# Financial Statements (2015) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/tribal%3Aminn_chiippewa_bois_forte%3A484ab593f5c896c8 ## Record - **Collection:** Tribal code - **Document type:** Tribal code ## Text Financial Statements September 30, 2015 Minnesota Chippewa Tribe w w w. e i d e b a i l l y. c o m Minnesota Chippewa Tribe Table of Contents September 30, 2015 Independent Auditor’s Report.................................................................................................................................... 1 Financial Statements Statement of Net Position .................................................................................................................................... 4 Statement of Activities ........................................................................................................................................ 5 Balance Sheet – Governmental Funds ................................................................................................................. 6 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ............................. 7 Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds ............................. 8 Reconciliation of the Changes in Funds Balances of Governmental Funds to the Statement of Activities ......................................................................................................................................................... 9 Statement of Net Position – Proprietary Funds ................................................................................................. 10 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds ..................................... 11 Statement of Cash Flows – Proprietary Funds .................................................................................................. 12 Notes to Financial Statements ........................................................................................................................... 14 Supplementary Information Combining Balance Sheet – Nonmajor Governmental Funds........................................................................... 29 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds ..................................................................................................................................... 31 Combining Schedule of Net Position – Internal Service Funds ........................................................................ 33 Combining Schedule of Revenues, Expenses, and Changes in Net Position – Internal Service Funds ............................................................................................................................................................. 34 Combining Schedule of Cash Flows – Internal Service Funds ......................................................................... 35 Combining Balance Sheet – U.S Department of Interior Programs .................................................................. 36 Combining Schedule of Revenue, Expenditures and Change in Fund Balance – U.S Department of Interior Programs ...................................................................................................................................... 37 Combining Balance Sheet – U.S. Department of Health and Human Services Programs ................................ 38 Combining Schedule of Revenue, Expenditures, and Changes in Fund Balance – U.S. Department of Health and Human Services Programs ...................................................................................................... 40 Schedule of Expenditures of Federal Awards ................................................................................................... 41 Notes to Schedule of Expenditures of Federal Awards ..................................................................................... 43 Independent Auditor’s 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............................................................................................................................................... 44 Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by OMB Circular A-133 ............................................................................. 46 Schedule of Findings and Questioned Costs ............................................................................................................ 49 Independent Auditor’s Report To the Tribal Executive Committee Minnesota Chippewa Tribe Cass Lake, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Minnesota Chippewa Tribe, Cass Lake, Minnesota, as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the Tribe’s basic financial statements as listed in the table of contents Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Because of the matters described in the “Basis for Disclaimer of Opinion’ paragraphs, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the governmental activities and each major fund. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Except for the matters described in the Basis for Disclaimer of Opinions paragraphs, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. www.eidebailly.com 4310 17th Ave. S. | P.O. Box 2545 | Fargo, ND 58108-2545 | T 701.239.8500 | F 701.239.8600 | EOE 1 Basis for Disclaimer of Opinion on the Governmental Activities The Tribe did not maintain adequate accounting records for its cash accounts in the governmental funds and the general fund as of September 30, 2015. Disclaimer of Opinion on the Governmental Activities and the General Fund Because of the significance of the matters described in the “Basis for Disclaimer of Opinion on the Governmental Activities” paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial position of the governmental activities and the general fund of the Tribe as of September 30, 2015 and the changes in financial position thereof for the year then ended. Unmodified Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of Department of Interior fund, the Department of Health and Human Services fund, the food stamp nutrition education fund, the Finance Corporation fund, the business-type activities, and the aggregate remaining fund information of the Tribe as of September 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Management has omitted a management’s discussion and analysis and budgetary comparison schedules that U.S. generally accepted accounting principles requires to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for place the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Tribe’s basic financial statements. The combining and individual fund financial statements are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The combining and individual fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2017, on our considerations of the Tribe’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide and opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Tribe’s internal control over financial reporting and compliance. Fargo, North Dakota November 30, 2017 3 Minnesota Chippewa Tribe Statement of Net Position September 30, 2015 Assets Cash and cash equivalents Investments Internal balances Account receivable, net Loans receivable, net Grant receivable Other receivables and accrued interest Prepaid items Other assets, net Capital assets Not being depreciated Being depreciated, net of depreciation Governmental Activities Business-Type Activities $ $ Total assets Liabilities Accounts payable Accrued liabilities Advances from grants Escrowed liabilities Noncurrent liabilities Due within one year Due in more than one year Total liabilities Net Position Investment in capital assets Unrestricted Total net position $ 611,226 846,501 19,988 117,058 772,813 40,455 24,308 - 1,699,701 13,332,641 (19,988) 159,786 29,640,290 94,946 500 3,382,184 Total $ 2,310,927 14,179,142 276,844 29,640,290 772,813 135,401 24,808 3,382,184 1,193,542 765,760 5,710 1,115,578 1,199,252 1,881,338 4,391,651 49,411,348 53,802,999 392,931 29,841 770,630 - 339,964 35,004 368,914 732,895 64,845 770,630 368,914 90,569 - 34,981,245 90,569 34,981,245 1,283,971 35,725,127 37,009,098 1,959,302 1,148,378 1,121,288 12,564,933 3,080,590 13,713,311 3,107,680 $ 13,686,221 $ 16,793,901 The accompanying Notes to Financial Statements are an integral part of these statements 4 Minnesota Chippewa Tribe Statement of Activities Year Ended September 30, 2015 Net (Expense) Revenue and Changes in Net Position Program Revenues Functions/Programs Primary government Governmental activities: General government Education Human services Conservation of natural resources Economic development Other Expenses $ 1,650,449 333,583 2,812,349 Primary Government Charges for Services Operating Grants and Contributions Governmental Activities Business-Type Activities $ $ $ $ 215,991 - 1,395,228 334,554 2,805,771 (39,230) 971 (6,578) - Total $ (39,230) 971 (6,578) 111,377 132,463 346,328 - 112,052 132,461 308,708 675 (2) (37,620) - 675 (2) (37,620) 5,386,549 215,991 5,088,774 (81,784) - (81,784) 1,249,504 1,368,957 - - 119,453 119,453 5,088,774 (81,784) 119,453 37,669 Change in net position (81,784) 119,453 37,669 Net position - beginning 3,189,464 13,566,768 16,756,232 3,107,680 $ 13,686,221 $ 16,793,901 Total governmental activities Business-type activities: Finance Corporation Total primary government $ 6,636,053 $ 1,584,948 $ Net position - ending The accompanying Notes to Financial Statements are an integral part of these statements $ 5 Minnesota Chippewa Tribe Balance Sheet – Governmental Funds September 30, 2015 Department of Health and Human Services Department of Interior General Fund Food Stamp Nutrition Education Other Governmental Funds Total Governmental Funds $ 197,418 89,211 112,992 11,648 40,455 2,966 $ 609,775 846,501 105,881 772,813 673,364 40,455 14,226 Assets Cash Investments Accounts receivable Grant receivable Due from other funds Other receivables Prepaid items $ 846,501 15,289 660,966 - $ Total assets 395,006 7,477 $ $ 1,522,756 $ 50,768 353,719 17,351 1,381 400,487 750 3,783 $ $ 402,483 $ 3,953 398,530 - $ 423,752 $ 259,334 $ 454,690 $ 3,063,015 $ 242,111 173,557 9,592 $ 104,295 150,554 4,485 - $ 326,958 1,251 4,332 8,789 $ 673,364 380,083 8,817 770,630 - 259,334 - Liabilities and Fund Balance Liabilities Due to other funds Accounts payable Accrued liabilities Advances from grants Total liabilities Fund Balance (Deficit) Nonspendable For prepaid items Committed For employee loans For wisdom steps For timber appraisal For workshops Unassigned Total fund balance (deficit) Total liabilities and fund balance $ 404,487 402,483 425,260 259,334 341,330 1,832,894 - 7,477 3,783 - 2,966 14,226 1,118,269 (7,477) (5,291) - 69,248 60,226 60,000 212 (79,292) 69,248 60,226 60,000 212 1,026,209 1,118,269 - (1,508) - 113,360 1,230,121 1,522,756 $ 402,483 $ 423,752 $ 259,334 $ The accompanying Notes to Financial Statements are an integral part of these statements 454,690 $ 3,063,015 6 Minnesota Chippewa Tribe Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position September 30, 2015 Total Funds Balances - Governmental Funds $ 1,230,121 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 1,942,953 Internal service funds are used by the Tribe to charge costs of certain activities. