settlement which decreased the Department s liability by $11 million. Expenses of governmental activities were $59 million and $53 million in 2016 and 2015, respectively. This includes $20 million and $19 million for per capita distributions in 2016 and 2015, respectively. During 2016 and 2015, $17 million and $13 million, respectively, was spent for government administration and $22 million and $20 million, respectively, was spent for government services. Governmental fund balances increased $7.4 million during fiscal year The primary reason for this increase is due to a ruling on a legal settlement which decreased the Department s liability by $11 million. Overview of Financial Statements The basic financial statements are comprised of three components: 1) Department-wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. The basic financial statements are accompanied by supplementary financial information that provide additional details. 4

8 Management s Discussion and Analysis For the Year Ended December 31, 2016 Figure 1 shows how the various components of this annual report are arranged and relate to one another: Figure 2 summarizes the information contained in the Department-wide and fund financial statements. The remainder of this overview section of management s discussion and analysis explains the structure and contents of each of the statements. 5

9 Management s Discussion and Analysis For the Year Ended December 31, 2016 Figure 2 Major Features of Department-Wide and Fund Financial Statements Department-Wide Statements Fund Statements Governmental Funds Scope Entire Department (except fiduciary funds) The activities of the Department that are not proprietary or fiduciary, such as education, health, housing and public safety. Required financial statements Statement of net position Statement of activities Balance sheet Statement of revenues, expenditures, and changes in fund balances Accounting basis and measurement focus Accrual accounting and economic resources focus. Modified accrual accounting and current financial resources focus. Type of asset/liability information All assets and liabilities, both financial and capital, and shortterm and long-term. Only assets available to fund payments of liabilities that are due during the year or soon thereafter; no capital assets or long-term debt are included. Type of inflow/outflow information All revenues and expenses during the year, regardless of when cash is received or paid. Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and other liabilities when due and payable. Department-Wide Statements The Department-wide financial statements provide readers with a broad overview of the Department s finances in a manner similar to a private-sector business. The statement of net position presents information on all of the Department s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position serve as a trend indicator of whether the financial position of the Department is improving or deteriorating. The statement of activities presents information showing how net position changed during the fiscal year. All changes in net position are reported when the underlying event giving rise to the change occurs, regardless of timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The Department s operations consist of only governmental activities. 6

10 Management s Discussion and Analysis For the Year Ended December 31, 2016 Fund Financial Statements Funds are established to help control and manage money for a particular purpose, or in order to demonstrate that it is meeting legal responsibilities for using certain grants and other monies. The fund financial statements provide detailed information about the most significant funds. Governmental Funds Governmental services are reported in governmental funds. Governmental services include general government administration, health and welfare, housing, educational and public safety services. Expenses for gaming regulation, maintenance and agricultural activities, contributions to political subdivisions of Louisiana, and per capita distributions are also reported in the governmental funds. Governmental funds focus on how cash and other financial assets flow in and out, and the balances left at year-end that are available for spending. Consequently, the governmental funds provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance government programs and services. Because this information does not encompass the additional long-term focus of the department-wide statements, reconciling information follows each governmental funds statement that explains the relationship (or differences) between the amounts reported in the departmentwide statements and the governmental funds statement. Department-wide Financial Analysis Net Position The Department s governmental activities net position increased $5.2 million to $81.2 million in 2016 from $76 million in Table 1 summarizes assets, liabilities and net position as of December 31, 2016 and Table 1 Statement of Net Position as of December 31, Assets Current and other assets $ 85,643,641 $ 110,297,190 Capital assets, net 29,275,836 30,431,328 Total assets 114,919, ,728,518 Liabilities Current liabilities 33,706,263 64,774,183 Total liabilities 33,706,263 64,774,183 Net position Net investment in capital assets 29,275,836 24,043,531 Restricted 17,981,725 39,145,273 Unrestricted 33,955,653 12,765,531 Total net position $ 81,213,214 $ 75,954,335 7

