September 20, 2021

Summary of Proposed Changes to 25 C.F.R. Parts 571

National Indian Gaming Commission

1

The National Indian Gaming Commission seeks tribal input, feedback, and suggestions 

concerning proposed amendments to 25 C.F.R. Part 571, specifically as this part applies to 

required submissions of the annual audit.

Pursuant to the Indian Gaming Regulatory Act, all gaming operations must conduct 

annual outside audits of the gaming and must submit copies of the audit to the NIGC. The 

suggested changes cover four subjects:

• Language clarifying acceptable audit opinions;

• Clarification to distinguish the audit process from the submission of audit reports and 

opinions;

• Correction and clarification of the prerequisites for the submission of consolidated 

audits, and;

• Language allowing the Commission to delegate its waiver granting authority.

I. Adverse and Disclaimed Opinions

25 C.F.R. §§ 571.12(b)(3), (d)(5), and (e)(5)

 

The current audit regulations do not directly address instances where an auditor 

finds that the financial statements may be incomplete or inaccurate. Regulators need complete 

and accurate information to identify and prevent theft and to make regulatory decisions.

Auditors form audit opinions by examining the types of risks an organization might face and 

the types of controls that exist to mitigate those risks. Once the risks and controls to mitigate 

those risks have been identified, the auditors examine the supporting evidence and determine if 

management is presenting the financial statements fairly in all material respects. There are four 

different types of audit opinions an auditor may express:

• Unqualified Opinion. An unqualified opinion states that the financial statements present 

fairly, in all material respects, the financial position, results of operations, and cash flows of 

the entity in conformity with generally accepted accounting principles (GAAP). This is the 

opinion expressed in a standard report. Under certain circumstances explanatory language 

might be added to the auditor’s standard report, while not affecting the auditor’s unqualified 

opinion on the financial statements

• Qualified Opinion. A qualified opinion states that, except for the effects of the matter(s) 

to which the qualification relates, the financial statements present fairly in all material 

respects the financial position, results of operations, and cash flows in conformity with 

GAAP.

• Adverse Opinion. An adverse opinion states that the financial statements do not present 

fairly the financial position, results of operations, or cash flows of the entity in conformity 

with GAAP.
September 20, 2021

Summary of Proposed Changes to 25 C.F.R. Parts 571

National Indian Gaming Commission

2

• Disclaimer of Opinion. A disclaimer of opinion states that the auditor does not express 

an opinion on the financial statements.

Because the intent of 25 C.F.R. § 571.12 is to provide third party verification of 

the submitted financial statements, the only types of opinions that provide the intended 

verification are Unqualified and Qualified Opinions. An adverse or disclaimed 

opinion essentially states that the financial statements cannot be relied upon. They 

also signal that something may be amiss in the operation.

An operation might receive an Adverse Opinion because the auditor’s findings indicate 

that the operation’s financial statements are materially inaccurate. Similarly, Disclaimed 

Opinions are issued when the operation has kept such poor records for all or a portion of its 

gaming operation that the auditor is unable to determine whether the financial statements, as a 

whole, are fairly presented. Both Adverse and Disclaimed Opinions indicate an operation ripe for 

theft. Because the current regulations do not explicitly prohibit the submission of disclaimed or 

adverse opinions, clarification is needed to achieve the intent of IGRA and the regulation. The 

ability to issue a Letter of Concern, or take other enforcement actions for a disclaimed or adverse 

opinion would provide a more robust means by which to address potential issues with financial 

statements.

Under the proposed changes, tribes that submit an Adverse or Disclaimed Opinion as part 

of their audit will therefore be subject to an action for failure to submit an audit. As always, the 

Chairman has discretionary enforcement authority.

II. Clarification that the audit report and opinion is the required submission

25 C.F.R. §§ 571.12(b) and 571.13(a-c)

The proposed changes distinguish between the audit process and the final product to be 

submitted. An audit is the process of testing, inspecting, and observing that a CPA firm 

undertakes to verify an operation’s financial statements and controls. The audit report and 

opinion are the product of that process. The two are often interchangeable in parlance, but the 

regulation would benefit from more precise language clarifying that it is the product—the thirdparty verified information—that the agency requires for its regulatory decisions, not merely the 

knowledge that the gaming operation completed the process.

III. Prerequisites for consolidated audits

25 C.F.R. § 571.12(d) and (e)

These proposed changes to § 571.12(d)(1) and (e) make explicit the implicit auditing 

requirement that only operations with the same owner (i.e., the tribe) may be consolidated. 

Generally Accepted Accounting Principles prevent the consolidated audits of businesses with 

different owners. This is a largely understood requirement, but the need for clarification arose 

when a tribe proposed submitting a single consolidated audit for six operations owned and 
September 20, 2021

Summary of Proposed Changes to 25 C.F.R. Parts 571

National Indian Gaming Commission

3

operated by separate non-tribally owned gaming enterprises. Audits must be performed in 

accordance with GAAP (25 C.F.R. § 571.12(b)(2)), the suggested changes clarify the ambiguity. 

The second suggested change in § 571.12(d) from “gaming operation” to “tribe” corrects 

an error and restores meaning to the regulation. The Audit Division takes the view that operation

and facility are synonymous. Under that view, the current regulation is nonsensical: a gaming 

operation cannot have multiple facilities because a gaming operation is a facility.

IV. Delegation of waiver granting authority

25 C.F.R. § 571.12(d)(4) and (e)(3)

The proposed change streamlines the process for granting a waiver. It would allow the 

Commission to delegate its authority to grant waivers permitting tribes to submit financial 

reviews or consolidated audits.

Audits are a significant cost of regulation, and in 2009, the Commission amended its 

regulations to give a break to tribes with small or numerous operations. The 2009 changes 

allow operations earning under $2 million to submit reviewed, rather than audited financial 

statements. They also allow tribes with multiple operations to submit consolidated 

statements. However, financial reviews and consolidated audits are riskier than full audits. To 

mitigate the risk, the Commission required tribes to be in strict compliance with the audit 

regulations for the past three years in order to qualify—or to receive a waiver from the 

Commission. The proposed change allows the Commission to delegate its authority to grant a 

waiver to other divisions, thereby allowing a faster response to the tribe.