ecocoe JAN 0 4 2006 Torres Martinez Desert Cahuilla Indians TORRES MARTINEZ SLE CAE TL MAU-1AL-MAH SURKUTT MEMEIL Basic Financial Statements And Independent Auditor’s Report September 30, 2004 2SELLS BIN 9S377S17IN0 CA FYSIGUIOE 08 TORRES MARCINLZ DESERT CAHUILLA TNDIANS rs PROCESS AS PAPER PER OMB DATA ALTERED Box 878 Loc 9 SFlag 50 DBKey 134957Torres Martinez Dessert Cahuilla Indians Basic Financial Statements And Independent Auditor's Report TABLE OF CONTENTS: FINANCIAL SECTION Independent Anditor’s Report. ‘Management's Discussion and Analysis... Basic Financial Statements: Government-wide Financial Statements: Government-wide Statement of Net Asset: Government-wide Statement of Activities. Fund Financial Statements: Balance Sheet - Governmental Funds. Statement of Revenues, Expenditures, and ‘Changes in Fund Balances - Governmental Funds. seve Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances ‘of Governmental Funds to the Statement of Activities. Notes to the Financial Statements. Supplementary Information: Statement of Cash Flows-Component Unit. Combining General Fund Department Statements: Combining Statements of Revenues, Expenditures and Changes in Fund Balance — Gencral Fund Departments... ae 10 MW 12 13, 23 24v ‘Combining Nonmajor Governmental Fund Statements: ‘Combining Statements of Assets, Liabilities, and Fund Balances Nonmajor Governmental Funds. 26 Combining Statements of Revenues, Expenditures and Changes in Fund Balance ~ Nonmajor Governmental Funds. 34 AUDITOR’S SECTION Report 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........ 45 Report on Compliance With Requirements Applicable to a Major Program and Internal Control Over Compliance in Accordance With OMB Circular A-133. seve 47 Schedule of Findings and Questioned Costs.. 49 AUDITEE’S SECTION Schedule of Expenditures of Federal Awatds.... 62 65 ‘Summary Schedule of Prior Audit Findings...e e e FINANCIAL SECTIONINDEPENDENT AUDITOR'S REPORT Tribal Council Torres Martinez Desert Cahuilla Indians Thermal, CA. We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Torres Martinez Desert Cahuilla Indians, as of and for the year ended September 30, 2004, which collectively comprise the Torres Martinez. Desert Cahuilla Indians’ basie financial statements as listed in the table of contents. These financial statements are the 33°¢ AVENUE WEST responsibility of the Torres Martinez Desert Cahuilla Indians’ management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Selnekis Tem-Al Corporation, which represent ninety six percent, ninety nine percent, and forty six SUITE 230 percent of the assets, net assets, and revenues of the aggregate discretely presented component units, a5 of and for the year ended September 30, 2004. Those financial statements were audited by other auditors whose report thereon has been fumished to us, and our opinion, insofar as it relates to the amounts included for LyNNwoob the aggregate discretely presented component units, is based on the report of the other auditors. Except as desoribed in the following paragraph, we conducted our audit in accordance with auditing standards generally accepted in the United States of WASHINGTON ‘America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards requite that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material os o36 misstatement. The financial statements of the Selnek-is Tem-Al Corporation were not audited in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and OFFICE isclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as ‘well as evaluating the overall financial statement presentation. We believe that ‘our audit and the report of the other auditors provide a reasonable basis for our opinions. (425) 774-0646 FAX NUMBER ‘Management has not implemented a methodology for comprehensively assessing the condition of the goveramental activities’ capital assets, and accordingly has not evaluated the need to adjust the net depreciated amounts. Accounting principles generally accepted in the United States of America require that an adequate adjustment of the net value of capital assets be recorded, which would ron_s@thesellsgroup-com decrease the assets and net assets of the governmental activities. The amount by which this departure would affect the assets and net assets of the governmental activities is not yet reasonably determinable. (425) 176-0694 E-MAIL (CERTIFIED PUBLIC ACCOUNTANTS + MANAGEMENT CONSULTANTS « SEMINAR LEADERS 1Jn our opinion, except for the effects, if any, of not providing an adequate adjustment for the govemmental activities as described in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities of the Torres ‘Martinez Desert Cahuilla Indians, as of September 30, 2004, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America, In addition, in our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Torres Martinez Desert Cahuilla Indians, as of September 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America As described in Note I, the Torres Martinez Desert Cahuilla Indians have implemented a new financial reporting model, as required by the provisions of GASB Statement No. 34, Basic Financial Statements ~ and Management’s Discussion and Analysis — for State and Local Governments, as amended and interpreted, as of September 30, 2004, In accordance with Government Auditing Standards, we have also issued our report dated October 5, 2005, on our consideration of the Torres Martinez Desert Cabuilla Indians” 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, compliance, results of that testing and not to provide an opinion con the intemal control over financial reporting or on compliance. ‘That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the results of our audit. ‘The management's discussion, analysis and statement of cash flows on pages 3 through 7, and page 23, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Torres Martinez Desert Cahuilla Indians’ basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of the Torres Martinez Desert Cahuilla Indians. ‘The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards have been subjected to the auditing procedures appligd in the audit of the basie financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. f Lynnwood, WA tk ALE theo M4. October 5, 2005 e e e e ® e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e ee e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e Torres Martinez Desert Cahuilla Indians Management’s Discussion and Analysis Year Ended September 30, 2004 Our discussion and analysis of the Torres Martinez Desert Cahuilla Indians” (the “Tribe”) financial performance provides an overview of the Tribe’s financial activities for the fiscal year ended September 30, 2004. Please read it in conjunction with the Tribe's financial statements, which begin on page 8 Financial Highlights The Tribe’s combined net assets decreased by $2.4 million, a 15.67% overall decrease. ‘The net assets of our business-type activities remained constant and the net assets of our governmental activities decreased by $2.2 million. ‘The Tribe’s overall liabilities decreased by $4.3 million, a 53.64% decrease from 2003, with $4.2 million of that decrease attributable to the governmental-type activities. Selnek-is Tem-Al (the “Development Corporation”) is still in its development stage and did not have any operating revenues for the year ended September 30, 2004; operating expenditures totaled $62,578. Construction in Progress of the Travel Center stood at $853,272 at year end, The Tribe’s primary governmental activities, revenues and transfers-in decreased by 17%, from $3.1 million in 2003 to $2.6 million in 2004. Expenditures, however, inereased from $3.5 million in 2003 to $5.8 million in 2004, a 39.14% increase that was primarily related to the $1.8 million in capital that was contributed to the Development Corporation. Using this Annual Report This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities (pages 8-9) provide information about the activities of the Tribe as a whole and present a longer-term view of the Tribe’s finances. ‘The governmental fund financial statements (pages 10-12) report the Tribe’s operations in more detail, showing how these services were financed in the short term as well as ‘what remains for future spending. Govemmental fund financial statements also report the Tribe's operations in more detail than the Tribe-wide statement by providing information about the Tribe's most significant funds.Reporting the Tribe as a Whole One of the most important questions asked about the Tribe’s finances is, “Is the Tribe, as, a whole, better off or worse off as a result of the year’s activities?” The Statement of Net Assets and the Statement of Activities report information about the Tribe as a whole and about its activities in a way that helps answer this question. These two statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenue and expenses are taken into account regardless of when cash is received or paid. ‘These two statements report the Tribe’s net assets and changes in them. You can think of the Tribe's net assets—the difference between assets and liabilities—as one way to ‘measure the Tribe’s financial health, or financial position. Over time, increases or decreases in the Tribe’s net assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the condition of the Tribe’s overall infrastructure, to assess the overall health of the Tribe. In the Statement of Net Assets and the Statement of Activities, we divide the Tribe into two kinds of activities: Governmental Activities—-Most of the Tribe’s governmental activities are reported here, which include community services, general government, education, public safety, health services, economic development, culture and recreation, interest on long-term debt, and contributions to the per capita distribution fund. State non-gaming distributions, charges for services, rentals, investment income and federal grants finance most of the governmental activities. Component Units—The Development Corporation and the Housing Authority are separate legal entities, which are discretely presented in the Tribe-wide financial statements. With discrete presentation, both the Development Corporation and the Housing Authority are reported in separate columns and are not included in total net assets of the primary government. Although legally separate, these component units are important because the Tribe is financially accountable for them. Reporting the Tribe’s Most Significant Funds Fund Financial Statements ‘The fund financial statements provide detailed information about the most significant funds—not the Tribe as a whole. The Tribal Council establishes funds by resolution to help it 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 money.Governmental Funds—Most of the Tribe’s basic services are reported in govemmental funds. Governmental fund presentation focuses on how money flows into and out of those funds and the balances that are left at year-end and are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. Governmental fund information helps you determine whether there are more or less financial resources that can be spent in the near future to finance the Tribe's programs. We describe and reconcile the relationship (or differences) between govemmental activities and balances reported in the Statement of Net Assets and the Statement of Activities (pages 8-9). The Tribe as a Whole ‘The Tribe's combined net assets decreased by $2.4 million, which is a 16.53% overall decrease, The majority of this decrease is attributable to a decrease in cash on hand at year end for the TANF governmental fund. Cash is down for the Tribe due to the elimination of funding for 2004 from the State of California for the TANF governmental fund. The Tribe expended approximately $0.9 million in reserve funds to operate the government and provide services to its members in 2004. Governmental Activities The General Fund includes departments that operate more for the good of the tribal members than to make a profit. Activities such as public works, community services, education, and public safety are directly involved with the tribal members. Other departments and activities are indirectly involved with the tribal members but perform functions for the Tribe’s overall good. Revenues decreased for the Tribe’s general fimd by 16.31% ($0.5 million), while total expenditures increased 70.59% ($2.4 million). The Tribe used $0.9 million in cash reserves to partially cover the $3.2 million shortfall, which was 966.67% (82.9 million) higher than last year’s shortfall of $0.3 million. A major component of the shortfall was the contribution of $1.8 million to the Tribe’s economic development activities, reflecting the Tribe’s continued efforts to build a stable and sustainable economic base, while still striving to maintain a high service level effort. Table 1 presents the cost of each of the Tribe’s general fund major line items as well as the changes in these costs compared to last year.Tobie + General Fund Expenditures {in mitions) Total Cost Change in of Services Cost of Sevices 26042008 Amount__ Percent Indirect Costs oo on (0.1) -100.00% Tribal Government Operations 48 23 25 108.70% ‘Social Services oa 0.0 01 0.00% Per Capita Distnbutons 04 os (os) 55.56% ‘Other os 02 03 150.0% ‘Total Expenditures 58 35 23 65.71% Total Revenues 26 31 5) 16.13% Shortfall 32 o4 700.0% ‘The Tribe accounts for its grant-funded programs under two separate categories — TANF and all other programs. Collectively, these are used to account for the activities of various federal and state governmental grant programs. The expenditure of grant funds is legally restricted to specified purposes. Program expenditures are budgeted on the basis of each respective program’s fiscal year, which varies by program, and may not coincide with the Tribe’s fiscal year. The U.S. Department of Health and Human Services, U.S. Department of Interior, Environmental Protection Agency and the U.S. Department of Housing and Urban Development fund some of the larger grants/contracts. Expenditures increased $.4 million from last year. Table 2 presents the activities of these funds as well as the changes in these funds compared to last year: Table 2 ‘Special Revenue Fund