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. (65,394) Total Net Position - Governmental Activities The accompanying Notes to Financial Statements are an integral part of these statements $ 3,107,680 7 Minnesota Chippewa Tribe Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds Year Ended September 30, 2015 General Fund Revenues Intergovernmental - federal Program income Settlement income Investment income Liquor permits Contract Other Total revenues $ 150,000 37,898 26,750 2,843 217,491 Department of Health and Human Services Department of Interior $ 621,353 82,750 704,103 $ Food Stamp Nutrition Education 1,575,176 122,940 1,698,116 $ 703,413 703,413 Other Governmental Funds Total Governmental Funds $ $ 793,585 5,835 186,174 985,594 3,693,527 5,835 150,000 37,898 26,750 82,750 311,957 4,308,717 Expenditures Personnel Fringe benefits Travel/training Office expense Pass-through funds Office and equipment rental Other expenditures Capital outlay 46,599 8,229 63,376 7,841 4,219 38,979 - 282,972 95,595 31,756 48,514 30,297 106,087 - 469,610 148,789 69,531 50,854 448,411 64,763 282,727 - 79,531 28,084 57,665 75,957 391,502 10,094 8,460 4,500 380,670 114,655 112,483 21,105 38,409 24,155 215,667 - 1,259,382 395,352 334,811 204,271 878,322 133,528 651,920 4,500 Total direct expenditures 169,243 595,221 1,534,685 655,793 907,144 3,862,086 32,628 108,882 163,431 47,620 112,327 464,888 201,871 704,103 1,698,116 703,413 1,019,471 4,326,974 15,620 - - - (33,877) (18,257) 1,102,649 - (1,508) - 147,237 1,248,378 Indirect costs Total expenditures Net Change in Fund Balance Fund Balance (Deficit), Beginning of Year Fund Balance (Deficit), End of Year $ 1,118,269 $ - $ (1,508) $ - $ The accompanying Notes to Financial Statements are an integral part of these statements 113,360 $ 1,230,121 8 Minnesota Chippewa Tribe Reconciliation of the Changes in Funds Balances of Governmental Funds to the Statement of Activities Year Ended September 30, 2015 Net Change in Funds Balances - Total Governmental Funds $ (18,257) Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported as expenditures in governmental funds. However, in the statement of activities the cost of capital assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation expense has exceeded additions (56,278) Internal service funds are used by the Tribe to charge the costs of certain activities. The net expenditures of the internal service funds is reported in governmental activities. (7,249) Change in Net Position of Governmental Activities The accompanying Notes to Financial Statements are an integral part of these statements $ (81,784) 9 Minnesota Chippewa Tribe Statement of Net Position – Proprietary Funds September 30, 2015 Business-Type Activity Enterprise Fund Finance Corporation Governmental Activities Internal Service Funds $ $ Assets Current Assets Cash and cash equivalents Investments, current portion Accounts receivable Due from other funds Prepaid expenses and other assets Accrued interest receivable Mortgage loans receivable, current portion Business loans receivable, current portion Installment loans receivable, current portion Total current assets Non-Current Assets Investments, net of current portion Mortgage loans receivable, net of current portion and allowance Business loans receivable, net of current portion and allowance Installment loans receivable, net of current portion Capital assets, net of accumulated depreciation Land Building and equipment Real estate acquired by foreclosures Total non-current assets Total assets 1,699,701 2,243,971 159,786 500 94,946 1,864,694 107,896 23,592 6,195,086 1,451 11,177 189,984 10,082 212,694 11,088,670 26,336,670 376,498 930,940 - 5,710 1,115,578 3,382,184 43,236,250 16,349 16,349 49,431,336 229,043 Liabilities and Net Position Current Liabilities Accounts payable Accrued liabilities Escrowed liabilities Due to other funds Noncurrent liabilities Due within one year Due in more than one year Total liabilities 339,964 35,004 368,914 19,988 12,848 21,024 169,996 34,981,245 35,745,115 90,569 294,437 Net Position (Deficit) Investment in capital assets Unrestricted 1,121,288 12,564,933 16,349 (81,743) Total net position (deficit) Total liabilities and net position $ 13,686,221 $ (65,394) $ 49,431,336 $ 229,043 The accompanying Notes to Financial Statements are an integral part of these statements 10 Minnesota Chippewa Tribe Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds Year Ended September 30, 2015 Revenue Housing revenue Indirect revenue Rental revenue Sales of business support services Other revenue Total operating revenue Business-Type Activity Enterprise Fund Finance Corporation Governmental Activities Internal Service Funds $ $ 1,738,168 - 641,339 39,274 23,147 373,767 1,738,168 1,077,527 524,165 - 1,214,003 1,077,527 Expenses Current Personnel Fringe benefits Depreciation Travel/training Office expenses Office and equipment rent Maintenance Other expenditures 647,382 191,063 97,193 44,396 36,415 56,606 358,083 120,580 6,814 24,693 25,340 30,802 54,428 464,036 Total direct expenses 1,073,055 1,084,776 176,449 - 1,249,504 1,084,776 Loss before nonoperating activity (35,501) (7,249) Nonoperating Activities Investment income 154,954 - Change in Net Position 119,453 (7,249) 13,566,768 (58,145) Less direct costs of revenue Net revenue Indirect costs Total expenses Net Position (Deficit), Beginning of Year Net Position (Deficit), End of Year $ 13,686,221 The accompanying Notes to Financial Statements are an integral part of these statements $ (65,394) 11 Minnesota Chippewa Tribe Statement of Cash Flows – Proprietary Funds Year Ended September 30, 2015 Operating Activities Cash received from customers Cash paid for wages and benefits Cash paid to suppliers Business-Type Activity Enterprise Fund Finance Corporation Governmental Activities Internal Service Funds $ $ Net Cash from (used for) Operating Activities 1,724,844 (837,068) (724,241) 1,117,138 (483,505) (716,217) 163,535 (82,584) Non-Capital Financing Activities Proceeds from other funds Payments to other funds - 160,856 (68,509) Net Cash from Non-Capital Financing Activities - 92,347 Capital and Related Financing Activities Cash paid for repairs on repossed property Cash received from sale of repossed property Cash paid for purchase of equipment (142,166) 69,899 - (9,525) Net Cash used for Capital and Related Financing Activities (72,267) (9,525) (5,217,496) 3,500,000 234,175 (2,596,675) 3,147,474 - Net Cash used for Investing Activities (932,522) - Net Change in Cash and Cash Equivalents (841,254) 238 Cash and Cash Equivalents at Beginning of Year 2,540,955 1,213 Investing Activities Purchase of investments Proceeds from investments Investment income Disbursement for loans Proceeds from loan payments Cash and Cash Equivalents at End of Year $ 1,699,701 The accompanying Notes to Financial Statements are an integral part of these statements $ 1,451 12 Minnesota Chippewa Tribe Statement of Cash Flows – Proprietary Funds Year Ended September 30, 2015 Reconciliation of Operating Loss to Net Cash from (used for) Operating Activities Operating Loss Adjustments to reconcile increase in operating income to cash from operating activities Depreciation Unrealized loss on investments Gain on sale of land/houses Changes in assets and liabilities Accounts receivables Installment loans receivable Accrued interest receivable Prepaid expenses and other assets Accounts payables Accrued liabilities Escrowed liabilities Net Cash from (used for) Operating Activities Business-Type Activity Enterprise Fund Finance Corporation Governmental Activities Internal Service Funds $ $ $ (35,501) (7,249) 97,193 (79,221) 52,343 6,814 - 104,665 (113,281) 22,170 (500) 95,986 1,377 18,304 39,611 28,441 (145,359) (4,842) - 163,535 The accompanying Notes to Financial Statements are an integral part of these statements $ (82,584) 13 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Note 1 - Summary of Significant Accounting Policies The various bands of Chippewa Indians residing within the Fond du Lac, Grand Portage, Bois Forte (Nett Lake), Leech Lake, Mille Lacs and White Earth Reservations comprise the Minnesota Chippewa Tribe (the “Tribe”). The Tribe is federally recognized Indian Tribe whose constitution was formally adopted by its members on January 24, 1936. The Tribe provides general government, public health and welfare, public safety, education, public works, culture and recreation, economic development and social and health services for the benefit of the members. Reporting Entity In evaluating how to define the government for financial reporting purposes, management evaluated the involved entities based on a number of criteria. It was determined that the Tribe is a primary government based upon the fact that it is legally separate, its governing body is separately elected, and it is fiscally independent of other governments. Potential component units of Tribe are evaluated on various criteria, the main one being the degree of accountability the primary government has over the potential component units. The most significant factor in the accountability assessment is the potential component unit’s financial accountability to the primary government, measured through the degree to which the primary government can appoint a voting majority of the governing body, impose its will, ascertain a potential financial benefit, or face a potential financial burden with regard to the potential component unit. Potential component units of the Tribe include the Minnesota Chippewa Tribe Finance Corporation. Based upon an evaluation of the potential component units using the criteria detailed above, the following conclusions were reached. The Minnesota Chippewa Tribe Finance Corporation should be included in the reporting entity of the Tribe. This is based on the fact that it is financially accountable to the primary government, and the Executive Committee appoints all board members of the Finance Corporation. This component unit is blended within the financial statements of the Tribe. Separately issued financial statements may be obtained by contacting the Finance Corporation office. Basis of Presentation Tribe-Wide Financial Statements The goal of Tribe-wide financial statements is to present a broad overview of Tribe’s finances. The basic statements that form the Tribe-wide financial statements are the statement of net position and the statement of activities. These two statements report information on all of the non-fiduciary activities of the Tribe. The effect of interfund activity has been removed from these statements, except those between government-type activities and business-type activities. Governmental activities, which are normally financed intergovernmental revenues, are reported separately from business-type activities, which are normally financed through user fees and charges for goods or services. 