Torres Martinez Audit 9-30-08

TORRES MARTINEZ DESERT CAHUILLA INDIANS
Audited Financial Statements

For the year ended September 30, 2008
TORRES MARTINEZ DESERT CAHUILLA INDIANS
TABLE OF CONTENTS
Page
FINANCIAL SECTION
Independent Auditors' Report ................................................... 3
Basic Financial Statements
Tribe-Wide Financial Statements
Statement of Net Assets ..................................................... 7
Statement of Activities ....................................................... 8
Governmental Fund Financial Statements
Balance Sheet - Governmental Funds ........................................... 11
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Governmental Funds ................................. 13
Reconciliation of Statement of Revenues, Expenditures, and
Changes in Fund Balances- Governmental Funds to Statement of Activities. . . . . . . . . . . . . . 14
Notes to the Financial Statements ............................................. 16
SINGLE AUDIT SECTION

Schedule of Federal Awards .................................................... 33
Independent Auditors' report on compliance and on internal
control over financial reporting based on an audit of financial
statements performed in accordance with
Governmental Auditing Standards .............................................. 35
Independent Auditors' report on compliance requirements
applicable to each major program and internal control over
compliance in accordance with OMB Circular A-133 ............................... 37
Schedule of Findings and Questioned Costs ........................................ 40
Corrective Action Plan ......................................................... 61
1
INDEPENDENT AUDITORS' REPORT
2
Midwest Professionals, P.L.L.C
Certified Public Accountants 215 South Court Avenue, Gaylord, MI 49735
989-732-1156 Fax 989-731-2541
INDEPENDENT AUDITORS’ REPORT
Tribal Council
Torres Martinez Desert Cahuilla Indians
P.O. Box 1160
Thermal, California 92274
We have audited the accompanying financial statements of the governmental activities, each
major fund, and the aggregate remaining fund information and the Tribal Housing Authority
discretely presented component unit of the Torres Martinez Desert Cahuilla Indians (“the
Tribe”), as of and for the year ended September 30, 2008, which collectively comprise the basic
financial statements of the Torres Martinez Desert Cahuilla Indians’ primary government as
listed in the table of contents. These financial statements are the responsibility of 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
Selnek-is Tem-Al Corporation, a discretely presented component unit of the Tribe and is
presently separately as a part of the Tribe’s basic financial statements. These component unit
financial statements were audited by other auditors whose report thereon has been furnished to
us, and our opinion, insofar as it relates to the amounts included for the Torres Martinez Desert
Cahuilla Indians, is based on the report of the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States, the provisions of
Office of Management and Budget Circular A-133, "Audits of States, Local Governments and
Non-Profit Organizations". Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures 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 provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, each major fund, and the
aggregate remaining fund information and the discretely presented component units for the
primary government of the Torres Martinez Desert Cahuilla Indians for the year then ended
September 30, 2008, and the respective changes in financial position and cash flows, where
Member of American Institute of Certified Public Accountants
Member of Native American Finance Officers Association
3
Midwest Professionals, P.L.L.C
989-732-1156 Fax 989-731-2541
Page 2
applicable, thereof for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated,
September 27, 2009 on our consideration of the Torres Martinez Desert Cahuilla Indians’
internal control over financial reporting and on our tests of its compliance with certain provisions
of laws, regulations, contracts, and grants. That report is an integral part of an audit performed
in accordance with Government Auditing Standards and should be read in conjunction with this
report in considering the results of the audit.
The Torres Martinez Desert Cahuilla Indians has not presented the management’s discussion and
analysis and budgetary comparison information that accounting principles generally accepted in
the United States of America has determined is necessary to supplement, although not required
to be part of, the basic financial statements.
As discussed in Note 13 to the financial statements, the Torres Martinez Desert Cahuilla Indians,
has expended certain grant funds in a manner that may have violated certain restrictive
provisions of the related grants. The possible outcome of these matters is uncertain at this time.
Accordingly, no provision for any liability has been made in the financial statements for possible
federal and state claims for refunds of those grant monies.
Our audit was performed for the purpose of forming an opinion on the financial statements taken
as a whole. The accompanying schedule of expenditures of federal and state 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 not a
required part of the financial statements of Torres Martinez Desert Cahuilla Indians. Such
information in that schedule has been subject to the auditing procedures applied in the audit of
the financial statements and, in our opinion, is fairly stated, in all material respects, in relation to
the financial statements taken as a whole.
Midwest Professionals, PLLC
Midwest Professionals, P.L.L.C.
September 27, 2009

Gaylord, Michigan
4
BASIC FINANCIAL STATEMENTS
5
PRIMARY GOVERNMENT FINANCIAL STATEMENTS
6
THE TORRES MARTINEZ DESERT CAHUILLA INDIAN TRIBE
Statement of Net Assets
September 30, 2008
Component Units
Selnek-Is
Governmental Tem-Al Tribal Housing
Activities Corporation Authority
Assets
Current assets
Cash and cash equivalents $ 1,486,845 $ 1,199,132 $
Due from other governments 4,975,472
Receivables - net 12,169 157,461
Other receivables 39,850
Prepaid expenses 58,596 225,568
Inventory 234,010
Total current assets 6,572,932 1,816,171 0
Noncurrent assets
Restricted cash 1,035,412
Capital assets
Capital assets not being depreciated 1,157,174
Capital assets, depreciable 3,250,531 21,857,336
Net capital assets 4,407,705 21,857,336
Total assets 10,980,637 25,365,819 0
Liabilities
Current liabilities
Accounts payable $ 796,923 $ 2,152,516 $
Accrued liabilities 337,522 667,629
Line of credit 695,312
Deferred revenue 4,773,774
Notes payable-equipment 45,701
Current portion of capital lease obligations 37,492 124,525
Current portion of notes payable 875,388 3,661,015
Payable to related party 200,000
Due to HHS 662,492
Due to AMIHA 159,201
Total current liabilities 7,642,792 7,546,698
Non-current liabilities
Compensated absences 241,385
Capital lease net of current portion 259,341
Notes payable, net of current portion 19,950,294
Total non-current liabilities 241,385 20,209,635
Total liabilities 7,884,177 27,756,333 0
Net assets
Invested in capital assets 4,581,498
Restricted (1,816,757)
Unrestricted 331,719 (2,390,514)
Total net assets $ 3,096,460 $ (2,390,514) $ 0
See Accompanying Notes to the Financial Statements.
7
Statement of Activities
For the Year Ended September 30, 2008
Program Revenues
Operating Capital Grants
Charges for Grants and and
Expenses Services Contributions Contributions
Functions/Programs
Primary Government:
Governmental activities
General operation $ 5,542,341 $ 27,543 $ 395,143 $
Economic Development 549,330 25,820
Public works 17,844 13,653 3,495
Health and general welfare 16,637 16,637
Education 42,703 33,682
General assistance 27,269
Community services 13,342,234 15,733,060
Culture and recreation 213,893 173,289
Redevelopment and housing 221,315
Environmental management 192,111 164,280
Indirect costs 1,437,707
Interest on long-term debt 29,491
Unallocated depreciation and
amortization 419,072
Total governmental activities 21,830,632 240,305 16,567,612 0
Component unit
Selnek-Is Tem-Al Corporation $ 4,490,068 $ 1,220,351 $ $
TMHA 261,649 99,670 237,325
Total component unit $ 4,751,717 $ 1,320,021 $ 237,325 $
General revenues
CA non-gaming tribes revenue
Interest and investment income
Gaming Proceeds Red Earth Casino
Indirect cost transfers
Other
Transfers from/(to) component units
Transfers in/(out)
Total general revenues and
transfers
Change in net assets
Net assets - ending
8
Net (Expense) RComponent Units
Selnek-Is Tribal
Governmental Tem-Al Housing
Activities Corporation Authority
$ (5,119,655) $ $
(523,510)
(696)
(9,021)
(27,269)
2,390,826
(40,604)
221,315
(27,831)
(1,437,707)
(29,491)
(419,072)
(5,022,715) 0 0
(1,469,675)
75,346
(1,469,675) 75,346
1,100,000
497,425
49,990
1,437,707
451,297
132,945 (132,945)
(623,674)
3,669,364 (1,469,675) (756,619)
(1,353,351) (1,469,675) (681,273)
$ 3,096,460 $ (2,390,514) $ 0
9
GOVERNMENTAL FUND FINANCIAL STATEMENTS
10
Balance Sheet - Governmental Funds
September 30, 2008
Nonmajor Total
Governmental Governmental
General Fund TANF Funds Funds
Assets
Current assets
Cash and cash equivalents $ 946,702 $ $ 540,143 $ 1,486,845
Due from other governments 4,444,576 530,896 4,975,472
Accounts receivable 9,448 2,721 12,169
Employee receivable 23,437 1,725 14,688 39,850
Prepaid expenses 23,893 23,893
Due from other funds 547,492 691,038 15,000 1,253,530
Total assets $ 1,527,079 $ 5,163,953 $ 1,100,727 $ 7,791,759
Liabilities and fund balances

Current liabilities
Accounts payable $ 234,615 $ 386,024 $ 176,284 $ 796,923
Accrued liabilities 13,262 271,687 52,572 337,521
Deferred revenue 4,491,242 282,532 4,773,774
Due to other funds 691,038 15,000 547,492 1,253,530
Due to other governments 159,201 159,201
Total liabilities 1,098,116 5,163,953 1,058,880 7,320,949
Fund balances
Unreserved, reported in
General fund 428,963 428,963
Special revenue fund 41,847 41,847
Total fund balances 428,963 0 41,847 470,810
Total liabilities and fund balances $ 1,527,079 $ 5,163,953 $ 1,100,727 $ 7,791,759
11
Reconciliation of Governmental Fund Balances

to the Statement of Net Assets
September 30, 2008
Total governmental fund balances $ 470,810

Amounts reported for governmental activities in the statement of net assets are different
because:
Capital assets used in governmental activities are not financial resources and therefore
are not reported in the funds. 4,407,706
Prepaid expenses are are amortized over the benefited periods, but are expended in
the period of acquisition in the funds: 34,701
Long-term loans payable are not due and payable in the current period and therefore
are not reported in the funds. (1,816,757)
Net assets - governmental activities, per statement of net assets $ 3,096,460
12
Statement of Revenues, Expenditures and Changes in