11 Management s Discussion and Analysis For the Year Ended December 31, 2016 Changes in Net Position Total revenues for the years ended December 31, 2016 and 2015, were $8 million and $4.2 million compared with expenses of $59.5 million and $53.4 million, respectively. Excess cash and investments of the business-type activities are transferred to the governmental activities/general fund so they can be appropriated or invested based on the overall needs of the Department. During 2016 and 2015, the Tribe s business-type activities made net transfers to the Department of $44.6 million and $45.9 million, respectively. Table 2 summarizes the Department s changes in net position during 2016 and Table 2 Changes in Net Position For the Years Ended December 31, Revenues Program revenues: Charges for services $ 1,280,700 $ 1,246,512 Operating grants and contributions 2,643,618 2,622,984 General revenues 4,056, ,359 Total revenues 7,980,888 4,219,855 Expenses Government administration 16,837,311 12,929,123 Government services 21,729,253 20,128,276 Per capita distributions 20,241,716 19,460,552 Interest on debt 642, ,400 Total expenses 59,450,340 53,367,351 Deficiency of revenues under expenses (51,469,452) (49,147,496) Distribution from Minors Trust Fund 1,169,737 - Gain on reduction of settlement liability 11,000,000 - Transfers from other departments of the Tribe 44,558,594 45,933,376 Change in net position 5,258,879 (3,214,120) Net position beginning 75,954,335 79,168,455 Net position ending $ 81,213,214 $ 75,954,335 Governmental Activities Governmental activities revenues and net transfers from business-type activities totaled $53 million in 2016 and $50 million in Transfers from business-type activities provide most of the resources for funding governmental activities. Other revenue sources were licensing fees, federal grants and contracts and investment income. 8

12 Management s Discussion and Analysis For the Year Ended December 31, 2016 In addition, the Department received $1,169,737 in 2016 from the Minors and Incompetent Trust Fund for members who had received contributions in prior years but had been dis-enrolled from the Tribe. During 2016, the Department reported a gain on reduction of settlement liability of $11 million due to a settlement reached that reduced the Department s liability from $22 million to $11 million at December 31, Revenues from grants and contributions were $2.6 million in 2016 and 2015, respectively. Investment income/(loss) was $2.4 million and ($1.7) million in 2016 and 2015, respectively. Governmental activities expenses were $59 million and $53 million in fiscal year 2016 and 2015, respectively. Government administration and per capita expenses increased $5 million compared to Per capita distributions increased $1 million while administration expenses and contributions to political subdivisions increased $4 million. Per capita distributions vary depending on gaming operations and income. Governmental services, which consist of health, education, public safety, housing, maintenance, and agriculture, increased $2 million compared to This increase is primarily due to an increase in salaries, repairs and maintenance, and health related costs. Interest on debt was $0.6 and $0.8 million in 2016 and 2015, respectively. Financial Analysis of the Department s Funds Governmental Funds The focus of the governmental funds is to provide information on nearterm inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Department s financing requirements. Unrestricted fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of December 31, 2016, the Department s governmental funds reported ending fund balances of $50 million. Compared to the prior year, fund balances increased $7.4 million. Total expenditures in the general fund were $55.7 million. The largest expenditures in the general fund were per capita payments to tribal members and government administration. The per capita distributions for fiscal year 2016 were $20.2 million, accounting for 36% of total expenditures of the general fund. Government administration expenditures were $10.9 million, which accounts for 20% of total general fund expenditures. The federal programs fund has restricted fund balance of $2 million as of December 31, During 2016, fund balance increased $2 million due to revenues received for a mitigation plan. Overall, federal programs fund expenditures remained relatively comparable with the prior year. 9

