Financial Statements (2015)

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Financial Statements

September 30, 2015

Minnesota Chippewa Tribe

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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.

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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.

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

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

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)

1,249,504

1,368,957

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

Minnesota Chippewa Tribe

Balance Sheet – Governmental Funds

September 30, 2015

Department

of Health

and Human

Services

Department

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

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

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

Interior

621,353

82,750

704,103

Food Stamp

Nutrition

Education

1,575,176

122,940

1,698,116

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

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)

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

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

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)

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

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)

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.

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.

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.

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.

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.

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.

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:

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.

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.

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

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

1,134,342

744,770

265,500

172,252

14,648

34,678,346

265,500

(36,664)

$ 34,678,346

228,836

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)

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.

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

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

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

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

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.

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.

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

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

1,216

2,092

3,308

45,108

35,827

28,535

3,143

3,144

6,287

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

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

17,515

108

2,240

5,645

7,885

1,438

644

113,852

16,388

16,408

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

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

MIAAA

Workshops

115

4,888

27,784

Wild Rice

Sales

116

Timber

Sale

119

Active

Workplace

122

Business

Development

127

Survey

Blood Degree

129

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

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

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

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

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

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

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)

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

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

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

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)

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)

Net Change in Cash

and Cash Equivalents

1,451

(1,213)

238

Cash and Cash Equivalents

at Beginning of Year

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

(24,446)

(3,117)

31,464

(11,150)

(7,249)

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)

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

3,953

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

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

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

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

108,364

593

10,335

3,190

187,368

750

7,956

61,878

108,957

13,525

188,118

7,956

61,878

108,957

11,000

2,525

13,525

25,561

162,557

188,118

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)

125

61,878

108,957

13,525

188,118

7,956

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

22,375

4,162

12,546

2,609

1,381

17,351

1,381

400,487

750

3,783

Total assets

22,375

4,162

12,546

2,609

1,381

423,752

22,375

4,162

12,546

2,609

1,330

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)

22,375

4,162

12,546

2,609

1,381

423,752

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)

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)

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

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

16,740

2,517

15AAMNTSS

93.044

56,883

15AAMNTSS

15AAMNT

93.044

12,926

40,476

12,414

122,699

15AAMNT3HD/15AAMNT3CM

93.045

92,000

194,739

286,739

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

704,103

378,037

93.043

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

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

93.525

1402MNTANF

1502MNTANF

93.558

Expenditures

132,141

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

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

19,249

60,666

3,959

64,625

$ 3,243,786

666,356

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.

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

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

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.

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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.

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

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?

Opinion

Qualified

Unmodified

Qualified

300,000

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.

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.

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.

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.

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.

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.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.