Fund Balance - Governmental Funds
Nonmajor Total
Governmental Governmental
General Fund TANF Funds Funds
Revenues
Intergovernmental $ 15,018,743 $ 1,548,869 $ 16,567,612
Indirect cost recoveries $ 1,437,707 1,437,707
CA non-gaming tribes revenue 1,100,000 1,100,000
Interest investment income 461,447 34,952 1,026 497,425
Tero fees 11,000 11,000
Charges for goods and services 186,941 186,941
Rental revenue 14,368 14,368
Licenses, permits, fines, and forfeits 27,996 27,996
Other 483,932 10,526 6,833 501,291
Total revenues 3,723,391 15,064,221 1,556,728 20,344,340
Expenditures
Current
General operations $ 4,098,451 $ 1,096,024 $ 365,351 $ 5,559,826
Economic development 549,330 549,330
Public works 14,349 3,495 17,844
Health and general welfare 16,637 16,637
Education 42,703 42,703
Community services 139,122 12,519,852 683,260 13,342,234
Culture and recreation 213,893 213,893
Bad debt expense 27,269 27,269
Environmental management 192,111 192,111
Indirect costs 1,390,495 47,212 1,437,707
Debt service
Principal 42,756 42,756
Interest 20,377 9,114 29,491
Capital outlay 5,980 239,299 245,279
Total expenditures 5,062,791 15,064,221 1,590,068 21,717,080
Revenues over (under) expenditures (1,339,400) 0 (33,340) (1,372,740)
Other financing sources (uses)

Transfers in/(out) 99,666 33,278 132,944
Total other financing sources (uses) 99,666 0 33,278 132,944
Net change in fund balances (1,239,734) 0 (62) (1,239,796)

Fund balances, beginning of year 1,591,251 0 41,909 1,633,160
Prior period adjustments 77,446 77,446
Fund balances, as restated 1,668,697 0 41,909 1,710,606
Fund balances, end of year $ 428,963 $ 0 $ 41,847 $ 470,810
13
Reconciliation of the Statement of Revenues,

Expenditures and Changes in Fund Balance of
Governmental Funds to the Statement of Activities
Net change in fund balances - governmental funds $ (1,239,796)

Amounts reported for governmental activities in the statement of activities are different
because:
Capital outlays are reported in governmental funds as expenditures.
However, in the statement of activities, the cost of those assets is
allocated over their estimated useful lives as depreciation expense.
In the current period, these amounts are:
Capital outlays - 245,279
Depreciation and amortization expense - (419,072)
Amount by which capital outlays are less than depreciation in
current period (173,793)
Compensated absences are expensed as used in the governmental funds. However,

they are expensed as earned on the statement of activities. (17,219)
Repayment of principal on long-term debt is reported in the governmental funds as an
expenditure, but is reported as a reduction in long-term debt in the statement of net
assets and does not affect the statement of activities. The amount of long-term debt
principal payment in the current year is: 42,756
Expenditures for certain items are recognized in the period of acquisition in the funds,
but are required to be amortized over the benefited period in the Statement of
Activities 34,701
Change in net assets of governmental activities $ (1,353,351)
14
NOTES TO THE FINANCIAL STATEMENTS
15
Notes to the Financial Statements
Note 1 - Nature of Business and Summary of Significant Accounting Policies

The Torres Martinez Indian Reservation, located in Thermal, California, was established by
Executive Order on May 15, 1876.
The Torres Martinez Desert Cahuilla Indian Tribe (the "Tribe") is a federally recognized Indian tribe
located in California, comprised of approximately 445 individual members. Within certain
restrictions imposed by the U.S. Government, the Tribe has jurisdiction over activities occurring on
the reservation and has rights to economic and other benefits resulting from the use of reservation
property and resources.
The Tribe is governed by an elected Tribal Council (Council), consisting of eight members. It
operates under a constitution that was approved by the United States government on November 9,
1997. The Indian Reorganization Act of 1934 and subsequent federal legislation govern the
relationship between the Tribe and the United States government. In accordance with its
Constitution, the Tribe enacts laws through resolutions of the Council.
The financial activities of the Tribe and its enterprises are confidential. The accompanying
financial statements and related notes are to be distributed only based on authorization from
Council or its designee. Information related to federal grants and contracts required by U.S. Office
of Management and Budget Circular A-133 is public information and is available on request from
the Tribal Treasurer.
The financial statements of the Tribe conform with generally accepted accounting principles
(GAAP) applicable to government units. The Governmental Accounting Standards Board (GASB)
is the standard-setting body for governmental accounting and financial reporting. GASB
statements and interpretations constitute GAAP for governments, including Indian Tribes. As
permitted by GASB Statement 20, the Tribe has elected not to apply pronouncements of the
Financial Accounting Standards Board (FASB) issued subsequent to November 30, 1989 in the
accounting for business-type activities and enterprise funds.
The accompanying financial statement have been prepared in accordance with the reporting model
defined by GASB Statement 34, Basic Financial Statements - and Management's Discussion and
Analysis - for State and Local Governments. In addition, GASB Statement 37, Basic Financial
Statements-and Management's Discussion and Analysis-for State and Local Governments:
Omnibus and GASB Statement 38, Certain Financial Statement Note Disclosures, are also
applicable in conjunction with GASB Statement 34.
A. Reporting Entity
Legal Entity
All the entities that are not legally separate are part of the Tribe's primary government for financial
reporting purposes. The legal entity includes:
 Governmental and regulatory offices, agencies and departments of the Tribe.
16
Note 1 - Nature of Business and Summary of Significant Accounting Policies - Continued
A. Reporting Entity - Continued

Component Units
Component units are legally separate organizations for which the Tribe is financially accountable
and/or for which the nature and significance of their relationship with the Tribe is such that
exclusion would cause the financial statements to be misleading or incomplete.
The Tribe is considered to be financially accountable for an organization when either:
1. The Tribe appoints a voting majority of the organization's governing body and can
impose its will on that organization; or
2. There is a potential for the organization to provide specific financial benefits to, or
impose specific financial burdens on, the Tribe.
Discrete Component Units
Component units not meeting the criteria for blending with the primary government are discretely
presented in the financial statements. Discrete presentation entails reporting component unit
financial data in a column separate from the financial data of the Tribe's primary government.
The Selnek-Is Tem-Al Corporation ("Selnek") is considered a discrete component unit accountable
to the Tribe's primary government. Two Council members sit on the five-member Selnek Board of
Directors, and Selnek is responsible for managing the Tribe's economic development. Selnek's
financial statements as of and for the year ended December 31, 2007 were separately audited.
Copies of those audited financials can be obtained by contacting The Torres Martinez Desert
Cahuilla Indian Tribe.
The Torres Martinez Tribal Housing Authority ("TMTHA") is also considered a discrete component
unit accountable to the Tribe's primary government. Two Council members sit on the
seven-member Board of Commissioners. TMTHA is responsible for the undertaking, construction,
maintenance and operation of the housing projects that were previously managed by the Tribe and
All Mission Indian Housing Authority (AMIHA). TMTHA does not issue a separate audit report.
B. Summary of Significant Accounting Policies
Basis of Presentation
Basic Financial Statements
The basic financial statements of the Tribe include the government-wide and the fund financial
statements. The focus is on the Tribe as a whole in the government-wide financial statements,
while reporting additional and detailed information about the Tribe's major governmental activities
in fund financial statements.
17

B. Summary of Significant Accounting Policies - Continued
Government-Wide Financial Statements
The government-wide statement of net assets and statement of activities display information about
the Tribe's primary government. These statements include the financial activities of the overall
Tribe, except for fiduciary activities. Eliminations have been made to minimize the double counting
of internal activities.
Government activities are financed primarily through investment income, intergovernmental

revenues, indirect cost reimbursements, licenses and permits, and taxes.
The government-wide statement of activities reflects the cost of programs and functions (social
services, environmental, education, etc.) reduced by directly associated revenues (program
income, and operating and capital grants) to arrive at the net revenue or expense for each program
and function. Net program revenue or expense for governmental activities are then adjusted for
general revenues to determine the change in net assets for the year. Indirect expenses such as
support services and administration incurred in the general government and other
functions/activities are not allocated to programs/functions that they may benefit. When both
restricted and unrestricted resources are available for use, it is the Tribe's policy to use restricted
resources first, then unrestricted resources as they are needed.
Fund Financial Statements

The fund financial statements provide information about the Tribe's funds. Separate statements for
the governmental fund category are presented. The emphasis of fund financial statements is on
major governmental and enterprise funds, each displayed in a separate column. All remaining
governmental and enterprise funds are aggregated and reported as nonmajor funds.
The Tribe reports the following major governmental funds:
General Fund - The general fund is the Tribe's primary operating fund. It accounts for all
governmental financial resources, except those required to be accounted for in another fund.
TANF - DHHS - The Tribal Temporary Aid to Need Families (TANF) fund accounts for the Tribe's
TANF program revenues and related activities.
18

Basis of Accounting
The government-wide fund financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Under this method revenue is recorded
when earned and expenses are recorded when liabilities are incurred, regardless of when the
related cash flow takes place. Grants and similar items are recognized as revenue as soon as all
eligibility requirements imposed by the provider have been met.
Governmental funds are reported using the flow of current financial resources measurement focus
and the modified accrual basis of accounting. Under this method revenue is recognized when
measurable and available. The Tribe considers all revenue reported in the governmental funds to
be available if the revenue is collected within sixty days after year-end. Expenditures are recorded
when the related fund liability is incurred. General capital asset acquisitions are reported as
expenditures in governmental funds. Proceeds from long-term debt and acquisitions under capital
leases are reported as other financing sources.
Investments
Investments are recorded at market value. Fair value is determined by the reported market value
of securities and mutual funds trading on national exchanges.
The Tribe receives advance payments of certain grant awards. Section 112 of the Department of
Interior and Related Agencies Act, 1998, P.L. 105-82, Nov. 14, 1997, specifies investment options
as follows:
Advance payments made under this title to Indian Nations, tribal organizations, and tribal consortia
pursuant to the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450 et seq.)
may be invested by the Indian Nation, tribal organizations, or consortium before such funds are
expended for the purposes of the grant, compact or annual finding agreement so long as such
funds are: (1) invested by the Indian Nation, tribal organization, or consortium only in obligations of
the United States, or in obligations or securities that are guaranteed or insured by the United
States, or mutual (or other funds) registered with the Securities and Exchange Commission and
which only invest in obligations of the United States or securities that are guaranteed or insured by
the United States; or (2) deposited only into accounts that are fully collateralized to ensure
protection of the funds, even in the event of a bank failure.
Accounts and Loans Receivable

