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REDW In the News: Senior Manager Adam H. Smith featured by Indian Gaming Magazine

The article shared below, “Casino Cloud-Based Operations,†by REDW Senior Manager Adam H. Smith, appeared in the July issue of Indian Gaming Magazine.


In the wake of COVID-19, the need to get casinos back to basics while using today’s technology is now more important than ever. Prior to the widespread use of personal computers, general managers and department managers walked the casino floor, interacted with patrons, and unless for a meeting, spent very little time in an actual office. Marketing and player development was the responsibility of management, and consisted of shaking hands and having lengthy conversations with patrons. The analytics were slow and delivered twenty-four hours later, but the financials took a back seat because management already knew what the numbers would look like – they were on the casino floor for twelve hours a day. If you talk to those in the gaming industry prior to the 90s, this was the bluebook for operating a casino. Gaming management was all about relationships and knowing your customer.

Fast-forward to today and management is tied to desktop computers waiting for revenue reports, emails, and general business workflows. The proliferation of software options locally installed on back-of-house servers has tied many down to desk work. A casino may have a half dozen different software applications that are running reports needed to functionally manage casino staff and operations. Many of these reports are delayed and twenty-four hours from when the activity took place. Retrieving cumbersome data from various applications has taken many away from the fundamentals of successful gaming management, and in times when remote work is necessary, getting accurate timely data is often not even possible.

To make up for the lost player interactions and the pre-2000 style of gaming management, casinos decided to use endless amounts of free play to garner patrons. In many cases, this free play is used without much strategic thinking and is provided without merit. Personal interactions with once loyal patrons are, in large part, gone, while significant time is wasted on inefficient data communications.

Post COVID-19, the gaming industry will have changed. No more can management have wasted movements, inefficient processes and excuses for poor decision-making.

Today, more than ever, two things are critical: 1) getting customers loyal again; and 2) accurate and efficient access to vital revenue and analytical data for making strategic decisions. The objective is simple, manage the casino from the gaming floor while at the same time monitoring live real-time gaming data and business communications. How is this accomplished? Operating through cloud-based applications is the answer, and many casinos have already discovered this competitive advantage.

There are certain gaming applications that need to run off a locally installed server, but for a casino’s accounting and financial reporting application, it is more secure and efficient to be in the cloud. Currently, with a manual process, many casinos are months behind on financial reporting and delivering financial results to management and council. This makes it extremely difficult to make timely, successful and strategic decisions.

Utilizing cloud applications that can interact with locally installed gaming applications will give back the control to management and decision makers.

Operational real-time gaming analytics and data will enable management to retain the lost interactions with patrons. Management should be able to walk the casino floor with a handheld device giving instantaneous data on the operations of the casino, such as information on current cash amounts in the cage, vault, and kiosks, revenue data on current net win, and which machines are being played with current hold percentages. Data from players club accounts can interact with the gaming floor and show who is actively gambling at the casino in real-time. With accounting software and gaming analytics in the cloud, management and governing bodies have information instantaneously available.

Not only are there clear benefits from a strategic decision-making standpoint, but also from an internal team-member involvement perspective. Many casino employees today are exceedingly comfortable with cloud-based applications and can readily grasp the technology, and in fact, many expect this kind of connectivity. All of this is possible today, and many casinos who recognized the need now have a competitive advantage coming out of the COVID-19 crisis.

For years, the mere opening of a casino provided profitability and enhanced the financial viability of a surrounding local economy with jobs and resources for a tribe. Due to a more competitive environment and changes in gaming style and preference, operating a casino is not an easy task. Casinos and tribes need to be ready for the next steps in the evolution of gaming and cloud-based operations, and put their properties in a position to make timely, strategic economic decisions that will allow for success now and in the future.


For more information on the competitive advantages of casino cloud based operations, please contact Adam H. Smith, 505.998.3219.

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REDW Welcomes Seasoned Tax Executive Tony Arnold

Tony Arnold, Tax Executive

Tony Arnold

Phoenix, AZ — July 7, 2020 — Tony Arnold, CPA, joined REDW LLC, one of the Southwest’s largest and fastest growing certified public accounting and business advisory firms, on June 22, 2020 as a new Senior Tax Manager in the firm’s Phoenix office. With over 17 years of experience in federal and state income and indirect tax compliance, Tony brings dynamic leadership and consulting skills to the firm’s growing commercial practice.

“I am excited to join the REDW Phoenix office and partner with our leaders and team members to continue to grow the tax practice,†said Tony. “I look forward to learning and working side by side with our team to achieve REDW’s long-term growth strategy.â€

Over the past almost 10 years, Tony led the in-house Federal, State and Indirect tax teams at one of the largest privately owned used car sales and finance companies in the United States. Earlier in his career, Tony was a Tax Manager with EY in Phoenix where he served clients in the manufacturing, construction, restaurant, retail, tech, biotech and pharmaceutical industries. His addition to REDW’s leadership highlights the firm’s commitment to strategic succession, as well as its alignment and development in niche practice areas for long-term growth strategy. Tony is also expected to become a trusted resource for the firm’s burgeoning services resulting from the COVID-19 pandemic, including tax and loan strategies.

