NIGC Consultation Topics 2018

Updated on January 30, 2018

National Indian Gaming Commission 1849 C Street NW, Mail Stop 1621 Washington, DC 20240 

Tel: 202.632.7003 Fax: 202.632.7066 WWW.NIGC.GOV

NIGC Consultation Topic 1

Management Contract Regulations 

Proposed Action

Following the National Indian Gaming Commission’s 2017 consultation sessions, the Commission 

carefully reviewed the Indian Gaming Regulatory Act, NIGC regulations, and the Agency’s internal procedures 

for management contracts. As a result of that review and based on comments received during the consultations, 

the Commission believes that changes to our management contract regulations will improve the efficiency of 

the contract review process and take necessary action to ensure consistency with IGRA’s requirements 

regarding term limits. 

Background

IGRA mandates that the Chair of the National Indian Gaming Commission may only approve a 

management contract if it does not exceed a term of five years, or in rare circumstances, seven years.

1 NIGC 

regulations reflect that limitation as well as the other requirements of IGRA.2 Management contracts are not 

approved unless they comply with IGRA’s requirements, including term limits.3

After management contracts have been approved, tribes and their management contractors may amend

their contracts by following the streamlined procedures for review and approval of contract amendments found 

in 25 C.F.R. Part 535. Part 535 provides an expedited process; background investigations are only required if 

the third party individuals and/or entities responsible for the management contract have changed, and no new 

business plan or updated financial information is required. The expedited process is designed to allow the 

parties to sustain their relationship in a dynamic business environment while maintaining the integrity of the 

Chair’s initial management contract review and approval by relying primarily on the Chair’s initial contract 

approval.

The safeguards found in NIGC’s management contract review process serve to assure that IGRA’s 

primary policy goals of protecting Indian gaming from organized crime and other corrupting influences and 

ensuring a tribe is the primary beneficiary of its gaming operation are met. A thorough review of past practice 

demonstrates that parties, using Part 535’s expedited process, have submitted amendments to the initially 

approved contracts that materially altered terms mandated by IGRA. Specifically, parties have extended the 

term of their approved contract by an additional one to five years resulting in a contract that, in essence, extends 

beyond the explicit term limits of IGRA.

4

The proposed amendments clarify the regulations by explicitly noting that amendments that extend the 

approved management agreement beyond the term limits permitted by IGRA (five or seven years) will be 

reviewed under the requirements of Part 531. So, for example, if an approved contract with a five-year term is 

nearing the end of its term, and the parties are happy with the relationship and simply wish to extend it for an 

 

1

See 25 U.S.C. § 2711(b)(5). 

2

See 25 C.F.R. Parts 531 and 533.

3

See 25 U.S.C. § 2711(a)-(c).

4

25 U.S.C. § 2711.
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additional five years, they may do so, but it may not be reviewed as an amendment under Part 535. Because 

IGRA limits contract terms to five or seven years, the Chairman will review the agreement under Part 531, and 

the entire requisite information that 531 requires must be submitted. 

For another example, though, if a management contract had a one year term, and the parties wanted to 

amend the agreement to extend it for an additional year, for a total term of two years, the Chair would review 

the amendment under part 535 because the term limit would still be within the statutory limit of five or seven 

years. 

The Commission understands this change may affect the timing and expense of updating background 

investigations for making suitability determination of management contractors. Independent of the changes 

discussed above, the Commission received comments during the last round of consultation that the background 

investigation process was time-consuming and expensive. As a result, the Commission has done a thorough 

review of its background investigation process and is proposing changes to our internal procedures to make the 

process more efficient, thereby reducing the cost of investigations. 

Under the new process, NIGC staff will review the background investigation applications and divide 

them into different investigative groups based on the level of risk. This process will allow the agency staff to 

focus their investigative resources on the most vital individuals and entities. This replaces a one-size-fits-all 

model that scrutinizes all applicants the same. For example, under the current process, the top direct financial 

interest goes through the same background investigation as the smallest indirect financial interest. But under the 

new process entities and individuals with a direct financial interest holding the highest level of risk to the tribe 

will have a more in-depth background investigation completed versus those entities or individuals who have an 

indirect financial interest.

In addition, the Commission has proposed changing the individuals and entities that are required to 

submit background applications under the regulations to those that have 10% or greater financial interest. This 

proposed change should significantly reduce the costs to the management contractors in submitting full 

applications on smaller investors. This proposed change will also better align the agency’s requirements with

other regulatory agencies. This change should not increase the risk to tribal gaming as the Commission will 

retain discretionary authority to conduct background investigations on the owners with even the smallest 

interest, who may pose a threat to the industry. 