Accounts receivable includes normal business receivables and loans to members of the Tribe.
The Tribe has not adopted any policies for identifying potential uncollectible accounts.
19

Internal Balances
The primary government controls disbursements through a 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 from other funds, as well as the
amounts owed to other funds are reflected in the financial statements as interfund receivables and
payables.
Interfund transfers are flows of assets (such as cash or goods) without equivalent flows of assets in
return and without a requirement for repayment.
Capital Assets
Capital assets are recorded at historical cost. Contributed assets, including those from the federal
government, are recorded at estimated fair value on the date received. Additions, improvements
and other capital outlays that significantly extend the useful life of an asset are capitalized. Costs
incurred for repairs and maintenance are expensed as incurred. Reservation lands and related
resources (such as timber stands and other natural resources) are not capitalized because there is
not an historical cost associated with these assets.
Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital
asset accounts) and estimated useful lives of capital assets are as follows:
Governmental Funds Capitalization

Asset Category Threshold Useful Life
Buildings and improvements $5,000 40 years
Equipment, vehicles, and fixtures $5,000 5 years
Computer equipment $5,000 3
Modular Buildings $5,000 15
Wells/Pump Houses $5,000 15
Depreciation is provided using the straight-line method over estimated useful lives.
Construction in Progress
Construction-in-progress represents the construction costs incurred related to infrastructure and
other building projects. Upon completion, such costs are reclassified to the appropriate capital
asset classification and depreciation is commenced. No interest costs were capitalized during
September 30, 2008.
20

Fund Equity
In the government-wide financial statements, equity is classified as net assets and displayed in
three components:
 Invested in capital assets, net of related debt - Consists of capital assets, including
restricted capital assets, net of accumulated depreciation and reduced by the
outstanding balance of any borrowing that is attributable to the acquisition or
improvement of those assets.
 Restricted net assets - Consists of net assets with constraints placed on the use
either by (a) external groups such as creditors, grantors, or laws and regulations of
other governments; or (b) law through enalbling legilation.
 Unrestricted net assets - All other net assets that do not meet the definitions of
above.
In the fund financial statements, governmental fund equity is classified as unreserved fund
balance. Fund balance is further classified as reserved or unreserved. Reserves represent those
protions of fund balance that are not available to be appropriated for expenditure or legally
segregated for a specific future use.
Federal Awards and Grants

The Tribe has received federal funds for specific purposes that are subject to review and audit by
the grantor agencies. Although such audits could generate expenditure disallowances under the
terms of the grants, it is believed that any required reimbursement would not be material.
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 them, 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 liability for deferred
revenues is removed from the combined balance sheet and revenue is recognized.
Compensated Absences
It is the Tribe's policy to permit employees to accumulate up to 200 hours of earned but unused
vacation leave benefits and carry them forward into following years. Employees may be paid for
unused vacation leave upon separation from service. Sick leave is not accumulated from year to
year. Vacation pay liability has not been reported in the governmental funds financial statements
because the majority of the balance is not expected to be liquidated with current available
resources.
21

Advertising Costs
Advertising costs are expensed as incurred. During the year ended September 30, 2008
advertising costs amounted to $12,453.
Indirect Costs
The Tribe's last negotiated indirect cost rate was 11.94% for fiscal year 2007. Indirect costs
represent costs of administration and operation, including accounting costs, which cannot be
readily allocated to individual programs. These costs are paid from the indirect cost pool and
allocated to applicable programs, based on a negotiated indirect cost agreement. The rate of
11.94% of total direct costs, less capital expenditures and pass through funds, was charged to
benefiting programs.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Accordingly, actual results could differ from those estimates.
Federal and State Income Taxes

The Torres Martinez Desert Cahuilla Indian Tribe, as a federally recognized sovereign government,
is exempt from federal and state income taxes. As such, no income taxes have been provided for
in the accompanying financial statements.
Budgetary Data
The Tribal Council does not establish a formal annual budget for its governmental general or major
special revenue funds because it is not legally required and, therefore, presentation of budgetary
comparison information is not required.
22
Note 2 - Cash and Cash Equivalents

Cash consists of the following at September 30, 2008:
Governmental Activities
Carrying Bank Balance
Amount
Demand deposits $ 1,486,845 $ 2,817,531
Total cash and cash equivalents $ 1,486,845 $ 2,817,531
Except as shown below, as of September 30, 2008 the Tribe's accounts were insured by FDIC.
Custodial Credit Risk - Deposits

Custodial credit risk is the risk that in the event of a bank failure, the government's deposits may not be
returned to it. The Tribe does not have a deposit policy for custodial credit risk. As of September 30,
2008, $1,598,143 of the government's bank balance of $2,817,531 was exposed to custodial credit risk
as follows:
2008
Uninsured and uncollateralized $ 1,598,143
Note 3 - Receivables
Governmental receivables at September 30, 2008 are summarized as follows:
General
Fund USDA TANF Total
Receivables:
Employees $ 6,413 $ 1,725 $ 8,138
Revolving loans $ 14,688 14,688
Other 26,472 2,721 29,193
Gross receivables 32,885 14,688 4,446 52,019
Net total receivables $ 32,885 $ 14,688 $ 4,446 $ 52,019
Note 4 - Due from Other Governments

The following amounts are due from the respective funding agencies at September 30, 2008 for
grant/contract program reimbursements:
Governmental Activities:
U.S. Government
Interior $ 261,099
Health and Human Services 14,913
Environmental Protection Agency 128,781
Institute of Museum and Library 6,103
Housing and Urban Development 115,310
State of California and other 4,449,266

Total Governmental Activities $ 4,975,472
23
Note 5 -Capital Assets

Capital assets activity for the year ended September 30, 2008, is summarized as follows:
Balance Prior Period Balance

10/1/2007 Additions Deletions Adjustments 9/30/2008
Capital assets not being depreciated
Land $ 377,955 $ $ $ $ 377,955
Construction in progress 551,071 228,148 779,219
Total capital assets not being
depreciated 929,026 228,148 0 0 1,157,174
Capital assets being depreciated
Land improvements 41,267 41,267
Buildings and improvements 1,807,802 1,807,802
Modular Buildings 1,045,609 1,045,609
Computers & Equipment 1,035,899 17,131 1,053,030
Vehicles 1,055,925 1,055,925
Wells/Pump Station 780,759 780,759
Total capital assets being
depreciated 5,767,261 17,131 0 0 5,784,392
Less accumulated depreciation
Land improvements 9,960 2,751 12,711
Buildings and improvements 219,146 45,632 264,778
Modular Buildings 377,081 69,707 446,788
Computers & Equipment 908,703 52,614 961,317
Vehicles 409,092 196,317 605,409
Wells/Pump Station 190,806 52,051 242,857
Total accumulated depreciation 2,114,788 419,072 0 0 2,533,860
Net capital assets being
depreciated 3,652,473 (401,941) 0 0 3,250,532
Net capital assets $ 4,581,499 $ (173,793) $ 0 $ 0 $ 4,407,706
Depreciation expense was allocated as follows on the statement of activities.
Government Activities
Community services $ 12,100
General operation $ 130,668
Health and general welfare 251,515
Natural resources 11,564
Culture and recreation 13,225
Total governmental activities depreciation expense $ 419,072
24
Note 6 - Related Party Transactions

In October 2003, the Tribe entered into a lease with Selnek to lease certain real estate property in
Imperial County, California. The lease provides for the Company to construct and operate a highway
travel center with a gas station, convenience store, and related amenities. The term of the lease is
fifty-five years with an option for an additional 25 years. The annual rent is $20.
The Tribe made contributions to Selnek of $100,100 and $10,761, respectively, during the years ended
December 31, 2007 and 2006. Selnek is carrying a note payable to the Tribe for $200,000 for funds
advanced in 2005 and 2006 at December 31, 2007; even though, the Tribe determined that amount is
uncollectible and reported the $200,000 loan balance as a transfer to related party at 9/30/07. The
decision to expend the note payable balance was not approved until after the Selnek 12/31/07 audit was
isssued and prior to the issuance of the 9/30/07 Tribal audit.
The Tribe paid $9,448 worth of expenditures on behalf of Selnek at 9/30/08, which the Tribe has
recorded as a receivable. These expenditures are in addition to the contributions that were made to
Selnek listed in the above paragraph.
The Tribe transferred the Housing Authority component unit to All Mission Indian Housing Authority in
June 2008. All account balances were transferred to AMIHA, except for the MEPA liability balance due
to AMIHA from the Tribe, which amounted to $159,200 at September 30, 2008. The MEPA liability was
subsequently paid to AMIHA during fiscal year 2009. The Indian Community Development Block Grant
and the Indian Housing Block Grant funds, previously recorded in the financial statements under the
Housing Authority Component Unit, were received by the Tribe and passed through to AMIHA after June
2008. AMIHA now administers these grants on behalf of the Tribe.
25
Note 7 - Interfund Activity

Interfund balances are summarized as follows:
Due From Due To Total
Non-major funds General fund $ 547,492
General fund TANF $ 691,038
TANF Non-major funds $ 15,000
The Tribe uses a pooled cash account for all general fund and non-major fund disbursements. The
Interfund balances represent each fund's allocated share of pooled cash. The net amount of funds
advanced by the general fund to other non-major governmental funds for expenditures is $550,786 as of
September 30, 2008. Amounts are non-interest bearing, and generally due upon demand.
Interfund transfers are summarized as follows:
Transfers From Transfers To Purpose Total
General Fund Non-major funds Close-out grant $ 33,278
Housing Authority General Fund Transfer Housing Authority to General $ 132,945
fund
Housing Authority Other Entity Transfer Housing Authority to AMIHA $ 623,674
Note 8 - Deferred Revenue

Governmental funds report deferred revenue in connection with receivables for revenues that are not
considered to be available to liquidate liabilities of the current period. Governmental funds defer revenue
recognition in connection with resources that have been received, but not yet earned. At the end of the
current fiscal year, the various components of deferred revenue reported in the governmental funds were
as follows:
U.S. Government
Interior $ 220,358
Health and Human Services 4,495,014
Environmental Protection Agency 54,290
State of California and other 4,109
Total Governmental Activities $ 4,773,771
The deferred grant revenue represents payments made by the granting agencies that have not been
spent as of September 30, 2008.
26
Note 9 - Payables
Accounts payable and accrued liabilities at September 30, 2008, were as follows:
Accrued
Vendors Expenses MEPA Total
General fund $ 234,615 $ 13,264 $ $ 247,879
TANF 386,024 271,687 657,711
Nonmajor governmental funds 176,284 52,571 228,855
Total governmental
activities $ 796,923 $ 337,522 $ 0 $ 1,134,445
Note 10 - Lease Commitments