Expenditures (inmilions) Total Cost henge in of Services cost of Services 204 2003___Amount Pe Environmental Protecton Agency TH oF 04 87.4% Department af interior 05 08 00 0.00% Deparment of Health & Human Services 184 184 00 0.00% Depertment of Housing & Urban Developmen 13 14 02 18.10% ‘Other Funding Agoncios 93 05 @2) 40.00% Total Expenditures 188 182 04 2.20% 6Capital Asset Administration Capital Assets—At September 30, 2004, the Tribe had $7.9 million invested in a broad range of capital assets, including buildings, vehicles, equipment and land. Table 3 presents the changes in the Tribe’s capital asscts compared to last year, net of accumulated depreciation: Table 3 Capital Assets (in milions) 2004 2003 Change Land and improvements 304 so4 $0.0 Buildings and improvements $23 $24 80.2 Vehicles, Furniture and Equipmer $62 $62 $0.0 Infrastructure Assets $0.0 $00 $0.0 Other $20 $0.1 S19 Less: Accumulated Depreciation ($3.0 (321) ($0.9) Total $79 $67. S12 Economic Factors and Next Year’s Budgets The Tribal Council has considered many factors when setting the fiscal year 2005 and 2006 budgets. The most significant factors are the continued economic development efforts of the tribe, increasing competition for dwindling federal and state grant dollars, and the need to maintain existing capital assets and infrastructure. These were taken into account when adopting the government funds’ budgets for 2005 and 2006. The 2005 budget was based primarily on September 30, 2004 actual expenditures, and resulted in a budget for the General Fund of $3.1 million. Budgeted expenditures are expected 10 rise nearly 9%, to $3.4 million for the year ending September 30, 2006. The increased budgeted expenditures are attributed primarily to increased personnel costs and public works development, specifically the renovating of the Tribal Hall. ‘The development Corporation is expected to open the Travel Center during fiscal year 2005, and open the casino component in fiscal year 2006, The Tribe anticipates incurring debt estimated at $17.0 million in order to construct and outfit the casino component. Contacting the Tribe’s Financial Management This financial report is designed to provide tribal members, customers, and investors and creditors with a general overview of the Tribe’s finances and demonstrate the Tribe's accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the Tribe’s Chief Financial Officer at the Tribal Offices.Basic Financial Statements‘Torres Martinez Desert Cahuilla Indians Statement of Net Assets September 30, 2004 Primary ‘Component Government Uri Governmental Activities Selnck IMTHA ASSETS Cath and cash euivalents 5 1950198 §aMis#S38,864 Investments 2299,207 ‘Accounts receivable 38,001 Due fom other finds 1,083,436 ‘Accra eoverues 1osssea Prepaid expenses "15.258 Capital sets net 199730, 859,485 Total aes Tas195571 183,539 Hae Liseiiries ‘Aecourtspayeble 106,068 i754 ‘Accrued bilities 138,80 Line of credit 99,507 Duoto otter finds 1083436 Deferred rerenies 11857960 35630 Noncurrent liabilities: 2,799 CCarcent petion of long-erm obligations 26009 Noncuren portion of lng obligtons 144290 “ota ible 356,589 aaa Ta NET ASSETS Invested in capital acts, net of ead debt qaanore Unrestricted 34635910 ssog18 535 “Total net assets Tisza “J eeasle | Es "The notes tothe financial statements are an integral part of this statement 86 uauaqes sp Jo uid etsy awa ou (SUP ao SU SL eco TI WNT WRIT WET We WAT soma Ke TR cee rooted on, ‘ ‘ : 5 somes oud Gear SORT aS =n a5 = a a aE ETAT teen) intimacy BP ‘sa axa +002 ‘0¢ snqundos papurg 280 om 40 sonyaqoy Jo mmamowerg sweypar eonqe 12950¢1 Zam rep soxz03, eee eee ee eeee ‘Torres Martinez Desert Cabnilla Indians e Balance Sheet - Governmental Funds e September 30, 2008 e Hus uD Toul Gove 1oDRG —Newmmer Cavern @ Ft TAN 22:10 inde Funds e ASSETS e Cth and cat quate Sonya $ — uasson s S$ mean $ 1950194 e Invests 229.707 229907 ‘Accounts ecivale 47287 sors 8021 e Dee from thr funds 1083636 1089-436 e Acered revere sats 3.409 1955384 Prepaid items ngsn 345.258 e "Tota ase 5 pees s 1507.09. s sass a's Ea e LIABILITIES AND FUND BALANCES e abies e “Accoums payable s s3989 5 s sao $106,068 “Acered payrolls 20,786 oni 20946 1383830 e Doe tothe amis 3300 SiR,I75 13.261 1.083436 e Deferred tevenve 2sz0x0__ 1462.61, 143,569, 157,950, e Tell ible 325.775 ms Lao 2186289 Pind Belances e Unseserved,undesipated 635,900 2535909 e “Total find balrces 615.909 7 3 @ 55,909 e Tefal abies and fund balances § 3962.66. __L307aR” S373 TRS e Amounts reported for governmental activities in the statement of net e ses are diferent becse: e Capital assets wed in govern ative arena financial ‘sources and therefore ate not reported in the fs e agm3n e Long-term labltes are mat duc and payable inthe curent period and e ‘heefoe arene reported nthe fonds (070286) e [Nessus of government actives sla e “The notes tthe ancl statement ate an integral pat ofthis statement e 0‘Torres Martinez Desert Cabuilla Indians Statement of Revenues, Expenditures, and Changes in Fund Balances ‘Governmental Funds ‘Year Ended September 30, 2004 HHS HUD Aggresue meet FeDBG—_Nor-msjor Fund tar _62:10__Funds_ REVENUES Tndicet recoveries Spier s s as iat ro: gaing tribes even 4853357 Meceiaenus 216,102 Inergovernenial grants snd cones ‘United States fede agencies: ‘Depanent of Housing and Uden Development smirs 781390 Environmental Protection Agency 1473333 Deparment ofthe terior ‘45a Depament of Justice Deparment of eld and Taman Services 15232153 Department of Asriclure Foundation forts Ars & Humaniis State of Conia ther gens and contacts 16246 Total revenues ERT a ETA EXPENDITURES Curent Direc expends: ‘era government S243 nas Environmental sr2is4 Social services| wns 13asi62 338,01 dveation 18258 Indie expences ina 155259 ‘ota euren cxpendianes TTEET 1S 165,311 0 —TRI0907 Deb service Prneple 45,068 capital owtsy ang 253386 __sm2175 963473 “Tota expenditures Groans —Teacnras, sans h6ss380 Excess dficiene) of revenues ores expenditres 210.565) 715,386) © o LOTBER FINANCING SOURCES (USES) Proceeds of capita tied debt 215,36 ‘Net change in fond balances SABO © Fund bulances- begining, ex previously report 5627130 urd balance ojustents 219.782 und balances = begining restored 6ss6a72 nd balances ending $3 La.Gs900"s 7 zs zs ‘The notes tothe inal sntments are an integral part ‘Toul ‘Governments Funds 1.919.627 “445557 216,102 feed 19073933 's4s,all 29,129 16.246, Bip16.20, 508,546 ‘gras 14,9288 e258 190208 294,255 45,088 2.103246 34,447 89 9263857 215386 Ga10965), 5627130 219742 531637. 335,509SOOSHHSOHSHSHHHSHHHOHHHHHHHHHHHHHHTHHHOHOOSOHCO Torres Martinez Desert Cahuilla Indians Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds To the Statement of Activities For the Year Ended September 30, 2004 [Net change in fund balances - total governmental funds (from page 11) 5 3,210,963) Amounts reported for governmental activites in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, inthe statement of activities the cost of those assets is allocated over thei estimated useful lives and reported as depreciation expense. This is the amount by ‘which capital outlays exceeded depreciation in the current period 1,204,563, ‘The issuance of long-term debt provides current financial resourees (0 ‘governmental funds, but issuing debt increases long-term liabilities in the statement of net assets, Repayment of long-term debt principal isan ‘expenditure in the governmental funds, bt the repayment reduces long-term liabilities in the statement of net assets. This is the amount by hich the proceceds exceeded repayments (215,386) ‘Change in net assets of governmental activities (page 9) 3 G21 785 ‘The notes othe financial statements at in integral part of this statement. 2e e e 4 e e e e e e e e e e e e e ° e e e e e e e e e e e e e e e e e e e e e e e e e Torres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 I, Summary of Significant Accounting Policies ‘A. Reporting entity: ‘The Torres Martinez Indian Reservation was established by Executive Order oa May 15, 1876. The Torres Martinez Desert Cahuilla Indians (the Tribe) is a sovereign domestic government entity recognized by the United States Federal Government, The Tribe's Constitution was adopted November 9, 1997. "The governing body of the Tribe is the ‘Tribal Council, consisting of eight elected Council members. The services provided by the Tribe include general government, social services, education and natural resource management, The accompanying financial statements present the goverment and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, ar, in substance, part of the government's operations. The discretely presented component units are reported in a separate column in the government-wide financial statements (Gee note below for description) to emphasize that they are legally separate from the government. The Tribe thas no blended component units, Discretely Presented Component Units. Solnek-is Tem-Al Corporation (Selnek) is considered @ discretely presented component unit accountable to the Tribe’s primary government, Two council ‘members sit on the five-member Selnek Board of Directors, Selnek is responsible for managing the Tribe’s economic development. Selnek's fiscal year ended December 31, 2003, and it was audited separately by another auditor. The copy of the Selnek audit report can be obtained at the Seinek administration office. ‘Torres Martinez Tribal Housing Authority (TMTHA) is also considered a discretely component unit accountable to the Tribe's primary government. Two council members sit on the seven- ‘member Board of Commissioners. TMTHA is responsible for undertaking, construction, maintenance or operation of the housing projects that were previously managed by the Tribe and ‘All Mission Indian Housing Authority (AMIHA). TMTHA did not issue 2 separate audit report, separate cash flow statement is included in the supplementary information section, B. Government-wide and fund financial statements ‘The financial statements of the Tribe have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units, The Goveromental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. In June 1999 the GASB issued Statement 34 Basic Financial Starements—and Management's Discussion and Analysis—for State and Local Governments and Statement 35 Basic Financial Starements—and Management's Discussion and Analysis—for Public Colleges and Universities. These Statements establish new financial reporting requirements for state and local governments and public colleges and universities throughout the United States. They require new information and restructure much of the information that governments have presented in the past. Comparability with reports issued in prior years is affected Other GASB Statements are required to be implemented in conjunction with GASB Statement 34. ‘Therefore, the Tribes have implemented the following GASB Statements in the current fiscal year: Statement 33 Accounting and Financial Reporting for Nonexchange Transactions, Statement 36 Recipient Reporting for Certain Shared Nonexchange Revenues, Statement 37 Basic Financial Statements—and ‘Management's Discussion and Analysis—for State and Local Governments: Oninibus, and Statement 38 Certain Financial Statement Note Disclosures. 18‘Torres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 ‘The Tribe is required to implement these standards for the fiscal year ending September 30, 2004. With the implementation of GASB Statements 34 and 35, the ‘Tribe has prepared required supplementary information titled Managements Discussion and Analysis which precedes the bsic financial statements. In accordance with these new standards, the Tribe's government-wide financial statements (Le, the statement of net assets and the statement of activities) report information on all the non-fiduciary activities of the primary government and its component units. Goveramental activities, which are largely supported by intergovernmental revenues, are reported separately from business-type activities, which rely primarily ‘on user charges for supper. ‘The statement of activities demonstrates the degree to which the direct expenses of a given function, or department are offset by program revenues, Direct expenses are those that are clearly identifiable with a specific function, or department, Indirect expenses are general and administrative support expenses that are allocated and charged to individual funds and programs. Program revenues include both charges to users ‘who ditectly benefit from the services or privileges provided by a given function or department and grants, ‘contracts and other awards that are restricted to meeting the operational or capital requirements of a particular function, or department. Investment earnings and other items not properly included among ‘Program revenues are reported instead as general revenues. ‘Major individual governmental funds are reported as separate columns inthe fund financial statements, C. Measurement Focus, Basis of Accounting, and Basis of Presentation ‘The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues axe recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current nancial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available, Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrval accounting, However, debi service expenditures, expenditures related to compensated absences, and claims and Judgments are recorded only when payment is due ‘The expenditures for indirect administrative costs are accounted for in the general fund, in an indirect cost pool. ‘These costs are allocated to various contracts at a standard rate generally applied to all direct ‘expenditures except capital equipment and any pass-through funds. Reimbursements received from grants and contracts are included in the governmental activites charges for services revenues. Actual indirect cost reimbursement is subject to audit. Adjustments, if any, are not anticipated to be significant. Any increase or decrease resulting fiom the difference between the proposed level of spending and recovery and the actual level of spending and recovery will be reflected in future rates. ‘The Tribe reports the following major governmental funds: ‘The General fund is the government's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund, ‘The Department of Health and Human Services (HHS) TANF fund accounts for the Tribe's HHS ‘TANF program revenues and related activities. 