oversight

Indian Gaming: Federal Controls Did Not Detect Compact Approval Violation

Published by the Government Accountability Office on 1997-12-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        United States
GAO     General Accounting  Office
        Washington, D-C. 20548
                                                                _
                                                                             )5-Q6cs=-
        l$esources, Community,   and                            . .
        Economic Development     Division

       B-278768


       December 19, 1997


       The Honorable Tadd M. Johnson
       Chajrman
       National Indian Gaming Commission

       Subject:   Indian Gaming: Federal Controls Did Not Detect Comnact        ADDrOVd
                  Violation

       Dear Mr. Chairman:

       As a part of an ongoing study for the Senate Committee on Indian Affairs, we
       are looking at the implementation of gaming regulation by the National Indian
       Gaming Commiss’Ion (Commission), the state of Washington, and several other
       states.’ While conducting this study, we found that the Nisqually Indian Tribe
       was operating class ICI (casino-type) gaming in Washington without the
       approval of the Secretary of the Interior, which is required by the Indian
       Gaming Regulatory Act of 1988 (IGRA)!

       In summary, the tribe did not submit its compact3 with the state of
       Washington to the Secretary for approval until very recently. As a result, the
       Indian Gaming Management StaE, an administrative office within the Bureau
       of Indian Affairs that receives and logs in the compacts submitted for the
       Secretary’s approval and publishes a list of approved compacts, did not know
       that the tribe had a compact with the state. In addition, the Commission,


      ‘Arizona, Michigan, Nevada, and New Jersey.

      2P.L. 100497, Oct. 17, 1988; 25 U.S.C. 2701 et seq.
      3A compact is an agreement that may include provisions concerning standards
      for the operation and maintenance of the gaming facility, the application of
      laws and regulations of the tribe or the state that are related to the licensing
      and regulation of the gaming activity, and the assessment by the state of the
      amounts necessary to defray the costs of regulating the gaming activity.
                                            GAO/RCED-98-45B Indian Gaming Compact Controls
B-278768                                                _
 which oversees and enforces compliance with class Ill gaming regulations,
 svas not aware that the Nisqually lnclian Tribe was operating class Ill gaming
 without the required approval of its compact. Although we do not know why
 this omission was not detected, we are concerned that similar instances of
 noncompliance may or could exist elsewhere and go unnoticed.

 BACKGROUND

 The Congress passed IGRA in an attempt to ensure the integrity of Indian
 gaming and its conduct in a safe, fair, and crime-free environment. To ensure
 compliance with IGRA, the Secretary reviews and approves the compacts
 negotiated between tribes and state~.~ He also reviews the compacts to ensure
 that they comply with other federal laws and do not violate the trust
 obligation of the United States to Indians.

 Under IGRA, class HI gaming activities shall be lawful on Indian lands only if
 such activities are conducted in conformance with a compact that (1) has
 been entered into by the Indian tzibe and the state and (2) is in effect. A
 compact takes effect when the Secretary of the Interior has published a notice
 of approval of the compact in the Federal Re9ister.5 Under the Commission’s
 regulations, operating class IIl games “in the absence of a tribal-state compact
 that is in effect” is a “substantial violation.”

 Once the tribe and the state negotiate and sign their compact, the tribe is
 responsible for submitting the compact to the Department of the Interior for
 the Secretary’s approval. The Indian Gaming Management Staff receives and
 logs in these compacts. It also maintains and publishes a list of compacts
 that are in effect.6 The Commission is responsible for regulating and
 monitoring both class II gaming (such as bingo) and class HI gaming. Once a
 class III facility is in operation, the Commission is responsible for monitoring
 the facility’s compliance with IGRA’s requirements and with the Commission’s
 regulations. The Commission is also responsible for publishing enforcement
 regulations for class Ill gaming and for issuing a notice of violation or an


4The Secretary of the Interior has delegated this authority to the Assistant
Secretary-Indian Affairs, who is responsible for the Bureau of h-&an Affairs.
525 U-SC. 2710(d)(3)(B).                  c
The Commissi on makes this listing, as well as other Commission documents,
available to the public 24 hours a day through the National Indian Gaming
Commission Information System.
 2                                    GAO/WED-98-45R hIian   Gaming Compact Controls
B-278768                                                 -

 order of temporary closure for substantial violations if it cannot obtain
 voluntary compliance. The Commission also may assess Civil fines for
 violations of IGRA.

