GAO releases report into regulation of $28B tribal casino industry

The Inn of the Mountain Gods, owned by the Mescalero Apache Nation in New Mexico. Photo from Facebook

The Government Accountability Office today released a report into the regulation of the $28 billion tribal casino industry.

The report looked at regulation on the tribal, state and federal levels. But the primary focus was the National Indian Gaming Commission, whose leaders have stressed more tribal consultation and training since the start of the Obama administration in January 2009.

As a result, all four recommendations in the report were directed at the agency. The GAO urged NIGC to ask states for more input about Class III standards, to improve training and technical assistance for tribes, to develop more policies regarding "letters of concern" sent to tribes and to come up with a better way at tracking responses from tribes to those letters.

"The commission has more recently emphasized actions that encourage voluntary resolution of compliance issues, including providing training and technical assistance and alerting tribes of potential compliance issues using letters of concern," the GAO said in a summary of the report. "However, the effectiveness of these two approaches is unclear. The commission has limited performance measures that assess outcomes achieved. With such additional measures, the commission would be better positioned to assess the effectiveness of its training and technical assistance."

The report did not contain any major bombshells or reveal any significant controversies. But there was some new information provided about the Class III gaming compact process at the Bureau of Indian Affairs.

The Indian Gaming Regulatory Act gives the BIA 45 days to take action on a compact. The agency can approve an agreement, reject it or let it take effect to the extent its provisions are consistent with the 1988 law. A compact in the last category is considered "deemed approved."

According to the report, the BIA approved 78 percent of all compacts between 1998 and 2014. Some 510 agreements were reviewed during that period -- 405 were approved, 60 were deemed approved, 32 were withdrawn or returned and 19 were disapproved.

The Mohegan Sun Casino, owned by the Mohegan Tribe. The tribe's Class III gaming compact requires 25 percent of slot machine revenues to go to the state of Connecticut. Photo from Facebook

The GAO looked more closely at the agreements and found that 61 percent of the 276 compacts that were in effect as of October 2014 contained revenue sharing provisions. "These revenue sharing provisions include various payment structures that may require, for example, tribes to pay states a fixed amount or a flat percentage of all gaming revenues or an increasing percentage as gaming revenues rise," the report stated.

"Of the 169 compacts that include revenue sharing provisions, most (164) involve payments tied to gaming revenues and include a maximum payment, ranging from 3.5 percent to 25 percent of all or a portion of gaming revenues," it continued. "A few compacts (5) require a fixed payment."

The GAO counted 13 compacts with a revenue sharing rate of 25 percent. A much larger number -- 100 agreements -- had revenue sharing rates between 10 percent to 14.9 percent, an indication of a potential industry standard.

However, an equal number of compacts had no revenue sharing provisions at all, according to the report. There was no breakdown by state.

In addition to looking at the BIA and the NIGC, the GAO visited 12 tribes to learn more about their regulatory efforts. Some tribal gaming organizations -- including the National Indian Gaming Association, the largest of its kind -- also provided some information for the report.

"Among other things, representatives from tribal associations emphasized that tribal governments have worked diligently to develop regulatory systems to protect the integrity of Indian gaming and have dedicated significant resources to meet their regulatory responsibilities," the report stated. "For example, according to representatives of the National Indian Gaming Association, in 2013, tribal governments dedicated $422 million to regulate Indian gaming, including $319 million for tribal government gaming regulatory agencies; $83 million for state gaming regulation; and $20 million for Commission regulation and oversight of Indian gaming collected through fees required by IGRA."

Sen. John Barrasso (R-Wyoming). Photo from Senate Indian Affairs Committee

The report was delivered to the Senate Indian Affairs Committee. Sen. John Barrasso (R-Wyoming), the chairman, highlighted the parts about the NIGC's regulatory efforts.

“This new report calls for improvements in the Commission’s methods in maintaining the integrity of the gaming system,” Barrasso said in a press release. “The NIGC should find more effective methods that will ensure all facets of gaming are conducted with accountability and accuracy.”

Sen. John McCain (R-Arizona), who first co-sponsored IGRA when he served in the House, also singled out the NIGC's activities. He said the agency should heed recommendations to improve training and strengthen accountability.

Sen. John McCain (R-Arizona) at the winter session of the National Congress of American Indians. February 28, 2006. Washington, DC
Sen. John McCain (R-Arizona). File photo by Indianz.Com

“The primary role of NIGC is to maintain the health and integrity of Indian gaming for the benefit of Indian tribes,” McCain said. “If NIGC continues to rely on Indian casinos to voluntarily comply with federal guidelines, then the commission must at least improve its state and tribal training and consultation initiatives and develop metrics that assess their effectiveness.”

Even though Barrasso and McCain said the report revealed some "troubling findings" about the NIGC, the agency's new leader welcomed the scrutiny. Jonodev Chaudhuri, a member of the Muscogee Nation of Oklahoma, was confirmed as chairman by the Senate on April 16 and sworn into office on May 13.

Interior Secretary Sally Jewell administers the oath of office to Jonodev Chaudhuri, the chairman of the National Indian Gaming Commission. Photo from Twitter

“The NIGC appreciates the time and effort GAO took to understand how the NIGC and tribal regulators fulfill the unique mission of regulating Indian gaming,” Chaudhuri said in a press release. “The report is another tool for the Commission to assess its performance in the regulation of Indian gaming, while also illustrating areas where the Commission can continue to advance the goals of the Indian Gaming Regulatory Act.”

Chaudhuri, who first joined the NIGC in September 2013, said the agency has already taken steps to implement the GAO's recommendations, including those regarding consultation and training. A Congressional and Intergovernmental also has been hired to work with Congress, tribes, states and federal agencies, and procedures regarding the "letters of concern" are being refined.

“Sound regulation preserves public confidence, supports tribal self-sufficiency and self-determination, protects tribal assets, and promotes a safe and fair environment for all people who interact with the industry,” Chaudhuri said.

Government Accountability Office Report:
Regulation and Oversight by the Federal Government, States, and Tribes (June 3, 2015)

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