4 e e ® e e e e e e ® e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e ee @ e @ e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e ‘Torres Martinez Desert Cahuilla In Notes to Financial Statements For the Year Ended September 30, 2004 The Department of Housing and Urban Development (HUD) ICDBG fund accounts forthe Tribe's HUD ICDBG program revenues and related activities. Private-sector standards of accounting and financial reporting issued prior to Decemiber 1, 1989, generally are followed in both the government-wide and proprictary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the GASB. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to the same limitation. The government has elected not to follow subsequent private-secior guidence. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments where the amounts are reasonably equivalent in value to the interfund services provided and other charges between the government's indirect cost pool and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. D. Assets, liabilities, and net assets or equity 1, Deposits and investments Cash includes amounts in demand deposits as well as cash in time deposits and other investments with a ‘maturity date within three months of the date acquired by the Tribe, All investments are reported at market value Federal statutes require that advance payments received by the programs under the Indian Self Determination and Education Assistance Act or the Tribally Controlled Schools Act be deposited in accounts insured by an agency or instrumentality of the United States or in accounis fully collateralized to ensure protection of the advanced funds in the event of a bank failure, Additionally, such funds may be invested as long as they are invested in: a. Obligations or securities guaranteed or insured by the United States, ». Mutual (or other) furds registered with the Securities and Exchange Commission which only invest in i Obligations of the United States, or ii, Securities that are guaranteed or insured by the United States, 2. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. 3, Capital Assets Primary Government Capital assets are defined as assets that have an initial, individual cost of more than $5,000 and an estimated useful life of more than one year. Such assets are recorded at historical cost whether purchased, or constructed. The costs of normal maintenance and repairs that do not add to the value of an asset or materially extend an asset’ life arc not capitalized. Mejor outlays for capital assets and improvements are capitalized as projects are constricted, 15‘Torres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 Buildings, vehicles, and equipment of the primary government are reported net of accumulated depreciation in the government-wide statement of net assets and are depreciated using the straight line method over the following estimated useful lives: Assets Years Buildings and improvements 40 Equipment, machinery and vehicles 7 Depreciation expense has been included in the direct expenses of the individual functions of the primary government in the government-wide statement of activities. Diseretely Presented Component Units Property, plant, and equipment are stated at cost, less accumulated depreciation. “Major expenditures for property and those which substantially increase useful lives are capitalized, Maintenance, repairs, and ‘minor renewals are expensed a5 incurred, Selnek uses the straight-line method to depreciate the cost of assets over lives of 2t0 40 years. 4. Deferred Revenue “The Tribe reports deferred revenue on its combined balance sheet. Deferred revenues arise when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period Deferred revenues also arise when resources are received by the government before it has a legal claim to thom, for example, when grant money is received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met or when the Tribe has a legal claim to the resources, the lability for deferred revenues is removed fiom the combined balance sheet and revenue is recognized 5. Long-Term Obligations In the government-wide financial statements, and governmental fund types in the fund financial statements, long-term debt is reported as liabilities in the applicable governmental activities fund statement of net asscts. In the fund financial statements, governmental fund types recognize the face amount of debt issued san other financing source, 6. Interfund Receivables, Payables and Transfers The primary government controls disbursements trough ¢ central cash account in the general fund and other funds are then required to repay the general fund for the disbursements made on their behalf. To simplify the management of some types of assets (such as investment accounts) the general fund may sometimes account for assets that are owed to other funds. Since each fund is a fiscal and accounting entity, the amounts due to one fund ftom other funds, as well as the amounts owed to other fimds are reflected inthe financial statements as interfund receivables and payables. Interfund transfers are flows of assets (such as Gash or goods) without equivalent flows of assets in return and without a requirement for repayment. 7. Compensated Absences It is the Tribe's policy to permit employees to accumulate up to 200 hours of eamed but unused vacation leave benefits and carry them forward into following years. Employees may be paid for unused vacation Jeave upon seperation from service. Sick leave is not cumulative from year to year. 16© e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e Torres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 8, Federal Income Tax ‘The Tribe is exerapt from federal income tax because ofits status as an Indian Tribal Govermment. IL, Stewardship A. Budgets ‘The Tribal Council does not establish a formal anual budget for its governmental general or major special revenue fund because it is not legally required and, therefore, presentation of budgetary comparison information is not required, B. Encumbrances In general, the Tribe does not use an encumbrance system to reserve fund balance for commitments relating to unperformed contracts for good or services, No reserve for encumbrances has been included in the basic financial statements at September 30, 2004. ILL, Detailed Notes on All Activities and Funds A. Cash and Cash Equivalents Note Governmental fund pppes At September 30, 2004 the Tribe's combined cash and cash equivalents in bank deposits with two financial institutions tofaled $2,018,608. Of this balance, $200,000 was either held by the Tribe or covered by federal depository insurance at September 30, 2004. The remaining balance, $1,818,608, was uninsured at September 30, 2004. At times during the year, the Tribe had funds on deposit that were uninsured and uuncollateralized. As a result, the funds were at risk of loss. The Tribe has not experienced any losses in, such accounts and believes they are not exposed to any significant credit rsk on cash and cash equivalents. ‘The carrying amount of the Tribe's combined cash and cash equivalents balances in the accompanying. general-purpose financial statements was $1,950,194 at September 30, 2004 ‘The reported amount of the primary government’ cash and cash equivalents at September 30, 2004 were comprised of the following Balance Cash on hand g RF Cash in bank deposits 1,347,635, Cash equivalent investments 601,552 ‘Total cash and cash equivalents 1,950,194 B, Investments Governmental find ppes Tnvestinents are categorized in three levels of custodian credit risk: (1) Insured or reeistered, or securities held by the government or its agent in the government's nar. (@) Uninsured and unregistered, with securities held by the counterpat’s trust department or agent in the government's name. WwTorres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 G). Uninsured and unregistered, with securities held by the counterparty, or by its trust department or ‘agent, but not in the government’ name. At September 30, 2004, the primary government had the following investments: Investment Type I 2 Total Certificates of deposit $165.48 § 3 $ 185,428 ‘US. treasury securities 922,685 922,685 ‘Common stock 1,197,927 1,191,594 3 2,299707_§ $ S___2.299.707 C. Prepaid Items: ‘The prepaid items balances at September 30, 2004 were as follows: General Fund TANF Fuad Torres Martinez Tribsl TANF prepaid rent ° $14,105 Torres Martinez Tribal TANF prepaid magazine isues ° 262,500 Other prepaid items 22,532 46.12 Total $22,532 3222.26 D. Due From (To) Other Funds: ‘The composition of Interfund balances at September 30, 2004, sas follows: Ducsiom Due to General fund $1,083,436 s 0 ‘TANF fand 38,000 TEDBG find 532175 ‘Non-major funds 513,261 Total Tonos. E, Capital Asset Primary Goverament ‘A summary of changes in the capital asses is as follows: Balance at Balance at Sept 03 Additions -—=—“Retirements September 30, 2004, Land S 413027 0 $0 $413,027 Buildings 2,101,538 215,386 2316924 Cast in progs. 158,107 1,887,860 2oas.967 Egpt., vhels., 6,199,676 6,199,676 ‘Ace. Depr. 2,079,540) 898.683) 9 (2.978.213 Tous Gszpas = Eizgse = EE 897 "a e e e e e e e e e e e ®e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e ee@ e @ 4 e e e e e e 4 e e e e e e e e e e@ e e e e e e e e e e e e e e e e e e e e e e Torres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 ‘The Tribe did not finish physical inventory ofall capital assets and the Tribe did not have a complete detail ‘capital assets list. The total depreciation expense and accumulated depreciation were calculated by group total. Component Unit A summary of changes in Selnek capital assets is as follows’ Balance at Balance at ‘Additions September 30, 2004 Office equipment S 5995 $1873 S 7,868 ‘Ace. depr. (300) (1,355) (4,655) Construction in progress 236879 _616,393 853,272 Sub-toral S2a2s74 $616.91 $850.485 F, Deferred Revenue: Primary Government Amounts recorded a3 deferred revere represent the amount of grant or contract receipts in excess of program expenditures at September 30, 2004, for programs with fiscal years ending subsequent to September 30, 2004, which, may be extended beyond September 30, 2004, to complete the terms of the contract. ‘The Tribe’s Special Revenue Fund deferred revenues at September 30, 2004 were as follows! Deferred (Accrued) Revenues: US. Department of Agricultre 3 ‘aaa US. Deparment of Housing and Urban Development (610,640) US. Deparment ofthe Interior (103,230) US. Environmental Protection Agency (142,229) U.S. Department of Health and Human Services 1,447,225, US. Department of Justice 7eis) ‘National Foundation on Art and Humanities (14,790) State of Califia (132i) Deferred revenue (net of $1,605,930 accrued revenue) from Federal and State Awards S___ss0aat Deferred revenue from ind:ect poo! 252,030 Total deferred revenue s___-202,376 Component Unit ‘The TMTIIA’s deferred revenues at September 30, 2004 were as follows: Deferred (Accrued) Revenues U.S. Department of Housing and Urban Development 3 25,630 19‘Torres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 G. Line of eredit Component Unit Selack has a line of credit agreement with Canyon National Bank. The line of credit allows for maximum borrowings of $100,000 and is uninsured. Interest is payable monthly on the outstanding balance at an annual rate of the bank's prime rate phis two percent. Interest raic on borrowings was 6% at December 31, 2003, Unpaid principle and interest is duc in October 2004, At December 31, 2003, there were borrowings (099,507 on the line of credit. H. Long term debt Primary Government The tribal TANF program purchased a modular office building on a Tong term lease agreement for the total ‘amount of $215,386. The Tribe made a down payment of $43,077 and the balance of $172,308 will be paid in $3,990 each month for the total of 60 months. ‘The estimated aggregate amounts of long-term lease agreement for the next five years are as follows: ‘Year ending September 30 Princ Interest Total 2005 3 26,009 $2,871 $47,880 2006 29,830 18,080 47/880 2007 34211 13,669 47,880 2008 39,237 8643 47880 2009 41.010 2880 47.830 Total $70,208 Tas ‘$239,400 HL, Indirect Costs: ‘The expenditures for indirect administrative costs are accounted for in the General Fund. These costs are allocated to various programs at a standard rate approved by the United States Department of the Interior. This rate is applied to direct expenditures. During the contract period October 1, 2003 through September 30, 2004 the Tribe used an approved indirect cost rate of $ percent. I. Prior Period Adjustments: Prior period adjustments have been made to the General Fund. The following table describes each adjustment and its effect on fund balances as of October 1, 2003: Amount Description feet $150,000 To adjust incorrect interfund balances. Increases the fund balance of the General Fund $51,087 To establish USDA loan receivables. Increases the fund balance of the General Fund $18,655 To correct improper closed program, Increases the fund balance of the General Fund 20 e e e e e e e ® e e e ® e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e eTorres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 J. Related Party Transactions with Component Unit: Selnek is a federally chartered corporation established by the Tribe. During the tribal fiscal year, the Tribe ‘made contributions to Selnek of $1,810,000 and Selnek booked $20,000 for its fiscal year ended December 31, 2003, The Tribe also paid $240,000 to a vendor on behalf of Selnek. K, Retirement Plat Primary Government ‘The Torres Martinez Desert Cabuilla Indian 401(K) Plan is a defined contribution pension plan established by the Tribe to provide benefits at retirement 1 eligible employees.” The plan's fiscal year is the calendar year. To be eligible, employees are subject to three months service requirement, Each year the Tribe makes ‘2 matching contribution of 100% of partcipant’s contributions up to 4% of the participant's salary. The Plan provisions and contribution requirements are established by the tribe in accordance with IRS ‘guidelines and may be amended by the Tribal