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Report Number : 2016-036

Indian Gaming Special Distribution Fund
The Method Used to Mitigate Casino Impacts Has Changed, and Two Counties' Benefit Committees Did Not Ensure Compliance With State Law When Awarding Grants


The 1988 federal Indian Gaming Regulatory Act (IGRA) authorizes Indian gaming through compacts between the State and federally recognized Indian tribes. Beginning in 1999, the State entered into 61 tribal compacts with provisions requiring tribes to pay into the Indian Gaming Special Distribution Fund (distribution fund). Since then, the State has entered into new compacts and amended others, each requiring varying levels of deposits by the tribes into the distribution fund. State law provides for the Legislature to appropriate money from the distribution fund to address four needs and prioritizes those needs. The fourth priority of the distribution fund—and the subject of this audit—is to provide grants that mitigate the effects of tribal gaming on local governments (mitigation grants). For this audit, we reviewed the allocation and expenditure of grants from the distribution fund for a selection of three counties. This report draws the following conclusions:

The method used to mitigate casino impacts has changed, which has slowed the drastic decline in the distribution fund balance, but some local mitigation is still taking place.

Expenditures and transfers from the distribution fund are expected to outpace revenue by nearly $61 million in fiscal years 2012–13 through 2017–18, continuing the trend noted in our previous audits. The State slowed the decline of the distribution fund by reducing appropriations to fund mitigation grants from $30 million for fiscal year 2010–11 to $9.1 million for fiscal years 2011–12 through 2013–14, and eliminating those appropriations entirely for fiscal years 2014–15 through 2017–18. However, most of the new and amended compacts established since fiscal year 2003–04 require tribes to offer to negotiate directly with counties and local jurisdictions to mitigate the effects of activities on tribal land that serve tribal gaming activities or operations. Some counties, including the three counties we reviewed, have entered into agreements directly with tribes for mitigation of the tribes’ activities.

Two of the three benefit committees we reviewed awarded mitigation grants without ensuring compliance with state law.

State law requires Indian gaming local community benefit committees (benefit committees) to determine that the amounts awarded for applicants’ projects represents a proportionate share of costs attributable to casino impacts. However, two benefit committees awarded grants based on applications that did not do so. In fiscal year 2013–14, Fresno County’s benefit committee awarded a grant of $362,000 to fund county sheriff positions, and San Diego County’s benefit committee awarded $250,000 to the county’s health and human services department without requiring the grantees to document the proportion of their respective project costs that was attributable to casino impacts, as required by state law.


As part of this audit, we also reviewed the benefit committees’ efforts to monitor that grant funds were placed in interest bearing accounts, whether benefit committee members filed statements of economic interests in a timely manner and whether the composition of each benefit committee complied with the law, the degree to which benefit committees appropriately calculated the geographic proximity of their cities and county to the tribal casinos, and the degree to which benefit committees have addressed recommendations from prior audit reports. In some of these areas, we found that one benefit committee could improve its processes, and we have made recommendations that are discussed in the Other Areas We Reviewed section of this report.


Summary of Recommendations

If the Legislature appropriates funding from the distribution fund for mitigation grants in the future, to comply with state law, the benefit committees for Fresno and San Diego counties should ensure that they obtain sufficient documentation from grant applicants to demonstrate that the requested funding represents the correct proportionate share of the costs attributable to casino impacts.


Agency Comments

Fresno County stated it had taken steps to implement one of the recommendations we directed to it and would implement the other two recommendations in the future, if the Legislature appropriates funding from the distribution fund for mitigation grants. Similarly, San Diego County indicated that if funding is awarded, it will implement additional review to address its recommendation. Riverside County also provided a response even though we did not direct any recommendations to it and therefore did not expect a response.

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