13 Management s Discussion and Analysis For the Year Ended December 31, 2016 The largest expenditure category in the federal programs fund is health services of $1.6 million, which is approximately the same as the prior year. Other current year expenditures include maintenance and agriculture, housing, public safety and educational services. Governmental funds capital outlay expenditures for 2016 totaled $0.7 million compared to $0.6 million in Capital outlay included land and vehicles. Capital Asset and Debt Administration Capital Assets As of December 31, 2016 and 2015, the Department had $29.3 million and $30.4 million of capital assets, including buildings, equipment and construction. Governmental activities capital assets decreased $1.2 million, net of additions, deletions, adjustments, impairments and depreciation. Significant capital asset additions were for land and vehicles. Capital projects of the Department included the construction of a new convenience store that opened in Depreciation charged in 2016 for governmental activities capital assets was $1.9 million. Additional information on capital assets can be found in the notes to the financial statements. Debt Administration The Department has $14 million and $37.1 million of demand notes payable as of December 31, 2016 and 2015, respectively. During 2016, the Department continued to pay down its demand notes payable. Additional information on the demand notes payable can be found in the notes to the financial statements. Economic Factors and Next Year s Budget The Tribe s Council considers many factors in determining the budget, taking into consideration 2016 actual revenues and expenditures and anticipated changes in 2017 based on planned new projects and expected changes in existing programs. During the next year, the Department expects to experience stable funding from federal and state agencies and stable or moderate growth in profits from its business enterprises. Contacting the Department s Financial Management The financial report is designed to provide a general overview of the Department s finances. If you have any questions about this report, or desire additional information, contact the Department s Controller at: Coushatta Tribe of Louisiana P O Box 818 Elton, LA Phone: (337)

14 Department-Wide Financial Statements

15 Statement of Net Position December 31, 2016 Governmental Activities Assets Cash and cash equivalents $ 19,709,022 Investments 42,251,625 Receivables 860,224 Due from other funds 3,649,940 Due from other governments 126,945 Inventory 161,363 Notes receivable, net 932,809 Restricted investments 15,981,725 Equity interest in component unit 1,969,988 Capital assets Land and construction in progress 15,304,299 Buildings and equipment, net 13,971,537 Total capital assets 29,275,836 Total assets 114,919,477 Liabilities Accounts payable and accrued liabilities 8,248,908 Other payable 11,000,000 Unearned revenue 475,630 Demand notes payable 13,981,725 Total liabilities 33,706,263 Net Position Net investment in capital assets 29,275,836 Restricted 17,981,725 Unrestricted 33,955,653 Total net position $ 81,213,214 The accompanying notes are an integral part of these financial statements. 11

16 Statement of Activities For the Year Ended December 31, 2016 Net (Expense) Revenue and Changes Program Revenues in Net Position Operating Charges for Grants and Governmental Expenses Services Contributions Activities Functions/Programs Governmental activities Administration $ 11,888,432 $ 451,260 $ - $ (11,437,172) Health and welfare services 9,720,861 60,548 1,601,814 (8,058,499) Housing services 1,012, ,938 16,000 (833,633) Maintenance and agriculture 3,927, , ,618 (3,026,120) Educational services 3,689, ,139 (3,587,394) Public safety 3,379,055 15, ,047 (3,025,319) Gaming regulation 1,717, ,770 - (1,442,585) Per capita distributions 20,241, (20,241,716) Contributions to political subdivisions 3,231, (3,231,524) Interest on debt 642, (642,060) Total governmental activities $ 59,450,340 $ 1,280,700 $ 2,643,618 (55,526,022) General revenues (losses) Investment income 2,394,597 Decrease in equity interest in component unit before distributions (2,707,348) Other 4,369,321 Distribution from Minors Trust Fund 1,169,737 Special Item - Gain on reduction of settlement liability (Note 9) 11,000,000 Transfers 44,558,594 Total general revenues, distributions, special item and transfers 60,784,901 Change in net position 5,258,879 Net position beginning of year 75,954,335 Net position end of year $ 81,213,214 The accompanying notes are an integral part of these financial statements. 12