The Tribe leases its building and land from Biometric Solution Technologies under a capital lease. The
lease requires minimum monthly payments of tribal council, through December 10, 2009. At the
expiration of the lease term, the Tribe may purchase the building and land for $0. The Tribe made
payments of $42,756 to Biometric Solution Technologies for the year ended September 30, 2008.
A summary of changes in capital leases for the year ended September 30, 2008 is as follows:
Balance Balance
10/2/2007 Additions Reductions 9/30/2008
$ 80,247 $ 0 $ (42,756) $ 37,491
Obligations under capital leases at September 30, 2008 were as follows:
2009 $ 39,900
-
-
Total minimum lease payments 39,900
Less: Amount representing interest costs (2,409)
Present value of minimum lease payments $ 37,491
The future minimum lease payments at September 30, 2008 are as follows:
Years Ending September 30, Principal Interest Total
2009 $ 37,491 $ 2,409 $ 39,900
Total $ 37,491 $ 2,409 $ 39,900
27
Note 11 -Long-Term Debt

Changes in long-term debt for the year ended September 30, 2008, were as follows:
Balance Balance
10/1/2007 Additions Reductions 9/30/2008 Amount Due W
Governmental
Notes payable $ 1,537,880 $ $ $ 1,537,880 $ 875,388
Compensated absences 146,721 344,243 249,579 241,385
Notes payable at September 30, 2008, are summarized as follows:
In February 2007 the Tribe reached a settlement with the Department of Health
and Human Services (HHS) over the misuse of TANF funds for the years ending
September 30, 2002 and 2003. In that settlement the Tribe agreed to pay
penalties to HHS in the amounts of $625,380 and $912,500 respectively. The
payment plans of the settlement call for quarterly payments of $25,000
beginning September 30, 2006 for the 2002 penalty and $25,000 quarterly
payments beginning March 31, 2008 for the 2003 penalty. Amounts due under
the settlement agreement are non-interest bearing. $ 1,537,880
Less current portion (875,388)

Total long-term debt, net of current maturities $ 662,492
As of December 2008 the Tribe is not in compliance with the terms of the
agreement.
Note 12 - Line-of-Credit
The Tribe had a line of credit agreement with Smith Barney. The line of credit was fully collateralized by
securities held in the Tribe's Smith Barney Account and allowed maximum borrowings of the sum of the
loanable values of each class of eligible securities contained in the Tribe's Smith Barney accounts,
computed as of the close of the New York Stock Exchange (NYSE) trading day on which an extension of
credit is made. The line of credit account was closed as of November 16, 2007.
Balance Balance
10/1/2007 Additions Reductions 9/30/2008
Governmental
Line of Credit - Principal $ 1,398,802 $ $ (1,398,802) $ 0
Line of Credit - Accrued Interest 252,343 20,377 (272,720) 0
Total Line-of-Credit $ 1,651,145 $ 20,377 $ (1,671,522) $ 0
28
Note 13 - Contingent Liabilities and Commitments

Federal and State Grants
Many of the Tribe's programs are funded by various federal and state agencies. Expenditures made
under such programs are subject to review and approval or disallowance by the agencies. Any costs
disallowed by the agencies are subject to negotiation and are not recorded as liabilities until mutually
agreed-upon.
Questioned costs relating to the Tribe's management of federal grants during the fiscal years 2007
($356,290) and 2008 ($62,246) totaled $ 418,536. Details of these questioned costs can be found in
Part C, Schedule of Findings and Questioned Costs, which is identified, as part of this report, in the table
of contents. The current financials do not reflect any liabilities that may result from the resolution of
these questioned costs. The impact of these audit findings on the Tribe's financial statements cannot be
determined at this time.
Other
The Tribe is subject to lawsuits and claims that arise out of the normal course of business. Although the
outcome of such matters cannot be forecast with certainty, it is the opinion of management and legal
counsel that the likelihood is remote that any such claims or proceedings will have a material adverse
effect on the Tribe's financial position, results of operations, or liquidity.
As indicated in Note 1, Tribal employees are paid for unused annual leave at separation with carryover of
annual leave to the next fiscal year restricted to 200 hours. The Tribe's policy is to recognize the costs of
compensated absences when actually paid to the employees.
The Tribe maintains a solid waste landfill and is responsible for certain closure and post-closure care
costs as defined by state and federal laws. An estimated amount of post-closure care costs to be
incurred by the Tribe has not been determined. The Tribe has historically been awarded contracts from
the U.S. Government to fund closure and post-closure accounts.
The Tribe is required to provide guarantees on two loan agreements for Selnek. One loan is a
commercial construction loan to be used for building the Casino with a long-term balance of 18,969,722
as of 12/31/2007. The second is a real estate term loan agreement for the Travel Center with a balance
of $4,641,587 as of 12/31/07. 90% of the real estate loan agreement is guaranteed by the United States
Department of Interior.
Selnek is operating under a compact between the Torres-Martinez Cahuilla Indians and the State of
California, which was approved by the United States Department of Interior on November 26, 2003 and
was effective January 16, 2004 when it was published in the Federal Register. The compact contains
specific requirements, including the payment of a percentage of its net win from the operations of gaming
devices. The percentages are three percent in the first year, four percent in the second year of
operations and five percent thereafter.
29
Note 14 - Risk Management

The Tribe faces a considerable number of risks of loss, including:
a) damage to and destruction and loss of property and contents;

b) environmental damage;
c) workers' compensation (i.e., employee injuries);
d) tort actions; and,
e) errors and omissions.
A variety of methods is used to provide insurance for these risks. Commercial insurance policies,
transferring all risks of loss, except for relatively small deductible amounts, are purchased for property
and content damage, tort actions, and errors and omissions. Settled claims for these risks have not
exceeded commercial insurance coverage for the past three years. The Housing Authority participates in
the Tribe's commercial insurance policy and Selnek has their own insurance policy.
Given the lack of coverage available, the Tribe has no coverage for potential losses due to environmental
damages. The amounts of any potential future losses are unknown.
Note 15 - Economic Dependence

The Torres Martinez Desert Cahuilla Indian Tribe receives approximately 73% of its operating revenue
from the TANF grant provided by the Department of Health and Human Services.
Note 16 - Prior Period Adjustments

Certain prior period adjustments were recorded effective October 1, 2007 to correct/reclassify various
balance sheet accounts and correct errors made in prior years as follows:
Governmental
Activities
Beginning net assets/fund balances, as previously reported $ 4,449,811
Changes to:
Long-term liabilities 77,447
Beginning net assets/fund balances, as restated $ 4,527,258
30
Note 17 - Retirement Plan

Employee Benefit Plan
The Tribe has established a defined contribution 401(k) retirement plan for the benefit of its employees
and employees of its enterprises, effective January 1, 1999, entitled the (the "Plan"). Generally the
Plan's eligibility requirements are as follows:
 each employee will be eligible to be a participant in the Plan after one full year of eligible
employment and the attainment of age eighteen;
 a participant employee's interest shall fully vest after six years;
 a participant employee may direct the employer to make a contribution to the Plan in an
amount payable to the participant from his/her current salary;
 the employer may make a voluntary matching contribution to the Plan on behalf of each
participant employee;
 the Plan includes a rollover provision; and
 distribution of benefits may occur when a participant reaches retirement, dies or separates
from employment.
During the year ended September 30, 2008, the Tribe recorded expenses for matching contributions to
the Plan of approximately $116,686.
Note 18 - Per Capita Distributions

The The Torres Martinez Desert Cahuilla Indian Tribe legislature voted to make per capita distributions
from the money received from other California tribes that have gaming. During the year ended
September 30, 2008, distributions were made to Tribal members age 18 and older.
At September 30, 2008, distributions were made to eligible members in the amount of $1,198,338.
31
SINGLE AUDIT SECTION
32
Schedule of Expenditures of Federal, State and Other Awards
Grantor/Program Title Federal

Federal Grantor/Pass Through CFDA Federal
Grantor/Program Title Number Expenditures
U.S. Department of Housing and Urban Development

Direct Programs
Indian Housing Block Grant 14.867 $ 21,675
Indian Housing Block Grant 14.867 20,915
*Indian Community Development Block Grant 14.862 221,315
*Indian Community Development Block Grant 14.862 371
Total U.S. Department of Housing and Urban Development 459,011
U.S. Department of Interior

Direct Programs
*Consolidated Tribal Government Program 15.021 215,769
*Consolidated Tribal Government Program - FY08 DCSC 15.024 24,980
Water Resource 15.037 14,851
Environmental Management 15.041 5,222
Total U.S. Department of Interior 260,821
U.S. Environmental Protection Agency

Direct Programs
Clean Air Act 66.034 70,707
Clean Air Act 66.038 469
*Performance Partnership Grants 66.605 687,048
Lead Awareness 66.715 31,611
Water Infrastructure 66.202 41,421
General Assistance Program III 66.926 199,651
Total Environmental Protection Agency 1,030,907
Institute of Museum and Library Services

Direct Programs
Native American Library Technical Services 45.311 6,000
Native American Library Services-Enhancement 45.311 103
Total Institute of Museum and Library Services 6,103
U.S. Department of Health and Human Services

Direct Programs
Child Care - Mandatory 93.576 21,167
Total U.S. Department of Health and Human Service 21,167
TOTAL EXPENDITURES OF FEDERAL AWARDS $ 1,778,010
* tested as a major program under OMB A-133
33
Torres Martinez Desert Cahuilla Indian Tribe
Notes to Schedule of Expenditures of Federal and State Awards
for the Year Ended September 30, 2008
Note A- Basis of Accounting
The accompanying schedule of expenditures of Federal and State Awards includes the
Federal and State Grant activity of Torres Martinez Desert Cahuilla Indians and is
presented on the modified accrual basis of accounting. The information in this schedule
is presented in accordance with the requirements of OMB Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations.Therefore, some amounts
presented in this schedule may differ from amounts presented in, or used in the
preparation of, the basic financial statements.
Note B-Subrecipients
The Torres Martinez Desert Cahuilla Indians did not provide federal awards to
subrecipients during the fiscal year.
Note C-Outstanding Federal Loans
The Torres Martinez Desert Cahuilla Indian Tribe has no federal loan balances
outstanding at September 30, 2008.
Note D-Reconciliation of Reported Expenditures to Financial Statement Totals
The following is a reconciliation of total federal expenditures reported on the Schedule of