“We are happy to have Tony join the ranks of in house experts at REDW,†said Mike Allen, Principal in Charge of REDW’s Phoenix office. “Our clients will benefit greatly from his expertise in the tax area, as well as the experience he has gained working with businesses and their owners for many years. Tony will be a tremendous resource during these unprecedented times.â€

Tony holds a Bachelor of Science degree in Accounting from the University of Utah, and a Master of Taxation degree from Arizona State University.

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Distressed M&A in a Pandemic: Considerations for Private Equity

Even before the coronavirus sent the global economy into a tailspin, private equity funds were training their focus inward on creating value for their portfolio companies and signaling more interest in distressed investing. The onset of the pandemic has only magnified this trend. Since March, when COVID-19 became a palpable threat to lives and businesses in the United States, most private equity funds have been scrambling to keep their portfolio companies afloat.

Meanwhile, volatility in the markets has given the industry the correction in valuation they have been looking for. Although we expect many to remain in triage mode for the short term, distressed funds and those with dry powder are actively looking for both quality and value investment opportunities—of which there will be many. What makes the current environment so unique is that—with the exceptions of businesses and industries that touch “essential†services—no company or industry has escaped the effects of COVID-19. The denominator for so many companies in distress today is not faulty strategy or feeble management teams; it is the sudden lack of liquidity deriving from a precipitous drop in demand.

While it may be easier to find discounted deals, it will be harder to value them. Though prior recessions offer some concept of what an eventual recovery might look like on paper, the nature of this particular economic rebound, when it happens, is unknown. There is no clarity around when the health threat might subside and allow for a resumption of “normal†activity and, thus, no clarity around when the economy might recover.

Detailed and rigorous due diligence has always been key to a successful acquisition, but now is a critical component in valuing a target with some confidence.

Valuing a Target During a Pandemic

Before the crisis hit, private equity fund managers already were trending toward becoming industry specialists. To properly value a target, fund managers will need a deep understanding of a company’s operational universe—everything from internal controls and processes to customers, the supply chain, access to raw materials, and the unique dynamics of the industry in which that company operates.

For companies in industries that have significant exposure to the turbulence caused by the pandemic—for example, supply chain disruption to the manufacturing and distribution or retail industries—operational diligence should include:

  • An investigation into a target’s contracts with third-party suppliers to help determine the target’s force majeure and insurance clauses
  • An evaluation of the extent to which the target’s various buyers have been affected and what the recovery timeline may be for those markets
  • A determination of what employee and contractor safety measures are in place to keep the business running should another pandemic wave hit
  • A review of any employment or labor issues resulting from the pandemic that could prove problematic or lead to litigation

A fund’s quantification of the impact of the coronavirus on earnings before interest, taxes, depreciation, and amortization (EBITDA) should first determine whether the damage to the target’s operations is reparable. If it is, then funds should develop an operating plan that outlines a clear path to generating returns.

The scope of traditional valuation techniques, such as discounted cash flow and benchmarking against publicly traded companies’ valuations, is less equipped to account for the uncertainty and volatility in the markets today.

Any financial projections should include a range of uncertainty outcomes, models of what the domino effect may be from the impact of a pandemic on different aspects of a target’s business, and the ways in which that domino effect will cascade to the target.

In order to get a financial picture of a target, it has become customary to normalize historical earnings, which has involved pro forma EBITDA adjustments that reflect the current run rate of the business.

Tax & Other Considerations

Any fund seeking a distressed transaction should engage tax advisors at the beginning of the process. Not only does this ensure proper tax structure of the deal but it enables funds to identify a target’s beneficial tax attributes, such as tax basis and net operating losses (NOLs) and carryforwards. Parameters around the usage of the latter two changed with the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act, and transactions with distressed entities should be sure to quantify those changes.

With the exception of a handful of businesses that have benefited from the pandemic, most have been significantly negatively affected. The restaurant, hospitality and airline sectors have been especially hard hit. While there are federal relief measures available, the private equity industry has largely been excluded from them, though there are some options for portfolio companies.

Funds should also consider which sectors may emerge as “winners.†The healthcare and technology sectors are typically referred to as “recession resilient,†but given the potential paradigm shift that may result from the pandemic—remote working, businesses pivoting to accommodating audiences and consumers with whom they cannot have contact—there is real potential for digital commerce, telemedicine and automation to be positioned for success.

Adapting New Procedures for the New Normal

Both the challenges and the urgency to assess targets with some accuracy are greater today. Distressed diligence can be a fast-paced process. Private equity funds and targets that have already begun to fold digitalization or, better yet, digital transformation into their business operations are better positioned to transact during this time of uncertainty.

The pandemic is triggering unprecedented change. For the due diligence process, this means first and foremost having the digital capabilities to conduct a detailed diligence process and making sure the target company does as well. It also means reevaluating which factors are taken into consideration in financial projections and revenue models, looking at all the possible contingencies in a worst-case scenario.

One thing COVID-19 has taught us is that no business is immune to a pandemic, and the impact on people, businesses and the global economy can be swift and unforgiving. The recovery from the coronavirus crisis remains unclear. Whether the economy will take a V, U, W or L shape, new processes and procedures for conducting due diligence remotely will need to remain in place or be locked and loaded in the event of an analogous global event.