17 Fund Financial Statements

18 Balance Sheet Governmental Funds December 31, 2016 Assets Federal Total General Programs Governmental Fund Fund Funds Cash and cash equivalents $ 17,033,126 $ 2,675,896 $ 19,709,022 Investments 42,251,625-42,251,625 Receivables 860, ,224 Due from other funds 5,139, ,139,553 Due from other governments 20, , ,945 Inventory 161, ,363 Notes receivable, net 932, ,809 Restricted investments 15,981,725-15,981,725 Total assets $ 82,380,139 $ 2,783,127 $ 85,163,266 Liabilities and Fund Balances Liabilities Accounts payable $ 2,314,350 $ 5,585 $ 2,319,935 Accrued liabilities 5,928,973-5,928,973 Other payable 11,000,000-11,000,000 Due to other funds 1,162, ,334 1,489,613 Unearned revenue 25, , ,630 Demand notes payable 13,981,725-13,981,725 Total liabilities 34,412, ,127 35,195,876 Fund balances Nonspendable 1,094,172-1,094,172 Restricted 15,981,725 2,000,000 17,981,725 Committed 108,838, ,838,716 Unassigned (77,947,223) - (77,947,223) Total fund balances 47,967,390 2,000,000 49,967,390 Total liabilities and fund balances $ 82,380,139 $ 2,783,127 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 29,275,836 The Tribe has an equity interest in a component unit. The equity interest is not a current financial resource and therefore is not reported in the funds. 1,969,988 Net position of governmental activities $ 81,213,214 The accompanying notes are an integral part of these financial statements. 13

19 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended December 31, 2016 Revenues General Federal Fund Programs Fund Total Intergovernmental grants and contracts $ 71,181 $ 2,572,437 $ 2,643,618 Gaming regulation and licensing 274, ,770 Investment income (loss) 2,394,597-2,394,597 Indirect cost recovery 254, ,907 Charges for services 684, ,020 Fees 321, ,910 Other 2,209,964 2,159,357 4,369,321 Total revenues 6,211,349 4,731,794 10,943,143 Expenditures Current General and administration 10,915,118-10,915,118 Health and welfare services 8,077,742 1,613,612 9,691,354 Educational services 3,498, ,139 3,600,713 Housing services 985,182 16,000 1,001,182 Public safety 2,749, ,047 3,087,835 Gaming regulation 1,717,355-1,717,355 Maintenance and agriculture 2,966, ,088 3,689,037 Per capita distributions 20,241,716-20,241,716 Contributions to political subdivisions 3,231,524-3,231,524 Capital outlay 714,521 17, ,861 Debt service, interest 642, ,060 Total expenditures 55,740,529 2,809,226 58,549,755 Revenues over (under) expenditures before other financing sources (uses) and special item (49,529,180) 1,922,568 (47,606,612) Other Financing Sources (Uses) Distributions to KCM (1,675,000) - (1,675,000) Distribution from the Minors Trust Fund 1,169,737-1,169,737 Transfers in 46,773,531 77,432 46,850,963 Transfers out (2,292,369) - (2,292,369) Total other financing sources (uses) 43,975,899 77,432 44,053,331 Net change in fund balances before special item (5,553,281) 2,000,000 (3,553,281) Special Item Gain on reduction of settlement liability (Note 9) 11,000,000-11,000,000 Net change in fund balances 5,446,719 2,000,000 7,446,719 Fund balances, beginning of year 42,520,671-42,520,671 Fund balances, end of year $ 47,967,390 $ 2,000,000 $ 49,967,390 The accompanying notes are an integral part of these financial statements. 14

20 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds to the Statement of Activities For the Year Ended December 31, 2016 Net change in fund balances - governmental funds $ 7,446,719 Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital outlay $ 731,861 Depreciation expense (1,887,353) (1,155,492) The change in equity interest in and distributions to component units does not require the use of current financial resources and is not reported in the funds, but recorded as general revenue in the statement of activities. Change in equity (2,707,348) Cash distribution 1,675,000 Change in net position of governmental activities $ 5,258,879 The accompanying notes are an integral part of these financial statements. 15