Expenditures of Federal and State Awards to the federal revenue total reported on the
Tribe’s statement of revenues, expenditures, and changes in fund balance-
governmental funds for the year ending September 30, 2008 is as follows:
Intergovernmental Expenditures reported per financials $ 21,717,080

Less: General Fund expenditures (5,062,791)
Less: Program income (53,337)
Less: State Grant expenditures (15,026,927)
Plus: Housing Authority grant expenditures 237,325
Less: Transfers (33,278)
Less: Excess expenditures over revenues (62)
Adjusted Expenditures per Governmental Financials $ 1,778,010
Federal Expenditures per Schedule of Awards $ 1,778,010
34
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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
Tribal Council
P.O. Box 1160
We have audited the basic financial statements of the Torres Martinez Desert Cahuilla Indians as
of and for the year ended September 30, 2008, and have issued our report dated September 27,
2009. We conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting

In planning and performing our audit, we considered Torres Martinez Desert Cahuilla Indians’
internal control over financial reporting as a basis for designing our auditing procedures for the
purpose of expressing our opinions on the basic financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the Torres Martinez Desert Cahuilla Indians’
internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the Torres Martinez Desert Cahuilla Indians’ internal control over financial
reporting.
A control deficiency exists when the design or operation of a control does not allow management
or employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination
of control deficiencies, that adversely affects the Torres Martinez Desert Cahuilla Indians’ ability
to initiate, authorize, record, process, or report financial data reliably in accordance with
generally accepted accounting principles such that there is more than a remote likelihood that a
misstatement of the Tribe’s financial statements, that is more than inconsequential, will not be
prevented or detected by the Tribe’s internal control.
We consider the deficiencies described in the accompanying schedule of findings and question
costs to be significant deficiencies in internal control over financial reporting as findings 06-01,
06-04, and 07-01.

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Page 2
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in

more than a remote likelihood that a material misstatement of the financial statements will not be
prevented or detected by the Tribe’s internal control.
Our consideration of the internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and would not necessarily identify all deficiencies
in internal control that might be significant deficiencies or material weaknesses. However, of the
significant deficiencies described above, we consider findings 06-04, and 07-01 to be material
weaknesses.
Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Torres Martinez Desert Cahuilla
Indians’ financial statements are free of material misstatements, 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 instances of noncompliance or other matters that are required to
be reported under Government Auditing Standards which are described in the accompanying
schedule of findings and question costs as items 08-01 and 08-02.
This report is intended solely for the information and use of the Torres Martinez Desert Cahuilla
Indians Tribal Council, management of the Torres Martinez Desert Cahuilla Indians, and
federal/state awarding agencies and is not intended to be and should not be used by anyone other
than these specified parties.
September 27, 2009

Gaylord, Michigan

36
989-732-1156 Fax 989-731-2541
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH

MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN
ACCORDANCE WITH OMB CIRCULAR A-133
Tribal Council
P.O. Box 1160
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 Management and Budget (OMB)
Circular A-133 Compliance Supplement that are applicable to each of its major federal and state
programs for the year ended September 30, 2008. Torres Martinez Desert Cahuilla Indians’
major federal programs are identified in the summary of auditors’ 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 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.
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 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 requirements and performing such other procedures, as
we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion. Our audit does not provide a legal determination of Torres Martinez
Desert Cahuilla Indians’ compliance with those requirements.

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Page 2
As described in findings: 06-07, 06-13, 07-01, 07-03, 08-01 and 08-02 in the accompanying
schedule of findings and questioned costs, the Torres Martinez Desert Cahuilla Indians did not
comply with requirements regarding Allowable Costs/Cost Principles, Cash Management, and
Reporting that are applicable to these programs:
Federal Program CFDA#
Other Aid to Tribal Governments 15.020
Temporary Aid for Needy Families 93.558
Performance Partnership 66.605
Indian Housing Block Grant 14.867
Community Development Block Grant 14.862
State Program
TANF-Maintenance of Effort State of California- DSS
Compliance with such requirements is necessary, in our opinion, for the Tribe to comply with the
requirements applicable to those programs.
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 each of its major federal/state programs for the year
ended September 30, 2008.
Internal Control Over Compliance
The management of the Torres Martinez Desert Cahuilla Indians is responsible for establishing
and maintaining effective control over compliance with 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 major federal and state programs in
order to determine our auditing procedures for the purpose of expressing our opinion on
compliance, but not for the purpose of expressing an opinion on the effectiveness of the internal
over compliance. Accordingly, we do not express an opinion on the effectiveness of the Tribe’s
internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and would not necessarily identify all deficiencies in the
internal control that might be significant deficiencies or material weaknesses as defined below.
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Page 3
However, as discussed below, we identified certain deficiencies in internal control over

compliance that we consider to be significant deficiencies and another that we consider to a
material weakness.
A control deficiency in an entity’s internal control over compliance exists when the design or
operation of a control does not allow management or employees, in the normal course of
performing their assigned functions, to prevent or detect noncompliance with a type of
compliance requirement of a federal program on a timely basis. A significant deficiency is a
control deficiency, or combination of control deficiencies, that adversely affects the entity’s
ability to administer a federal program such that there is more than a remote likelihood that
noncompliance with a type of compliance requirement of a federal program that is more than
inconsequential will not be prevented or detected by the entity’s internal control. We consider
the deficiencies in internal control over compliance described in the accompanying schedule of
findings and question costs as findings 06-01, 06-04, and 07-01 to be significant deficiencies.
A material weakness is a significant deficiency, or combination of significant deficiencies, that

results in more than a remote likelihood that material noncompliance with a type of compliance
requirement of a federal program will not be prevented or detected by the entity’s internal
control. Of the significant deficiencies in internal control over compliance described in the
accompanying schedule of findings and question costs, we consider finding 06-04 and 07-01 to
be material weaknesses.
Torres Martinez Desert Cahuilla Indians’ response, to the findings identified in our audit, is
described in the accompanying corrective action plan. We did not audit the Tribe’s response and,
accordingly, we express no opinion on it.
This report is intended solely for the information and use of the Torres Martinez Desert Cahuilla
Indians Tribal Council, management of the Torres Martinez Desert Cahuilla Indians, and
federal/state awarding agencies and is not intended to be and should not be used by anyone other
than these specified parties.

September 27, 2009
Gaylord, Michigan

39
Schedule of Findings and Questioned Costs

Year Ended September 30, 2008
A. Summary of Auditor’s Results
1. The auditor’s report expresses an unqualified opinion on the basic financial statements of
the Torres Martinez Desert Cahuilla Indians.
2. Significant deficiencies relating to the audit of the basic financial statements is reported
in the Report on Compliance and on Internal Control over Financial Reporting Based on
an Audit of Financial Statements Performed in Accordance With Government Auditing
Standards. Some of these significant deficiencies are identified as material weaknesses.
3. No instances of noncompliance material to the basic financial statements of the Torres

Martinez Desert Cahuilla Indians were disclosed during audit.
4. Significant deficiencies relating to the audit of the major federal and state programs are
reported in the Report on Compliance Requirements Applicable to Each Major Program
and Internal Control Over Compliance in Accordance with OMB Circular A-133. Some
of these significant deficiencies are identified as material weaknesses.
5. The auditor’s report on compliance for the major federal and state award programs for
the Torres Martinez Desert Cahuilla Indians expresses a qualified opinion.
6. Audit findings relative to a major federal and state award programs for the Torres
Martinez Desert Cahuilla Indians are reported in Part C. of this Schedule.
7. The programs tested as major programs included:
CFDA
No.
Federal Programs:
Aid to Tribal Government 15.020

(Bureau of Indian Affairs)
Temporary Aid for Needy Families 93.558

(U.S. Dept. of Health and Human Services)
Performance Partnership 66.605

(Environmental Protection Agency)
Community Development Block Grant 14.862

(U.S. Dept. of Housing and Urban Development)
State Programs:
TANF- Maintenance of Effort MOU-08-60

(State of California-CDSS) MOU-07-60
40
8. The threshold for distinguishing Types A and B programs was $300,000.
9. The Torres Martinez Desert Cahuilla Indians was determined to be a non low-risk
auditee.
41
Fiscal Year Ending September 30, 2008
B. FINDINGS - FINANCIAL STATEMENT AUDIT
PRIOR YEAR FINDINGS:

Internal Controls Over Financial Reporting
06-1 Payroll
Significant Deficiency
Criteria or Specific Requirement: Payroll information should be accurately reported and timecards should
be signed before payroll is processed.
Condition: During our testing of forty tribal payroll transactions, we noted the following exceptions:
 One employee's check did not have taxes deducted correctly.

 Two instances where the hours reported on the timecards did not match the hours on the
pay stubs.
 Five instances where timecards were either not signed by the employee or not signed by
a supervisor.
 Six I-9's were not properly completed.
Context: A random sample was selected for testing from the population of payroll checks written during
fiscal year 2006.
Effect: The Tribe could be paying employees for hours that were not worked. One employee is having an
incorrect amount of taxes deposited on their behalf. Additionally, the Tribe could be penalized for each
incomplete I-9.
Cause: Payroll personnel are not ensuring that correct practices are being followed.
Auditors' Recommendations: We recommend that payroll personnel be reminded of the importance of