Council ‘The Tribe’s 401 (K) Plan contributions for 2004 were: $160,375, L. Commitments and Contingencies: Primary Government ‘The Tribe has acted as the administrator of funds under the Temporary Assistance for Needy Families (TANF) program of the U. S. Department of Health and Fluman Services, Administration for Children and Families (ACE) and the California Department of Social Services (CDSS). Based on findings and questioned costs reported in the FY 2002 and 2003 audits, ACF notified the Tribe by letter dated January 13 2005 citing six findings from the FY 2002 audit regarding potential misuse of federal TANF funds totaling in excess of $4 million and requesting the Tribe to provide additional information and supporting documentation related to the findings and questioned cost items. The Tribe is in receipt of subsequent correspondence from ACF, particularly a letter dated July 18 2005 citing three findings from the FY 2003 audit regarding potential misuse of federal TANF funds totaling in excess of $2 million. In addition, the ‘Tribe received a letter ftom CDSS dated December 8 2004, requesting that the Tribe provide documentation concerning certain advances and expenditures by the Tribe under the State component of the TANF program. The Tribe also is in receipt of a letier dated March 7 2005 from CDSS potentially seeking repayment of all State-provided TANF funding to the Tribe since program inception, an amount totaling in excess of $24 million, primarily for failure to file financial reports that substantiated the expenditure of State TANF funds. CDSS has based their request on the presumption that any potential misuse of federal TANF funds will also extend to State TANF funds. The Tribe has responded to the federal and State requests through production of documentation supporting the questioned costs, reconciliation and allocation of TANE federal and State awards, the filing of corrected and accurate financial reports, and the implementation of a corrective action plan designed to restore sound administration of the TANF program. Both ACF and CDSS have accepted the financial reports, pending, audit, while resolution ofthe findings and questioned costs items is still under review. The Tvibe intends to continue being responsive to the informational requests from ACF and CDSS, maintain compliance with applicable laws and regulations, and complete its corrective action plan, While the Tribe has been responsive to the informational requests ofthe federal and State funding agencies, the potential exists for disallowance of some oral ofthe questioned cost items and/or the imposition of penalties against the Tribe (any penalties assessed would be in the nature of reduced future finding rather than a direct monetary penalty), If such action occurs, the Tribe intends to follow the administrative proceedings available to it under applicable federal statacs and contest any disallowance or penalty, As this matter is still under review, with individual questioned cost items subject to either favorable or unfavorable resolution, no 21Torres Martinez Desert Cahuilla Indians Notes to Financial Statements For the Year Ended September 30, 2004 adjustments have been made to the financial statements for the effect of any such potential disatlowances or penalties. ‘The Tribe had been secking $532,175 in reimbursement from the Stac of California on the mobile home park project during FY 2004, In September 2005, the Tribe did receive reimbursement in the amount of $389,391 and is continuing to work toward close out of that grant and collection of the remaining reimbursable amounts “The Tribe began the process of evaluating whether or not to pursue legal action against certain former Yerdors and employees for various goods and services that either were not received or were of questionable ‘value. As of the date of the audit report, no adjustments have been made to the financial statements for the effect of any such possible claims on behalf of the Tribe. ‘The Tribe receives financial assistance from numerous federal and state governmental agencies, as well as private foundations, in the form of grants and contracts. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements or contracts and are subject (o audit. Certain expenditures incurred by the Tribe in connection with federal and state grants may be questioned and subject to possible disallowance by federal grantor agencies. The amount of questioned costs that might have to be reimbursed to the grantors cannot be detetmined presently and no provision for any liability that might result has been made in the general-purpose financial statements ‘The ‘Tribe is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions, and injuries 10 employees. The Tribe carries commercial insurance forall such risks. Component Unit Selnek has commitments under contracts for the purchase of property and equipment and for the constriction of buildings related to the highway travel center project. The estimated total cost of this project is approximately $7,490,000. As of December 31, 2003, Selnek has expended $853,272 which is included in construction in progress in the accompanying financial statements. 22 e e e e e e e e e e e e ° e e e e e e ® e e e e ® e e e e e e e e e e e e e e e e e eSupplemental Information @2060006000000060000600606008000000000000000080800080Torres Martinez Desert Cabuilla Statement of Cash Flows Diseretely Presented Component Unit ‘Year Ended September 30, 2004 Diseretely Presented ‘Component Unit TMTHA, CASH FLOWS FROM OPERATING ACTIVITIES Net loss s 5435 Aajustment to reconcile income from operations to net cash ‘provided by operating activities ‘Changes in assets and liabilities: Lncrease (Decrease) in accounts paysble and accrued expenses 28.429 [Net cash provided by operating activities 33,868 [NET DECREASE IN CASH AND CASH EQUIVALENTS: 33,868 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR, o (CASH AND CASH EQUIVALENTS, END OF YEAR 8 33,864 ‘See accompanying independent auditor's report 23Torres Martinez Desert Cahuilla Indians ‘Combining Statement of Revenues, Expenditures, and Changes in Fund Balance General Fund-General Goverament Year Ended September 30, 2004 See accompanying independent auditor’ report 24 e Indirect General Cost e Fund Pool ‘TERO e a 9 04 ‘oral e REVENUES ‘Ca. State non-gaming tribes revenue 3 445557 $ s 445,557 e “Tero fee income 8318 8318 e Indcet cost recovery 1,919,697 1,919,627 Rental income 13,980 e Investment income S461 e Othe income 112348 Teal revenues TORT Te assaier ° EXPENDITURES e Current: e Salaries and wages 648 1,088,713 91,710,071 Paytol tas and fringe benefits 290039 33,017 323,086 e ‘General administration 120,678 505,526 30,694 656,898 e ‘Contractual expenditures $70,081 65349 338 626,268 Contributions 1,810,000 1,810,000 e Program expenditure 294,549, 294,549 e Per capita 36,469 362,409 Capital outlay 474212 a2 e “Total dee expenditures Jone) SGT sess 5,708,503 e [EXCESS OF REVENUES OVER EXPENDITURES (3,006,421) 9 aa7961 154,362) e OTHER FINANCING SOURCES (Uses) e “Transfer n (out) (650,000) 60,000) e _BXCESS OF REVENUES OVER EXPENDITURES e AND OTHER FINANCING SOURCES (USES) GiseaaIy Tipe) “ORAS e FUND BALANCE. BEGINNING OF YEAR, e originally stated 6,627,130 6,627,130 e Prior period adjusment 219,742 219,782 e FOND BALANCE, BEGIYNING OF YEAR, e as adjusted 6,846 872 6,846,872 ° FUND BALANCE, END OF YEAR $ __ 37004518 oS _GaTsay _ 3,682,510Torres Martinez Desert Cabuilla Indians Combining Statement of Revenues, Expenditures, and Changes in Fund Balance General Fund-Social Services Year Ended September 30, 2004 Calter Resource Resource Water Management 8 ois _ 0-09 Total REVENUES Ca: State non-guming tribes revenue s ° Other income 4900 __27,125 “otal revenues Taco” 77.195 EXPENDITURES Curent Salaries and wages 460 25008468 Payroll mes and fringe benefits 1I6l 13,61 General acinistation 190 4327 4st7 Program expenditure ses ee Total dre expenditures ie eer am EXCESS OF REVENUES OVER EXPENDITURES. (400) (4,709) (51,492) (56,601) OTTER FINANCING SOURCES (iss) “Transfer in (ot) snaoo 0,000 EXCESS OF REVENUES OVER EXPENDITURES [AND OTHER FINANCING SOURCES (USES) ey ae CH, FUND BALANCE, BEGINNING OF YEAR, as originally stated ° FUND BALANCE, END OF YEAR 5 (400) $ _4,709) $_ (1.492) (6601) ‘See accompanying independent auditor's report. 2‘Torres Martinez Desert Cahuilla Indians Combining Balance Sheet - Non Major Governmental Funds September 30, 2004 BIA BTA, BIA. BIA Fire ATTG witalite RIP 0 32 3 35 Assets (Cash and cash equivalents 5 8 8.901 $ 8 6,561 ‘Accrued revenue 23990 21,123, otal asets 5 23,992 § 3901 $ 2113S 6.561 Liabilities and Fund Equity Liapierries Accounts payable 5 s 8 s ‘Acerued payrollablities 308 Due to other finds 23,688 Deferred revenue ‘Tota ibilities a Funp Eourrr Fund balances: ‘Uneserved o oO 6 o ‘Total abilities and fund equity s 2992 8901 $24,123. $ 6561 ‘See accompanying independent auditor's report 26Torres Martinez Desert Cahuilla Indians ‘Combining Balance Sheet - Non Major Governmental Funds September 30, 2004 BIA BIA BIA BIA Water Rese JOM Hid Evira a 3 15, 0 Assets Cash and cash equivalents s ssi 8 s s 66,106 Accrued revenue 1170 4930 Total assets s Sasi $ 1170s 930. § Liabilities and Fund Equity LuABILITIBS Accounts payable s s s s Accrued parol bilities Due to otbr funds 1170 4920 Deferred revenue 54.513 “otal libilites S413 11 390 FuND FourrY und balances: reserved ° o ° 0 Tova ibilites and fund equity s sasi3_s 170s 5 66,196 See accompanying independent auditor's report n‘Torres Martinez Desert Cahuilla Indians Combining Balance Sheet - Non Major Governmental Funds September 30, 2004 BOR PA EPA EPA Salton GAP Clean Air Water Infta a 44 oo. o Assets (Cash and cash equivalents s s 175-8 5 Aceroed revenue £8,998 39589 8.073 Total assets $ 48.998_ § 3175 $ 3958S 8.073 Liabilities and Fund Equity LiaBiuertes Ascoumis payable 5 8 s s ‘Acerued payoll bilities 837 4.982 9 Due to other funds 48,161 38,840 8073 Defered revenue 2,193 Total liabilities BOE 7 Sse ua) FUND ROUTTY und balances: Uneeserved ° o o 0 “otal inbiliies and fund equity s 48.9985 ss 39589, $ 8.073 See accompanying independent auditor's report 28‘Torres Martinez, Desert Caluilla Indians Combining Batance Sheet - Non Major Governmental Funds September 30, 2004 BPA BPA BPA, eA, ead Non-Point Mgmt US Boarder Swap %6 7 —41 By Assets Cash and cash equivalents s s s 5 m ‘Accrued revere 1,063 22.460 2521 Tota assets 5 14963 5 22.4608 7521s im Liabilities and Fund Equity wasiries ‘Accounts payable s s s s Accrued payrol bilities Due to other funds 14,063 22,460 7521 Deferred revenve i Total liabilities Tans 2D 73a 172, FUND EQUITY und balances Unreserved o o o otal abilities and fund equity s 14,063. $ 22,460 $ 75218 1 EE Fn SS S$ ‘See accompanying independent auditor's report 2‘Torres Martinez Desert Cahuilla Indians Combining Balance Sheet - Non Major Governmental Funds September 30, 2004 BPA BPA BPA Hs W Pollution Pesticides Nom-Point 319 Family V 3 85 86 in Assets Cash and cash equivalents $ 8 8 s Accrued revenue 237 25,510 12971 3.223 “Total assets s msn_$ 23510 $ gis 3.223 Liabilities and Fund Equity cans Accounts payable s 5 s s Acerved payroll abilities 7: 2s Due to other funds 26,595 24.275 rap7 3203 Dofered revenue “otal abies FB 25510 aa aa FUND EQURY Fund balances: reserved ° 0 © ° Tota abilities and fund exuity s sp s 23510, $ ign s_ 328 ‘See accompanying independent auditor’ report 30‘Torres Martinez Desert Cahuilla Indians Combining Balance Sheet - Non Major Governmental Funds September 30, 2004 HHS kup Hub HUD ANA ltery RHED HBG 37 91 ma 7 Assets (Cash and cash equivalents 5 8 s 55873 8 Accrued revenue gis 3977 78,286 “Total assets 8 lusts 3971 $ 55878 78,286 aE Se SSS 8286 Llabitiies and Fund Equity ABILITIES. ‘Accounts payable s s s 52075 $ ‘Accrued payroll abilities 2,783 3,285 Due io other funds 9.161 3977 75,001 Deferred revenve 3,798 Total liabilities TCC 37 35873 FUND EOUITY Fund balances: Unreserved o “Total ibibtes and fund equity s gis 3977 $ 558738 78,286 ‘Sce accompanying independent auditor’ report 31‘Torres Martinez Desert Cabuilla Indians ‘Combining Balance Sheet - Non Major Goveramental Funds September 30, 2004 BIA BIA oa bor crap Mining Loan Fund Couet sa 66, 30 B Assets ‘Cash and cash equivalents s 8 2701 4441 Acerved revenue 135,981 17015 Total assets S__ssgat_§ W015, Liabilities and Fund Equity LIABILITIES ‘Accounts payable 8 s s s ‘Accrued payroll liabilities eto other funds 135,981 I7a1s Detered revenve . 