The Single Audit

There is an immense increase in Single Audits in 2020, and that’s because Tribal Government expenditures were larger in 2020 than ever in modern history. This is because the Federal Government distributed incredible amounts of funds to Tribal Governments within the Coronavirus Relief Fund (“CRF”). These funds were designed to be used to mitigate the negative effects that the global pandemic had on the Tribal Members of Tribal Governments.

These funds put many Tribal Governments in a scenario that they have never been before, they are required to receive a Single Audit to test their compliance with the use of the CRF amounts. A Single Audit, previously known as the OMB Circular A-133 audit, is an organization-wide financial statement and federal awards’ audit of a non-federal entity that expends $750,000 or more in federal funds in one year.

It is without a doubt that the funds distributed from the Federal Government were an enormous assistance for Tribal Governments nationwide; however, don’t let the Single Audit surprise you.

The best way to prepare is to first create a separate fund within your general ledger for the amounts received and distributed on behalf of the CRF. The expenditures should be closely monitored to ensure the compliance with both your purchasing internal controls and the vague literature describing what these funds can be used for. Document and ensure approval of any changes to your purchasing process as a response to the global pandemic. This can include bidding processes, approval hierarchy, or emergency assistance. You don’t want to make changes to your internal controls without the appropriate approval. Don’t get caught surprised when your financial audit includes a single audit for the first time. Consult with your legal team and accounting team to be prepared and proactive for your audit.

Palm Springs for the week

There are few places hotter than Palm Springs, CA this time of year, and, yet, I have found myself battling this blistering heat twice within the last month. Today, the accounting manager, who we work with told us that it can get up to 116 degrees during the day, and immediately, I wanted to stay in for lunch.

Although the heat may be debilitating for a northwest kind of guy like me, Palm Springs does have a certain appeal to it. There are few places that can pull off not only the relaxed atmosphere of a golf town but also the upbeat vibe of a casino environment, but Palm Springs does it better than almost anyone. The town has a certain attitude that only tourist towns have, the attitude that everyone here has chosen to be here.

We ate at the popular sushi restaurant Okura for dinner, and I was puzzled on whether the packed restaurant was full of tourist or locals, especially considering it was a Tuesday night, and everyone was dressed to impress.

Palm Springs was once the celebrity hide-out, and there were entire communities occupied by A list movie stars that once occupied the area. Since, the celebrities have spread throughout the Coachella valley, but the beautiful, gated communities remain, and as everywhere else – skyrocketed in value in the past year.

There are several Tribal members that call Palm Springs home. The Agua Caliente reservation was established in 1876 and consists of 31,128 acres of land and 6,700 acres are located by Downtown Palm Springs.  The tribe has a strong presence outside of Palm Springs with an enormous and largely profitable casino.

Palm Springs is a wonderful quick experience every time we go; nevertheless, it’s nice returning to the reasonable weather of Reno, NV.

The Wahlberg brothers enter the Tribal Casino Resort business.

The Wahlberg brothers were a huge hit at the Indian Gaming Tradeshow and Convention last week as they disclosed their relationship with the Little River Band of Ottawa Indians. The Wahlberg’s food and beverage franchises will be added as an amenity for guests within the Tribe’s Resort Casinos. This was a big step for the partnership, and, in my opinion, a glimpse into the future of Tribal Casino Resort amenities.  

Venues within Tribal Casinos tend to be managed by an in-house team, which was a topic I covered in a previous blog, “Should Casino’s Manage their restaurants in-house or outsource to a third-party management company?”, but tides are slowly turning. The Wahlberg partnership, and the exposure developed from it, is setting the stage for the transition of an industry. I believe food and beverage outlets will be the first venues to be outsourced, especially considering the difficulties in hiring, recently.

History repeats itself, and if we reflect to the history of the Las Vegas strip, we notice that the Casino Resorts were once completely the management responsibility of the in-house team; however, in time, the restaurants were almost completely outsourced. Then, once outsourced, celebrity chefs were recruited / created, and now, Las Vegas is one of the restaurant capitals of the world.

We will see if the successful exposure of the Wahlberg Tribal Casino partnership at the Indian Gaming Tradeshow and Convention will catch on, and I’m curious to see what trendy food and beverage venue is next.

Although not as trendy, a staple that I think would be successful at several Tribal Casino Resorts is the House of Blues. House of Blues has a unique blend of Live Music, food and beverage, and nightlife that is hard to replicate. House of Blues is also within the Live Nation family, so artist will both perform at locations they wouldn’t previously consider and perform for Live Nation costs, unlike the premium added to Tribal Casino performance quotes.  

Capital Assets Part 1 – Capitalization Threshold

Yesterday, my girlfriend asked me why I like to buy expensive furniture but am conservative in everything else, I told her because I can capitalize furniture. 🙂

Capitalization is a complex topic and can sometimes be difficult to keep track of, especially during large construction projects. The first part of understanding capital assets is understanding the concept of the capitalization threshold.