14 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 The statement of activities reports gross direct expenses by function reduced by program revenues. This results in a measurement of net revenue or expense for each of the Tribe’s activities. Direct expenses are those that are clearly identifiable with a specific function. Program revenues are directly associated with the function or business-type activity and include 1) charges for services and 2) operating or capital grants and contributions that are restricted to a particular function. Fund Financial Statements The fund financial statements provide information about the Tribe’s funds. Separate statements for each fund category – governmental and proprietary– 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 non-major funds. The Tribe reports the following major governmental funds:  General Fund – This fund is the general operating fund of the Tribe. All financial resources of the general government that are not required to be reported in another fund are accounted for in the general fund.  Department of Interior Fund – This fund is used to account for the revenues and expenditures relating to federal awards received from the Department of Interior.  Department of Health and Human Fund – This fund is used to account for the revenues and expenditures relating to federal awards received from the Department of Health and Human Services.  Food Stamp Nutrition Education Fund – This fund is used to account for the revenues and expenditures relating to the grant. The Tribe reports the following major proprietary fund:  Finance Corporation – This fund accounts for low interest loans to Native Americans for the purchase, construction or rehabilitation of housing. Additionally, the Tribe reports the following fund type:  Internal Service Funds – These funds account for the following activities provided to other departments of the Tribe on a cost-reimbursement basis: indirect costs, insurance, computer/copier services, revolving funds, and office supplies. Basis of Accounting The Tribe-wide, proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. 15 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Tribe considers revenues to be available if they are collected within one year of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Intergovernmental revenue, permits, charges for services and investment income associated with the current fiscal period are the major revenues that are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period to the extent they are collected in one year. All other revenue items are considered to be measurable and available only when the Tribe receives cash. Amounts reported as program revenues include the following: amounts received from those who purchase, use or directly benefit from a program; amounts received from parties outside the Tribe that are restricted to one or more specific programs; and earnings on investments that are legally restricted for a specific program. Proprietary funds report operating revenues and expenses separately from nonoperating items. Operating revenues and expenses generally result from providing services or producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Tribe’s enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the costs of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the Tribe considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the Tribe considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless Council has provided otherwise in its commitment or assignment actions. Other Significant Accounting Policies Cash Equivalents The Tribe considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments Investments are recorded at fair market value. Receivable and Credit Policy Trade receivables are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. The receivables are non-interest bearing. Payments on trade receivables are applied to the earliest unpaid invoices. The carrying amount of trade receivables is reduced by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected. At September 30, 2015, the allowance for doubtful accounts was $5,000 in the governmental activities as well as the General fund. 16 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Grants Receivable Grants receivable consists of amounts due for reimbursement of approved expenditures on grants entered into with various government agencies. Receivables of this nature are considered fully collectible. Prepaid Items Certain cash payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. Interfund Transactions During the course of operations, transactions occurred between individual funds for good provider and services rendered. These receivables and payables are properly classified as “due from other funds” or “due to other funds” in the fund financial statements, and are eliminated in the government-wide statement of net position, except those between government-type activities and business-type activities. Repayment terms for interfund balances have not been established. Quasi-external transactions are account for as revenues and expenditures. Transactions that constitute reimbursements to a fund for expenditures initially made from it that are properly applicable to another fund, are recorded as expenditures in the reimbursing fund and as a reduction of expenditures in the fund that is reimbursed. Loans Loans are reported at their outstanding unpaid principal balance net of the allowance for loan losses. Interest income on loans is accrued at the specific rate on the unpaid principal balance. The accrual of interest on loans is discontinued at the time the loan is 90 to 120 days delinquent unless the credit is well secured and in the process of collection. All current year interest accrued but not collected for loans that are charged off is reversed against interest income. All prior year interest accrued but not collected is charged off against the allowance for loan losses. The Finance Corporation has determined that the accounting for nonrefundable fees and costs associated with originating loans does not have a material effect on the financial statements. As such, these fees and costs have been recognized during the period they are collected and incurred, respectively. Allowance for Loan Losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against allowance when management believes the uncollectibility of a loan is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated by management and is based upon management’s review of the collectability of the loans in light of historical experience, nature and volume of loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. 17 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Capital Assets Capital assets are reported in the applicable governmental or business-type activities column in the governmentwide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000. Such assets are recorded at historical cost or estimated historical cost. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend lives are not capitalized. Property, plant, and equipment of the primary government, as well as the component units, are depreciated using the straight line method over the following estimated useful lives: Buildings and improvements Machinery and equipment 20 years 3-5 years Advances from Grants The government reports advances from grants on its balance sheet. Advances from grants arises when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period. Advances from grants also arises when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to the incurring of the qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the government has legal claim to the resources, the liability for advances from grants is removed from the combined balance sheet and the revenue is recognized. Compensated Absences Unused vacation and personal leave is accrued at year-end for each employee as established under the personnel policies of the Minnesota Chippewa Tribe. The amount of vacation and personal leave that can be accrued is unlimited and may be carried over from year-to-year. Upon termination, an employee will be paid for both unused vacation and personal leave, up to 240 hours. Escrowed Liabilities Escrowed liabilities consist of amounts collected from borrowers for the payment of taxes and insurances. Revolving Fund Under terms of the agreement between the Finance Corporation and the Minnesota Housing Finance Agency, an initial contribution was made and revolving funds are provided from interest earned on loans and investments and rental income. Indirect Costs Indirect costs represent recoverable overhead costs charged by the Tribe to federal, state, and tribal programs in connection with administering and accounting for programs funded by federal, state and tribal resources. The latest indirect cost rate approved by the cognizant federal agency (Department of Interior, Office of Inspector General) was 18.33% for all programs. Certain programs were limited to lesser amounts as prescribed in the grant/contract award and a number of programs were not funded for the full amount of indirect costs based on the approved rate. These overhead costs have been reflected in the accompanying combined financial statements as expenditures of the governmental funds and as revenue to reimburse the expenditures of the indirect cost fund. 18 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Federal and State Income Taxes The 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. Real Estate Acquired by Foreclosure The inventory of real estate obtained through foreclosure or deed transfer in lieu of foreclosure is recorded at the outstanding mortgage principal remaining less any unused escrow remaining when title to the real estate is obtained. Additional expenses such as property insurance, foreclosure expense and building repairs are expensed during the year as incurred. The Finance Corporation adjusts the inventory of real estate to market value when the facts indicate that the market value of the foreclosed real estate is less than the originally recorded carrying value. Use of Estimates In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to significant change in the near-term relates to the determination of the allowance for loan losses. Fund Balance The following classifications describe the relative strength of the spending constraints:  Nonspendable fund balance – amounts that are not in nonspendable form (such as inventory) or are required to be maintained intact.  