To discuss assessment and optimization of your due diligence practices, tax and other procedural considerations, please contact REDW Valuation Practice Leader, Brian Foltyn.

_____________________________________________________________________________________

Reprinted with permission of BDO USA, LLP. REDW LLC is an independent member of the BDO Alliance USA.

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Rare Valuation & Estate Planning Opportunities – Capitalizing on Record Low Interest Rates

By Ed Street and Brian Foltyn

Increased economic and financial uncertainty can create opportunities to transfer ownership interests in business entities at reduced values. In addition, low interest rates can provide further tax planning opportunities as discussed in this article.

Depressed Values + Low Interest Rates = Tax Planning Opportunities

Typically, stock prices and interest rates are inversely related. Oversimplified, when interest rates rise, borrowing money becomes more expensive and business earnings (net income) decrease due to:

  • Higher borrowing costs for businesses, which directly reduce business earnings and
  • Consumers decreasing spending, which causes business activity and business earnings (net income) to decrease.

Reductions in business earnings in turn cause stock prices to be reduced. And when interest rates fall, typically the opposite happens.

However, there are times when this relationship seems to break down. For instance, we are NOW observing both lower stock prices and lower interest rates, which is creating unique estate tax planning opportunities.

Depressed Values

For investment holding companies, asset values are depressed and for operating businesses, valuations have been negatively impacted by reduced business activity and increased financial and economic uncertainty, ultimately, leading to reductions in current earnings and future earnings expectations. In addition, increased uncertainty tends to decrease earnings based valuation multiples. Further, in the case of minority interests, we are observing an increase in discounts for lack of control and lack of marketability or liquidity in the markets for both holding and operating companies.

Lower overall equity values coupled with higher discounts for minority interests allow acquirers to purchase a greater number of shares and thus potentially enjoy greater future capital appreciation.

Low Interest Rates

The U.S. Treasury Department reduced the mid-term Applicable Federal Rate (AFR) from 1.75% in February to 0.99% in April, 0.58% in May and 0.43% in June.

Mid Term Rates for 2020
JanuaryFebruaryMarchAprilMayJune
1.69%1.75%1.53%0.99%0.58%0.43%

 

The AFR is used as a proxy for private loan rates in estate tax planning. This means that if your client’s estate is large enough to trigger estate taxes when they pass, intra-family loans, sales to grantor trusts, grantor retained annuity trusts (GRATs) and charitable lead annuity trusts (CLATs), in addition to outright gifts, are some examples of actions or estate planning strategies that could transfer future appreciation in asset value outside of a taxable estate.

Note: Under certain circumstances, existing intra-family loan balances can be consolidated and replaced with new loans using the current AFR rate.

Hypothetical Example

Assume that Dad sells $10.0 million of company shares at fair market value to his children in exchange for an eight year note. Assuming that the company shares are used to fund interest expense and ultimately repay the note, the below table summarizes the anticipated total return on the shares as of February 2020 and June 2020.

Excel table summarizes a hypothetical example of anticipated total return on sold shares

Note that on both dates, the expected appreciation in the company’s business exceeds the AFR, which allows the children to service the debt, repay the note at the end of the term and still retain ownership in the company. However, the hypothetical June 2020 transfer results in an additional $4.3 million of value (future value in hypothetical example) transferred compared to February 2020.

How REDW Can Help

Right now, it seems that with the country beginning to reopen and an economic recovery looming, the window of opportunity to maximize your client’s transfer of wealth may be small. REDW’s team holds extensive expertise and knowledge in both valuation and tax planning and can assist you and/or your clients to benefit from the current environment. Please contact Ed Street or Brian Foltyn to get started.


Copyright 2020 REDW LLC, CPAs & Advisors. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.

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REDW Wealth Secures #3 Ranking Among New Mexico Financial Planners

REDW Wealth LLC, an SEC-registered investment advisory firm subsidiary of REDW LLC, has been rated the third largest financial planning business in New Mexico by Albuquerque Business First (ABF)*.

In a survey conducted recently by ABF, individual companies provided the total assets under their management.  REDW Wealth, which began business in Albuquerque in 1997, reported $753.88 million in the total assets it manages – which also makes the firm the largest locally owned firm participating in the survey. The two companies that reported total assets greater than REDW Wealth are headquartered elsewhere.

“With our emphasis on developing long-term, collaborative partnerships with clients, we often receive requests for services that extend well beyond traditional investment management,†said Paul Madrid, Principal and Head of REDW Wealth. “Our deep local roots were established more than 60 years ago, and today our founders still inspire individuals, families and business owners in the Southwest to seek us out because of our credibility and inherent understanding.†He continued: “But our growth is more than simply a numbers game. To us, the size or ranking of a firm is a confirmation of trust; that is, our clients trust our dedication to improving their financial well-being and enhancing their financial knowledge.â€

Steve Cogan, REDW Managing Principal, said: “It is very gratifying to see our Wealth division continue to grow and stack up well against national firms. Beyond specific rankings, however, the inclusion on this list shows that our team is leading the way in client service and in adapting rapidly to an ever-changing demographic landscape with distinct needs and preferences.â€


*Albuquerque Business First disclosure:
Albuquerque Business First (ABF) annual survey is a ranking based on total assets under management at year-end of independent financial planners in the state of New Mexico. Only firms that fill out the invitation survey are included in the list; ABF does not guarantee that every firm in the state was included. The list is entirely done through ABF and American City Business Journals; no third parties or outside groups are involved. The main criteria to be included in the list is that the organization has to do the majority of their business as financial planning services, and that they have a presence in New Mexico.