21 Notes to Financial Statements December 31, ) Summary of Significant Accounting Policies The Reporting Entity The Coushatta Tribe of Louisiana (the Tribe ), located in Allen Parish in southwestern Louisiana, is a federally recognized Indian Tribe and a sovereign entity. The Tribe s reservation, comprised of approximately 5,130 acres of land, is owned and held in trust or held in fee for the benefit and use of the Tribe by the United States of America. Within certain restrictions imposed by the United States government, the Tribe has jurisdiction over activities occurring on the reservation and has rights to economic and other benefits resulting from the use of the reservation property and resources. The Tribe is governed by an elected tribal council (the Council ). The Indian Reorganization Act of 1934 and subsequent federal legislation govern the relationship between the Tribe and the United States government. The Tribe enacts laws through resolutions of the Council. The Tribe s (the Department ) administers all federal and state grants and contracts received by the Coushatta Tribe of Louisiana. The Department provides administration, law enforcement, health and welfare, housing, and educational services to tribal members. Expenditures for management oversight and accounting services for the Department and certain other activities of the Tribe are reported in the Tribe s general fund, which is reported within the Department. The Department does not administer any business-type activities. The accompanying financial statements present only the Governmental Services Department of the Tribe and does not include the financial activities of any of the Tribe s other departments, enterprises or other activities. Accordingly, these financial statements do not purport to and do not present fairly the financial position, changes in financial position and cash flows, where applicable, of the Tribe in conformity with accounting principles generally accepted in the United States of America. Accounting Standards The Department s financial statements conform with generally accepted accounting principles (GAAP) applicable to government units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. GASB statements and interpretations constitute GAAP for governments, including Indian tribes. Basic Financial Statements The basic financial statements of the Department include the Department-wide and the fund financial statements. The focus is on the Department as a whole in the Departmentwide financial statements, while reporting additional and detailed information about the Department s major governmental activities in the fund financial statements. 16

22 Notes to Financial Statements December 31, 2016 Department-Wide Financial Statements The statement of net position and statement of activities present information about the Department. These statements include the financial activities of the overall Department. Eliminations have been made to minimize the double-counting of internal activities. Governmental activities are financed primarily through transfers from business-type activities, investment income, intergovernmental grant and contract revenues and other fees. Governmental activities include all governmental funds. The statement of net position reports the assets and liabilities of the Department. The net position section of this statement represents the residual amount of assets less their associated liabilities. The statement of activities presents a comparison between direct expenses and program revenues for each function of the Department s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (1) fines, fees and charges to recipients for goods or services provided by various activities and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including investment income, are presented as general revenues. The general revenues are available to support the net costs of the functions and programs not covered by program revenues. Indirect expenses are allocated to the programs/functions that they benefit. Fund Financial Statements The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column in the fund financial statements, with other nonmajor funds aggregated in a single column. The Department has two funds, the general fund and federal programs fund, which are both reported as major funds. The general fund is the Department s primary operating fund. It accounts for all governmental financial resources, except those required to be accounted for in other funds. The federal programs fund accounts for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. The primary source of revenues is intergovernmental grants and contracts from federal and state government agencies. Basis of Presentation The accounts of the Department are organized on the basis of funds, each of which is considered a separate accounting entity. The Department accounts for the operations of each fund through a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. 17

23 Notes to Financial Statements December 31, 2016 Department resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Measurement Focus and Basis of Accounting The Department-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when liabilities are incurred, regardless of when the related cash flow takes place. Governmental funds are reported using the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they are measurable and available ). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The Department considers all revenues available if they are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred. However, principal and interest on general long-term liabilities and claims and judgments are recorded as fund liabilities and expenditures when they are due. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long-term liabilities and acquisitions under capital leases are reported as other financing sources. Nonexchange transactions, in which the Department gives (or receives) value without directly receiving (or giving) equal value in exchange include grants, entitlements and donations. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which eligibility requirements have been satisfied and the revenue is measurable and available. In determining when to recognize intergovernmental grant and contract revenues, the legal and contractual requirements of the individual grants and contracts are used as guidance. Most grants and contracts require that monies be expended for a specific purpose before any amounts will be paid to the Department; therefore, revenues are recognized based upon the expenditures recorded. All other major governmental revenues are recorded when received, because they are either not available soon enough to pay liabilities of the current period or are not objectively measurable. Deferred inflows of resources (unavailable revenues) arise when potential revenue does not meet both the measurable and available criteria for recognition in the current period. 18