Restricted fund balance – amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation.  Committed fund balance – amounts constrained to specific purposes by the Tribe itself, using its highest level of decision-making authority (i.e., Tribal Council). To be reported as committed, amounts cannot be used for any other purpose unless the Tribe takes the same highest level action to remove or change the constraint.  Assigned fund balance – amounts the Tribe intends to use for a specific purpose. Intent can be expressed by the Tribal Council or by an official or body to which the Tribal Council delegates the authority.  Unassigned fund balance – amounts that are available for any purpose. Positive amounts are reported only in the general fund. Net Position Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for acquisition, construction, or improvements of those assets and adding back any unspent proceeds. 19 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 When both restricted and unrestricted resources are available for us, it is the Tribe’s policy to us restricted resources first then unrestricted resources as they are needed. When committed, assigned or unassigned resources are available for use, it is the Tribe’s policy to used resources in the following order; 1) committed, 2) assigned, 3) unassigned Note 2 - Deposits and Investments Deposits In accordance with the Tribe’s investment policy, the Tribe maintains deposits at those depository banks authorized by the Board. All such depositories are members of the Federal Reserve System. Credit Risk Custodial credit risk is the risk that, in the event of the failure of the counterparty, the Tribe will not be able to recover the value of its collateral securities that are in the possession of an outside party. In accordance with Tribal investment policy, the Tribe maintains deposits at those depository banks authorized by the tribal council, all of which are members of the Federal Reserve System. As of September 30, 2015, the Tribe’s deposits were adequately insured or properly collateralized by pledged securities. Investments The Tribe and Finance Corporation maintain separate investment policies. The Tribe may invest funds as authorized by the board as follows: 1. 2. 3. 4. United States Government and Agency Securities (US Treasury bills, notes and bonds); Government money market funds; Collateralized certificates of deposit; and Corporate bonds rated “A” or better The Finance Corporation may invest funds as authorized by the Board as follows: 1. United States Treasury notes and bills issued by the United States Treasury or any other obligation guaranteed as to principal or interest by the United States. 2. Stocks, bonds, and mutual funds are allowable investments for Duluth Housing Program, investment in these securities totaled $237,625 at September 30, 2015. 3. Debentures issued by any federal government agency or instrumentality, including but not limited to the federal national mortgage association, federal home loan bank, farm credit bank, federal home loan mortgage corporation, government national mortgage association, and student loan marketing association. All federal securities shall be direct issuances of federal government agencies and instrumentalities. 4. Money market funds and certificates of deposits in federal institutions. 20 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Custodial Credit Risk The custodial credit risk for investments is the risk that in an event of failure of counterparty, the Tribe will not be able to recover the value of the investment of the collateral securities in the possession of the outside party. The Tribe has no custodial risk for investments for September 30, 2015. The Tribe does not have a formal policy that limits custodial credit. Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of the investment. The Tribe does not have a formal policy that limits investments maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The Tribe manages exposure to fair value of loss arising from changing interest rates by having fixed income investments with varying maturity dates. The Minnesota Chippewa Tribe’s investments as of September 30, 2015 , consist of the following: Fair Value Governmental activities US Government Sponsored Issues $ 846,501 Business-type activities US Government Sponsored Issues Certificate of deposit Municipal bonds Total business-type 578,875 8,840,859 3,912,907 13,332,641 Total investments $ 14,179,142 Maturities in Years Less than 1 1 to 5 $ $ 846,501 $ - 1,893,281 350,690 2,243,971 578,875 6,947,578 3,562,217 11,088,670 3,090,472 $ 11,088,670 The Tribe carries its investments at market value and adjusts for the change in market values through current earnings. Money market mutual funds are unrated as of September 30, 2015. Concentration Risk Concentration of credit risk is the risk of loss attributed to the magnitude of investments in a single issuer. The Tribe places no limits on the amount which may by invested with a single issuer. There are no investments in anyone issuer that is in excess of 5% of total investments. 21 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Note 3 - Mortgage Loans, Business Loans, and Installment Loans Receivable Mortgage Loans Receivable As of September 30, 2015, the Finance Corporation had 576 outstanding mortgage loans. Loans are to be repaid in thirty (30) years or less, except for renovation loans, which are to be repaid in fifteen (15) years or less. Housing loans are secured by liens on the property to the extent such liens may validly be granted, and in accordance with standard mortgage procedures appropriate to the nature of the ownership of the land. Housing loans for dwellings on Tribal or Band land are made only if such land is leased (which lease shall be approved by the Tribe or Band) under terms insuring the availability of the land for a period equal to the term of the housing loan and 20 years thereafter. The Bureau of Indian Affairs must approve housing loans for dwellings on allotted lands in writing. Under terms of the agreement with MHFA, the Finance Corporation must use these funds in a manner approved by MHFA and must revolve repaid principal. The mortgage loans receivable consisted of the following at September 30, 2015: Mortgage loans receivable Duluth renovating loan receivable Mortgage receivable - FHA Rental development loans Revolving loan fund Allowance for doubtful accounts Total loans, net of allowance Less current portion or loan receivable $ 23,508,452 74,494 10,475,145 2,407,653 (7,692,711) (571,669) 28,201,364 (1,864,694) $ 26,336,670 Business Loans Receivable On May 11, 2005, the Finance Corporation was awarded a grant from the Community Development Financial Institution for $949,783 for the purpose of making business loans. Loans amounting to $1,341,261 have been made as for September 30, 2015. As of September 30, 2015, the Finance Corporation had 13 outstanding business loans. These loans are secured by equipment and real estate. The business loan receivable consisted of the following as of September 30, 2015: Business loan receivable Allowance for doubtful accounts Total loans, net of allowance Less current portion or loan receivable Total loans, net of allowance $ 563,129 (78,735) 484,394 (107,896) $ 376,498 22 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Installment Loans Receivable As of September 30, 2015, the Finance Corporation had outstanding installment loans with a total receivable balance of $954,532. The loans are to be repaid in five years or less with a balloon payment in the final year. The installment loans are for repossessed properties that have been sold to the borrower on a contract for deed. Note 4 - Advances The Finance Corporation has advances due to other organizations at September 30, 2015, as follows: Minnesota Housing Finance Agency $ 34,981,245 Minnesota Housing Finance Agency The Finance Corporation, through a 1976 agreement with the Minnesota Housing Finance Agency, is administering housing assistance funds for Native Americans. The funds advanced are not required to be repaid to the Minnesota Housing Finance Agency as long as the Housing Corporation follows the guidelines enacted in the agreement. Funds appropriated by the Minnesota Housing Finance Agency to the Minnesota Chippewa Tribal Housing Corporation is as follows: Fiscal Year 1977-1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Plus re-allocation funds from off-reservation Chippewa Equity participation loan Total MHFA funds originally appropriated Less Duluth Urban Indian Housing Fund terminated Total MHFA funds appropriated American Indian Housing Funds Duluth Urban Indian Housing Funds $ 25,490,677 1,048,509 1,048,509 1,048,509 1,048,509 1,048,509 1,134,342 1,134,342 744,770 744,770 $ 265,500 - 172,252 14,648 - 34,678,346 265,500 - (36,664) $ 34,678,346 $ 228,836 23 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 The advances from Minnesota Housing Finance Agency are calculated as follows: Total MHFA funds appropriated Regular Duluth down payment and assistance program Other Indian Housing Funds $ 34,678,346 $ Total 228,836 $ 34,678,346 228,836 Plus: Duluth equity participation program Off-reservation demonstration program - 92,250 23,513 92,250 23,513 Less: MHFA payments returned - (41,700) (41,700) 302,899 $ 34,981,245 Advances from MHFA as of September 30, 2014 Note 5 - American Indian Housing Funds $ 34,678,346 $ Operating Lease The Finance Corporation rents 22 single family real estate properties to individuals on a month to month basis. Real estate property under operating leases was valued at $2,992,500 at September 30, 2015, and is included in Real Estate Acquired by Foreclosure at the lower rate of cost or market value. Total rental income received on leased real estate property was $154,260 for the year ended September 30, 2015. The Finance Corporation leases building space to the Tribe in a building previously acquired from the Tribe in January 2007. The total rent paid to the Finance Corporation from the Tribe for the year ended September 30, 2015 was $138,735. 