This award does not evaluate the quality of services provided to clients and is not indicative of the practice’s future performance. It does not represent a client endorsement. Neither the firms nor their employees pay a fee to Albuquerque Business First in exchange for inclusion in the 2020 New Mexico Financial Planners ranking, nor was membership in any organization required.

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Key Financial and Business Considerations for Tribal Casino Reopening

based on interviews with Anthony Gerlach of the Tribal Gaming Industry group and Cristin Heyns-Bousliman of the Human Resources Consulting group.

The big question when considering a tribal casino reopening: How quickly will guest confidence return to pre-pandemic traffic levels? Forecasts are mixed. Some predict volume will fall one-third to one-half. Others express cautious optimism that a pent-up demand exists and activity will return to normal levels at least initially, especially if no other entertainment options exist in their market. With most tribal gaming operations planning to reopen within the next few weeks, we summarize some key financial issues for tribal casino reopening.

Financial Impacts of Reopening

Cash Flow Coordination with Tribal Government

Regulatory Considerations

HR Considerations for Tribal Casino Reopening

How REDW Can Help


Financial Impacts of Reopening

The tribal gaming industry has experienced declines in revenues through these unprecedented times. Although most tribal casinos have generously continued paying employees during closures, such practices cannot last forever, and many are now turning to layoffs and furloughs. Most have tried to curb the decline in revenues by aggressively limiting spending. However, new costs have cropped up with reopening. Implementing new health and safety standards — virus testing, cleaning products, new/added payroll, costs for cleaning, etc. — drive up the cost for compliance.

For tribal casinos trying to maintain compliance with debt and financial ratio covenants, there is also now the added risk of missing those marks. Meeting current obligations under these debt agreements may not be possible for a period of time due to the closures and lack of cash flow. We encourage proactive discussions with the institutions holding your debt.

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Cash Flow Coordination with Tribal Government

Profit Distributions

Tribal governments often depend heavily on profit distributions from gaming operations. In many cases, these profit distributions fund a significant percentage of the tribal government’s operating budget. Reconsider these distributions in light of the casino closures.

Here are some of the questions suggested by REDW Principal and tribal gaming industry expert, Anthony Gerlach on the topic:

  • How much of a dip in gaming revenues and profits should be forecasted due to the pandemic? For what period?
  • Will there be a quick recovery back to “normal†volume upon reopening or is a delayed recovery expected?
  • What changes in operations does the tribal government need to consider relative to this likely decline in available cash flows?

“In fact,†said Gerlach, “conversely, gaming operations may need to seek cash flow assistance from the tribe, as a bridge to when operations once again turn profitable.â€

Federal Resource Considerations

The tribe and casino also must jointly consider what federal resources received by the tribe are available to use. Federal assistance may well be available for paying for the added costs of the tribal casino reopening. CARES Act funding under the Tribal Coronavirus Relief Fund might be the best resource.

The Tribe can use CARES Act funds to pay for costs that are:

  1. Necessary due to COVID-19 public health response
  2. Not previously accounted for in a tribally-approved budget as of March 27, 2020
  3. Incurred during March 1, 2020 through December 31, 2020.

Covered costs related to tribal casino reopening include:

  • Added cleaning and sanitation supplies
  • Payroll and related costs of any added positions needed to service this added cleaning
  • COVID-19 testing for employees
  • Temperature scanners and related equipment
  • Plexiglas partitions for game operations

Tribes cannot use funds to cover revenue shortfalls. Gaming operations must maintain documentation to appropriately identify and justify such costs.

The REDW Tribal Gaming Industry Group recommends setting up new general ledger accounts and/or departments to segregate COVID-19 costs. The tribe should also plan to reimburse the casino for these costs once it approves the mandated documentation, as opposed to passing-through the funds to the casino to use at the casino’s discretion. The second approach poses a risk of classifying the casino as a subrecipient, which can trigger a federally required Single Audit for use of the funds.

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Regulatory Considerations

First, notify regulatory bodies of the tribal casino’s intent and schedule to reopen. Agencies requiring advance notice include state gaming agencies and the Tribal Gaming Regulatory Authority (TGRA). The TGRA will likely be involved in some of the particular nuances of reopening and consensus with management about proper course of action. The National Indian Gaming Commission (NIGC) has also requested that gaming operations provide a notification of their reopening.

Next, conduct a review to update all regulatory compliance submissions before returning from closure. Ensure all submissions have been made regarding facility licensing, EPHS certifications, external and internal audits, fees, etc. Review the NIGC’s Minimum Internal Control Standards (MICS) to update all compliance items, especially for activities stalled during the closure, such as the monthly or quarterly inventories required in areas like bingo paper, pull tabs, and sensitive keys.