24 Notes to Financial Statements December 31, 2016 Unearned revenues arise when resources are received before the Department has legal claim to them, as when grant monies are received before the occurrence of qualifying expenditures. In subsequent periods, when the revenue recognition criteria are met or when there is a legal claim to the resources, the unearned revenue is recognized. Estimates The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. Budget The Department is not required to have a legally adopted budget. Cash and Investments The Department considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments are accounted for in accordance with generally accepted accounting principles. Investments are reported at fair value. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. Investments are presented in the financial statements in accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosures. This statement addresses common deposit and investment risks related to credit risk, concentration of credit risk, interest rate risk, and foreign currency risk. Receivables and Notes Receivable Governmental activities receivables include amounts due from tribal members, employees, customers, other governments, notes receivable, and accrued interest. Management determines the allowance for doubtful accounts and notes by identifying troubled accounts and using historical experience. If amounts become uncollectible, they will be charged to operations when that determination is made. Allowances for doubtful accounts for notes receivable are based on collection experience. 19

25 Notes to Financial Statements December 31, 2016 Inventories Inventories, consisting of pharmacy items and maintenance parts, are presented at the lower of cost or market value. Cost is determined using the first-in, first-out method of inventory valuation. Fair Value of Financial Instruments The carrying values of financial instruments, including cash equivalents, accounts and notes receivable, and accounts payable approximate fair value due to their short-term nature. Capital Assets and Depreciation Capital assets, which include property, equipment, buildings and infrastructure assets are depreciated and reported in governmental activities within the Department-wide financial statements. Capital asset acquisitions are reported as capital outlay expenditures in the governmental fund financial statements. Capital assets have an estimated useful life greater than one year and are recorded at historical cost or estimated historical cost if actual historical cost is not known. The estimated useful lives for capital assets are determined based on either industry standards or replacement cycles. Donated assets, including those from the federal government, are recorded at estimated fair value on the date received. Assets transferred between governmental activities and proprietary funds are transferred at net book value at the date of transfer. Additions, improvements and other capital outlays of $5,000 or more that significantly extend the useful life of an asset are capitalized. Costs incurred for repairs and maintenance are expensed as incurred. Original reservation lands and related resources are not capitalized because there is not an historical cost associated with these assets. Depreciation is computed using the straight-line method. Land and construction-inprogress are not depreciated. The estimated useful lives assigned to depreciable capital assets, by asset class, are as follows: Land improvement Buildings and improvements Machinery and equipment Office equipment Vehicles Infrastructure 15 years 7-40 years 3-10 years 5-10 years 5-15 years 5-25 years Capital assets are evaluated for impairment in accordance with GASB Statement No. 42 Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries. 20

26 Notes to Financial Statements December 31, 2016 If impairment is indicated, the impairment loss is measured by the amount in which the carrying value of the asset or asset group exceeds its fair value. Fair value is measured by comparables sales, solicited offers, or discounted cash flow models. Compensated Absences The Tribe provides annual and sick leave for the Department s employees. Annual leave is lost if not used during the year earned and no accumulated sick leave is paid at separation. Net Gaming Revenue Distributions Portions of fund balance and net position are committed for future use and are, therefore, not available for appropriation or expenditure. The Tribe has committed certain amounts of each net gaming revenue distribution received from the Casino for the following purposes: Health Services (10%) Health services committed funds are used to provide tribal members advanced prenatal care for expectant mothers, nutrition programs for the entire Tribe, regular preventative health and dental care, elderly convalescent care, and many other types of healthcare. Education (4%) Education committed funds are used to assist tribal members seeking higher education through scholarship awards. Such funds are also used to retrain tribal members and give advanced technical training to tribal members seeking to advance in their respective fields. Housing (2%) Housing committed funds are used for construction and renovation of single family homes, elderly care facilities, housing rehabilitation programs and other efforts to upgrade the housing of tribal members. Debt Service/Economic Development (12%) Debt service/economic development committed funds are used for debt service and economic development funding for the future financial stability of the Tribe. Per Capita Distributions (40%) Per capita committed funds are divided equally among tribal members. The per capita allocation to each tribal member under the age of 18 is deposited in a minor trust fund. Upon reaching the age of 18, the members begin receiving their share of revenue allocation if they have met the educational requirements enacted by Tribal Council. If educational requirements are not met, they may not receive distributions from their minor trust fund until attaining the age of 21 unless they apply to the tribal courts for a distribution for specific purposes according to qualifications and guidelines set by Tribal Council. Discretionary (32%) These funds are uncommitted and may be used to fund projects and/or expenditures deemed necessary by Council to benefit tribal members. 21