24 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Note 6 - Capital Assets Capital asset activity for the year ended September 30, 2015 is as follows: Governmental activities: Capital assets, not being depreciated: Land Balance October 1, 2014 $ Capital assets, being depreciated: Buildings Equipment Vehicles Total capital assets being depreciated Less accumulated depreciation for: Buildings Equipment Vehicles Total accumulated depreciation Total capital assets being depreciated, net Governmental activities capital assets, net Business-type activities: Capital assets, not being depreciated: Land $ Balance September 30, 2015 Deletions - $ - $ 1,193,542 1,113,941 397,132 1,500 9,525 - - 1,113,941 406,657 1,500 1,512,573 9,525 - 1,522,098 307,212 384,534 1,500 55,879 7,213 - - 363,091 391,747 1,500 693,246 63,092 - 756,338 819,327 (53,567) - 765,760 $ 2,012,869 $ (53,567) $ - $ 1,959,302 $ 5,710 $ - $ - $ 5,710 Capital assets, being depreciated Equipment MCT buildings Other buildings and improvements Total capital assets being depreciated Less accumulated depreciation for: Equipment MCT buildings Other buildings and improvements Total accumulated depreciation Total capital assets being depreciated, net Business-type activities capital assets, net 1,193,542 Additions $ 66,234 1,600,000 - - 66,234 1,600,000 400,830 - - 400,830 2,067,064 - - 2,067,064 38,211 620,000 4,764 86,723 - 42,975 706,723 196,082 5,706 - 201,788 854,293 97,193 - 951,486 1,212,771 (97,193) - 1,115,578 1,218,481 $ (97,193) $ - $ 1,121,288 25 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Depreciation expense for the year ended September 30, 2015 was charged to the following functions/programs: Governmental activities: General government Internal Service Total depreciation expense - governmental activities $ Business-type activities: Finance Corporation Note 7 - $ 56,990 6,102 63,092 $ 97,193 Interfund Balances A summary of the Tribe’s interfund balances as of September 30, 2015 is as follows: Department of Health and Human Services Food Stamp Nutrition Education Nonmajor Governmental Funds General Fund Business-Type Activities - Finance Corporation Internal Service Funds Due from other funds $ 750 11,648 660,966 189,984 Due to other funds $ 242,111 104,295 326,958 19,988 169,996 $ $ 863,348 863,348 The Department of Health and Human Services Fund, Food Stamp Nutrition Fund, and Nonmajor Governmental Funds have a due to the General Fund, Department of Health and Human Services Fund, and Nonmajor Governmental Funds for reimbursement of borrowed funds. Note 8 - Long-Term Liabilities Changes in long-term liabilities during the year ended September 30, 2015 are as follows: Governmental activities Compensated absences Balance October 1, 2014 $ 91,948 Additions $ 164,141 Retirements $ 165,520 Balance September 30, 2015 $ 90,569 Due Within One Year $ 90,569 The compensated absences are paid out of the general fund. 26 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Note 9 - Short-Term Note Payable The Tribe has a revolving line of credit where they may borrow up to $1,000,000, at prime rate plus 2.75 percent (3.25% at September 30, 2015). There was no outstanding balance on this line as of September 30, 2015. The line of credit is due on demand and expires on October 31, 2015. Note 10 - Retirement Plan The Tribe contributes to the Simplified Employee Pension Individual Retirement Account, a defined contribution pension plan, for substantially all employees. The plan is administered by the Tribal Executive Committee. Benefit terms, including contribution requirements, for the Plan are established and may be amended by the Committee. The Tribe is require to contribute 5 percent of the annual salary to individual employee accounts for each participating employee. District recognized pension expense of $104,467. Note 11 - Insurance The Tribe has established a self-funded insurance company for their employee dental insurance. Employee’s dependents can participate for a reasonable rate. All claims are processed by the Meritain Health which then bills the Tribe for the amount of the claim. The following is the activity for the year ended September 30, 2015: The Tribe is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; environmental damage; and natural disasters. With the exception of environmental damage, these risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years. 27 Minnesota Chippewa Tribe Notes to Financial Statements September 30, 2015 Note 12 - Deficit Fund Balance The following funds were in a deficit position as of September 30, 2015: Governmental Funds Major Fund Department of Health and Human Services Nonmajor Fund Rural Business Enterprise Wisdom Steps Integrated Systems Energy Conservation Business Development Survey Blood Degree Eldercare Development Project Wild Rice Fund $ (1,508) (48) (6,287) (108) (35,827) (28,535) (11,976) (45,108) Internal Service Funds Office Space Administrative Pool Revolving Fund (133,591) (89,922) (16,016) Management intends to restore the deficit fund balances. The funds will be restored through general fund transfers or additional funding for federal and state agencies. Note 13 - Concentration of Credit The Finance Corporation receives a majority of its funding from the State of Minnesota. Also, the Finance Corporation lends money only to Native Americans for the purchase, construction, or rehabilitation of housing within the State of Minnesota. Note 14 - Dental Self Insurance The Tribe is self-insured with respect to dental insurance costs. The terms of the plan do not include a stop-loss provision with would limit the Tribe’s liability. The following is the activity for the year ended September 30, 2015: Claims incurred Claims paid $ 23,247 23,247 28 Supplementary Information September 30, 2015 Minnesota Chippewa Tribe w w w. e i d e b a i l l y. c o m Minnesota Chippewa Tribe Combining Balance Sheet – Nonmajor Governmental Funds September 30, 2015 Employee Loan Fund 103 Assets Cash Accounts receivable Grants receivable Due from other funds Other receivables Prepaid items Total assets MIAAA Workshops 115 Wisdom Steps 113 Wild Rice Sales 116 Timber Sale 119 Active Workplace 122 Business Development 127 Survey Blood Degree 129 Wisdom Steps Board 132 Wisdom Steps Integrated Systems 133 Cobell Probate 134 Economic Development 602 $ 17,145 11,648 40,455 - $ 479 - $ 3,520 - $ - $ 60,000 - $ - $ - $ - $ 59,762 - $ - $ 49,177 - $ 52,116 260 $ 69,248 $ 479 $ 3,520 $ - $ 60,000 $ - $ - $ - $ 59,762 $ - $ 49,177 $ 52,376 $ - $ 15 15 $ 1,216 2,092 3,308 $ 45,108 45,108 $ - $ - $ 35,827 35,827 $ 28,535 28,535 $ - $ 3,143 3,144 6,287 $ - $ 52,376 52,376 Liabilities and Fund Balance Liabilities Due to other funds Accounts payable Accrued liabilities Deferred revenue Total liabilities Fund Balance (Deficit) Nonspendable For prepaid items Committed For employee loans For wisdom steps For timber appraisal For workshops Unassigned Total fund balance (deficit) Total liabilities and fund balance $ - - - - - - - - - - - 260 69,248 - 464 - 212 - (45,108) 60,000 - - (35,827) (28,535) 59,762 - (6,287) 49,177 (260) 69,248 464 212 (45,108) 60,000 - (35,827) (28,535) 59,762 (6,287) 49,177 - 69,248 $ 479 $ 3,520 $ - $ 60,000 $ - $ - $ - $ 59,762 $ - $ 49,177 $ 52,376 29 Minnesota Chippewa Tribe Combining Balance Sheet – Nonmajor Governmental Funds September 30, 2015 Rural Business Enterprise 661 Assets Cash Accounts receivable Grants receivable Due from other funds Other receivables Prepaid items Total assets Federal Flow Through 701 Energy Conservation 740 Senior Comm Srvc Employ (SCEP) 810 General Assistance 755 Saint Louis County Racial Disparity 817 SCSEP Limited 811 CSSD Adult Day Services 842 Eldercare Development Project 843 Total Nonmajor Governmental Funds $ - $ 19,249 - $ - $ 7,335 550 $ 1,438 652 $ 644 $ 112,992 860 $ 16,408 - $ - $ 197,418 89,211 112,992 11,648 40,455 2,966 $ - $ 19,249 $ - $ 7,885 $ 2,090 $ 644 $ 113,852 $ 16,408 $ - $ 454,690 $ 48 48 $ 17,515 17,515 $ 108 108 $ 2,240 5,645 7,885 $ 1,438 1,438 $ 644 644 $ 113,852 113,852 $ 16,388 20 16,408 $ 11,976 11,976 $ 326,958 1,251 4,332 8,789 341,330 Liabilities and Fund Balance Liabilities Due to other funds Accounts payable Accrued liabilities Deferred revenue Total liabilities Fund Balance (Deficit) Nonspendable For prepaid items Committed For employee loans For wisdom steps For timber appraisal For workshops Unassigned Total fund balance (deficit) Total liabilities and fund balance $ - - - 550 652 644 860 (48) 1,734 (108) (550) - (644) (860) (48) 1,734 (108) - 652 - - - $ 19,249 $ - $ 7,885 $ 2,090 $ 644 $ 113,852 - 2,966 - (11,976) 69,248 60,226 60,000 212 (79,292) - (11,976) 113,360 - $ 16,408 $ - $ 454,690 30 Minnesota Chippewa Tribe Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds Year Ended September 30, 2015 Employee Loan Fund 103 Revenue Intergovernmental - federal Program income Other $ Total revenue Wisdom Steps 113 5,835 12 $ MIAAA Workshops 115 4,888 $ 27,784 Wild Rice Sales 116 $ Timber Sale 119 - $ - Active Workplace 122 Business Development 127 Survey Blood Degree 129 $ $ $ 98 - 5,594 Wisdom Steps Board 132 $ Wisdom Steps Integrated Systems 133 67,635 $ Cobell Probate 134 Economic Development 602 2,905 - 286,792 - $ 132,461 - 5,847 4,888 27,784 - - 98 - 5,594 67,635 2,905 286,792 132,461 Expenditures Personnel Fringe benefits Travel/training Office expenses Pass-through funds Office and equipment rental Other expenditures 113 58 4,675 35,974 1,298 199 45,108 - 423 110 - 12,142 7,896 1,955 1,494 - 5,627 27,568 847 19,160 14,459 2,568 903 5,001 150,314 49,721 607 165 - 40,110 8,236 10,238 9 4,757 48,587 Total direct expenditures 113 4,733 37,471 45,108 - 533 23,487 5,627 62,034 8,472 200,807 111,937 - - - - - - - - - 720 36,808 20,524 Indirect costs Total expenditures 113 4,733 37,471 45,108 - 533 23,487 5,627 62,034 9,192 237,615 132,461 Excess (Deficiency) of Revenues Over (Under) Expenditures 5,734 155 (9,687) (45,108) - (435) (23,487) (33) 5,601 (6,287) 49,177 - Fund Balance (Deficit), Beginning of Year 63,514 309 9,899 - 60,000 435 (12,340) (28,502) 54,161 - - - Fund Balance (Deficit), End of Year $ 69,248 $ 464 $ 212 $ (45,108) $ 60,000 $ - $ (35,827) $ (28,535) $ 59,762 $ (6,287) $ 49,177 $ - 31 Minnesota Chippewa Tribe Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds Year Ended September 30, 2015 Rural Business Enterprise 661 Revenue Intergovernmental - federal Program income Other Total revenue $ - Federal Flow Through 701 Energy Conservation 740 $ $ 20,983 - - Senior Comm Srvc Employ (SCEP) 810 General Assistance 755 $ 29,354 - $ 54,439 - Saint Louis County Racial Disparity 817 SCSEP Limited 811 $ 12,514 - $ 254,137 - CSSD Adult Day Services 842 $ 80,163 Eldercare Development Project 843 Total Nonmajor Governmental Funds $ $ - 793,585 5,835 186,174 - 20,983 - 29,354 54,439 12,514 254,137 80,163 - 985,594 Expenditures Personnel Fringe benefits Travel/training Office expenses Pass-through funds Office and equipment rental Other expenditures (83) - 19,249 - - 17,535 4,713 815 320 405 1,019 34,868 3,924 6,055 3,739 - 6,534 716 2,680 1,408 - 68,011 24,696 20,978 6,938 6,993 88,914 43,900 10,767 2,190 3,597 12,000 1,965 7,339 3,986 432 219 - 380,670 114,655 112,483 21,105 38,409 24,155 215,667 Total direct expenditures (83) 19,249 - 24,807 48,586 11,338 216,530 74,419 11,976 907,144 - - - 4,547 5,201 1,176 37,607 5,744 - 112,327 Total expenditures (83) 19,249 - 29,354 53,787 12,514 254,137 80,163 11,976 1,019,471 Excess (Deficiency) of Revenues Over (Under) Expenditures 83 1,734 - - 652 - - - (11,976) (33,877) (131) - (108) - - - - - - 147,237 Indirect costs Fund Balance (Deficit), Beginning of Year Fund Balance (Deficit), End of Year $ (48) $ 1,734 $ (108) $ - $ 652 $ - $ - $ - $ (11,976) $ 113,360 32 