Further, the Commission is proposing a regulatory change to clarify the “reduced scope of investigation” 

provision. The proposed clarification should assist those that qualify with additional options to reduce the 

regulatory background investigation onus.

To further reduce the time and cost of background investigations, the agency will no longer use the 

office of Personnel Management (OPM) to conduct background checks going forward. Instead, we will process 

fingerprint check through the Federal Bureau of Investigation (FBI) and perform credit check through other 

more efficient alternatives.

Lastly, to reduce the up-front financial burden and timing concerns, the proposed amendments to the 

regulation removes the requirement of a deposit before the background investigations begin. Instead, the 

agency will bill the management contractors regularly as the investigation proceeds.

Tribal Input Requested

The Commission seeks feedback on its proposed amendments to the management contracts regulations. 
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NIGC Consultation Topic 2

Audit Regulations

Proposed Action: 

The Commission is considering additional amendments to 25 C.F.R. § 571.12 regarding audit 

submission regulations as a means of reducing the cost burden of these requirements for small or charitable 

gaming operations. The Commission would like to consult on developing regulatory language for proposed 

changes in support of tribal economic development, self- sufficiency and strong tribal governments per IGRA’s 

mandate. The Commission is seeking feedback on any recommended changes to the annual audit regulations. 

See C.F.R. § 571.12. 

Background: 

NIGC regulation at 25 C.F.R. § 571.12 requires each gaming operation to submit audited financial 

statements to the NIGC on an annual basis. Submission of the annual audit report is critical to the NIGC's 

mission to protect the integrity of Indian gaming and provides a certain level of assurance as to the safekeeping 

of tribal gaming revenues. The audit report prepared and submitted on a timely basis is evidence of, among 

other things, the integrity of the gaming operation and, more specifically, of the adequacy of the books and 

records, the functioning of the internal financial controls, and the disclosure of information having a bearing on 

the financial statements.

In 2009, the regulation was revised to allow gaming operations with annual gross gaming revenue less 

than $2 million to submit reviewed financial statements if they had otherwise complied with the requirement to 

submit timely audit reports for the previous three years. The intent of the 2009 revision was to relieve smaller 

gaming operations of the cost of an annual CPA audit. However, for small gaming operations, even the cost of a 

CPA review can be perceived as prohibitive and in some cases, so costly, it significantly lowers the net revenue 

of the operation and may deter tribes from pursuing these gaming opportunities. 

In fiscal year 2016, only 80 operations earned less than $2 million in gross gaming revenue. Of those 

80, only six submitted the lesser financial statement review. Small or charitable gaming operations often 

produce less than $100,000 in gross gaming revenue annually, some less than $10,000. Contracting a CPA firm 

to perform an annual audit can prove cost prohibitive, and as a result, may deter tribes from pursuing these 

gaming opportunities. 

NIGC reviewed statutes and regulations from a number of jurisdictions and agencies concerned with 

financial entities, including the State of Nevada, the Federal Deposit Insurance Corporation and the Department 

of Interior. We found no consistency in the audit requirements. For example, Nevada gaming regulations 

require audits of financial statements for operations grossing more than $5 million but maintain the right to 

require audits, compiled statements or reviews of financial statements of those operations whose gross revenue 

is less than $5 million. Interior exempts non-federal entities from their audit requirement if the entity expends 

less than $750,000 per year. As NIGC considers altering its own regulations, it recognizes that there are 

currently 95 Tribal operations that produce less than $3 million in gross gaming revenue. Further, the 

Commission is aware that tribal operations comply with the most regulations, from their own governments, as 

well as state and federal entities. 
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Tribal Input Requested: 

With this in mind, the Commission is seeking feedback and recommendations on how to amend this 

regulation while still ensuring we are supporting financial stability and maintaining a high level of protection of 

tribal gaming operations. Specifically, we want input on the following questions: 

 Do you have any suggestions as to how the NIGC can improve its regulation regarding annual audits for 

small or charitable gaming operations?

 Do you think the $2 million threshold (see C.F.R. § 571.12) still adequately captures the universe of 

small gaming operations?

 Do you find that your operation is adequately prepared for the annual audit each year? Do you think that 

you would benefit from training on how to prepare for a financial audit so that the audit can be 

performed more efficiently, saving the tribe money? 

NIGC Consultation Topic 3

Management & Sole Proprietary Interest Regulations 

Proposed Action

The Commission is considering developing regulations clearly setting out its standard for what 

constitutes “management” as well as its criteria for evaluating when a “sole proprietary interest” violation has 

occurred.

