The dodgy accounting practices of Massachusetts’s Mashpee Wampanoag Tribe raised red flags back in 2016, when the tribe had already burdened itself with $375 million in debt to its casino partner the Malaysian Genting Group according to an audit whose formerly confidential findings were posted on the Federal Audit Clearinghouse website.
Now, with the tribe’s chances for a casino pinned on a bill in Congress, and the chairman who led the tribe for nine years through its casino adventure forced out after his own financial problems surfaced, the news of the tribe’s audit warnings can’t be seen as a positive development.
Although the tribe hasn’t given up on its attempts to put the land in Taunton back into trust after the Department of the Interior withdrew its earlier action that allowed the tribe to break ground on its First Light Casino.
In 2016 the audit of the tribe’s government services department by Walker and Armstrong of Arizona highlighted outdated accounting practices and procedures, discrepancies in employee pay rates, and irregular inventory of capital assets. The audit at that time warned that its practices left it vulnerable to theft and fraud.
The 30-page audit covered human services, education, historic preservation, natural resources, housing, public works, health services, public safety, planning and development and tribal administration. It was posted recently on a federal government website.
Although the document identified vulnerabilities such as “material weaknesses and significant deficiencies” on internal controls it did not indicate any actual instances of financial improprieties or law breaking. It does point out that the tribe was using an accounting manual from 2003. It also notes that the tribe did not submit an audit package required by the federal government within nine months of the end of the year because of “numerous reporting errors in prior years that required significant analysis and correction.”
The report notes that “management is not reviewing the payroll registers prior to processing and recording payroll in the general ledger,” and that finance officials kept large numbers of checks in an unlocked cabinet and stored signature stamps used to sign checks in an unsecure location. Which gave employees the opportunity to write themselves checks.
The problems identified in the audit were typical of poorly managed accounting departments in much smaller organizations, said the report.
As of January 2017 the tribal gaming authority had a debt to Genting of $375 million, according to the audit. The tribe used some of that money to buy 321 acres, 151 acres in Taunton, some on Martha’s Vineyard. The year before the tribe had transferred $17 million to tribal operations.
For several years the Mashpees have fought a legal battle in federal court against neighbors in Taunton who oppose the $1 billion casino. They sued the Department of the Interior to peel back its 2015 action putting that land into trust and making it reservation land that could host Indian gaming. A federal judge sided with the opponents, ruling that the department had violated the U.S. Supreme Court’s Carcieri v. Salazar ruling of 2009 that says that tribes not under federal jurisdiction in 1934 can’t put land into trust. That put a seemingly insurmountable roadblock in the way of the casino.
Now the tribe has pinned its hopes on a bill by Rep. William Keating of Massachusetts that has been reintroduced to the new Congress. Although bipartisan, the bill has plenty of opposition.
The nearly $500 million debt the tribe now has may be the least of its problems, since Genting really has no recourse for forcing it to be repaid since the tribe is sovereign, even if it doesn’t have any sovereign land. Also, the tribe has not guaranteed repayment or signed any obligation. However, it could be vulnerable to having the land seized for repayment if the land falls out of trust.
The tribe’s treasurer Gordon Harris condemned the disclosure of the audit in an email to the Cape Code Times. “This leak of confidential financial information is clearly an attack on our Tribe, designed to raise suspicion with non-Tribal partners and allies and sow discord within the Tribal Citizenry,” he wrote. “It’s difficult enough to fight for our land and combat the assaults on our sovereign rights without having to deal with leaks intended to undermine the hard work and credibility of dedicated, committed tribal servants.”
According to the Times, the audit posting isn’t really a leak “since nonfederal entities spending more than $750,000 in federal awards must be audited.” However, the tribe could have opted out of making that audit publicly available.
Conceding that some areas needed improvement, Harris said the audit findings were “typical.” “Once notified of these audit findings, the tribe and its management immediately developed and is implementing corrective action measures to effectively address each audit finding,” he wrote. “The implementation of these corrective measures addresses each of the audit findings.”
Harris said the tribe has committed itself to strengthening its internal controls and points out that the audit included a corrective action plan. The Times notes that Harris didn’t say that the plan has been implemented.
The Times also noted that the audit contradicted statements of the recently ousted chairman, Cedric Cromwell that the tribe has “regular outside audits.” The chairman was relieved of his duties after a 9-0 vote of no confidence from his council due to a news story that was published detailing his own debt, including $37,000 owed in federal taxes.
Under Cromwell’s stewardship the tribe went into debt $440 million to Genting, which informed its investors last year that it was writing off the investment as a loss. The tribe claims that repayment is contingent on a casino being built and being profitable.
Recent revelations by the Times show that the tribe’s financial standing fell apart in recent years so that by January 1, 2019 it had $83,670 left in its general fund after starting with $6,369,258. Not enough to fund must tribal services. The tribe was forced to lay off 31 employees last year. It is unknown how much it has now.