keeping accurate payroll information. We also would recommend that the payroll procedures be updated
to allow more time for payroll personnel to adequately ensure that payroll procedures be properly followed.
Supervisors should attend training to stress the importance of verifying time daily to ensure that all time is
approved.
Current Year Status: Unresolved. Our audit procedures over payroll transactions identified similar
problems with timecards/timesheets not properly signed by a supervisor and in some instances,
timecards/timesheets were missing.
42
Internal Controls Over Financial Reporting-continued
06-04 Reconciliation of Accounts
Material Weakness
Criteria or Specific Requirement: All accounts should be reconciled on a monthly basis.
Condition: The following account classifications had one or more accounts that were not reconciled during
the year:
 Cash - The three bank accounts (including the housing bank account) were not
reconciled separately and the reconciled amount did not tie to the trial balance. Some of
the outstanding checks are more than a year old.
 Accounts receivable - These accounts were not reconciled and the only support provided
was general ledger detail.
 Tenants receivable - No account has been set up for housing tenants accounts receivable,
and no allowance for doubtful accounts has been established.
 MEPA receivables - No receivable has been set up. No estimate has been made.
 Employee advances - No supporting documentation was provided
 Prepaid assets - No supporting documentation was provided for material prepaid
accounts selected for testing.
 Capital assets - No detailed capital asset listing was kept for the tribe as a whole and the
few lists provided were not accurate.
 Accounts payable - This account was not reconciled. The cash basis of accounting was
used rather than an accrual basis for the general funds.
 MEPA liability - No liability has been set up and no estimate has been done.
 Due to / due from accounts do not tie out between the funds of the Tribe, or between the
Tribe and its component units.
 Indirect cost revenues and expenses are not reconciled.
Context: We attempted to audit all material balance sheet accounts.
Effect: The financial statements are materially misstated.
Cause: There was a lack of qualified accounting staff mixed with high turnover during the fiscal year.
Auditors' Recommendations: We recommend that the accounting staff hire additional competent staff or
hire an outside accounting firm to provide accounting services for the tribe. The staff should be carefully
selected and trained to follow the policies and procedures established. We would also recommend
reviewing policies and procedures and make appropriate changes that would better assist the Tribe with
dealing with the negative effects of high turnover. The tribe should consider changing accounting software
so that TANF and the Tribe are using the same accounting software.
Current Year Status: Unresolved. A C.P.A. firm was contracted by the organization to perform
reconciliation and tie-in procedures on all financial balances. While these procedures were performed and
balances were accurate, the issue of timeliness of these reconciliation procedures still remains a material
weakness. Most of these reconciliation procedures were performed 6+ months following year-end. These
procedures should be performed on a monthly/quarterly basis.
43
Internal Controls over Financial Reporting-continued
07-01 Support for Salaries and Wages
Material Weakness
Condition: Our payroll testing procedures identified these issues involving timesheet support:
1) Salaries and wage allocations between multiple activities were not found to be properly
supported on individual employees’ timesheets (28 out of 75 payroll transactions test).
2) Timesheets did not always identify the specific department/program in which the employee
performed services (28 out of 75 payroll transactions test).
Criteria: Federal grant requirements in OMB Circular A-87, Attachment B, Sect. 8, under “Support of salaries and
wages” section requires that not only the program charged be identified on the timesheet (personnel activity report)
but that the timesheet “must reflect an after the fact distribution of the actual activity of each employee”. Each
program’s actual hours charged must be reflected on the employee’s timesheet(s).
Cause: Improper completion of employee timesheets with split payrolls has resulted in this finding.
Effect: Split payrolls may not reflect actual time spent on each charged activity (program).
Recommendation: Proper completion by the program supervisors of the employee timesheets should resolve this
issue. The personnel/payroll department should enforce the proper completion of employee timesheets as it relates
to proper documentation of split program timesheets. The Tribe’s timesheet will have to be either modified or
multiple timesheets will have to be used for employee’s whose wages are allocated to multiple activities. We
recommend that the fiscal policies and procedures manual section related to payroll and timesheet processing be
revised.
Current Year Status: Unresolved.
None
44
CURRENT YEAR FINDINGS:
Internal Controls Over Financial Reporting

None
08-01 Indirect Cost Plan
Condition: The Tribe operated its indirect cost plan during the fiscal year without an approved indirect cost
rate. To date no final approved rate has been issued.
Criteria: OMB Circular A-87 requires that a Tribe receive approval of its cost recovery rate over its indirect cost
plan whenever federal contracts and awards are to be charged to the plan. Current year plans are required to be
submitted no later than six months following the close of the prior fiscal year. These plans are sent to the U.S.
Department of Interior-National Business Center (N.B.C.) for approval and determination of an allowable cost
recovery rate.
Effect: During the fiscal year ending September 30, 2008, the Tribe recorded cost recovery charges totaling
$1,437,707 to various federal programs. Without an approved rate, charges were made to programs using an
estimated (provisional) rate. This rate is subject to final approval by the NBC which creates uncertainty over the
financial position of the Tribe as it relates to changes in recoveries once a final rate is approved.
Recommendation: Submission of the Tribe's indirect cost plan in a timely manner to N.B.C. for plan and rate
approval.
45
Compliance and Other Matters-continued
08-02 Collateralization of Bank Deposits
Criteria or Specific Requirement: Section 112 of the Department of Interior and Related Agencies Act, 1998, P.L.
105-82, Nov. 14, 1997, states, "Advance payments made under this title to Indian Nations, tribal organizations, and
tribal consortia pursuant to the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450 et seq.)
may be invested by the Indian Nation, tribal organizations, or consortium before such funds are expended for the
purposes of the grant, compact or annual finding agreement so long as such funds are: (1) invested by the Indian
Nation, tribal organization, or consortium only in obligations of the United States, or in obligations or securities
that are guaranteed or insured by the United States, or mutual (or other funds) registered with the Securities and
Exchange Commission and which only invest in obligations of the United States or securities that are guaranteed or
insured by the United States; or (2) deposited only into accounts that are fully collateralized to ensure protection of
the funds, even in the event of a bank failure."
Condition: As of September 30, 2008, the Tribe had $1,598,143 in bank deposits that were uninsured and
uncollateralized. Approximately $329,000 of these uncollateralized bank deposits can be attributed to federal grant
funds (deferred revenue).
Effect: In the event of a bank failure, the Tribe could lose funds deposited with the bank.
Cause: Management is not following compliance requirements as specified by the Department of the Interior and
Related Agencies Appropriations Act.
Recommendation: We recommend that the Tribe establish a bank account for the TANF program that meets the
100% collateralization requirement. The tribe was in the process of obtaining pledged collateral for all federal
funding during our audit fieldwork.
46
C. FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL
AND STATE AWARD PROGRAMS AUDIT
PRIOR YEAR FINDINGS (CROSS-CUTTING):
Internal Control over Compliance
06-05 Procurement
Criteria or Specific Requirement: Procurement procedures that were established by the Tribe and
adopted by the TANF program should be strictly followed. One of four methods must be used for
procurement. The procurement manual outlines these. The established procedures involving
procurement are detailed in the procurement manual in section 1.5 as either, “a) small purchase
procedures, b) sealed bids (formal advertising) c) competitive negotiation [and] d) sole source.”
Condition: Thirteen checks were selected for testing the various levels of procurement. The
following exceptions were noted during testing:
 Six transactions were missing requisitions.

 Nine of thirteen transactions that were required to have documentation proving
that bids were collected had no documentation.
 Eleven out of thirteen purchases did not provide proper evidence regarding
debarment.
Questioned Costs: Not applicable
Context: We examined thirteen transactions selected from the entire TANF check population.
Effect: The TANF program is not in compliance with grant requirements. Additionally, the Tribe
may be paying more for equipment and supplies than necessary were they to use the bid process.
Cause: High turnover in staff and lack of proper training have contributed to the lack of controls
being used by the tribe over procurement.
Auditors' Recommendations: We recommend that procurement responsibilities be assigned

primarily to one person. This one person should be properly trained on all procurement
procedures and be able to help others understand the requirements of procurement.
Current Year Status: Resolved.
47
Internal Control over Compliance-continued
06-08 Equipment and Real Property Management
Criteria or Specific Requirement: The Code of Federal Regulations Title 45, Section 92.32,
paragraph (c)(1) and (c)(2) states that, “Procedures for managing equipment (including
replacement equipment), whether acquired in whole or in part with grant funds, until disposition
takes place will, as a minimum, meet the following requirements:
(1) Property records must be maintained that include a description of the property, a serial number
or other identification number, the source of property, who holds title, the acquisition date and
cost of the property, percentage of Federal participation in the cost of the property, the location,
use and condition of the property, and any ultimate disposition data including the date of disposal
and sale price of the property.”
Condition: Property management records can not be produced for the end of the fiscal year under
audit.
Questioned Costs: None
Context: We requested capital asset listings for the year under audit.
Effect: The existing and purchased property and equipment in the TANF program is lacking
proper controls to monitor the use of the equipment and what equipment the program actually
owns.
Cause: There are several different areas where capital asset listings are maintained. Vehicles and
the IT equipment are two of the areas with some sort of asset listings. Both of the listings were
incomplete as prescribed by federal regulations due to lack of job training and employee
knowledge as to what the lists should include.
Auditors' Recommendations: The Program management should develop and implement adequate
property management policies and procedures that comply with the federal regulations, complete a
comprehensive inventory of its equipment and real property, and reconcile the results with the
amounts recorded in the accounting records.
48
Other Compliance Matters-continued
06-13 Single Audit Act
Criteria or Specific Requirement: OMB A-133 Subpart C.320 states "The audit shall be
completed and the data collection form and reporting package shall be submitted within the earlier
of 30 days after receipt of the auditors report(s), or nine months after the end of the audit period,
unless a longer period is agreed to in advance by the cognizant or oversight agency for audit."
Condition: The Tribe has not submitted a timely audit report for 2006.
Questioned Costs: Not applicable
Context: The audit report was not submitted within nine months after the end of the audit period.
Effect: The federal agency may restrict or withhold grant funds for non-compliance with OMB
A-133.
Cause: The Tribe did not properly maintain financial records or plan for a timely audit.
Auditors' Recommendations: The Tribe should do a complete overhaul of the fiscal department's
policies and procedures. This would include a thorough evaluation of the functions of the
department. The Tribal Administration should also consider the addition of one or two
component staff members, preferably a CPA, to allow for a reasonable work load after the policies
and procedures are re-written.
CURRENT YEAR FINDINGS (CROSS-CUTTING):

Internal Control over Compliance
None
Other Compliance Matters
None
49
PRIOR AND CURRENT YEAR FINDINGS (MAJOR PROGRAMS):

Prior year findings 06-05 Procurement and 06-08 Equipment and Real Property are considered resolved as
they relate to all major federal and state programs.
Federal Major Programs:
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Temporary Aid to Needy Families

CFDA no. 93.558
Internal Controls Over Compliance
Significant deficiencies, identified in Part B of the Schedule of Findings and Question Costs, finding 06-01
Payroll, 06-04 Reconciliation of Accounts, 07-01 Support for Salaries and Wages are applicable as
findings to this major program.
Below is noted specific question costs related to some of these unresolved findings:
07-01 Support for Salaries and Wages (see Part B)
Question Costs: Unsupported payroll, consisting of missing and unsigned timesheets/timecards, as well as,
timesheets lacking support of split payroll allocations (between administrative and support services), were
as follows:
Population and Sample Size:
Number Dollars
Population 6344 $4,270,039
Sample 89 77,487
Not in Compliance 27 27,394
FY 2008 Question Costs: $27,394
Less: State of California-MOE portion (100%) 27,394
Total Federal Portion of Question Costs $ 0
50
Temporary Aid to Needy Families-continued