Finally, review the status of employee licensing. What happens to employees whose licenses expired during the period of closure? Check the licenses of laid-off employees before they are rehired. Put special protocols or exemptions into place, as long as employees submit renewals within a certain timeframe.

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HR Considerations for Tribal Casino Reopening

As tribal gaming operators look to reopen business amidst the COVID-19 pandemic, they need to make key decisions and develop protocols in many areas related to the health and safety of employees and guests. The most detailed and comprehensive plan for reopening we have seen is courtesy of the Wynn Las Vegas, which published a 28-page document on casino reopening procedures. (Click for link.) Topics include pre-entrance screening, social distancing, and sanitation for facilities and games.

The REDW Human Resources Consulting Department is assisting many tribal casino clients with reopening plans, focusing on employee safety and a new paradigm for “touchless†customer service.

According to Cristin Heyns-Bousliman, REDW’s National Practice Leader-Human Resources Consulting:

“Tribal casinos must present clear policies and procedures for admission into the workplace, mindful social distancing, and enhanced sanitation protocol. This requires designing a new approach to make guests feel comfortable, with thorough staff training on how to implement this approach.â€

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REDW Can Help

The tribal gaming industry will no doubt come out stronger on the other side of this pandemic, but there is certainly a storm to weather first. Count on the tribal gaming experts at REDW to help you navigate the financial impact to your operations.

Contact Anthony Gerlach, CPA for questions or further insights on casino reopening as it pertains to gaming operations, new regulations, and financial assessment and planning.

Address questions about employment law or human resources policies for employees returning to work to Cristin Heyns-Bousliman, Esq.

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Copyright 2020 REDW LLC, CPAs & Advisors. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.

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Opinion: Valuation Has Thrown a Wrench in the M&A Gears

by Brian Foltyn, CVA, Principal, Valuation Practice Leader

Consider: Valuations across many sectors will likely be lower based upon the uncertainty of future events and the unquantifiable risks related to the COVID-19 pandemic; however, declining valuations create opportunities to pursue transactions and create long-term value.

In February 2020, the S&P 500 closed at a record high. But in a matter of weeks, the COVID-19 pandemic changed the trajectory of the markets. Today, many U.S. public companies face depressed stock prices. Virtually all IPOs planned for early 2020 have been tabled as current levels of valuations and volatility make listings unfeasible. Not surprisingly, the M&A activity in the private markets has paused as investors assess this new environment.

In late March, the equity markets plunged more than 30 percent and will likely cause private investors to reduce valuations and adjust pricing mechanisms on their deal flow. Although not enough time has passed to have observable data, it should be noted that historically, the periods directly following a market dislocation have resulted in more attractive valuations, as shown below in years 2010 – 2014 following the 2008 Recession aka the Great Recession.

Valuation is typically viewed as more of an art than science; however, in the current economic climate where so much is unknown (i.e., forecasted future cash flow), REDW is considering the following items to reasonably navigate our valuations:

  • Lower public company valuations;
  • Conservative discounted cash flow (DCF) and leveraged buy-out (LBO) model assumptions;
  • Discounted debt;
  • Opportunistic buyers;
  • Distressed sellers;
  • Valuation gaps bridged with earn-outs; and
  • Minority ownership interest opportunities.

COVID-19’s full impact is yet to be seen, with many analysts predicting GDP drops in 2020-Q2 of 30-40 percent. This environment is one of the most concerning we have ever faced and is likely to continue to evolve. Historically low interest rates paired with depressed valuations will stimulate M&A activity. Recall, from 2008 to 2011, Berkshire Hathaway used its gigantic cash hoard to invest in Mars, Goldman Sachs, Bank of America and Dow Chemical to generate approximately $10 billion in profits. We believe significant opportunities exist for transactions to be consummated as the market becomes more attractive for buyers, the buyers have significant un-deployed cash reserves, and sellers are in need of near term capital and expertise. REDW will continue to help buyers and sellers navigate their valuation and due diligence challenges while capitalizing on opportunities.


If you are considering buying or selling a business, or would like to discuss M&A opportunities, please contact Brian Foltyn.


Copyright 2020 REDW LLC, CPAs & Advisors. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.

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REDW in the News: Crisis Leadership Tips from Its HR Consulting Practice Leader, as Shared by Albuquerque Business First

The article shared below, “NM Crisis Leadership Tip for the Day: Back Off,” by Albuquerque Business First publisher Candace Beeke, appeared in the publication’s April 3, 2020 issue.


Cristin Heyns-Bousliman, HR Consulting Practice Leader, REDW LLC

After dipping their collective toes in the water for years, many businesses recently dove headfirst into remote work.

And that sudden change has created challenges for many, including how to lead a remote team. That’s keeping Cristin Heyns-Bousliman, practice leader of human resources consulting at REDW, very busy at her own home office.

“It’s hard to not devolve into micromanagement,” noted Heyns-Bousliman, a Woman of Influence and 40 Under Forty honoree who recently merged her HR firm, Human Resources Experience, into REDW. REDW had $18.7 million in New Mexico revenue in 2018, according to our Top 100 Private Companies List.