The capitalization threshold is the minimum cost at which an item is recognized as a capital asset on the balance sheet as opposed to an expense on the income statement.

Capitalization thresholds are determined by regulatory bodies and policies such as GASB 34 and OMB A-133. Organizations can also create their own capitalization thresholds if they are equal to or greater than the regulatory requirements. The Enterprises and Tribal Governments I work with typically use a Capitalization threshold of either $3,000 or $5,000. In my experience, most clients also use aggregate amounts; for example, ten $500 computers purchased under the same order would be capitalized under equipment.

Once the capitalization threshold is established, it is important to either create an excel fixed asset tracking document or implement fixed asset software to keep track of the items that exceed the capitalization threshold. I strongly suggest creating an excel workpaper that is updated at least monthly with new additions in both capital assets and accumulated depreciation, disposals of assets, and transfers of assets from the construction in progress accounts. When the audit comes around, they will greatly appreciate a document that brings everything together.

For Governments (and extra credit with your auditors):

An issue that I’ve noticed several times this year is items being added to the fixed asset listing, but not being recorded as capital outlay on the general ledger. It is important to remember that capital asset additions should be recorded as capital outlay, instead of non-capital outlay expenditures. Although there will not be no impact on your net position, finding each capital outlay amount at year end can be a time-consuming exercise.

The capital outlay amounts are required to do the conversion entry reconciling your fund statements to the government-wide statements. Without the appropriate amount recorded as capital outlay, the two Governmental Financial Statements will not reconcile.

*The above is the fundamentals of a capitalization threshold. Fixed Assets are highly complex. Below are some great videos / articles to understand better.

The trials and tribulations of eating “healthy” on the road.

I travel a lot. In fact, last semester of business school, I traveled 10 out of the 12 weeks for work. It’s no secret that constant travel requires a lot of work to maintain a healthy lifestyle. The eating out, lack of available gyms, and stationary lifestyle of “life on the road” can be daunting for someone who cares about their health (hopefully all of you).

There is no substitute to healthy habits at your home-base, but I’ve learned a few tricks on diet in attempting to beat the life on the road extra pounds. I am no nutritionist, and I could definitely be better at practicing what I preach; however, I hope this is a good starting point for your life on the road dietary goals.

Call your hotel ahead of time.

  • Call your scheduled hotel reservation ahead of time and ask if the rooms have both a microwave and refrigerator. These two simple kitchen appliances are key to a somewhat healthy diet on the road. It’s the difference between a hot meal, chilled veggies, or a week’s diet consisting of grains and nutrition bars.  

Pack a spork and a “camping” bowl.

  • You can find both these cooking tools at REI. A spork is a fork and spoon combined for an individual eating utensil. A reusable spork and “camping” bowl are important to have for your different meals throughout the week. Both should be both easy to pack and easy to clean. These two handy items will assist with your breakfast, lunch, and dinner. Breakfast and Dinner will most likely be in the hotel room; however, the spork and “camping” bowl should be easy to transport for lunch at the client.

Have grocery shopping list on the notes section of your cell phone.

  • You should have your grocery go-to items, as an easily accessible checklist on your phone. Items shouldn’t be by brand because there is a large chance you will replace the brands based on the closest grocery store to your hotel.
  • Here is my shopping list for a five-day, including breakfast, snack, lunch, and dinner:
    • 6 pre-made salad chicken packs
    • Pack of 3 ready rice
    • Soy Sauce
    • 6 nutrition bars
    • 1 container of peanuts
    • 2 salad bags
    • Salad Dressing (balsamic vinaigrette)
    • 4 peanut butter small packs
    • 2 packs of pre-made eggs
    • 2 bananas
    • 2 apples
    • 1 big bag of popcorn.
    • Tea

Wash your spork and “camping” bowl immediately after your meals.

  • There is nothing worse than a dirty spork and bowl a day after dinner. The soy sauce is almost impossible to remove to its entirety, and the reality that you’re eating like a camper, while all the restaurants can be expensed, becomes a cold reality. It’s best to make the experience of eating healthy as seamless as possible.

Let me know if you have tips, or better shopping items below! I would love to know additional secrets to the extremely difficult act of staying healthy on the road.

The quaintness of Oklahoma, and the monumental case that is shaking the state.

Oklahoma has a polite stillness that is virtually impossible to replicate. This morning, as we drove to our client from our hotel in Fort Sill, Oklahoma, we were stuck behind a tractor for most of the 20-minute commute; however, unlike my typical response to traffic, unsavory, I was fine with it. I enjoyed observing the farms in action, the open calm space, and a side of America I don’t get enough of. In fact, I even confided into my coworker that I sometimes ignorantly overlook this aspect of our country, which is a majority of the land.