2.701 aaa ‘Total liabiiies ase 2.704 44a Tins FUND EQUITY und batances: Unreserved 6 oO 9 ‘Total liabilities and fund equity 5 135.981 8) 2701 $ aus 1915 See accompanying independent auditors report 2Torres Martinez Desert Cahuilla Indians Combining Ratance Sheet - Non Major Governmental Funds September 30, 2004 sine Foundation swrce Libray 94 48 Foal Assets Cash and cash equivalents s s s 206,442 Accrued revenve 50 1491 523,400 Tova ese s 4505 ___ 14791 s 729851 Liabilities and Fund Equity ABILITIES Account payable 5 5 s s2078 ‘Acered payroll abilities 20.946 Duet other funds 450 14701 si3.262 Deferred reveaue 143.569 Tova abilities 50 TAL TBS UND eourry Fund balances Unrserved ° ° ° Total abilities and fund eaity 5 430s 14.791 s 729.851 ‘Sce accompanying independent auditor's report 3‘Torres Martinez Desert Cahuilla Indians ‘Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds - General Government Year Ended September 30, 2004 BIA, BIA ATO rar 32 Total REVENUES Grants and Contracts: US. Department of the Interior $4982. _135981_$ __ 185,825 ‘Total reverues 29,882 135.98 185,823 EXPEMDITURES Current Salaries and wages 30,565 96,161 126,726 Paycol taxes and fringe benefits 1.689, 39,820 47,508 “Total direct expenditures 38,254 135,981 174,235 Indirect expenditures 11,588 11.588 “Total expenditures 49,882 T3598 185,823 EXCESS OF REVENUES OVER EXPENDITURES. ° ° o FUND BALANCE, BEGINNING OF YEAR o o o FUND BALANCE, BND OF YEAR 8 os oso ‘See accompanying independent autitor's report Fy) e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e‘Torres Martinez Desert Cahuilla Indians Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Government Funds - Social Services Year Ended September 30, 2004 DOA ns Ans HRS Loan Childeare Famity sna 80 a7 o4 21 REVENUES. Grants and Contrats US. Department of Health & Human Services 5 $49,608 s 2451 8 5331 US. Department of Housing and Urban Development US. Department ofthe Interior US. Department of Agriculture 10,000 US. Pounciation forthe Arts Humanities US. Department of Justice Total revenues ig00 RS EXPENDITURES Curcent Salaries and wages Payroll taxes and fringe benefits Progeam services 10,000 45,592 Contractual expenditures Genera admsinisration 2451 5231 Capita outlay Total direct expenditures ae HT 23 Indirect expenditun 4016 Total expenditures 10,000 2,608 2ST 3 EXCESS OF REVENUES OVER EXPENDITURES ° o ° o PUND BALANCE, BEGINNING OF YEAR, 0 o ° ° FUND BALANCE, END OF YEAR 6 See accompanying independent auditor's report 35forres Martinez Desert Cabuilla Indians Combining Statement of Revenues, Expenditures, aud Changes in Fund Balance Nonmajor Government Funds - Social Services ‘Year Ended September 30, 2004 HHS HUD HUD WUD csBG RHED ——-RHED-CAP_ der Housing 24 82 22:50 on REVENUES Grants and Contracts: US, Departient of Health & Human Services 5 81,000 5 s s US. Department of Housing and Urban Developraent 435,698 55,075 66,630 US. Department ofthe interior US. Department of Agriculture US, Fourdation forthe Arts & Humanities US. Department of Justi Toil revenues oa as ST eT EXPENDITURES Current Salaries and wages 28,205 Payroll saxes and fringe benefits 3,100 Program services Contractual expenditures 81,000 8610 General administration 13,260 Capital outlay 363.533 6,630, ‘Total dveet expenditures 3,000 363,533 SRS 6,530 Indirect expenditures 12,165 2,500 Total expenditures 31,000 35,098 35.675 aun EXCESS OF REVENUES OVER EXPENDITURES o ° o o PUND BALANCE, BEGINNING OF YEAR, ° ° 0 o FUND BALANCE, END OF YEAR $ os os os 0 See accompanying independent auditor's report 36‘Torres Martinez Desert Cahuilla Indians Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Government Funds - Social Services ‘Year Ended September 30, 2004 HUD BIA. Bia BIA TRG Wildlife Fire Mining, fa 33 50 66, REVENUES ‘Grants and Contract: US, Department of Health & Human Services 8 s s s USS. Department of Housing and Urban Development 183,187 US. Department ofthe Interior azar 49,403 11,506 USS. Foundation forthe Arts & Humanities US. Department of Justice Total revenues TEE aa BB T1506 EXPENDITURES Curent Salaries and wages 87,644 26,305 20,900 Payroll axes and fringe benefits 15,024 3844 1787 Program services 52,270 ‘Contractual expenditures B18 10445 General administration 19631 $s 25,131 Capital outlay “Total direct expenditures 1317 35200 Tai Tos Indirect expenditures 2,267, 1,605 1,061 ‘Total expenditures ar 9,023 T1506 EXCESS OF REVENUES OVER EXPENDITURES o ° o ° FUND BALANCE, BEGINNING OF YEAR, o ° ° o FUND BALANCE, END OF YEAR 8 os os os 0 ‘See accompanying independent auditors report 37‘Torres Martinez Desert Cahuilla Indians ‘Combining Statement of Revenues, Expenditures, and Changes in Fund Balance ‘Nonmajor Government Funds - Social Services Year Ended September 30, 2004 ite bo! Library Court 48 3 Tota REVENUES Grants and Contracts: USS. Department of Health & Human Services 8 5 8 138,390 USS. Department of Housing and Urban Development Ai 190 US. Department ofthe Interior 98,400 US. Department of Agriculture 10,000 USS. Foundation forthe As & Humanities 44,668 45668 US. Department of Justice 39,129 “Total revenues HGR 39,129 Tarr EXPENDITURES Current: ‘Salaries and wages 3.940 28081 195,075, Payrol axes and fringe benefis 337 2420 BES19 Program services 107,862 Contractual expenditures 29,996 808 139,877 General administration 10295 7813 84067 Capital oulay 43016 ‘Total direct expenditures mee 9 988,164 Indirect expenditures 83,614 ‘Total expenditures H68 35D. Torri EXCESS OF REVENUES OVER EXPENDITURES ° ° ° FUND BALANCE, BEGINNING OF YEAR, ° ° ° PUND BALANCE, END OF YEAR s os ° ‘See accompanying independent auditor’ report 38‘Torres Martinez Desert Cahuilla Indians ‘Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Fands - Environmental Year Ended September 30, 2004 EPA &PA PA cae Clean Air Water fata “4 oo o REVENUES Grants an Cont: U.S. Environmental Protection Agency SMES tosses «413310 US. Deparment ofthe Inerioe US. Department of Reah and Human Servees Salat of Californin “otal revenues Da a aso EXPENDITURES Carcent Salaries and wages vo3.se2 a4se7 Payol taxes and irnge benefits 34.8 15.953, Contractual expenitres 6817 19407 General advnistaion e588 19,157 capital ay 413310 Tot det expenditures Taw Be a310 Iediet expenditures 19,059 1470 “otal expenditures B38 106534 Tao EXCESS OF REVENUES OVER EXPENDITURES ° ° ° FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR ‘See accompunying independent auditors report 2Torres Martinez Desert Cabuilla Indians Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds - Environmental Year Ended September 30, 2004 REVENUES ‘Grants and Contracts; USS. Environmental Protection Agency s USS. Department ofthe Interior US. Depurtment of Mealh and Human Services, Satate of California Total revenues EXPENDITURES Cureent Salaries and wages Payroll taxes and fringe benefits Contractual expenditures Gonoral administration ‘Capita outlay Total direct expenditures Indicect expenditures ‘Total expenditures EXCESS OF REVENUES OVER EXPENDITURES FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR 8 BPA Water Palla 3 101288 $ aR 27,231 15333, 39971 8.646 3118 10,103, 101,284 ‘See accompanying inependent auditor's report 40 BPA US/Mex m1 5678 518 » 367, 37 State Non 319 86 17.236, aaa 213 11536 3,105 rs nese e@ e @ e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e Torres Martinez Desert Cabuilla Indians Combining Statement of Revenues, Expenditures, and Changes in Fund Bulance ‘Nonmajor Governmental Funds - Environmental ‘Year Ended September 30, 2004 REVENUES ‘Grants and Contract: US. Environmental Protection Agency USS. Departmeat of the Inte US. Department of Health and Human Services Satate of California ‘Total revenues EXPENDITURES Current Salaries and wages Payroll taxes and finge benefits ‘Contractual expenditures General administration Capita outlay Total direct expenditures Indivect expenditures “Total expenditures EXCESS OF REVENUES OVER EXPENDITURES FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR EPA Non-Point ca 133,124 $ Tsi24 46,868 16,409) 30,758 8,650 ne OK 30,430 133,128 ‘See accompanying independent auditors report 4a EPA Lead 16 18,192 § Ee 8329 166 9697 18 a BPA Pesticides 85 69319 ae 34,320 14,081 B40 10540 9,538 319‘Torres Martinez Desert Cahuilla Indians ‘Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds - Environmental Year Ended September 30, 2004 EPA Hs BIA swap ANA Env Water 93 Ei 6 REVENUES ‘Grants and Contact: U.S. Environmental Protetion Agency 8 38265 $ 5 USS. Department of the Interior 13i7 USS. Department of Health and Human Services 43913 Satate of California Total revenues ce Bos Ts EXPENDITURES Current: Salaries and wages 3.998 24,450 8,278 Payroll taxes and fringe benefits 2380 1132 L1st Contractual expenditures 22,900 General administration 2,007 18,331 n Capital oulay Total direct expenditures B13 300 Indirect expenditures 1,980 1,817 “Total expenditures 35.265 T3I7 EXCESS OF REVENUES OVER EXPENDITURES o ° ° FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR ‘See accompanying independent auditors report 2Torres Martinez Desert Cahuilla Indians ‘Combining Statement of Revenues, Expenditures, and Changes in Fund Balance ‘Nonmajor Governmental Funds - Environmental ‘Year Ended September 30, 2004 BIA BOR State Enviroment Salton. = SWRCB. 90. 68 98 Total REVENUES: Grants and Contacts: USS. Environmental Protection Agency s 5 s 5 1073933 US. Department ofthe Interior nan 159,855 "242,403 USS. Department of Health and Human Services 43,913 Satate of Californie 450 17746. ‘Total revenues Toss T7799 EXPENDITURES: Corrent: Salaries and wages 1238 33,487 344,588 Pagroll taxes and fringe benefits 90 15,628 117866 ‘Contractual expenditures 56,883 83,937 22,819 General administration 2524 25.185 450 127251 Capital outlay ‘Total direst expenditures rs Te aT ect expenditures 10,496 1618 ‘Total expenditures Tt T59.855 BO EXCESS OF REVENUES OVER EXPENDITURES ° ° ° ° FUND BALANCE, BEGINNING OF YEAR 0 6 o FUND BALANCE, END OF YEAR 5 ‘ce accompanying independent auditors report 8‘Torres Martinez Desert Cahuilla Indians Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds - Education ‘Year Ended September 30, 2004 BIA BIA Higher Ed JOM w 8 ‘Total ‘REVENUES Grants and Contacts: USS. Department of the Interior s 6713 $__ 12072. §_18,785, ‘Total revenues 3 12,072 18,785, EXPENDITURES Current General administration 6548 1710 18,258 ‘Total dire expenditures 6548 11,710 18,258 Indirect expenditures 165, 362 527 Total expenditures 13 1,072 Ta785 EXCESS OF REVENUES OVER EXPENDITURES o ° ° FUND BALANCE, BEGINNING OF YEAR o ° o FUND BALANCE, END OF YEAR s os o ‘See accompanying independent auditor's report a4AUDITOR’S SECTIONREPORT 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 PS Tribal Council Torres Martinez, Desert Cahuilla Indians ‘Thermal, CA We have audited the financial statements of the govemmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Torres Martinez Desert Cabuilla Indians, as of and for the year ended September 30, 2004, which collectively 33° AVENUE WEST comprise the Torres Martinez Desert Cahuilla Indians’ basic financial statements and have issued our report thereon dated October 5, 2005. We did not audit the financial statements of the Selnek-is ‘em-Al Corporation, which represent ninety six percent, ninety nine percent, and forty six percent of the assets, net assets, and, revenues of the eggregate discretely presented component units, as of and for the year ended September 30, 2004, Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as relates to the amounts included for the aggregate discretely presented component units, is based on the report of the other auditors. We conducted our LYNNWOOD 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, issued by the Comptroller General of the United States. The financial statements of the Selnek-is Tem-Al Corporation were not WASHINGTON audited in accordance with Government Auditing Standards. Internal Control Over Financial Reporting SUITE 230 In planning and performing our audit, we considered the Torres Martinez Desert Cahuilla Indiens’ internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the intemal control over financial reporting. However, we noted certain matters involving the internal (425) 174-0686 control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the Torres Martinez, Desert Cahuilla Indians’ ability to record, process, summarize, and (425) 776-0696 report financial data consistent with the assertions of management in the financial statements. Reportable conditions are described in the accompanying schedule of findings and questioned costs as findings 04-01 and 04-02. oFFIce FAX NUMBER E-MAIL, ron_s@theselisgroup.com ‘CERTIFIED PUBLIC ACCOUNTANTS + MANAGEMENT CONSULTANTS « SEMINAR LEADERS 45‘A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce 10 a relatively tow level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the intemal control over financial reporting would not necessarily disclose all matters in the intemal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be ‘material weaknesses. However, we believe none of the reportable conditions described above is a material weakness, Compliance and Other Matters As part of obtaining reasonable assurance about whether the Torres Martinez Desert Cahuills Indians’ financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed an instance of noncompliance or other matters that are required to be reported under Government Auditing Standards which is described in the accompanying schedule of findings and questioned costs as finding 04-02. We also noted certain additional matters thet we reported to management of the Torres Martinez. Desert Cahuilla Indians in the accompanying schedule of findings and questioned costs as findings 04-03 to 04- 08. This report is intended solely for the information and use of the audit committee, management, the Torres Martinez, Desert Cahuilla Indians, and federal awarding agencies and pass-through entit intended to be and should not be used by anyone other than these specified parties Of, kotto oop, 0h Lynnwood, WA October 5, 2005 46REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABL TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Tribal Couneil Torres Martinez Desert Cahuilla Indians Thermal, CA Compliance We have audited the compliance of the Torres Martinez, Desert Cahuilla Indians, with the types of compliance requirements described in the U. S. Office of 33" AVENUE WEST Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to its major federal program for the year ended September 30, 2004, The Torres Martinez Desert Cahuilla Indians’ major federal program is identified in the summsty of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the Torres Martinez Desert Cahuilla Indians’ management. Our responsibility is to express an opinion on the Torres Martinez Desert Cahuilla Indians’ compliance based on our audit SUITE 230 LYNNWOOD We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the WASHINGTON Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a ‘major federal program occurred. An audit includes examining, on a test basis, evidence about Torres Martinez Desert Cahuilla Indians’ compliance with those oFFIce requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our (425) 174-0646 opinion, Our audit does not provide a legal determination on the Torres Martinez Desert Cahuilla Indians’ compliance with those requirements, As described in finding 04-05 and 04-06 in the accompanying schedule of findings and questioned costs, the Torres Martinez Desert Cahuilla Indians, did (425) 776-0698 not comply with requirements regarding allowable costs/cost principles and equipment and property management that are applicable to its TANF program. Compliance with such requirements is necessary, in our opinion, the Torres E-MAIL Martinez Desert Cahuilla Indians, to comply with requirements applicable to that ron_s@thesellsgroup.com Program. FAX NUMBER ‘CERTIFIED PUBLIC ACCOUNTANTS + MANAGEMENT CONSULTANTS # SEMINAR LEADERS 47In our opinion, except for the noncompliance described in the preceding paragraph, the Torres Martinez Desert Cahuilla Indians, complied, in all material respects, with the requirements referred to above that are applicable to cach of its major federal programs for the year ended September 30, 2004. The results of our auditing procedures also disclosed other instances of noncompliance with those requirements that are required to be teported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as findings 04-04, 04-07, and 04-08. Intemal Control Over Compliance ‘The management of the Torres Martinez Desert Cahuilla Indians, is responsible for establishing and maintaining effective intemal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs, In planning and performing our audit, we considered ‘Torres Martinez Desert Cahuilla Indians’ internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A-133. We noted certain matters involving the internal control over compliance and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over compliance that, in our judgment, could adversely affect the Torres Martinez Desert Cahuilla Indians” ability to administer ‘a major federal program in accordance with the applicable requirements of laws, regulations, contracts, and grants. Reportabie conditions are described in the accompanying schedule of findings and questioned costs as findings 04-03, and 04-06 through 04-08. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively tow level the risk that noncompliance with the applicable requirements of laws, regulations, contracts, and grants caused by error ot fraud that would be ‘material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their essigned functions. Our consideration of the intemal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe that none of the reportable conditions described above is a material weakness. This report is intended solely for the information and use of the audit committee, management, City Council, and federal awarding agencies and pass-through entities and is not intended to be and should not ‘be used by anyone other than these specified parties. Lhe halls Daops, 24, Lynnwood, WA. October 5, 2005 48‘Torres Martinez Desert Cahuilla Indians Schedule of Audit Findings and Questioned Costs For the Year Ended September 30, 2004 Section I Summary of Auditor’s Results FINANCIAL STATEMENTS: ‘Type of auditor's report issued: Qualified Internal control over financial reporting: ‘Material weakness (es) identified? No Reportable condition(s) identified that are not considered to be material weakness (es)? Yes ‘Noncompliance material to financial statements noted? Yes FEDERAL AWARDS: Internal control over major programs: Material weakness (es) identified? No Reportable condition(s) identified that are not considered to be material weakness (es)? Yes “Type of auditor’s report issued on compliance for major program: Qualified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular 4-133? Identification of major program(s): CFDA Number(s) Name of Federal Program or Cluster 93,558 Dollar threshold used to distinguish between type A and type B programs: $552,029 Auditee qualified as low risk auditee? NoTorres Martinez Desert Cabuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 Section I1-Financial Statement Findings Finding 04-01 Compliance Finding[ ] Reportable Condition[ X] Material Weakness [_ ] Criteria or specific requirement: Internal Control over Financial Reporting The financial statements are management’s responsibility. Management is responsible for adopting sound accounting policies and for establishing and maintaining internal control that will, among other things, initiate, record, process, and report transactions (as well as events and conditions) consistent with the fair presentation of financial statements in conformity with generally accepted accounting principles. [AICPA Professional Standards AU § 110.03] Context and condition: Management did not implement sufficient internal control policies and procedures to ensure that transactions were properly accounted for and recorded. Tribal goverament's management also did not implement sufficient internal control policies and procedures to ensure that transactions were executed in compliance with laws, regulations and the provisions of contracts and grant agreements that could have direct and material effects on the financial statements of its major federal program(s) and its financial statements as a whole, Cause and effect: The characteristics of internal control that would reasonably assure compliance with both generally accepted accounting principles (GAAP) and the requirements of federal laws, regulations, and program compliance requirements are generally divided into five components; the control environment, the process of risk assessment, the performance of control activities, the process of gathering information and communicating it, and the process of monitoring the quality of internal control over time. The Tribe was not able to document with sufficient evidence that all of these five components existed during most of the period covered by the audit. These weaknesses in internal control have prevented the Tribe’s accounting department from preparing reliable financial statements and federal reports, maintaining accountability over assets, and demonstrating compliance with laws, regulations, and other compliance requirements. Recommendation: We recommend the Tribe retain qualified accounting personnel to manage fiscal operations, and. address the accounting, financial and compliance reporting needs of the Tribe as a whole. The ‘Tribe should also continue to develop formal policies and procedures for intemal control over financial reporting, legal, regulatory, grant, and contract and agreement compliance requirements.Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 Management’s Response: ‘The Torres Martinez, Desert Cahuilla Indians have reorganized the operating structure of the Tribe's TANF program to provide for direct oversight by Tribal Administration and the incorporation of Tribal Policies and Procedures (including Personnel; Property Management; Procurement; Travel/Vehicle Use; Planning and Controls; Complaint Resolution; and, Financial Management). The Tribe has developed and implemented formal policies and procedures in the accounting area, including the adoption of internal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria. These policies and controls require sufficient levels of authorization and provide for supporting documentation in line with existing Tribal policy as well as the requirements specific to 45 CER 92.20 and OMB Circular A-87. The Torres Martinez. Desert Cahuilla Indians maintains it accounting records on two separate software programs, each with different account code structures, different program modules, different data structures, even different physical network servers. The use of these two diverse software programs has hindered the Tribe’s ability to manage combined financial reporting for the Tribe as a whole, To address this issue, the Tribe has undertaken the selection of a single software solution to address the accounting and financial needs of the Tribe as a whole, both the typical tribal government activities as well as grantor-funded programs. As of the date of this audit report, the Tribe has identified that single software solution and has targeted January 1, 2006 as the “go-live” implementation date for the single accounting software system. In the interim, the Tribe has developed procedures to manually prepare a consolidated report for the Tribe as a whole. Regarding the financial reporting requirements for federal and state grants, the Tribe has subsequently filed all reports required by the respective grantor agencies for the period ended September 30, 2004. In addition, the Tribe has specifically, as part of its reorganization of the administration of the TANF program, subsequently filed corrected reports for all periods from the inception of the Tribe’s administration and participation in that program through the 2005 fiscal year, providing those agencies with not only the required reports but full supporting schedules that agree with the final adjusted TANF original books and records. To ensure that any reporting solution is timely, accurate and complete, the Tribe has, as part of its Corrective Action Plan, retained qualified accounting personnel to manage its fiscal operations. We have also developed more formal policies and procedures in the accounting area, including the adoption of intemal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria. 51Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 Finding 04-02 ‘Compliance Finding[X] Reportable Condition [ X] Material Weakness [__] Criteria or specific requirement: Internal Control over Financial Reporting Generally Accepted Accounting Principles (GAAP) requires that management maintain continuing accountability for the capital assets acquired. [NCGA Statement 1] Condition and context: ‘The Tribe did not have sufficient property records to support the total amount of recorded property acquisition costs in both in current and previous reporting periods. Some information about some of the acquisitions had been retained, but a comprehensive listing in sufficient detail to support the financial statement amounts wes not maintained. Cause and effect: The Tribe’s property management policies do not adequately address how capital equipment and real property classifications are to be defined, how maintenance records will be established and maintained, how equipment, building, and vehicle inventory listings will be maintained, how historical information about purchase transactions will be retained, and other relevant asset management information is to be recorded. The Tribe did not have a policy requiring that a physical inventory of fixed assets be taken and the results reconciled with the general ledger at least once every two years. These failures expose the Tribe to the risk that equipment, vehicles, and buildings might not be adequately safeguarded and maintained, Sufficient accountability does not exist to discourage temptation to misuse and misappropriate assets acquired with Tribal funds and Federal awards. Recommendation: The Tribe should develop and implement adequate property management policies and procedures and complete a comprehensive inventory of its equipment and real property and reconcile the results with the amounts recorded in the accounting records. Management’s Response: The Torres Martinez Desert Cahuilla Indians, as part of its active involvement in the administration of the TANF program, has established a Procurement Department to manage all aspects of purchasing consistent with Tribal and grant-imposed requirements and procedures. Included in these procedures are dollar thresholds for the use of quotes, both verbal and written (RFQ), bids (EB), and an RFP process for service or similar type purchases; objectively-stated evaluation criteria; on independent review panel for RFPs and IFBs; and, adherence with “Common Rule” requirements as codified in the applicable grantor CFR section. 52Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 In addition to these procedures, the Tribe has incorporated its Tribal polices related to Property Management, Procurement and Financial Management with the TANF program. As part of these actions, the Tribe has developed and implemented policies and procedures related to the maintenance of complete property records, the definition of expenditures requiring capitalization, physically tagging assets, and the practice of performing a physical inventory of both capital assets and expendable equipment-type assets to ensure contro! and accountability over those assets. The actual physical inventory of all such assets has begun with an anticipated completion date of October 24, 2005. 33‘Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 Section IIL - Federal Award Findings and Questioned Costs Finding 04-03, HHS Temporary Assistance for Needy Families 93.558 Compliance Finding[ ] Reportable Condition [X] Material Weakness [ ] Criteria or specific requirement: B. Allowable Costs The A-102 Common Rule requires that non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. [OMB Circular A-133 Compliance Supplement - Part 6] Context and condition: Procedures performed in an attempt to reconcile the participant payments recorded in the payroll processing company’s reports together with those recorded directly in the Tribe's general ledger to the supporting documentation in the participant files were not completed. Questioned costs: $0 Cause and effect: ‘The TANF grant and assistance payments were processed by both an outside payroll processing company and by direct payments prepared by the Tribe’s accounting department. No comprehensive report detailing the payments was prepared, As a result, it does not appear as if the case managers could reliably control or monitor how much wes paid to, and on behalf of, individual clients over time. Despite the internal control risk level we noted during our examination of the documentation from a sample of participant's files in comparison with the disbursement data obtained from the payroll processing and general ledger records we did not discover material duplications or inaccurately calculated payments. Recommendation: The Tribe should develop a procedure to record and report on the TANF grant and assistance disbursements, in a timely manner, in 2 form accessible to both program and fiscal managers. Management’s Response: The Torres Martinez Desert Cahuilla Indians has implemented more formal policies and procedures, including internal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria. The Tribe has also strengthened controls over program participant records, including the verification of data and reconciliation of amounts awarded and paid. As noted by the auditors, the results of their 34‘Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 fieldwork testing did not disclose any duplicate payments, incorrect application of payment, or other errors, The Tribe will also, as part of its movement to a single software solution for its fiscal operations, manage the disbursement of TANF grant and assistance payments to clients