Minnesota Chippewa Tribe Combining Schedule of Net Position – Internal Service Funds September 30, 2015 Office Space Assets Current Assets Cash and cash equivalents Accounts receivable Due from other funds Prepaid expenses and other assets Equipment Accumulated Depreciation $ Total assets Computer/ Copy Services Revolving Fund 9,881 - $ 1,250 26,790 (26,790) $ Admin Pool 1,451 38,270 72,223 (55,874) $ 46 19,988 10,082 - MCT Insurance $ Total 131,726 - $ 1,451 11,177 189,984 10,082 99,013 (82,664) 9,881 1,250 56,070 30,116 131,726 229,043 142,968 504 - 18,583 (1,317) - - 8,445 21,024 13,661 - 169,996 12,848 21,024 - - - 90,569 - 90,569 143,472 17,266 - 120,038 13,661 294,437 (133,591) (16,016) 16,349 39,721 (89,922) 118,065 16,349 (81,743) Liabilities and Net Position Current Liabilities Due to other funds Accounts payable Accrued liabilities Noncurrent liabilities Due within one year Total liabilities Net Position (Deficit) Investment in capital assets Unrestricted Total net position (deficit) Total liabilities and net position $ (133,591) $ (16,016) $ 56,070 $ (89,922) $ 118,065 $ (65,394) $ 9,881 $ 1,250 $ 56,070 $ 30,116 $ 131,726 $ 229,043 33 Minnesota Chippewa Tribe Combining Schedule of Revenues, Expenses, and Changes in Net Position – Internal Service Funds Year Ended September 30, 2015 Revenue Sales of business support revenues Indirect revenue Rental revenue Insurance revenue Office Space $ - 23,147 641,339 373,767 1,077,527 Expenses Current Personnel Fringe benefits Travel/training Office expenses Office and equipment rent Maintenance Depreciation Other expenditures 8,123 1,096 73 54,428 - - 4,073 3,179 6,814 12,198 349,960 119,484 24,693 21,045 27,623 67,070 149 384,768 358,083 120,580 24,693 25,340 30,802 54,428 6,814 464,036 Total expenses 63,720 - 26,264 609,875 384,917 1,084,776 Change in Net Position (24,446) - (3,117) 31,464 (11,150) (7,249) Net Position (Deficit), Beginning of Year (109,145) (16,016) 59,187 (121,386) 129,215 (58,145) (133,591) $ (16,016) $ 56,070 $ 641,339 - (89,922) $ $ 373,767 Total 39,274 $ $ MCT Insurance 23,147 - Net Position (Deficit), End of Year $ Admin Pool - Total operating revenue 39,274 - Computer/ Copy Services Revolving Fund 118,065 $ $ 23,147 641,339 39,274 373,767 (65,394) 34 Minnesota Chippewa Tribe Combining Schedule of Cash Flows – Internal Service Funds Year Ended September 30, 2015 Operating Activities Cash received from customers Cash paid for wages and benefits Cash paid to suppliers Office Space $ Computer/ Copy Services Revolving Fund 29,393 (9,219) (163,142) $ 2,406 (225) (20,764) $ Admin Pool 68,696 (19,450) $ MCT Insurance 642,876 (474,061) (137,881) Net Cash from (used for) Operating Activities (142,968) (18,583) 49,246 30,934 Non-Capital Financing Activities Proceeds from other funds Payments to other funds 142,968 - 18,583 - (38,270) (695) (30,239) Net Cash from (used for) Non-Capital Financing Activities $ Total 373,767 (374,980) $ (1,213) 1,117,138 (483,505) (716,217) (82,584) 160,856 (68,509) 142,968 18,583 (38,270) (30,934) - 92,347 Capital and Related Financing Activities Purchase of equipment - - (9,525) - - (9,525) Net Change in Cash and Cash Equivalents - - 1,451 - (1,213) 238 Cash and Cash Equivalents at Beginning of Year - - - - 1,213 1,213 Cash and Cash Equivalents at End of Year Reconciliation of Operating Income (Loss) to Net Cash from (used for) Operating Activities Change in net position Adjustments to reconcile operating income (loss) to cash from (used for) operating activities Depreciation Changes in assets and liabilities Accounts receivables Prepaid expenses and other assets Accounts payables Accrued liabilities Net Cash from (used for) Operating Activities $ - $ - $ 1,451 $ - $ - $ 1,451 $ (24,446) $ - $ (3,117) $ 31,464 $ (11,150) $ (7,249) $ - - 6,814 - - 6,814 (9,881) (108,641) - 2,406 (20,764) (225) 45,549 - 1,537 2,550 (4,617) 25,891 (15,954) - 39,611 28,441 (145,359) (4,842) (142,968) $ (18,583) $ 49,246 $ 30,934 $ (1,213) $ (82,584) 35 Minnesota Chippewa Tribe Combining Balance Sheet – U.S Department of Interior Programs September 30, 2015 Tribal Operations 503 Natural Resources 510 Johnson O'Malley (Various) Total Assets Cash Prepaid items Total assets $ 228,885 7,137 $ 3,953 - $ 162,168 340 $ 395,006 7,477 $ 236,022 $ 3,953 $ 162,508 $ 402,483 $ 236,022 236,022 $ 3,953 3,953 $ 162,508 162,508 $ 3,953 398,530 402,483 Liabilities and Fund Balance Liabilities Accounts payable Deferred revenue Total liabilities Fund Balance Nonspendable Prepaid items Unassigned Total fund balance Total liabilities and fund balance 7,137 (7,137) $ 236,022 $ 3,953 340 (340) $ 162,508 7,477 (7,477) $ 402,483 36 Minnesota Chippewa Tribe Combining Schedule of Revenue, Expenditures and Change in Fund Balance – U.S Department of Interior Programs Year Ended September 30, 2015 Tribal Operations 503 Revenue Intergovernmental - federal Contract $ Total revenue Natural Resources 510 204,101 82,750 $ Johnson O'Malley (Various) 82,698 - $ Total 334,554 - $ 621,353 82,750 286,851 82,698 334,554 704,103 Expenditures Current Personnel Fringe benefits Travel/training Office expenses Office and equipment rental Other expenditures 155,672 47,922 4,598 13,338 19,754 1,133 44,503 25,650 41 82 132 82,797 22,023 27,117 35,094 10,543 104,822 282,972 95,595 31,756 48,514 30,297 106,087 Total direct expenditures 242,417 70,408 282,396 595,221 44,434 12,290 52,158 108,882 286,851 82,698 334,554 704,103 Revenue over Expenditures - - - - Fund Balance, Beginning of Year - - - - Indirect costs Total expenditures Fund Balance, End of Year $ - $ - $ - $ - 37 Minnesota Chippewa Tribe Combining Balance Sheet – U.S. Department of Health and Human Services Programs September 30, 2015 Title VI Nutrition Grant 620 NEW/ STRIDE Program 621 Caregiver Support 622 MFIP 808 Title III 830 Nutrition Support Services 832 MIAAA 831 Assets Cash Accounts receivable Grants receivable Due from other funds Prepaid items $ 125 - $ Total assets $ 125 $ $ 125 125 $ - $ 70 - $ 108,364 593 $ 10,335 3,190 $ 187,368 750 - $ 7,956 - 61,878 $ 70 $ 108,957 $ 13,525 $ 188,118 $ 7,956 61,878 61,878 $ 70 70 $ 108,957 108,957 $ 11,000 2,525 13,525 $ 25,561 162,557 188,118 $ 9,464 9,464 61,878 - Liabilities and Fund Balance Liabilities Due to other funds Accounts payable Accrued liabilities Deferred revenue Total liabilities Fund Balance (Deficit) Nonspendable For prepaid items Unassigned Total fund balance (deficit) Total liabilities and fund balance (deficit) $ - - - 593 (593) 3,190 (3,190) - (1,508) - - - - - - (1,508) 125 $ 61,878 $ 70 $ 108,957 $ 13,525 $ 188,118 $ 7,956 38 Minnesota Chippewa Tribe Combining Balance Sheet – U.S. Department of Health and Human Services Programs September 30, 2015 Alzheimer Project 834 Caregiver 835 Grandkin 838 Integrated System Development 841 Title III-D 840 MNSURE 851 Total Assets Cash Accounts receivable Grants receivable Due from other funds Prepaid items $ 50 - $ 22,375 - $ 4,162 - $ 12,546 - $ 2,609 - $ 1,381 - $ 17,351 1,381 400,487 750 3,783 Total assets $ 50 $ 22,375 $ 4,162 $ 12,546 $ 2,609 $ 1,381 $ 423,752 $ 50 50 $ 22,375 22,375 $ 4,162 4,162 $ 12,546 12,546 $ - $ $ 2,609 2,609 1,330 51 1,381 242,111 173,557 9,592 425,260 Liabilities and Fund Balance Liabilities Due to other funds Accounts payable Accrued liabilities Deferred revenue Total liabilities Fund Balance (Deficit) Nonspendable For prepaid items Unassigned Total liabilities and fund balance (deficit) $ - - - - - - 3,783 (5,291) - - - - - - (1,508) 50 $ 22,375 $ 4,162 $ 12,546 $ 2,609 $ 1,381 $ 423,752 39 Minnesota Chippewa Tribe Combining Schedule of Revenue, Expenditures, and Changes in Fund Balance – U.S. Department of Health and Human Services Programs Year Ended September 30, 2015 NEW/ STRIDE Program 621 Revenue Intergovernmental - federal Other $ Total revenue MFIP 808 377,737 300 $ Title III 830 578,158 - $ Nutrition Support Services 832 MIAAA 831 69,809 - 401,309 116,668 $ Caregiver 835 - $ Integrated System Development 841 Title III-D 840 19,257 - $ 2,660 - $ - MNSURE 851 $ Total 126,246 5,972 $ 1,575,176 122,940 378,037 578,158 69,809 517,977 - 19,257 2,660 - 132,218 1,698,116 149,232 42,601 17,935 9,729 14,950 85,059 179,045 55,256 20,558 28,636 30,410 177,186 21,377 8,811 12,011 8,313 11,000 7,781 516 43,789 11,676 750 437,411 18,000 - 9,253 3,467 774 482 5,281 - 875 269 1,516 - 66,039 26,709 18,253 2,944 6,341 450 469,610 148,789 69,531 50,854 448,411 64,763 282,727 Total direct expenditures 319,506 491,091 69,809 511,626 - 19,257 2,660 - 120,736 1,534,685 Indirect costs 58,531 87,067 - 6,351 - - - - 11,482 163,431 378,037 578,158 69,809 517,977 - 19,257 2,660 - 132,218 1,698,116 Revenue over (Under) Expenditures - - - - - - - - - - Fund Balance (Deficit), Beginning of Year - - - - (1,508) - - - - (1,508) Expenditures Personnel Fringe benefits Travel/training Office expenses Pass through funds Office and equipment rent Other expenditures Total expenditures Fund Balance (Deficit), End of Year $ - $ - $ - $ - $ (1,508) $ - $ - $ - $ - $ (1,508) 40 Minnesota Chippewa Tribe Schedule of Expenditures of Federal Awards Year Ended September 30, 2015 Contract or Pass Through Number Federal Grantor/Pass Through Grantor/Program U.S. Department of Interior Passed-through the Bureau of Indian Affairs Tribal operations CFDA Number Expenditures 15.048 $ 286,851 Johnson O'Malley 15.130 334,554 Natural resources 15.035 82,698 Total U.S. Department of Interior $ U.S. Department of Health and Human Services Direct programs NEW Program, 10/14 - 6/15 NEW Program, 07/15 - 9/15 Total CFDA #93.594 93.594 93.594 Disease Prevention/Health Promotion, 10/14 - 12/14 15AAMNTPH Integrated System Development, 10/14 - 9/15 Caregiver Support, 1/15 - 9/15 Caregiver Support, 10/14 - 12/14 Total CFDA #93.052 $ 296,730 81,307 2,600 93.048 9,193 93.052 93.052 16,740 2,517 15AAMNTSS 93.044 56,883 15AAMNTSS 15AAMNT 15AAMNT 93.044 93.044 93.044 12,926 40,476 12,414 122,699 15AAMNT3HD/15AAMNT3CM 15AAMNT3HD/15AAMNT3CM 93.045 93.045 92,000 194,739 286,739 93.053 93.053 31,230 30,450 61,680 NSIP - Home Delivered/Congregate Meals, 10/14 - 12/14 NSIP - Home Delivered/Congregate Meals, 1/15 - 9/15 Total CFDA #93.053 Total Special Programs passed through the MN Board of Aging Cluster CFDA #93.044, 93.045, 93.053 15AAMNNSHIP 15AAMNNSHIP 704,103 378,037 93.043 15AAMNTFC 15AAMNTFC Special Programs passed through for the MN Board of Aging Title III, Part B Grants for Supportive Services and Senior Centers, 1/15 - 9/15 Title III, Part B Grants for Supportive Services and Senior Centers, 10/14 - 12/14 AAA Administration, 1/15 - 9/15 AAA Administration, 10/14 - 12/14 Total CFDA #93.044 Home Delivered/Congregate Meals, 10/14 - 12/14 Home Delivered/Congregate Meals, 1/15 - 9/15 Total CFDA #93.045 Amounts PassedThrough to Subrecipients 19,257 274,854 471,118 41 Minnesota Chippewa Tribe Schedule of Expenditures of Federal Awards Year Ended September 30, 2015 CFDA Number Federal Grantor/Pass Through