 FEDERAL CONTROLS DID NOT DETECT COMPACT APPROVAL VIOLATION

 Federal controls did not detect that the Nisqually Indian Tribe was operating a
 class HI gaming facility without a compact in effect. The tribe and the state of
 Washington negotiated a compact, which both signed on May 25, 1995. On
 May 1,1997, the tribe began class Ill gaming at its Red Wind Casino in Yehn,
 Washington. However, because the tribe did not submit the compact to the
 Secretary for approval, the tribe’s compact was never in effect Thus, IGRA’s
 requirements for the operation of class lIl gaming-approval of the compact by
 the Secretary of the Interior and publication of the notice of approval in the
 Federal Retiter-were not completed, and the tribe’s class Hl operation is not
 in compliance with the act’s requirements7

 In October, when we brought this information to the attention of the
 Department of the Interior and the Commission, neither was aware that the
 tribe’s casino was operating without a compact in effect. A Commission
 official told us in November that the tribe had been contacted and was
 planning to submit its compact for approval. According to this official, the
 tribe conceded that it had not submitted the compact to the Secretary. On
 December 10, 1997, the Indian Gaming Management Staff received the
 compact for the Secretary’s approval.

 Under its enforcement regulations, the Commission can issue a notice of
 violation for any violation of IGRA’s provisions. With or after issuing a notice
 of violation, the Commission may issue an order of temporary closure for all
 or part of an Indian gaming operation if a “substantial violation” is present.
 The Commiss’ion did not initiate either a notice of violation or a temporary
 closure order for this violation. According to the Commission’s Director of
 Enforcement, the Co mmission considers the tribe’s failure to submit the
 compact for Secretarial approval a technical oversight by the tribe. He also
 told us that the Commissi on is working to bring the Nisqually gaming facility
 into compliance.




‘It is also unlawful to possess or use any gambling device on an Indian
reservation unless a compact is in effect 15 USC. 1175 and 25 USC.
2710(d)(6).

 3                                   GAO/WED-9845B    Indian Gaming Compact Controls
B-278768

 CONCLUSIONS

 ?he Nisqually Indian Tribe’s class III facility is opera&g without a compact in
 effect. Until very recently, the tribe did not submit its compact for approval to
 the Secretary of the Interior as required. No matter what the primary cause of
 this particular violation may have been, the federal government’s controls
 were inadequate. They did not identify the omission and may not be adequate
 to ident3y other violations.

 RECOMMENDATIONS

 We recommend that you take the steps necessary to bring the tribe’s gaming
 operation into compliance with IGRA’s requirements and with the
 Commission’s regulations.

 We also recommend that you determine if similar violations are occurring
 elsewhere. In addition, to avoid similar violations in the future, you should
 review and evaluate the Commission’s current controls, including reporting
 requirements, processes, and procedures for overseeing class III gaming, and
 take appropriate steps to strengthen the controls to ensure compliance with
 IGRA’s requirements and with the Commission’s regulations.

 SCOPE AND METHODOLOGY

 As part of our work on another assignment, we obtained a copy of the
 Nisqually Indian Tribe’s compact from the state of Washington. Since the
 compact was not shown on the list of compacts in effect, we discussed this
 matter with officials of the Indian Gaming Management Staff. When they
 confirmed that their office had not received a compact for approval, we
 notified the National Indian Gaming Commission.

 While the Commission was not aware that the Nisqually compact had not been
 submitted for the Secretary’s approval, the Commission’s Director of
 Enforcement told us that the Nisqually gaming faciliw had received oversight
 from the Co&       ion’s field staff since its opening in May. In addition, the
 Director told us that, as a part of their oversight responsibilities,
 the Commission’s field staff will be required to verify that gaming operations
 have a compact in effect.




 4                                     GAO/WED-98-45B Indian Gaming Compact Controls
B-278768                                                .
We did not assess the Commission’s internal controls to identify why this
violation was not detected. We performed our review .tiom October through
December 1997 in accordance with generally accepted government auditing
standards.



This report contains recommendations to you. As you know, 31 USC. 720
requires the head of a federal agency to submit a written statement of the
actions taken on our recommendations to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform and
Oversight not later than 60 days after the date of this letter and to the House
and Senate Committees on Appropriations with the agency’s first request for
appropriations made more than 60 days after the date of this letter.

We are providing copies of this report to the Senate Committee on Indian
Affairs and to other appropriate congressional committees, as well as to the
Secretary of the Inter-ion the Assistant Secretary for Indian Affti, and the
Director, Indian Gaming Management Staff. We will also provide copies to
others on request.

If you or your staff have any questions about this report, please call me at
(202) 512-3841.




BarryT.Hill
Associate Director, Energy,
  Resources, and Science Issues




 5                                  GAO/RCED-98-45R Indian Gaming Compact Controls
                                        .-



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