in-house instead of through a third-party processor. This action will inherently provide the Tribe with more direct control over these disbursements as well as provide management with the ability to review the payment history to any client on-line and in real time. Finding 04-04 HHS Temporary Assistance for Needy Families 93.558 Compliance Finding [X] Reportable Condition ] Material Weakness { ] Criteria or specific requirement: _B. Allowable Costs The general criteria affecting allowability of costs under Federal awards include requirements that costs must be reasonable and necessary for the performance and administration of Federal awards and costs must be documented in accordance with the A-102 Conmmon Rule for State, local and Indian Tribal governmental units. [OMB Circular A-133 Compliance Supplement - Part 3-B] Context and condition: This finding had been reported in prior years and management subsequently applied procedures at the request of the awarding agencies that may favorably affect the allowability of costs that had previously been questioned. Results from our tests of sample disbursement transactions during fiscal year 2004 indicated that more effective accounts payable intemal control activities appear to have been performed. This condition, which had existed in prior years, was much improved in fiscal year 2004, However, documentation provided for some TANF program expenditures examined during our audit, lacked sufficient supporting documentation to comoborate the performance and delivery of goods and services associated with these expenditures. Questioned costs: $46,200 ‘Cause and effect: This condition appears to result from a failure to implement adequate internal control procedures over the procurement of goods and services. The lack of adequate documentation subjects transactions to being questioned and possibly disallowed by the contracting or granting agency. Specifically, we noted a series of payments to 2 single vendor, supposedly for cight copies of a $7,700 fleet management software program. Management was subsequently only able to verify that two licenses for the software were granted by the manufacturer, 35e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e e Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 Recommendation: ‘The Tribes should establish procurement procedures to prevent payments without adequate documentation and approval. Management’s Response: The Torres Martinez Desert Cahuilla Indians acknowledges that in prior years certain program expenditures did not always include adequate, contemporaneous supporting documentation of the expenditure. However, and as noted by the auditors, great improvements have been mae in documenting both eurrent transactions as well as retrieving documentation related to prior years’ transactions. The Tribe has developed and implemented formal policies and procedures in the accounting area, including the adoption of internal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria. These policies and controls require sufficient levels of authorization and provide for Supporting documentation in line with existing Tribal policy as well as the requirements specific to 45 CER 92.20, 45 CER 92.22, 45 CFR 92,36 and OMB Circular A-87 The Tribe would aiso note that the auditor’s reference to the fleet management software was brought to their attention by ‘Tribal administrative personnel. ‘The Tribe is reviewing these transactions and, should the results of that review indicate improprieties, will seek restitution from the individuals and/or vendors involved in the transactions. Finding 04-05 HHS Temporary Assistance for Needy Families 93.558 Compliance Finding [XJ Reportable Condition] Material Weakness [ _] Criteria or specific requiremen B. Allowable Costs OMB Circular A-87 (A-87) establishes principles and standards for determining allowable direct and indirect costs for Federal awards. While direct costs are those that can be identified specifically with a particular final cost objective, the indirect costs are those that have been incurred for common or joint purposes, and not readily assignable to the cost objectives Specifically benefited without effort disproportionate to the results achieved, Indirect costs ore normally charged to Federal awards by the use of an indirect cost rate. [OMB Circular A133 Compliance Supplement - Part 3-B] Context and condition: ‘The amount of inditect costs charged to the program did not agree with the rate negotiated, ‘The amount paid was approximately 20% of the direct base. Questioned costs: $1,287,877 56‘Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 Cause and effect: it appears as if indirect costs charged were based! on estimate of the amourt of direct costs tnultplied by an estimated indirect cost rate and did not reflect the actus) direct costs or approved indirect rate forthe period. As mentioned previously, it would have been difficult for wPPreibe's management (o monitor compliance with this requirement without reliable fiscal reporting from the TANF program's accounting system. Our estimate of the actual direct cost Seeeee the program in fiscal year 2004 multiplied by the approved indirect cost rae ($8,525,443 x 5.00%) was approximately $1,287,877 fess than the $1,714,150 amount actual paid from program funds to the ‘Tribe's indirect cost pool. Recommendation: “The ‘tribe should properly classify and report only the allowable indirect costs in accordance swith current approved rates as contributions fo the Tribe's indirect cost pool. Management’s Response: ‘The Torres Martinez Desert Cahuilla Indians strongly disputes this finding and the related questioned cost: In recognition of past problems with the administration of the ‘TANF program, the Torres Martinez Desert Cahtilla Indians dedicated significant administrative resources to effect positive changes to the administration of the TANF program and to the program itself, Among the most restructuring that involved intense involvement and oversight important of these changes was a r ofthe TANF program by members of tribal administration. Consistent within the definitions at 45 CER 286.5 (2), the Tribe provided those direct services necessary to properly administer the ‘TANE program and successfully implement its Corrective Action Plan. [As noted by the auditors, the dollar amount charged to the TANF program for administrative osts totaled approximately 20% of the direct program costs incurred for FY 2004. This included the allocation of the 5% approved indirect cost rate (pursuant to 45 CFR 286.55 (d)}, plus the \Treet cost of Tribal administration personnel associated with the day-to-day oversight of the TANF program as well as the implementation of the Corrective Action Plan. While the dollar sts is significantly higher than in and percentage amount of those types of direct administrative prot fiscal years, it does reflect the actual level of effort devoted to the administration of the TTANE program by Tribal administration, and the elimination of a specific layer of TANF administration (TANE Executive Director, TANF Chief Financial Officer, ete.). ‘This level of involvement and related cost will continue through FY 2005 until the Corrective ‘Action Plan has been fully implemented and the ‘TANF program has achieved stabilization. However, those direct Tribal administrative costs, taken in conjunction with the allocation of the approved indirect costs, did not exceed the allowable administrative cost cap (25%) for the TANF program as provided for at 45 CFR 286.50 (@). For subsequent fiscal years, the Tribe 37SS TIFT FTFSTSFTSCSCSOOOHOOHOHOHOCHOOCHOOOEESE Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 Would anticipate that the dollar and percentage amount of direct ‘Tribal administration effort Would be somewhat reduced, but, consistent with the reorganization of the TANF programy and the higher level of oversight the Tribe has committed to for that program, would sill ieainta a ‘ost level much higher than in the eatlier years of the TANF program operation. Finding 04-06 HHS Temporary Assistance for Necdy Families 93.558 Compliance Finding [X] Reportable Condition [X} Material Weakness [ _] Criteria or specific requirement: F. Equipment and Real Property Management Procedures for managing equipment whether acquired in whole or in part with grant funds Tene thats CD property records must be maintained that include a description of the property, the source of property, the acquisition date and cost of the property, the location, use, and condition of the property, (2) 2 physical inventory of the property must be taken and the results Feconciled with the property records at least once every two years, [OMB Circular A102 Common Rule - Subpart B § Condi and context: The Tribe did not have sufficient property records to with the Common Rule documentation Teninet ants: Some of the required information about some of the acquisitions had been retained, but a comprehensive listing in sufficient detail to support the financial statonene amounts was not maintained. Questioned costs: Unknown ‘Cause and effect: deearitibe’s Property management policies did not adequately address the Common Rule Aocumentation standards. The Tribe did not have a policy requiring that a physical inventory of fixed assets be taken and the resulls reconciled with the general ledyer at lesst once every two 2eurs. Sufficient evidence was not available for estimating any questioned costs resulting from the possible misuse or misappropriation of assets acquired with Federal awards, Recommendation: The Tribe should develop and im procedures, complete a physical invent results of th iplement adequate property management policies and ory of its equipment and real property, and reconcile the inventory with the amounts recorded in the accounting records 58Torres Martinez Desert Cahuilla In ‘Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 Management's Response: ‘The Torres Martinez Desert Cahuilla Indians, as part of its active involvement in the wrtment to manage all cininistration of the TANF program, has established a Procurement Depa aspects of purchasing consistent with Tribal and grant-imposedt requirements and procedures. aaenead in these procedutes are dollar thresholds for the use of quotes, both verbal and written (RFQ), bids (IEB), and an RFP process for service or similar tyPS purchases; objectively-stated Gention rier an independent review pancl for RFPs and IPRs; and, adherence with Common Rule” requirements as codified in the applicable grantor CER section. In addition to these procedures, the Tribe has incorporated its Tribal polices related to Property Management, Procurement and Financial Management with the TANF prow As part of these 1d procedures related to the fetions, the ‘Tribe has developed and implemented policies an aes ots ance of complete property records, the definition of expenditures requiring capitalization, physically tagging assets, and the practice of performing physical inventory of both capital resis and expendable equipment-Iype assets to ensure control and accountability over those sesets, The actual physical inventory of all such assets has begun with an anticipated completion date of October 24, 2005. Finding 04-07 HIF Temporary Assistance for Needy Families 93.558 Compliance Finding [X] Reportable Condition [ X ] Material Weakness [ ] Criteria or specific requirement: L. Reporting ‘The requited financial and performance reports for Federal awards must be submitted on time, Mt Include all activity of the reporting period, be supported by applicable accounts performance records, and he fairly presented in accordance with program requirements. (OMB Circular A-133 Compliance Supplement - Part 3-L] Context and condition: ‘The TANF program administration could not provide copies of the interim financie! reperts that Tee kt have been filed with the State of California and the U.S. Department of Health and Hrouiin Serviges during the period ended September 30, 2004, nitial reports that Were subsequently filed were either inaccurate, unsupported by the entities own books and records, or were rejected by the awarding agencies. Questioned costs: SO Cause and effect: ‘The former TANF program management and its information systems appeared to be inadequate for the porposes of reliably preparing and submitting the required reports in a timely manner. The internal control reportable eondition over financial reporting as described in the financial 59 aman nnn dndbdinaindinninh OO OOS OOOO OOO00O8OSSSSSSEE8‘Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 statement finding 04-01 was a major cause of this reportable condition in intemal control over this compliance requirement and the instances of noncompliance with TANF award reporting requirements that occurred during fiscal year 2004. Recommendation: We recommend the Tribe retain qualified accounting personnel to monitor fiscal operations, and address the accounting, financial and compliance reporting needs of the program. ‘The Tribe should also continue to develop formal policies and procedures for internal control over financial reporting, legal, regulatory, grant and contract and agreement compliance requirements. Management’s Response: The Torres Martinez Desert Cahuilla Indians has subsequently filed all reports required by the State of California and the US Department of Health and Human Services for the period ended September 30, 2004. In addition, the Tribe has, as part of its reorganization of the administration of the TANF program, subsequently filed corrected reports for all periods from the inception of the Tribe's administration and participation in the TANF program through the 2005 fiscal year, Providing those agencies with not only the required reports but full supporting schedules that agree with the final adjusted TANF original books and records. The grantor agencies have accepted these reports pending further review. To ensure that any reporting solution is timely, accurate and complete, the Tribe has, as part of its Corrective Action Plan, retained qualified accounting personnel to manage its fiscal operations. We have also developed and impiemented formal policies and procedures in the accounting area, including the adoption of internal control Policies, to