Background: Management

IGRA provides that a tribal gaming operation owned by the tribe may either be managed by the tribe or 

by a management contractor subject to a management contract approved by the NIGC Chair.5 Management 

contracts not approved by the Chair are void.6This applies to any arrangement in which a contractor manages 

all or part of an Indian gaming operation.7To assist tribes in determining whether an activity constitutes 

“management,” NIGC Bulletin No. 94-5 explains that the term encompasses activities such as planning, 

organizing, directing, coordinating, and controlling all or part of a gaming operation.

8

In addition, language 

cited in an NIGC Office of General Counsel opinion letter expands on these terms by providing examples of 

management activities.9

To date, the Commission has not issued a regulation formally defining “management.” The Commission 

believes, however, that, in consultation with tribes, developing a regulatory definition consistent with past 

interpretations would help provide greater certainty to the tribal gaming industry regarding what constitutes 

management. The Commission notes that the Seventh Circuit has also recommended that the Commission 

 

5

See 25 U.S.C. §§ 2711(a)(1), 2710(d)(9); 25 C.F.R. § 533.1. 

6

25 C.F.R. § 533.7.

7

25 C.F.R. § 502.15.

8 NIGC Bulletin No. 94-5: “Approved Management Contracts v. Consulting Agreements (Unapproved 

Management Contracts are Void).”

9 NIGC Acting General Counsel Coleman, Re: Opinion regarding pledge of gross revenue from gaming 

operations (January 23, 2009).
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provide more certain guidance.10 To that end, the enclosed Management – Discussion Draft incorporates the 

Commission’s past descriptions of management for consideration as an addition to the Commission’s regulatory 

definitions.

Background: Sole Proprietary Interest

A stated purpose of IGRA is “to ensure that the Indian tribe is the primary beneficiary of the gaming 

operation.”11 One way IGRA seeks to serve this purpose is to require that tribal gaming ordinances provide that 

tribes have the sole proprietary interest and responsibility for the conduct of any gaming activity unless the 

gaming activity is individually owned.12 To determine whether a third party has received a proprietary interest 

in a tribal gaming operation in violation of the SPI mandate, the NIGC considers “1) the term of the 

relationship; 2) the amount of revenue paid to the third party; and 3) the right of control over the gaming 

activity provided to the third party.”13

The Commission has previously consulted on developing guidance or regulations concerning SPI in 

200814 and 2010.15 The Commission also notes that several courts have had the opportunity to consider and 

discuss SPI in the intervening years, noting and upholding NIGC’s formulation of the criteria to evaluate for 

SPI violations.16 In addition, the Department of Justice has articulated the position of the United States in 

litigation.17 The Commission believes that an SPI regulation consistent with past NIGC enforcement actions and 

litigation would provide greater certainty to the tribal gaming industry regarding what constitutes a violation of 

the SPI mandate. To that end, the enclosed Sole Proprietary Interest – Discussion Draft incorporates these 

interpretations for consideration as an addition to the Commission’s compliance regulations.

Tribal Input Requested

The Commission seeks feedback on the enclosed Discussion Drafts for “sole proprietary interest” and 

“management.”

 

10 Wells Fargo Bank, Nat. Ass'n v. Lake of the Torches Econ. Dev. Corp., 658 F.3d 684, 697 n. 13 (7th Cir. 

2011).

11 25 U.S.C. § 2702(2).

12 25 U.S.C. § 2710(b)(2)(A). An individually owned gaming operation must provide 60% of its net revenue to 

the tribe. 25 U.S.C. § 2710(b)(4)(B)(i)(III).

13 See, e.g., NOV-11-02.

14 NIGC Chairman Hogen, Dear Tribal Leader (June 13, 2008).

15 Notice of Inquiry and Request for Information; Notice of Consultation, 75 FR 70680 (November 18, 2010).

16 See, e.g., City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 830 F.Supp.2d 712 (D. Minn. 

2011); City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 785 F.3d 1207 (8th Cir. 2015); Bettor 

Racing, Inc. v. National Indian Gaming Com’n, 47 F.Supp.3d 912 (D. S.D. 2014).

17 See BETTOR RACING, INC. and J. Randy Gallo, Plaintiffs-Appellants, v. NATIONAL INDIAN GAMING 

COMMISSION, Defendant-Appellee, Flandreau Santee Sioux Tribe, Intervenor-Defendant., 2015 WL 1956293 

(C.A.8).