Despite the southern charm, Oklahoma has a storm brewing. There is a generational lawsuit that is redefining not only native rights but also the state of Oklahoma.

Back story

Oklahoma is well known for being the destination of one of America’s most devastating blemishes, the Trail of Tears. The Trail of Tears was the act of displacing approximately 60,000 American Indians from their tribal lands throughout the south and mid-west to reservations, located in Oklahoma, in and around 1839.

Following the devastating Trail of Tears and years of unfavorable lawsuits, American Indian lands had been restricted to a unique scatterplot of reservations throughout the state. As one Oklahoma Tribal Member shared with me, “There is a dollar store and competing Tribal Casino on every corner”. This may be an exaggeration, but it is evident that competition is strong within the state; however, the non-organic home of many American Indian tribes is molding into something new.

Current story

In July 2020, the Supreme court ruled in the McGirt vs. Oklahoma case that approximately half of Oklahoma was Tribal Lands. This case is seen as one of the most far-reaching cases for American Indians in the U.S. courts in decades. The case implies that either tribal courts or federal courts are responsible for jurisdiction in these areas. Not only legal responsibilities but now the approximately 1.8M people who live on these lands have just switched their governance accountability from state to tribal.

The transition to Tribal Lands is a large victory for Oklahoma tribal leadership, but with the victory comes large responsibilities and decisions. If ever there was a time for Oklahoma tribal governments to show strength in unity, the time is now. There are important questions that need to be answered, as related to jurisdiction, state tax revenues, and infrastructure, and the world is watching.

Indian Gaming Tradeshow & Convention is July 19-22, 2021. Here are two booths you should visit and one vendor that should be there, but isn’t.

Don’t worry, this is not a paid advertisement.

CasinoTrac is an incredible technology. Most of our clients in the south / mid-west already know this, but I think CasinoTrac is an important part of the future of the gaming business.  I recently messaged CasinoTrac for their training manuals because I’m under the impression that many of our clients will be transitioning to this IT software / hardware within the next couple years. The technology assists in both ensuring internal controls of operations and completing reconciliations of your General Ledger accounts. There are few technologies that I’m blown away by, but CasinoTrac is definitely one of them.

Another reason I think CasinoTrac is outstanding, is because it can produce data analytics to assist management in appropriately budgeting. The amount of data that CasinoTrac records, it is inevitable that it can transition to artificial intelligence in the future; however, for now, I thoroughly like auditing a casino client that utilizes this resource.

CasinoTrac Website

The other booth to check out is ours, BlueBird CPAs! I won’t be there but stop by to say hello to our amazing team. 🙂

BlueBird CPAs Website

Finally, one vendor that I believe should be there but isn’t  is UrVenue. UrVenue is a resource I used at both MGM properties and Grand Sierra Resort and Casino; it is also used at Wynn Properties.  It became the standard for nightlife venues, and within the past 5 years spread to pools, Live Entertainment Venues, and most recently, the VIP section of Allegiant Stadium in Las Vegas.  This software creates 3D online illustrations of your venue and provides a resource for customers to buy tickets to specific locations. It sets up at your host stand, so you can greet guest by name, and collect the appropriate CRM information to stay in touch. This software is unparalleled when it comes to useability, and it is growing in functions rapidly.

UrVenue Website

After the impacts of COVID-19, tribal enterprises are diversifying investments into major enterprises.

The impacts of COVID-19 taught us that our livelihoods could be taken quickly, and without remorse. For a few weeks in March, the Financial Audit become the last of our clients worries, and for good reason, the world had been put on pause. Casinos were closed to preserve the safety of their guest, employees, and tribal members, and, in response, the revenues stopped. Most Casinos had problems that they had never expected, such as locking the un-lockable 24-hour doors, reconciling their ATM machines perfectly, and furloughing over 90% of their staff. These emergency responsibilities became those of only a few, and desperate times provoked desperate measures.

At one property, the decision on whether to pay out employees for the initial two week furlough was left to a mid-level payroll manager who shared with me that her hand was shaking as she pressed the “execute transaction” button enabling hundreds of thousands of salaries and wages without the proper approvals and nobody to ask. One location had issues with their gaming machines and decided to keep the machines on to prevent IT issues. Several locations had never shut their doors before, and quickly realized that the doors were unable to lock.

The offices were solemn as we walked in for our audits (more-so than usual when people see the auditors), and several theories of the future were shared and discussed.

Then, in July there was a shift. The PPP loan was distributed, the Coronavirus Relief Fund was activated, and business was booming!

But, what now? Both Tribal and non-Tribal Casinos nationwide faced demise and escaped red handed, and now Tribal Governments are receiving both more money in grants and looser restrictions on their current cash than ever before. Some examples of the influx of opportunity are that Fuel Tax revenue in many states are no longer restricted for certain purposes, the Coronavirus Relief Fund has issued Billions of dollars, and Casinos are breaking revenue records almost like clockwork.