With remote work, managers can feel out of touch, causing them to virtually hover over employees, which, in turn, makes employees feel untrusted. “Both of those things aren’t good for mental health,” she noted.

Leaders need to accept work will be done differently and at a different pace during this unique and stressful situation. “It’s human nature that productivity is going to go down in this environment,” Heyns-Bousliman said.

Reassure your employees you understand that. Encourage them to take breaks during the day and get outside. “If you miss a Skype or an email or don’t respond within 30 seconds, no one’s going to think you’re slacking,” she said.

Heyns-Bousliman shared her own best practices for remote work:

  • Encourage team members to create a dedicated work space with plenty of natural light and a comfortable chair with a table/desk that is at the appropriate height (no one needs neck and back pain in addition to cabin fever).
  • Have a simple daily check-in/check-out procedure so team members do not feel micromanaged and managers don’t feel the need to micromanage (we use a quick Skype message – “Good morning†and “Logging off for the dayâ€).
  • At least once per week, have a video chat to check in with team members and go over projects/answer questions.
  • Acknowledge the elephant in the room: Tell team members they are trusted and not expected to be glued to their computer every second. Set reasonable expectations regarding response times. I like to set the expectation based upon the method of communication: email = not urgent, read and respond at your convenience, usually within 24 hours; Skype message or text = some urgency, respond within an hour or as soon as you are available; cell phone call = urgent, answer if you can or return the call ASAP.
  • Don’t skimp on technology that improves productivity. Buy the hardware and software licenses your employees need to get the work done with as few technology roadblocks as possible. Invest in better communication (text message alert systems, call forwarding, voicemail transcription to email, etc.). Everything feels more difficult right now. Your team members don’t need another challenge when it comes to technology.
  • Encourage team members to maintain their normal routine despite being at home – the work day should be the same and although the first couple of weeks in yoga pants were fun, we really are more productive and feel more professional when we dress the part.

For more information about HR Consulting services offered by REDW, contact Practice Leader Cristin Heyns-Bousliman or Principal Carol Cochran.

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Top Issues for CFOs and Other Tribal Gaming Leaders in 2020

The first year of the new decade is already very busy for gaming leaders. At REDW, we want to share with you our in-depth understanding of the key finance, accounting and business issues you need to be aware of as you look ahead to 2020 and beyond.

As expert gaming advisors with more than three decades serving gaming operations and other entities, we have a keen perspective on many new or recently enacted federal regulations, as well as important operational processes. Below, our experts share what they consider to be the most important issues for Gaming CFOs, CIOs, HR Directors, Investment Committees and other professionals in leadership positions.

Top Issues for Gaming Leaders:

GASB 84and its requirements,effective for periods beginning after December 15,2018,call for tribal CFOs to re-assess their Tribe’s retirement plan governance. Many retirement plans that were not included in your overall financial statements,other than in a footnote,may now be required to be included as a Fiduciary Fund. Further,some minor or other per capita trust funds may require reclassification from Fiduciary Fund to Special Revenue Fund. Also see related information under "Retirement Plans."

GASB 87 - Leases,effective December 15,2019,establishes new requirements,and since tribes generally function as both lessee and lessor,leases will likely be accounted for as capital expenditures rather than operating expenses.

REDW has scheduled a 3-part webinar series on GASB 87,beginning in April. Check redw.com/eventsfor details.

The Data Collection Form (DCF)for the Federal Audit Clearinghouse (FAC) now requires Single Auditees to include the text of their Notes to the SEFA and their Corrective Action Plans for any findings. Auditors must also transfer the text of their audit findings to the DCF.

For more information,see the FAC's Instructions and Documents webpage.

Annual Reviews of Vendors are vital to ensure that tribal databases include active, legitimate vendors. This is also a good time to review your Tribe’s process of ensuring the accurate determination of 1099 and W-2 vendors, and to double-check that you have a current W-9 on file. This is a prime target for IRS reviews, so make sure your processes and compliance are up to date. We can help if you need training or assistance with getting in compliance for this area.

Accurate Audit Preparation is critical. The Government Auditing Standards and Single Audit requirements put the burden on the auditee to accurately prepare and understand your financial statements, SEFA and footnote disclosures. So to help our clients improve and streamline their Grants Management process, REDW's Software Solutions team has developed a powerful new Abila MIP module called SEFA Proâ„¢,which extracts SEFA Reports directly from your existing Abila MIP Fund Accounting software.

In addition to a webinar demonstration of SEFA Pro,REDW will be conducting a series of Grants Management seminars in select cities. Check redw.com/eventsfor details.

Broadband Rightsfor tribes was granted this month by the FCC,meaning tribes may now apply for licenses to help establish or expand internet access over their reservation lands. After August 3,2020,private companies will bid for those rights across the nation –including in Indian Country.

For more information on assessing your Tribe's ability to gain broadband access, check out this article published by NAFOA.

New Overtime Rules took effect on January 1, 2020. If your Tribe’s legal counsel has determined that you follow FSLA and DOL regulations, then those with non-executive, non-administrative or non-professional duties are subject to 1.5 times their regular pay rates when more than 40 hours are worked in a work week. The threshold for salary levels for exempt employees is now $35,568. Also see related information under "Human Resources."