CFDA no. 93.558
Internal Controls Over Compliance-continued
07-02 TANF Eligibility
Statement of Condition: In performing test of client eligibility, three client files were not provided to the
auditor for testing.
Criteria: All client eligibility determinations should be adequately documented in accordance to

established tribal policies.
Cause and Effect: Either the client files do not exist or the filing system has prevented their retrieval. No
client should receive direct benefits without the proper support of eligibility.
Recommendation: The Tribal TANF department should consider their system of filing client information
and establish written policies and procedures which insure client files are assessable to authorized
personnel.
Conditions, identified in Part B of the Schedule of Findings and Question Costs, finding 08-01 Indirect
Cost Plan and 08-02 Bank Collaterialization are applicable as findings to this major program.
Condition, identified in Part C of the Schedule of Findings and Question Costs (Cross-Cutting Section),
finding 06-13 Single Audit, is applicable as a finding to this major program.
51

CFDA no. 93.558
06-07 Cash Management
Criteria or Specific Requirement: The Code of Federal Regulations Title 45, Section 92.20,
paragraph (b)(7) states that, “Procedures for minimizing the time elapsing between the transfer of
funds from the U.S. Treasury and disbursements by grantees and subgrantees must be followed.”
Condition: Two transactions were identified where TANF funds deposited into the general fund
bank account were not transferred to the TANF bank account in a timely manner. The two
drawdowns totaling $591,500 were deposited in the tribe's general bank account on October 25,
2005 and March 8, 2006 and the money was not transferred into the TANF bank account until
March 14, 2007. The TANF funds were utilized by the tribe during that time.
Questioned Costs: None
Context: We examined all drawdowns and transfers from the general fund bank account to the
TANF bank account.
Effect: The Tribe could be potentially spending TANF money for non- program expenditures.
Cause: The use of the general fund bank account to initially receive the drawdown was not being
properly tracked all of the time. The condition would also suggest that the current drawdown
procedures are not adequate enough to keep the drawdowns as close to the disbursements as
possible. Program management would have noticed that the money was missing if the cash
management requirements were being strictly followed.
Auditors' Recommendations: We recommend that drawdown procedures be established that more

closely reflect actual disbursement needs. During 2007 the Tribe changed the drawdown
procedure so the TANF funds go directly into the TANF bank account to avoid having grant
money be undetected in the general fund bank account again.
Current Year Status: Unresolved. During the fiscal year, the Tribe started having draw downs go
directly into the TANF bank account to avoid any mis-management of federal funds. This change
effectively resolved the original finding, however, the auditor notes the following additional cash
management issues:
1) Condition: The Tribe has used federal TANF funds to carry State TANF-Maintenance of Effort
(MOE) expenditures during the fiscal year. State funding, for the current fiscal year, was received
by the Tribe after the fiscal year. In order to operate the TANF program, the Tribe made grant
draws on the federal grant dollars. Upon receipt of the State TANF-MOE dollars, the Tribe
intends to reimburse the federal agency, thus restoring its federal grant. At year end, the Tribe’s
TANF program owed back to the federal agency reimbursements totaling $16,854,570.
Criteria: Grant funds are required to be expended only for activities authorized by grant
agreements. The use of federal TANF funds to finance state TANF maintenance of effort
spending is a violation of the federal grant agreement. The auditor was not provided any
52

CFDA no. 93.558
06-07 Cash Management-continued
Current Year Status:-continued
agreement for the use of federal advance TANF dollars in order to support state MOE spending by
the Tribe.
Recommendation: The Tribe needs to obtain its State MOE funding during the fiscal year. This
will require the Tribe to formally request a change in payment method from the State of
California. State funding needs to be received at the same time spending is occurring. Once a new
payment method is established, there will be no need for the Tribe to “borrow” federal funds to
cover these State MOE expenditures.
Current Year Status: As of September 30, 2008, the Tribe’s TANF program owed back to the
federal agency reimbursements totaling $4,444,576 which is included as part of the deferred
revenue balance as of September 30, 2008.
2) Condition: Unspent federal TANF dollars, totaling $150,674, were held by the Tribe at the end
of the year. The agency funds the Tribe on a cost reimbursable basis for this program. No waiver
was received from the awarding agency on these excess grant dollars.
Criteria: Federal grant requirements, outlined in OMB Circular A-133- Compliance Supplement,
under the general requirement Cash Management section states, “When entitites are funded on a
reimbursement basis, program costs must be paid for by the entity funds before reimbursement is
requested from the Federal Government”. Under the Payment Management System (PMS), an
entity is allowed up to three business days to liquidate a grant draw made under the system.
Cause/Effect: As noted later in Finding 07-03, the Tribe retained excess interest earnings which
contributed to this condition. The treatment of interest earnings as program income was not taken
into consideration in requesting grant funds during the fiscal year.
Recommendation: The auditor suggests that adjustment for these overdrawn funds be accounted
for in future grant drawdowns for this grant made under the DHHS Payment Management System
(PMS). Upon review of the Tribe’s drawdown system, every attempt should be made to improve
the timing and accuracy of every grant draw. All PMS grant draws should be supported by the
most current financial information available at the time the drawdown is made.
Current Year Status: As of September 30, 2008, unspent federal TANF dollars totaled $46,666.
These dollars were drawn in advance of grant expenditures and are reported as part of the deferred
revenue balance as of September 30, 2008.
53

CFDA no. 93.558
07-03 Interest Earnings
Condition: Interest earned on TANF federal funds during the fiscal year totaled $319,095. The
Tribe has treated these earnings as program income and used these earning to offset grant
expenditures.
Criteria: Under OMB Circular A-102, interest earned on advances by local government grantees
and subgrantees is required to be submitted promptly, but at least quarterly, to the Federal agency.
Up to $100 per year may be kept for administrative expenses. These excess earnings are required
to be remitted to Department of Health and Human Services, Payment Management System, P.O.
Box 6021, Rockville, MD 20852.
Effect: Treatment of interest earnings on federal advance dollars, without prior agency approval, is
a violation of federal grant requirements. The treatment of these interest earnings as program
income has contributed to the excess federal grant funds of $150,674 as noted in Finding 06-07 in
Part C of this schedule.
Recommendation: The Tribe needs to request a waiver from the agency in order to retain these
excess interest earnings. If a waiver is denied, then the Tribe must reimburse the agency for these
earnings.
Question Costs:
Excess interest earnings, during the fiscal year $34,852
Total Current Year Question Costs-

U.S. Dept. of Health and Human Services $ 34,852
54
Federal Major Programs:-continued
U.S. DEPARTMENT OF THE INTERIOR (BUREAU OF INDIAN AFFAIRS)
Aid to Tribal Government

CFDA no. 15.020
Payroll and 06-04 Reconciliation of Accounts are applicable as findings to this major program.

U.S. Dept. of Interior (Bureau of Indian Affairs) $ -0-
55
ENVIRONMENTAL PROTECTION AGENCY
Performance Partnership
CFDA no. 66.605
Condition, identified in Part B of the Schedule of Findings and Question Costs, finding 08-01 Indirect Cost
Plan is applicable as findings to this major program.

Environmental Protection Agency $ -0-
56
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Indian Housing Block Grant (Prior Year Major Federal Program)

CFDA no. 14.867
In June 2008 a transfer of this grant from the Tribe’s Housing Authority to another outside organization,
All Mission Indian Housing Authority (AMIHA) ocurred (see Note 6).
Community Development Block Grant (Current Year Major Federal Program)

CFDA no. 14.862

U.S. Dept. of Housing and Urban Development $ -0-
57
Cost Allocation Plans:
Indirect Cost Pool

CFDA no. N/A
Payroll and 07-01 Support for Salaries and Wages are applicable as findings to this federal cost allocation
plan. There are no current year question costs related to these findings.

Indirect Cost Allocation Plan $ -0-
State Major Programs:
STATE OF CALIFORNIA- DEPARTMENT OF SOCIAL SERVICES
Temporary Aid to Needy Families-Maintenance of Effort (MOE)

CFDA no. N/A MOU-08-60 and MOU-07-60
Payroll, 06-04 Reconciliation of Accounts, 07-01 Support for Salaries and Wages are applicable as
findings to this major program.
Below is noted specific question costs related to some of these unresolved findings:
07-01 Support for Salaries and Wages (see Part B)
Question Costs: Unsupported payroll, consisting of missing and unsigned timesheets/timecards, as well as,
timesheets lacking support of split payroll allocations (between administrative and support services), were
as follows:
Population and Sample Size:
Number Dollars
Population 6344 $4,270,039
Sample 89 77,487
Not in Compliance 27 27,394
FY 2008 Question Costs: $27,394
Less: Federal Portion (0%) 0
Total State Portion of Question Costs $27,394
58
Temporary Aid to Needy Families-Maintenance of Effort (MOE)-continued
Internal Controls Over Compliance-continued
07-02 TANF Eligibility
Statement of Condition: In performing test of client eligibility, three client files were not provided to the
auditor for testing.
Criteria: All client eligibility determinations should be adequately documented in accordance to

established tribal policies.
Cause and Effect: Either the client files do not exist or the filing system has prevented their retrieval. No
client should receive direct benefits without the proper support of eligibility.
Recommendation: The Tribal TANF department should consider their system of filing client information
and establish written policies and procedures which insure client files are assessable to authorized
personnel.