It is no surprise that the effects (and potential effects) of COVID-19 have opened Tribal Leadership’s eyes to the necessity for diversification.

On July 6, 2021 the New York Times published an article, “Native American Tribes Move to Make Real Estate a Force for Renewal” by Linda Baker, which discusses several tribes ambitious pursuits in buying commercial and residential real estate. On June 17, 2021 the Sant Clarita Valley newspaper, The Signal, published an article, “Palms deal continues growth of Native American ownership of Nevada casinos”, which discusses the $650M purchase of the Palms Casino by the Manual Tribe.  

It’s popularly suggested to avoid putting all your eggs in one basket, and until recently a lot of Tribes had been reliant of the cash transfers of their cash cow Casinos. COVID-19, however, taught us that these cash cows can be swiftly taken away. It’s time to look into new revenue generating enterprises and use the recent influx of cash to diversify. There are several attractive businesses to build, but I believe investing in already established enterprises outside of the Reservation can be beneficial to the growth of both tribal member opportunity and long-term enterprise.

Happy 4th of July weekend: one of the most independent independence days in history.

“Demand is high, and supply is low.”

Demand is high for almost everything these days, but one thing is impacting the economy unlike anything else and that’s labor. There is an enormous labor shortage nation-wide, and enterprises are beginning to feel the effects. Just this past week, a popular local Reno breakfast location altered its highest demanded hours because, “We [squeeze in] simply cannot keep our kitchen teams staffed, and as a result, we are on the verge of operational collapse.” This was the loudest of the recent operational casualties, but companies everywhere are adjusting their operations in response to the staff shortages. I recently spoke with the Director of Planning and Analysis at a local Casino, and he shared that the only impediment on record-breaking revenue is their lack of staff.

COVID Grants, forgivable PPP Loans, and stimulus checks have significantly impacted the economy, but are these the reason for the incredible number of vacant jobs, or could it be the increased pent-up demand from customers being under “house arrest” for the past year? Nevertheless, where are the record-breaking customers finding their funds for demand?

It’s hard to miss the signing bonus advertisements around your town, from $1,000 to free meals daily. The perks for employment are getting more and more exciting for anyone looking, yet people are still not taking jobs. According to the bureau of labor statistics unemployment was 3.5% pre-covid in February 2020, and it is currently 5.9% as of June 2021. Approximately 9.5M Americans are currently unemployed, and the numbers are barely changing month-to-month.

To give you an idea of unemployment relative to a financial crisis, in 2009 unemployment was at 9.3%; however, this high unemployment rate was due to the opposite direction of supply and demand – demand for labor was low, and supply of employees was high, I know this firsthand because this is when I graduated with my undergraduate degree.

Could the high unemployment rates be because of a lot of time to evaluate life decisions, such as jobs? It makes me wonder what the marriage / divorce statistics will be for 2020 and 2021.

Regardless, enjoy your independence today and enjoy the free market that was realized on this day in 1776. 

Could there be a better time to open Resorts World Las Vegas? MGM thinks so…

According to the Las Vegas Journal, at least 20,000 people were in attendance for the Grand Opening of the $4.3B Resorts World Las Vegas. This is the first Las Vegas strip resort grand opening in over a decade. The Cosmopolitan was the most recent grand opening, and prior to that, Aria Resort and Casino, both, which I attended, opened in 2010 and 2009. Ironically, both Aria and Vdara announced their sale to Blackstone the same month as the grand opening of Resorts World.

MGM or Resorts World, which investment direction is correct?

MGM International announced the sale of both Aria Resort and Casino and Vdara to the media simultaneously with the grand opening festivities of Resorts World, which shows two opposite investment directions on the Las Vegas strip. MGM believes the money earned from the sale, and lease back agreement, of their properties will be better spent on investing either on gaming developments overseas, especially Japan, or the fast-growing sports betting industry. MGM has been selling properties on the Las Vegas strip to Blackstone over the past two years to gradually reduce the risk of being the last man standing on an oversaturated Las Vegas strip. While some companies are buying in to the aura electricity of the Las Vegas strip, the largest property holder is “selling out”.

Resorts World, on the other hand, has just opened the largest and most extravagant hotel-resort in over a decade. The new mega-property plans to employ approximately 6,000 employees and go “all-in” on Las Vegas. The property has almost every amenity you can think of when thinking of Las Vegas. From Celine Dion to Tiesto, it’s attracted some of the top Las Vegas entertainers. Resorts World also has 40 food and beverage outlets, and a shopping center for all of your extravagant needs.

But, is it too late? Can Resorts World generate enough business to stand out from the pack, or is the property going to be competing for the same customers? We’ll see, but the future of Las Vegas is amongst us, and some are in, and some are out.