Grantor/Program U.S. Department of Health and Human Services, cont.. Passed-through the Minnesota Department of Human Services MnSure Outreach & Enrollment, 10/14 - 12/14 MnSure Outreach & Enrollment, 1/15 - 9/15 Total CFDA #93.525 Minnesota Family Investment Program, 10/14 - 12/14 Minnesota Family Investment Program, 1/15 - 9/15 Total CFDA #93.558 HBEIE130163 HBEIE130163 93.525 93.525 1402MNTANF 1502MNTANF 93.558 93.558 Expenditures $ 132,141 76 227,928 350,231 $ 132,217 578,159 Total U.S. Department of Health and Human Services $ 1,590,581 U.S. Department of Commerce Direct Programs Economic Development Planning, 10/14 - 12/14 Economic Development Planning, 1/15 - 9/15 Total CFDA #11.302 11.302 11.302 78,381 54,080 132,461 Total U.S. Department of Commerce 132,461 Environmental Protection Agency Direct Programs General Assistance Program 66.926 29,354 Total Environmental Protection Agency U.S. Department of Agriculture Passed-through State of Minnesota Department of Human Services Food Stamp Nutrition Education 29,354 2015IQ390342 10.551 703,413 Total U.S. Department of Agriculture U.S. Department of Justice Direct Programs Justice Assitance Grant U.S. Department of Labor Passed-through State of Minnesota Economic Security Senior Community Service Employment, 10/14 - 6/15 Senior Community Service Employment, 7/15 - 9/15 Total CFDA #17.235 Total U.S. Department of Labor Total Federal Financial Assistance Amounts PassedThrough to Subrecipients 391,502 703,413 16.738 17.235 17.235 19,249 60,666 3,959 64,625 64,625 $ 3,243,786 $ 666,356 42 Minnesota Chippewa Tribe Notes to Schedule of Expenditures of Federal Awards Year Ended September 30, 2015 Note A – Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Minnesota Chippewa Tribe 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. The Minnesota Chippewa Tribe received federal awards both directly from federal agencies and indirectly through pass-through entities. Federal financial assistance provided to a subrecipient is treated as an expenditure when it is paid to the subrecipient. Note B – Significant Accounting Policies Governmental fund types account for the Minnesota Chippewa Tribe’s federal grant activity. Therefore, expenditures in the schedule of expenditures of federal awards are recognized on the modified accrual basis – when they become a demand on current available financial resources. The Minnesota Chippewa Tribe’s summary of significant accounting policies is presented in Note 1 in the Minnesota Chippewa Tribe’s basic financial statements. The organization has not elected to use the 10% de minimis cost rate. 43 Independent Auditor’s 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 To the Tribal Executive Committee Minnesota Chippewa Tribe Cass Lake, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of Minnesota Chippewa Tribe, Cass Lake, Minnesota, (the Tribe) as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the Tribe’s basic financial statements and have issued our report thereon dated November 30, 2017. Internal Control over Financial Reporting In planning and performing our audit, we considered the Tribe's internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Tribe's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Tribe's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the accompanying schedule of audit findings and questioned costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses. A deficiency in internal control 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 and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider deficiencies 2015-A, 2015-B, 2015-C, 2015-D, and 2015-E described in the accompanying schedule of findings and questioned costs to be material weaknesses. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. www.eidebailly.com 4310 17th Ave. S. | P.O. Box 2545 | Fargo, ND 58108-2545 | T 701.239.8500 | F 701.239.8600 | EOE 44 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Tribe's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and is described in the accompanying schedule of findings and questioned costs as items 2015-E, 2015-001 and 2015-002. Tribe’s Response to Findings The Tribe’s responses to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The Tribe’s responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Fargo, North Dakota November 30, 2017 45 Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by OMB Circular A-133 To the Tribal Executive Committee Minnesota Chippewa Tribe Cass Lake, Minnesota Report on Compliance for Each Major Federal Program We have audited Minnesota Chippewa Tribe’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Minnesota Chippewa Tribe’s major federal programs for the year ended September 30, 2015. Minnesota Chippewa Tribe’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on the compliance for each of Minnesota Chippewa Tribe’s major federal programs based on our audit of the types of compliance requirements referred to above. 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 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 Minnesota Chippewa Tribe’s 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 on compliance for each major federal program. However, our audit does not provide a legal determination of Minnesota Chippewa Tribe’s compliance. www.eidebailly.com 4310 17th Ave. S. | P.O. Box 2545 | Fargo, ND 58108-2545 | T 701.239.8500 | F 701.239.8600 | EOE 46 Basis for Qualified Opinion on Certain Major Federal Programs As described in the accompanying schedule of findings and questions cost, the Minnesota Chippewa Tribe did not comply with the requirements regarding the following major federal programs. Finding Number CFDA Program Compliance Requirement 2015-001 10.551 93.558 Food Stamp Nutrition Education Allowable Activities/Allowable Costs Minnesota Family Investment Program Allowable Activities/Allowable Costs 2015-002 93.558 Minnesota Family Investment Program Eligibility Compliance with such requirements is necessary, in our opinion, for the Minnesota Chippewa Tribe to comply with the requirements applicable to this program. Qualified Opinion on Certain Major Federal Programs In our opinion, except for the noncompliance described in the Basis for Qualified Opinion paragraph, the Minnesota Chippewa Tribe complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on for the year ended September 30, 2015. Opinion on Each of the Other Major Federal Programs In our opinion, the Tribe complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its other major Federal programs identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs for the year ended September 30, 2015. Report on Internal Control over Compliance Management of the Minnesota Chippewa Tribe is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered Minnesota Chippewa Tribe’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Minnesota Chippewa Tribe’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 47 Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses and significant deficiencies may exist that have not been identified. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as items 2015-001, 2015-002, and 2015-003 to be material weaknesses. Tribe’s Response to Finding The Tribe’s responses to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The Tribe’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Fargo, North Dakota November 30, 2017 48 Minnesota Chippewa Tribe Schedule of Findings and Questioned Costs Year Ended September 30, 2015 Section I – Summary of Auditor’s Results FINANCIAL STATEMENTS Type of Auditor's Report Issued Unmodified: Business Type Activities Each major fund Aggregate remaining fund information Governmental activities General Fund Disclaimer: Internal Control over Financial Reporting Material weaknesses identified Significant deficiencies identified not considered to be material weaknesses Yes None reported Noncompliance Material to Financial Statements Noted? Yes FEDERAL AWARDS Internal Control over Major Programs Material weaknesses identified Significant deficiencies identified not considered to be material weaknesses Yes None reported Type of Auditor's Report Issued on Compliance for Major Programs Qualified, Unmodified (see below) Any Audit Findings Disclosed That Are Required to be Reported in Accordance with Section 510(A) of OMB Circular A-133 ? Yes Identification of Major Programs Name of Federal Program or Cluster Food Stamp Nutrition Education Johnson O'Malley Aging Cluster Minnesota Family Investment Program CFDA Number 10.551 15.130 93.044, 93.045, 93.053 93.558 Dollar Threshold used to Distinguish Between Type A and Type B Programs $ Auditee Qualified as Low-Risk Auditee? No Opinion Qualified Unmodified Unmodified Qualified 300,000 49 Minnesota Chippewa Tribe Schedule of Findings and Questioned Costs Year Ended September 30, 2015 Section II – Financial Statement Findings 2015-A Significant Journal Entries Material Weakness Condition – During the course of our engagement, we proposed material audit adjustments that would not have been identified as a result of the Tribe’s existing internal controls, and therefore could have resulted in a material misstatement of the Tribe’s financial statements. Criteria – A good system of internal accounting control contemplates an adequate system for recording and processing entries material to the financial statements. Cause – The Tribe does not have an internal control system designed to identify all necessary adjustments. Effect – This control deficiency could result in a misstatement to the financial statements that would not be prevented or detected. Recommendation – A thorough review and reconciliation of accounts in each fund should take place prior to the beginning of the audit. This review should be done at both the accounting staff and accounting supervisor levels. Management’s Response – The Tribe is developing a fiscal year-end review process and checklist that will be implemented at the end of the fiscal year September 30, 2014 to ensure that future audit adjustments will be minimal. 2015-B Preparation of Financial Statements Material Weakness Condition – The Tribe does not have an internal control system designed to provide for the preparation of the financial statements being audited. The auditors were requested to, and did, draft the Tribe’s financial statements and accompanying notes to the financial statements. Criteria – A good system of internal accounting control contemplates an adequate system for the ability to internally prepare their financial statements. Cause - Tribal personnel do not have adequate training to apply accounting principles generally accepted in the United States of America internally. Effect – The financial disclosures in the financial statements could be incomplete. Recommendation – This circumstance is not unusual in a Tribe of your size. It is the responsibility of management and those charged with governance to make the decision whether to accept the degree of risk associated with this condition because of cost or other considerations. Management’s Response – Due to cost constraints, the Tribe will continue to have the auditors draft the financial statements and accompanying notes to the financial statements. 