Social Security Deductions for Tribal Council Members may be deducted and paid if your Tribe has a Section 218A agreement in place with the Social Security Administration.

For more information on the Tribal Social Security Fairness Act, click to read an article from NAFOA. And for guidance on the proper filing of W-2s for Tribal Council pay, including when no Section 218A agreement is in place, visit the IRS tribal government website.

Tribal Tax Enforcement and Collection. Although many tribal governments have laws in place that allow for taxation revenues, tribes sometimes have difficulty enforcing the laws and collecting taxes due. Tribal governments should focus on educating the community of the tax laws – including taxpayers doing business on tribal land and even tribal government members. A strong understanding of the tax laws will help the tax administration team to enforce and collect taxes, thereby increasing tax revenues.

Taxation of Online Sales. The U.S. Supreme Court recently overturned a 1992 precedent that barred states from requiring an out-of-state seller with no physical presence to collect sales tax on a sale to a resident of the state. Now, physical presence is no longer required for a state to impose a sales tax on sellers, which can allow states to collect sales taxes from remote sellers. Tribes should explore adopting laws similar to state economic nexus laws that require remote sellers to remit and collect sales tax if they had aggregate sales of tangible personal property or services within tribal territory over stated thresholds. An economic nexus law can enable a tribe to increase tax revenues by collecting sales tax on sales delivered onto trust lands from remote sellers.

Economic Development. To promote economic development on trust land – and increase tax revenues – tribes can offer incentives to businesses who locate to trust land. This is similar to many states that offer credits and incentives, such as Oklahoma’s Investment/New Job Tax Credit package. It provides growing manufacturers a significant tax credit based on either an investment in depreciable property or the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance.

Protecting Tribal Sovereignty. State and taxation can be complicated when it comes to trust versus fee lands. The U.S. Supreme Court has stated that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty. Tribes need to be aware of what a state can and cannot tax on both trust and fee lands.

Indian Employment Credit. The federal government just extended a tax credit to employers who hire American Indians or their spouses who live on or near a reservation and work for an employer on that reservation. The credits, which encourage employers to hire American Indians, give employers a tax credit on a portion of the qualified wages and employee health insurance costs paid to an enrolled member of an Indian tribe or the enrolled member’s spouse.

AML Update. The American Gaming Association (AGA) has released its updated Best Practices for Anti-Money Laundering (AML) Compliance. The new publication contains a more vigorous Risk Assessment section, as well as enhanced procedures for Know Your Customer/Customer Due Diligence. It also includes deepened analysis and updated recommendations regarding new and emerging forms of gaming, including sports betting and mobile gaming. Casino operators should carefully review the new publication and consider updating policies and procedures to remain current in an area subject to increasing scrutiny and oversight.

REDW's Tribal Gaming team is presenting a webinar on the Bank Secrecy Act/Title 31 on May 14,2020. Check redw.com/eventsfor details.

Sports Betting:An opportunity or a mirage? Why are investors not wagering on this new source of revenue for the gaming industry,and what does this mean for tribal gaming? Sports books contribute minimally to casino profits,so as legal sports betting increasingly takes shape,will the shift benefit all,or just a small segment of the gaming industry?

Is a Resort Casino in Your Future?Strategic planning and market evaluations are vital to projecting the next opportunity. Gone are the days of certain success in the gaming industry. Competition,new regulations,economic growth,and changes in game offerings have executives and decision makers questioning their next move. Exploring what it means to be a “resort destinationâ€versus a “local casinoâ€could make the difference between generational income or paying lenders for decades. Income versus cash is a significant distinction all executives must understand,no matter the casino size.

Having to wait for Reliable and Timely Financial Data?Decision-makers need timely and reliable financial information to strategically plan and execute both short- and long-term goals. In today’s data-driven environment,waiting two months for closed books is unacceptable.

Check out our webinar recording on "Data Extraction Tips to Ease Your Audit Pain"from May 2019.

Defined Contribution Plan Reportingnow requires additional effort by tribes,as a result of GASB 84,which established criteria for identifying and reporting fiduciary activities. Effective December 15,2018,defined contribution retirement plans likely fall under the definition of a fiduciary component unit. Thus,these types of plans require reporting on your Tribe’s financial statements as a fiduciary activity –a major change to previous reporting,as these plans have not typically been reported within the government-wide financial statements. Tribes must now gather the necessary information to complete the required financial reporting,as do auditors,who must test this information for the first time.

The SECURE Act of 2019(Setting Every Community Up for Retirement Enhancement) is viewed by some as the most significant retirement legislation in over a decade. Four changes will likely have the greatest impact on your tribal retirement plans,both governmental and commercial:

•  Increased Age for Required Start Date for Mandatory Distributions. The Act raises the Required Minimum Distribution (RMD) starting age from 70½to 72;individuals now have until April 1 of the year following the year they turned age 72 to take their first RMD. Participants age 72 and older in a retirement plan who are still employed may delay RMDs until retirement.