California Dept. of Social Services $ 27,394
59
Summary of Current Year Question Costs
Agency Program Description CFDA# Question Costs

U.S. Health & Human Services TANF 93.558 $ 34,852
Total U.S. Health & Human Services $ 34,852
Cost Allocation Plan Indirect Cost N/A $ -

Total Cost Allocation Plan $ -
California Dept. Social Services TANF-MOE N/A $ 27,394

Total U.S. Health and Human Services $ 27,394
Total Current Year Question Costs $ 62,246
60
THE TORRES MARTINEZ DESERT CAHUILLA INDIANS
P.O. Box 1160
Thermal, CA 92274
(760) 397-0300 – FAX (760) 397-8146
September 30, 2009
To: Tribal Council

Kurt Tucker - Midwest Professionals
Re: Corrective Action Plan (Plan) for

Fiscal Year Ended 2008
Audit Findings
Summary:
Plan includes corrective actions for findings carried over from Fiscal Year 2007 Audit and new findings
for Fiscal Year 2008 audit. Fiscal Year 2008 audit was finalized in September 2009 given no
opportunity to address a corrective action plan for some of the findings on a timely basis. Some
findings will be carried over to Fiscal Year Ended 2009 and be part of that year’s “Corrective Action
Plan”.
Corrective Action Plan as follows:
UNRESOLVED PRIOR YEAR FINDINGS:
06-1 Payroll – Significant Deficiency

Payroll information should be accurately reported and timecards should be signed before
payroll is processed.
Response: Directors/Supervisors have been trained to review and sign timesheets before
submitting to Payroll Department. Payroll manager reviews timesheets for proper signatures,
i.e. employee and supervisor. Human Resources Department has been instructed to closely
review all I-9’s and W4’s for required information within the rules and regulations of its
agencies.
06-4 Reconciliation of Accounts – material weakness

All accounts should be reconciled on a monthly basis.
Response: Effective mid-Fiscal Year 2009 all bank accounts have been reconciled on
a monthly basis. Effective Fiscal Year 2010 all other Balance Sheet accounts will be
reconciled by Staff Accountants and reviewed by Finance & Accounting Manager.
The process will be included in the new Finance & Accounting Policy and Procedures
Manual being currently updated.
-1-
61
Corrective Action Plan cont…..
06-07
The code of Federal Regulations Title 45, Section 92.20, paragraph (b)(7) states that,
“Procedures for minimizing the time elapsing between the transfer of funds from the U.S. Treasury and
disbursements by grantees and sub-grantees must be followed”.
Conditions:
a) TANF funds deposited into the general fund bank account were not transferred to the TANF bank
account in a timely manner.
b) The Tribe has used federal TANF funds to carry State TANF-Maintenance of Effort (MOE)
expenditures during the fiscal year. The use of federal TANF funds to finance state TANF
maintenance of effort spending is a violation of the federal grant agreement.
Response:
a) During fiscal year 2007 a separate bank account was opened to directly deposit TANF draw-
downs from the DHHS Payment Management System to eliminate any TANF disbursements
delays. The goal is to disburse funds within three days as required by federal grant agreement.
b) TANF source funding will be reviewed with management to ascertain the best and compliant
method of funding; State MOE funding may be drawdown monthly and spent first during the fiscal
year before Federal funds are drawdown and spent. Discussions with the State will be
scheduled and new procedures implemented at the beginning of FY2010.
06-13 Single Audit Act

OMB A-133 Subpart C.320 states "The audit shall be completed and the data collection form
and reporting package shall be submitted within the earlier of 30 days after receipt of the auditor’s
report(s), or nine months after the end of the audit period, unless a longer period is agreed to in
advance by the cognizant or oversight agency for audit."
Response: The Finance & Accounting Department has been restructured to better control
accounting functions and facilitate a timely audit; created two Staff Accountants positions, one to
manage Tribal functions and the other TANF functions. Strong effort is being made to have continuity
in higher financial management (CFOs) which was lacking in previous years resulting in untimely
audit filings. The FY2006 Audit report was filed in January 2008, FY 2007 Audit report was filed in -
July 2009 and FY2008 Audit report is being filed now, September 2009. Fiscal year 2009 audit is
tentatively scheduled to begin in March 2010 to be filed before due date of June 30,2010.
-2-
62
07-01 Support for Salaries and Wages – Material Weakness
Criteria: Federal grant requirements in OMB Circular A-87, Attachment B, Sect. 8, under “Support of
salaries and wages” section requires that not only the program charged be identified on the timesheet
(personnel activity report)but that the timesheet “must reflect an after the fact distribution of the actual
activity of each employee”. Each program’s actual hours charged must be reflected on the employee’s
timesheet(s).
Response: Currently our timesheet software program (TimeForce) does not directly identify the
employee to a department/program, but instead, the name of the employee on the timesheet can be
traced via our payroll system (ADP) to a department/program and multiple program allocations.
TimeForce will be analyzed to ascertain if it is adjustable to provide the information being requested.
07-03 Interest Earnings
Condition: Interest earned on TANF federal funds during the fiscal year totaled $319,095. The
Tribe has treated these earnings as program income and used these earning to offset grant expenditures.
Criteria: Under OMB Circular A-102, interest earned on advances by local government grantees
And subgrantees is required to be submitted promptly, but at least quarterly, to the Federal agency.
Up to $100 per year may be kept for administrative expenses. These excess earnings are required
to be remitted to Department of Health and Human Services, Payment Management System, P.O.
Box 6021, Rockville, MD 20852.
Response: Tribe will discuss requesting a waiver from the agency in order to retain these excess
interest earnings as offsets to expenditures.
CURRENT YEAR FINDINGS:
08-01 Indirect Cost Plan

Condition: The Tribe operated its indirect cost plan during the fiscal year without an approved
indirect cost rate. To date no final approved rate has been issued.
-3-
63
Criteria: OMB Circular A-87 requires that a Tribe receive approval of its cost recovery rate
over its indirect cost plan whenever federal contracts and awards are to be charged to the plan.
Current year plans are required to be submitted no later than six months following the close of
the prior fiscal year. These plans are sent to the U.S. Department of Interior-National Business
Center (N.B.C.) for approval and determination of an allowable cost recovery rate.
Effect: During the fiscal year ending September 30, 2008, the Tribe recorded cost recovery
charges totaling $1,437,707 to various federal programs. Without an approved rate, charges
were made to programs using an estimated (provisional) rate. This rate is subject to final
approval by the NBC which creates uncertainty over the financial position of the Tribe as it
relates to changes in recoveries once a final rate is approved.
Recommendation: Submission of the Tribe's indirect cost plan in a timely manner to N.B.C.
for plan and rate
Response: Indirect Cost proposal for fiscal year 2008 has been submitted to N.B.C. for
approval. Indirect Cost proposal for fiscal year 2009 will be submitted in October 2009 and
fiscal year 2010 will be submitted in April 2010.
08-02 Collateralization of Bank Deposits
Criteria or Specific Requirement: Section 112 of the Department of Interior and Related
Agencies Act, 1998, P.L.105-82, Nov. 14, 1997, states, "Advance payments made under this
title to Indian Nations, tribal organizations, and tribal consortia pursuant to the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450 et seq.) may be invested by the
Indian Nation, tribal organizations, or consortium before such funds are expended for the
purposes of the grant, compact or annual finding agreement so long as such funds are:
(1)invested by the Indian Nation, tribal organization, or consortium only in obligations of the
United States, or in obligations or securities that are guaranteed or insured by the United
States, or mutual (or other funds) registered with the Securities and Exchange Commission
and which only invest in obligations of the United States or securities that are guaranteed or
insured by the United States; or (2) deposited only into accounts that are fully collateralized
to ensure protection of the funds, even in the event of a bank failure."
-4-
64
Condition: As of September 30, 2008, the Tribe had $1,598,143 in bank deposits that were
uninsured and uncollateralized. Approximately $329,000 of these uncollateralized bank
deposits can be attributed to federal grant funds (deferred revenue).
Effect: In the event of a bank failure, the Tribe could lose funds deposited with the bank.
Cause: Management is not following compliance requirements as specified by the Department
of the Interior and Related Agencies Appropriations Act.
Recommendation: We recommend that the Tribe establish a bank account for the TANF
program that meets the 100% collateralization requirement. The tribe was in the process of
obtaining pledged collateral for all federal funding during our audit fieldwork.
Response: The TANF program has a Collateralization of Bank Deposits agreement with
Wells Fargo Bank which meets the 100% collateralization requirement. Tribe is currently
working on a collateralization agreement with California Bank & Trust to meet the 100%
collateralization requirement.
END
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65

Torres Martinez Audit 9-30-08

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Torres Martinez Audit 9-30-08

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TORRES MARTINEZ DESERT CAHUILLA INDIANS

Audited Financial Statements

Notes to the Financial Statements ............................................. 16

SINGLE AUDIT SECTION

INDEPENDENT AUDITORS’ REPORT

Midwest Professionals, PLLC

Midwest Professionals, P.L.L.C.

September 27, 2009

Statement of Net Assets

September 30, 2008

See Accompanying Notes to the Financial Statements.

For the Year Ended September 30, 2008

Change in net assets

Net assets - ending

See Accompanying Notes to the Financial Statements.

(1,353,351) (1,469,675) (681,273)

Balance Sheet - Governmental Funds

September 30, 2008

Liabilities and fund balances

See Accompanying Notes to the Financial Statements.

Reconciliation of Governmental Fund Balances

September 30, 2008

Total governmental fund balances $ 470,810

See Accompanying Notes to the Financial Statements.

Statement of Revenues, Expenditures and Changes in

For the Year Ended September 30, 2008

Other financing sources (uses)

Net change in fund balances (1,239,734) 0 (62) (1,239,796)

See Accompanying Notes to the Financial Statements.

Reconciliation of the Statement of Revenues,

For the Year Ended September 30, 2008

Net change in fund balances - governmental funds $ (1,239,796)

Compensated absences are expensed as used in the governmental funds. However,

See Accompanying Notes to the Financial Statements.

Notes to the Financial Statements

For the Year Ended September 30, 2008

Note 1 - Nature of Business and Summary of Significant Accounting Policies

Notes to the Financial Statements

For the Year Ended September 30, 2008

Note 1 - Nature of Business and Summary of Significant Accounting Policies - Continued

A. Reporting Entity - Continued

Notes to the Financial Statements

For the Year Ended September 30, 2008

Note 1 - Nature of Business and Summary of Significant Accounting Policies - Continued

Government activities are financed primarily through investment income, intergovernmental

Fund Financial Statements

The Tribe reports the following major governmental funds:

Notes to the Financial Statements

For the Year Ended September 30, 2008

Note 1 - Nature of Business and Summary of Significant Accounting Policies - Continued

Accounts and Loans Receivable

Notes to the Financial Statements

For the Year Ended September 30, 2008

Note 1 - Nature of Business and Summary of Significant Accounting Policies - Continued

Governmental Funds Capitalization

Notes to the Financial Statements

For the Year Ended September 30, 2008

Note 1 - Nature of Business and Summary of Significant Accounting Policies - Continued

Federal Awards and Grants

Notes to the Financial Statements

For the Year Ended September 30, 2008

Note 1 - Nature of Business and Summary of Significant Accounting Policies - Continued

Federal and State Income Taxes