50 Minnesota Chippewa Tribe Schedule of Findings and Questioned Costs Year Ended September 30, 2015 2015-C Segregation of Duties Material Weakness Condition – The Tribe has a lack of segregation of duties in certain areas due to a limited staff. Criteria – A good system of internal control contemplates an adequate segregation of duties so that no one individual has incompatible responsibilities. No one person should have more than one duty relating to the authorization (approval), custody of assets (check depositing), record keeping and reconciliation functions. Cause – There are a limited amount of finance employees. Effect – Inadequate segregation of duties could adversely affect the Tribe's ability to detect misstatements in amounts that would be material in relation to the financial statements in a timely period by employees in the normal course of performing their assigned functions. Recommendation – While we recognize that your staff may not be large enough to permit complete segregation of duties in all respects for an effective system of internal control, the functions should be reviewed to determine if additional segregation of duties is feasible and to improve efficiency and effectiveness of financial management and financial statement accuracy for the Tribe. Segregation of authorization, custody of assets, record keeping and reconciliation functions would assist in mitigating the risk of fraud or misstatements to the financial statements. Management’s Response – Due to cost constraints, there will be no further administrative employees added. The Tribe will continue to look for further opportunities to segregate duties. 2015-D Inadequate Supporting Documentation Material Weakness Condition – During the course of our engagement we noted there as inadequate supporting documentation for the cash balances. This could result in a misstatement of the financial statements or potentially fraudulent activity that would not be prevented or detected in a timely manner. Proper documentation should be maintained to support all account balances and transactions. Criteria – A good system of internal control contemplates an adequate system for maintaining supporting documentation to support account balances. Cause – The Tribe does not have an internal control system designed to maintain adequate supporting documentation to support account balances. Effect – This deficiency could result in a material misstatement to the financial statements that would not be prevented or detected. Recommendation – it is the responsibility of management and those charged with governance to maintain adequate supporting documentation to support account balances. Management’s Response – The Tribe will ensure all bank accounts properly reconcile in a timely manner. 51 Minnesota Chippewa Tribe Schedule of Findings and Questioned Costs Year Ended September 30, 2015 2015-E Reporting Material Weakness and Material Noncompliance Condition – The September 30, 2015 audited financial statements were not filed with the Federal Audit Clearinghouse by the required due date. Criteria – Requirements contained in OMB Circular A-133 requires audited financial statements to be filed with the Federal Audit Clearinghouse within nine months of the Tribe’s year end, as required for compliance with reporting requirements. Cause – The Tribe’s financial statements were not available to be audited until after the nine month deadline had passed. Effect – Non-compliance with OMB Circular A-133 reporting requirements. Recommendation – We recommend that the Tribe implement and communicate a timeline within the finance department to ensure that the Tribe financial information and files are prepared, reconciled, and audited timely. This will allow for timely submission of its audited financial statements to the Federal Audit Clearinghouse within the nine month deadline as required by OMB Circular A-133. Management’s Response – The Tribe is currently trying to get their audit status to current with the Federal Government. Unfortunately, the FY 15 financial statements were unavailable to be audited in a timely manner. 52 Minnesota Chippewa Tribe Schedule of Findings and Questioned Costs Year Ended September 30, 2015 Section III – Federal Award Findings and Questioned Costs 2015-001 Allowable Activities/Allowable Costs Material Weakness in Internal Control over Compliance and Compliance Federal program Information: Passed-through CFDA Number U.S. Department of Agriculture Minnesota Dept. of Human Services 10.551 U.S. Department of Health and Human Services Minnesota Dept. of Human Services 93.558 Federal Agency Contract Number Award Year Food Stamp Nutrition Education 2015IQ390342 2015 Minnesota Family Investment Program 1402MNTANF 2014 Program Title Criteria: Requirements contained in 45 CFR Part 225 and in the grant agreement require that only allowable costs as defined by OMB Circular A-87 should be made with federal awards Condition: The Tribe had payments for unallowable expenditures and failed to maintain required supporting documentation verifying allowable cost details. Cause: Payments the Tribe made for promotional items are unallowable. The Tribe also did not adequately require recipients seeking services paid for by this DHS grant to submit all required supporting documentation to verify that these were allowable costs under the grant’s requirements. Effect: These expenditures were questioned costs. Questioned Costs: For CFDA #10.551 a sample of 60 items totaling $175,188 was selected from a population of $703,413. Two items with questioned costs totaling $30,502 were found in noncompliance. For CFDA #93.558 a sample of 40 items totaling $61,600 was selected from a population of $578,158. Two items with questioned costs totaling $34,100 were found in noncompliance. Recommendation: A responsible tribal official should be reminded of the allowable costs under OMB Circular A87. Also, the Tribe should require that all recipients seeking services paid for by this DHS grant must submit all required supporting documentation prior to paying for those costs. Management’s Response and Corrective Action Plan: 1. Actions Planned in Response to the Finding – The Tribe will update their review procedures to implement proper internal controls to ensure all expenditures are allowable and have adequate backup. 2. Explanation of Disagreement – There is no disagreement with the finding. 3. Official Responsible for Ensuring Corrective Action – The Accounting Manager will be responsible for ensuring corrective action. 4. Planned Completion Date for the Corrective Action – October 31, 2017. 5. Plan to Monitor Completion of Corrective Action – The Accounting Manager will oversee the process. 53 Minnesota Chippewa Tribe Schedule of Findings and Questioned Costs Year Ended September 30, 2015 2015-002 Eligibility Material Weakness in Internal Control over Compliance and Compliance Federal program Information: Federal Agency U.S. Department of Health Human Services Passed-through CFDA Number Program Title Contract Number Award Year Minnesota Dept. of Human Services 93.558 Minnesota Family Investment Program 1402MNTANF 2014 Criteria: Requirements contained in 25 CFR Part 900 and in the grant agreement specify that only eligible individuals are recipients of these benefits. A good system of internal accounting control contemplates an adequate system for obtaining and maintaining adequate supporting documentation verifying eligibility requirements Condition: The Tribe failed to maintain required supporting documentation verifying eligibility guidelines. EB concluded that the program has a significant internal control deficiency over compliance and compliance. Questioned Costs: None Cause: Due to the deficiency of internal controls to ensure proper documentation of eligibility, the Tribe did not adequately have support for 4 individuals tested under the grant to verify that these individuals were eligible under the grant’s eligibility requirements to receive services. Effect: Failure to maintain required supporting documents to verify eligibility could result in the failure to receive funds. Recommendation: The Tribe should keep all eligibility files for all individuals who receive services paid for the grant. Management’s Response and Corrective Action Plan: 1. Actions Planned in Response to the Finding – The Tribe will update their eligibility procedures to implement proper internal controls to ensure all files are submitted, reviewed and retained. 2. Explanation of Disagreement – There is no disagreement with the finding. 3. Official Responsible for Ensuring Corrective Action – The Accounting Manager will be responsible for ensuring corrective action. 4. Planned Completion Date for the Corrective Action – October 31, 2017. 5. Plan to Monitor Completion of Corrective Action – The Accounting Manager will oversee the process. 54 Minnesota Chippewa Tribe Schedule of Findings and Questioned Costs Year Ended September 30, 2015 2015-003 Subrecipient Monitoring Material Weakness in Internal Control over Compliance Federal program Information: Federal Agency U.S. Department of Agriculture Passed-through CFDA Number Minnesota Dept. of Human Services 10.551 Program Title Food Stamp Nutrition Education Contract Number Award Year 2015IQ390342 2015 Criteria: Requirements contained in 25 CFR Part 900 require that the Tribe monitor actual expenditures of their subrecipients. Condition: The Tribe failed to monitor expenditures made by their subrecipients. Questioned costs: None Effect: Failure to monitor these expenditures could result in unallowable costs. Cause: The tribe did not adequately monitor the expenditures made by subrecipients. Recommendation: The tribe should monitor the expenditures made by subrecipients to ensure subgranted funds are being made for allowable costs. Management’s Response and Corrective Action Plan: 1. Actions Planned in Response to the Finding – The Tribe will update their subrecipient monitoring procedures to implement proper internal controls to ensure all files are submitted, reviewed and retained. 2. Explanation of Disagreement – There is no disagreement with the finding. 3. Official Responsible for Ensuring Corrective Action – The Accounting Manager will be responsible for ensuring corrective action. 4. Planned Completion Date for the Corrective Action – October 31, 2017. 5. Plan to Monitor Completion of Corrective Action – The Accounting Manager will oversee the process. 55 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/tribal%3Aminn_chiippewa_bois_forte%3A484ab593f5c896c8. Public record. Not legal advice.