27 Notes to Financial Statements December 31, 2016 Net Position and Fund Balances The difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources is net position on the Department-wide financial statements. The difference between fund assets plus deferred outflows of resources and liabilities plus deferred inflows of resources is fund balance on the governmental fund financial statements. Net position is classified in the following three categories: Net Investment in Capital Assets Consist of capital assets, net of accumulated depreciation and reduced by debt that is attributed to the acquisition, construction or improvements of those assets. Restricted Net Position Restricted net position results when constraints placed on an asset s use are either externally imposed by creditors, grantors, and contributors, or imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Position Unrestricted net position consists of net position that does not meet the definition of the two preceding categories. When both restricted and unrestricted resources are available for use, it is the Department s policy to use restricted resources first, and then unrestricted resources as they are needed. Governmental fund balances are reported under the following five categories: Nonspendable Amounts which cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact. Restricted Amounts restricted to specific purposes when constraints placed on the use of the resources are either externally imposed by creditors, grantors or state or federal laws or imposed by law through constitutional provisions or enabling legislation. Committed Amounts which can be used only for specific purposes pursuant to constraints formally imposed by the Department through ordinance or resolution approved prior to year-end. Those committed amounts cannot be used for any other purpose unless the Department removes or changes the specified use by taking the same action it employed to commit those amounts. Assigned Amounts constrained by the Department s intent to use them for a specific purpose. The authority to assign fund balance rests with the Council. Unassigned All amounts not included in nonspendable or the other spendable classifications. The general fund is the only fund that would report a positive amount in unassigned fund balance. Deficits in fund balances of other governmental funds are reported as unassigned. 22

28 Notes to Financial Statements December 31, 2016 When an expenditure is incurred in governmental funds which can be paid using either restricted or unrestricted resources, the procedure is to pay the expenditure from restricted fund balance and then from less-restrictive classifications committed, assigned and then unassigned fund balance. Interfund Transactions Transactions that would be treated as revenue, expenditures or expenses if they involved organizations external to the Department are accounted for as revenue, expenditures or expenses in the funds involved. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund are recorded as expenditures/expenses in the reimbursing fund and as reduction of expenditures/expenses in the fund that is reimbursed. Transactions, which constitute the transfer of resources from a fund receiving revenues to a fund through which the revenues are to be expended, are separately reported in the respective fund s operating statements. Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either due to/from other funds or advances to/from other funds. Advances between funds are considered long-term in nature and are offset by nonspendable fund balance in applicable governmental funds to indicate they are not expendable financial resources. Income Taxes The Department is exempt from federal and state taxes based upon the Tribe s status as a federally recognized Native American Indian Tribe. Subsequent Events The Department has evaluated subsequent events through July 21, 2017, the date which the financial statements were available to be issued. Management feels that other than what has been noted in the pages below, there were no material subsequent events that required recognition or additional disclosure in these financial statements. New Governmental Accounting Standards Board (GASB) Pronouncements The Department has reviewed the accounting standards that have recently been issued, but not yet effective or implemented. Implementation of these standards is not expected to significantly impact accounting or financial reporting of the Department. 23