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Page 4 of 4~ Letter re: NIGC Comments
POTENTIAL NEW REGULATIONS

I Tribal Advisory Committees

Tribal advisory committees have proven valuable for years by providing diverse and
knowledgeable perspectives on gaming across Indian Country. Nonetheless, we do not believe
that a newly promulgated regulation providing for their use is necessary. NIGC usage of these
committees furthers the government-to-government relationship between Indian Country and
the Federal government. We encourage NIGC to clasely police the individuals on these
committees to ensure that they are qualified tribal government representatives and that the
committee represents a cross-section of gaming in indian Country by soliciting representatives
from large and small gaming enterprises and various geographic locales.

M Sole Proprietary Interest

A regulatory definition and accompanying guidelines on “sole proprietary interest” is
sorely needed. Such a regulation would help protect tribes while also providing guidance to
developers, lenders, management contractors and others regarding compliance with this IGRA
requirement. We recognize the task and challenge in crafting such a definition, but encourage
the Commission to work on this regulation.

We are pleased to offer our comments on the proposed regulatory revisions and
suggestions for new regulations. The dialogue between Indian Country and NIGC is productive
and continues to result in improved regulation of the gaming industry while balancing the
bedrock principles of tribal sovereignty. We look forward to continue this conversation in the
coming months and years and appreciate your close attention to our comments.

Ve (DA

Karen A. Welmas
Secretary-Treasurer, Tribal Council
AGUA CALIENTE BAND OF
CAHUILLA INDIANS

TC-11447-02-11

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Page 3 of 4— Letter re: NIGC Comments

responsibility to maintain Class Ill MICS for cases in which thase compacted agreements require
the NIGC MICS to be used as the standard.

This is a critical aspect of revising NIGC’s regulations. We strongly urge the tribal

advisory committee working on this issue with NIGC representatives to continue that important
effort.

B. Part 543: Class I! Minimum Internal Control Standards

Part 543 is an incomplete section of the NIGC regulations. As presently drafted, Part
543 requires an auditor to refer to Part 542 and sift through the text in order to identify thase
subsections of Part 542 applicable to a Class {I compliance review. In short, the status of Class I!
gaming is not well organized and this impairs a tribe’s ability to complete quality compliance
reviews. Here, perhaps more than anywhere else, a tribal advisory committee is an essential
resource for revising Part 543. We sincerely urge NIGC to move forward with revising the
current regulations, or drafting new sections, that a draft work product be provided to Indian

Country for informal comment prior to authorizing the draft regulation for formal public notice
and comment.

ioe Part 547: Minimum Technical Standards for Class i! Gaming Equipment

As with NIGC MICS, minimum technical standards are, by definition, subject to alteration
over time with technological developments. While we recognize that industry manufacturers of
Class II equipment enjay expertise in this area, we have great concern that this subsection of the
gaming industry is ill-suited to be NIGC’s primary resource for the development of MTS for Class
ll equipment. To obtain balance and objective standards in the development of MTS, we
Suggest the use of a tribal advisory committee composed of tribal representatives with Class 1!
experience and technical knowledge. Furthermore, we urge NIGC to consult with independent
testing laboratories, rather than industry insiders, in order to assist in the creation of MTS.

Vv. Part 556; Fingerprinting for Non-Primary Management Officials and Key Employees

For a number of years, tribes have advocated for providing tribal regulatory bodies with
the authority to submit fingerprints on vendors, including company representatives, who access
the gaming property. Critical to this proposal is that this be at the tribe's option rather than as a
mandate from NIGC as to the individuals who will or will not be fingerprinted. A full-fledged

regulation may be unnecessary; a guidance policy may be sufficient to confer appropriate
authority.

Vi. Pi a jon ccess

The Tribe recognizes that NIGC should have access to tribal gaming records in order to
fulfill its responsibilities under IGRA. Our review Suggests that Section 571.6(b) addresses this
issue, but we have no objection to further clarification in Part S71 generally.