document the processes required to maintain compliance with Tribal and grantor Jaws, regulations, including those at 45 CFR 92.41 Finding 04-08 HHS Temporary Assistance for Needy Families 93.558 Compliance Finding [X] Reportable Condition [ X] Material Weakness [ ] Criteria or specific requiremen N, Special Tests and Provi Ss There may be additional compliance requirements which are not based in law or regulation (e.g, ‘Were agreed t0 as part of the contraet agreement) which could be material to a major program. Any such requirements which may have a direct and material on a major program shall be included in the audit. [OMB Circular A-133 Compliance Supplement - Part 3-N] Context and condition: ‘The TANF program’s Tribal Family Assistance Plan state minimum participation rates. Tribal work hon-needy caretaker) are supposed to be a mi dala for fiscal year 2004 activities we individual participant's files. that the program agrees to satisfy participation requirements for all families (except inimum of 30%. During fiscal year 2005, summary ‘as compiled from the documentation maintained in Our review of this summary data indicated that minimum 60‘Torres Martinez Desert Cahuilla Indians Schedule of Findings and Questioned Costs For the Year Ended September 30, 2004 wed during fiscal year 2004, ‘The average participation rate 4% and was as low as 18.519% in December 2003. It was red to be improving at the end of the fiscal year, and was participation rates were not achie during fiscal year 2004 was 21.63: noted that participation rates appear 24.070 in September 2004. Questioned costs: $0 Cause and effe ‘ation rates was not complied during fiseal year 2004. The TANE ring that time appeared to be inadequate for imum participation rates. Program mnology that permits monitoring of Summary data about particip: program management and its information systems du the purposes of measuring and monitoring the required minit management has since implemented information system tech participation rate information. Recommendation: mediate needs for corrective action in the deliver services to participants and achieve formation to monitor the program’s ‘The Tribe needs to balance the focus on the imu program’s administration with the responsibility to the goals of the program by using participation rate inl ongoing operating effectiveness. Management’s Response: The Torres Martinez Desert Cahuilla Indians acknowledges that minimum participation rates have not at the required level or at the level desired by the Tribe. The Tribe has dedicated significant administrative resources to fulfill the commitments made to suecessfully implement its Corrective Action Plan, Such focus on achieving compliance with the financial requirements ofthe TANF program has resulted in an increased focus on administration of the program rather than on program development. As the Tribe has achieved a greater fovel of stability in the TANF program, recent attention and resources have been focused back to the development and growth of the program and the delivery of services to its participants. During FY 2005 the focus fas been on taking immediate corrective action and strengthening internal controls. As a result of the emphasis placed on administration there has been ‘an increase in work participation rates and the program is now current with all required reports. During Fiscal Year 2005 the average work participation for the Tribe exceeded the minimum requirement. Preliminary reports produced on October 31, 2005 indicate that the total work participation rate for Riverside County was 25.38% (minimum requirement: 20%) and 36.49% Tor Los Angeles County (minimum requirement: 36.49%). We anticipate actual numbers to be slightly higher once deta clean-up for the months of July, Angust, and September of 2005 is completed. 61AUDITEE’S SECTIONae a emt a ee fou veoct — sawweox sr ™ form wrae ra pw fon ee * ope ne or ‘Smo, FARA nogaimeoy wecmamyowe eros res vo ve wee oman ve yan woo: eva ar sma mnie man “sven ng pee mca en Tee ESTERS RED a RY ar ar aT = ‘ore meicg am baevorant on a> eran ed mage ne een SE ee ope me mpeg mm ts nena en Wed npn nom ols=as — aT anonym ertnernc ona ee ps muy ee mG A RH HON EO RO oso es ho par peo ey erat em PLP ea san en ae yon ays sa sae sy nn pm pew ee ee a sep nop rn ene a a ate oa No, HH ese MON RS NNN A LE “eer man nce aman nom EEL HO MF a pet ne pyr pice as cy pvnsete er quot on it nenoye sda mn ap mere yy hy mn Df HEY EYE HO a PERE RIRE | SRES ps aero amre cgarsap soch oe ar ae apn pp pa on aa ap sama gr ‘roor ‘og s9qua1296 popHD ZO OUT 20 spieny ag pax tsopad yo sazmpuodg Jo spaqos 94} 9} $3010 ‘roar ‘ne saqmandag popu 89k 24) 20 29924 30 SSANIpUIET Jo TAPAS yOu H9seC URINE SOLO,Torres Martinez Desert Cahuilla Indians Summary Schedule of Prior Audit Findings For the Year Ended September 30, 2004 Auditor Reference Number Current Status Explanation Torres Martinez Tribal TANF Corrected ‘The Torres Martinez Desert Finding number 03-01 Cabuilla Indians have reorganized the operating Internal control environment structure of the Tribe’s TANF program to provide for direct oversight by Tribal Administration and the incorporation of Tribal Policies and Procedures (including Personnel; Property Management; Procurement; Travel/Vehicle Use; Planning and Controls; Complaint Resolution; and, Financial Management). The Torres Martinez, Desert Cahuilla Indians have developed and implemented formal policies ‘and procedures in the accounting arca, including the adoption of intemal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria Torres Martinez Tribal TANF Corrected ‘The Torres Martinez Desert Finding number 03-02 Cahuilla Indians have developed and implemented formal ‘Supporting documentation policies and procedures in the accounting area, including the adoption of internal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria. These policies and controls require SHOHOSHSHSHHHSHHHSHSHHSHHHHOHSHOSHHHSHHOHHSHSHHEECE 65Torres Martinez Desert Cahuilla Indians Summary Schedule of Prior Audit Findings For the Year Ended September 30, 2004 sufficient levels of authorization and provide for supporting documentation in line with existing Tribal policy as well as the requirements specific to 45 CFR 92.20 and OMB Circular A-87, Torres Martinez Tribal TANF In Process The Torres Martinez Desert Finding number 03-03 Cahuilla Indians have incorporated its Tribal polices Fixed assets list related to Property ‘Management, Procurement and Financial Management with the TANF program. As part of these actions, the Tribe has developed and implemented policies and procedures related to the maintenance of complete property records, the definition We need to review our _ of expenditures requiring status of the physical capitalization, physically inventory and adjust. tagging assets, and the practice schedules to be able to get_of performing a physical this completed ASAP. We _ inventory of both capital assets expect inventory sheets to and expendable equipment-type be completed by Thursday, assets to ensure control and Oct 13, with compilation accountability over those assets. and reconciliation to take The actual physical inventory of another week or so, putting all such assets has begun with our planned completion an anticipated completion date date at about Oct 24. of October 24, 2005. ‘Torres Martinez Tribal TANF Corrected ‘The Torres Martinez Desert Finding number 03-04 Cahuilla Indians have developed and implemented formal Contractors payments policies and procedures in the accounting area, including the adoption of internal control policies, to document the processes required to maintain 66 POHOHOSHSHSHSHSSHSHSHSSOSHSHSHSHHHSHSSHHSHSHHOHSCHSCHHOHSOCEECOTorres Martinez Desert Cahuilla Indians Summary Schedule of Prior Audit Findings For the Year Ended September 30, 2004 compliance with Tribal and grantor laws, regulations, and. other specified criteria. These policies and controls require “ sufficient levels of authorization and provide for supporting documentation in line with existing Tribal policy as well as. the requirements specific to 45 CFR 92.20, 45 CFR 92.22, 45 CFR 92.36 and OMB Circular A-87. Specific to the $724,250.85 in questioned cost items addressed in Finding 03-04, the Tribe has located documentation in support of $709,250.85 of these costs, including deliverables demonstrating services rendered; the remaining $15,000.00 cited as questioned costs relates to an accounts payable entry that was voided through a credit memo, resulting in no disbursement of funds or claim of costs against the TANF program, ‘The Torres Martinez Desert Torres Martinez Tribal TANF Corrected Cahuilla Indians have developed Finding number 03-05 and implemented formal policies and procedures in the Supporting documentation accounting area, including the adoption of internal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria. These policies and controls require sufficient levels of authorization and provide for supporting documentation in line with 67Torres Martinez Desert Cahuilla Indians Summary Schedule of Prior Audit Findings For the Year Ended September 30, 2004 existing Tribal policy as well as the requirements specific to 45 CER 92.20, 45 CER 92.22, 45 CFR 92.36 and OMB Circular AST, Please note that Finding Specific to the $980,990.34 in 03-05 is in the total amount questioned cost items addressed of $979,192, a difference of in Finding 03-05, the Tribe has approximately $1,798.34 located documentation in ‘from the detail provided for support of $813,925.15 of these this Finding (898,090.34). costs, including approvals and authorization and sufficient information to allow for proper recordation of the costs incurred,. The Tribe has also located certain relevant Cynthia, Columba ~ this is documents related to $17,065.19 the $17,065.19 Esmeralda of the questioned costs items, payment. but is in the process of further researching this item. The remaining $150,000.00 cited as questioned costs relates to two journal entries to accrue expenses that were later reversed, resulting in no disbursement of funds or claim of costs against the TANF program. Torres Martinez Tribal TANF Corrected The Torres Martinez Desert Finding number 03-06 Cahuilla Indians have developed and implemented formal Participant payments policies and procedures in the accounting area, including the adoption of intemal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria. The Tribe has also strengthened 68Torres Martinez Desert Cahuilla In Summary Schedule of Prior Audit Findings For the Year Ended September 30, 2004 controls over program participant records, including the verification of data and reconciliation of amounts awarded and paid. Torres Martinez Tribal TANF Corrected ‘The Torres Martinez Desert Finding number 03-07 Cahuilla Indians have subsequently filed all reports Filing reports required by the respective ‘grantor agencies for the period ‘ended September 30, 2003. In addition, the Tribe has specifically, as part of its reorganization of the administration of the TANF program, subsequently filed corrected reports for all periods from the inception of the Tribe's administration and participation in that program through the 2005 fiscal year, providing those agencies with not only the required reports but full supporting schedules that agree with the final adjusted TANF original books and records, To ensure that any reporting solution is timely, accurate and complete, the Tribe has, as part of its Corrective Action Plan, retained qualified accounting personnel to manage its fiscal operations. We have also developed and implemented formal policies and procedures in the accounting area, including the adoption of intemal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, 69Torres Martinez Desert Cahuilla Indians Summary Schedule of Prior Audit Findings For the Year Ended September 30, 2004 including those at 45 CFR 92.41 Torres Martinez Tribal TANF Corrected The Torres Martinez Desert Finding number 03-08 Cahuilla Indians, as part of its implementation of strengthened Administrative Costs policies, procedures and controls, have instituted a system to ensure that Administrative Costs do not exceed the allowable amount per 45 CFR 286.50. A part of this system is the matching of expenditures with grant drawdowns to adequately time cash needs to expected disbursement of funds, as well as to properly allocate those funds drawn against direct program expenditures and administrative costs. Specific to FY 2003, the Tribe did not exceed the Administrative Cost limit provided for in 45 CFR 286.50; review of the subsequently-filed financial status reports indicates that the Administrative Costs incurred were substantially less than the 30% limit. ‘Torres Martinez Tribal TANF Corrected The Torres Martinez Desert Finding number 03-09 Cahuilla Indians have developed and implemented formal Prepaid leases policies and procedures in the accounting area, including the adoption of internal control policies, to document the processes required to maintain compliance with Tribal and grantor laws, regulations, and other specified criteria. These 70Please note that Finding 03-09 is in the total amount of $972,026, a difference of ‘approximately $225,147 ‘from the detail provided for this Finding. A portion of. the questioned cost was classified as a prepaid, leading to the apparent discrepancies in totals. The amounts presented at right are for the total amounts paid to the 2 vendors for the items in question. n ‘Torres Martinez, Desert Cahuilla Indians Summary Schedule of Prior Audit Findings For the Year Ended September 30, 2004 policies and controls require sufficient levels of authorization and provide for supporting documentation in line with existing Tribal policy as well as the requirements specific to 45 CER 92.22 and OMB Circular A87, Specific to the $972,026.00 in questioned cost items addressed. in Finding 03-09, the Tribe has supporting documentation and deliverables to support $822,172.98 of the questioned cost items: $225,000 related to magazine publishing and $597,172.98 related to extended ‘warranties on Information Technology equipment. Regarding the remaining balance, all related to magazine publishing, the Tribe is in the process of further researching ‘hat item.