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FEB/18/2011/FRI 12/36 PM ACBCI TRIBAL COUNCIL FAX No, 760 699 6919 P. 002

Acua CALIENTE BAND OF CAHUILLA INDIANS
Tripat CounciL

RICHARD M. MILANOVICH CuairmaN * JEFF L. GRUBBE Vice Cuatnman
Karen A. WELMAS Secaerany/Treasuasx + VINCENT GONzALEs III Memaen * ANTHONY J. ANDREAS IIT Memase

February 18, 2011

The Honorable Tracie L. Stevens
National Indian Gaming Commission
1441 L St. NW, Suite 9100
Washington D.C. 20005

Dear Chairwoman Stevens:

As the Secretary-Treasurer of the Agua Caliente Band of Cahuilla Indians, | submit these
comments in response to the National Indian Gaming Commission's Notice of Inquiry regarding
the potential need to revise existing regulations or promulgate new regulations. This response
identifies those areas which are of greatest importance to the Tribe and we look forward to
continuing this dialogue in the months to come.

REVISIONS TO EXISTING REGULATIONS
I. Part 502: Definitions

With respect to the definition contained in the regulations regarding “net revenues,” we urge
NIGC to adopt generally accepted accounting principles in promulgating regulations. This
ensures a consistency of application for Indian tribes and ease of administration for the NIGC.
In the context of “allowable uses” for such “net revenues” we strongly oppose a regulatory
attempt to micro-manage a given Tribe's usage of net revenues. |GRA already provides for
limitations on a tribe’s usage of these funds and further expansion of these limitations
improperly infringes on tribal sovereignty. This Commission honors and respects tribal
sovereignty and such a revision undercuts that longstanding approach toward Indian Country.
Similarly, we oppose an attempt to expand the definition of “management contract.” A revision
of this sort unnecessarily adds to the administrative process and creates the potential for
further delay. Instead, we suggest publication of guidelines for management contractors,
lenders, developers and others stating that NIGC retains the authority to review non-
management contracts. This has a two-fold purpose of protecting tribes and contracting
entities from contracts that include management responsibilities.

iF Part 514: Fees

In this section, we believe that NIGC should consider a late payment system in lieu of
NOV's for late fee payments. A revision of this sort could include an automatic additional
Percentage as a late payment penalty. Automatic NOV’s are, as a general matter, costly,
cumbersome, and often result in a settlement agreement with an associated fine. Of course, a
late payment system shauld have provisions to discourage abuse and mandate clear time limits
to ensure timely compliance.

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Page 2 of 4— Letter re: NIGC Comments

Wl. Part $34, 533, and $37

There is possible confusion as to the applicability of class games to be managed under
the present regulations. We recommend language to be added at the beginning of Parts 531
and 533 to clarify that these parts apply to both Class Il and Class II! gaming. There may be
other ways to amend the regulatory text in order to make clear which regulatory sections apply

to a particular class of gaming, but we support the effort to remove the present textual
confusion.

WV. MICS and Technical Standards

Parts 542 and 543 contain several important issues that require more detailed
discussion. We address them in turn.

A. Part 542: Class Ill Minimum Internal Control Standards

The Agua Caliente and other tribes have always agreed that internal controls are essential to the
protection of governmental revenues generated by gaming. The adoption and implementation
of MICS in 1999 by the NIGC, although against the wishes of some tribes, created a regulatory
scheme that attempted to work consistently with IGRA in its attempt to balance tribal, federal
and state responsibilities in regulating various classes of gaming. These regulations were based
on common and successful industry standards. However, tribal governments and tribal gaming
regulators have the greatest interest in safeguarding revenue generated by gaming and are the
most informed parties when determining the means to do so.

Part 542 remains relevant and necessary for Class Ill gaming, but requires updating. NiGC has a
responsibility ta maintain Class Il MICS for situations where compacted agreements state that
NIGC MICS are to be used. However, maintain and updating Part 542 does not extend authority
to NIGC for tribes that have compacts or ordinances that do not designate NIGC MICS as the
required standard. Removing this section creates uncertainty, and potential legal issues with
States (for instance California with which we have a compact making reference to MICS), for
those tribes who use Part 542 MICS as standard. Other unintended effects may be felt by Indian
Country as well. For example, with no NIGC standards or checklists, the “Agreed Upon
Procedures” relied upon by state and tribal regulators, as well as independent auditors, will be
rendered inapplicable. The problem is that at the moment, these entities have common ground
on this issue and this is preferable. Without this, compliance reviews may vary from place to
place resulting in uneven oversight and asymmetric application of procedures. This only serves
to provide ground for disputes among tribes and states.

We urge the NIGC to proceed with caution in any decision on the restructuring of Class
lll MICS. The NIGC should acknowledge that the MICS reflect existing and effective industry
standards and are advisory. MICS are only given the force of law through inclusion in Tribal-
State compacts or tribal ordinances enacted by Tribal Governments. That being said, NIGC has a

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