•  Long-term,Part-time Workers Must Be Allowed to Participate in 401(k) Plans. Employers with 401(k) plans must have a dual eligibility requirement for employees who complete either a one-year-of-service requirement (with the 1,000-hour rule) or three consecutive years of service with at least 500 hours of service.

•  Simplification of Safe Harbor Rules. The Act eliminates the annual safe harbor notice requirement for retirement plans that use the 3% safe harbor non-elective contribution.

•  Increased Penalty for Failure to File. The penalty for failing to file Form 5500 Annual Return/Report for Employee Benefit Plans has increased from $25 a day/$15,0 maximum to $250 a day/$150,0 maximum.

A culture of security awarenessis vital for protecting your Tribe’s information and ensuring it is safe from hackers and ransomware attacks in 2020. A continuous security awareness education program should include:

•  A Security Awareness Education Policy

•  Interactive training modules assigned to employees bi-monthly,or at least every two months

•  Phishing your team monthly,with remedial training assignments for those who get “hookedâ€

•  Assessments and quizzes

•  Educational materials,such as current cybersecurity events,posters,and videos.

Create,review and/or update IT Security Policies and Proceduresand ensure they are current with industry best practices. Be sure to share updates with all employees and have them acknowledge these policies and procedures annually.

Data backup and restoration proceduresmust be kept up to date and tested regularly. This will help to ensure that,if your data becomes encrypted with ransomware,you’ll avoid paying cyber criminals –and avoid the possibility of being targeted again.

Confirm IT best practices are in place. Perform an annual IT Risk Assessment to evaluate overall technology and architecture.

Implement Multi-Factor Authentication (MFA)as an added layer of security to prevent hackers from gaining access to your organization with compromised credentials. MFA helps to protect email,financial accounts,social media accounts and mobile devices.

Implement a robust vendor management processfor third-party providers. Ask what security practices are in place to protect your network and data,and review their SOC (Service Organization Controls) reports. Also,ensure a confidentiality agreement is in place.

Evaluate your current cyber-liability insurance policyor speak with a reputable broker if your organization does not have this insurance.

Changes to the Fair Labor Standards Act (FLSA),issued in September 2019 with compliance required as of January 1,2020,revised the criteria defining employees eligible for overtime pay (Non-Exempt employees) and those not eligible for overtime (Exempt employees). Certain executive,administrative,learned professional or computer-related technical positions earning a certain weekly salary are exempt from FLSA,meaning they are not eligible for overtime pay. Under the new regulations,the salary threshold for Exempt employees has increased to $684/week ($35,568/year). The duties test for exempt employees will still apply. Note that regional and industry pay differences are not considered in the new FLSA regulations.

Minimum wage increaseshave taken effect in many states,although the federal minimum wage has been at $7.25/hour for a decade. Employers should also check local wage rates,as they may be higher than the state rates. In some instances,the minimum wage rate may vary based on more than just the geographic location,and could be based on employer size and industry.

Pay compressioncould be an unintended consequence for employers who are increasing employee salaries to meet the new minimum salary requirements under the FLSA (see above) and keep these employees classified as exempt from overtime. Likewise,pay compression can become an issue when employers apply the increases to minimum wage rates in their organization. Pay compression occurs when the pay of one or more employees is very close to the pay for more experienced or longer-tenured employees in the same position,or when employees in entry-level type jobs are paid almost as much as colleagues in higher-level jobs,including supervisory or managerial positions. In both instances,employers should consider an adjustment to all related salary scales to avoid pay compression and ensure continued internal equity.

Compensation and benefitsmust be part of a viable structure that allows employers to retain top talent. Conducting a compensation study to determine whether your organization is competitive in the market in which you’re competing for talent is a good practice. It can ensure your organization is offering a competitive base wage,while also minimizing turnover and enhancing employee engagement. Intangible rewards also count! Talented,skilled employees value organizational cultures that include mentoring,feedback,career pathing and technology,as well as flexible work schedules,retirement plans,fitness incentives and work/life balance.

Workplace harassment claimsand the #metoo movement both require annual,robust sexual harassment training for employees. Training can be especially important for managers,who may benefit from additional training about what constitutes inappropriate conduct with a subordinate,as well as how to identify sexually abusive behavior in those they supervise. Employers should also adopt clear sexual harassment policies,identify inappropriate behaviors,and give employees the tools and training they need to report instances of sexual harassment in the workplace. In California,employers are now mandated to provide sexual harassment training.

Employer drug testingand your organization’s drug policies must be thoughtful and intentional and should address current state laws,as well as the organization’s position. With more states legalizing marijuana for medical or recreational use,some states are also passing laws prohibiting discriminating against employees who use marijuana. Will you accommodate marijuana use? If not,what accommodations does your state require,if any? Are there certain job positions where no accommodation can be made due to safety sensitivities that may be governed by federal safety regulations? Of paramount importance,a reasonable-suspicion program must be in place,as well as providing training for staff and management about how to react when someone is impaired on the job.

Rebalancinghelps to keep your portfolio’s risk and return in line with long-term objectives. In 2019,U.S. equity and fixed markets performed extremely well,and your allocations may have drifted from your targets. By not rebalancing over extended periods of time,you may create a different risk/return profile than was initially set in the Investment Policy Statement.

Volatilitywill most likely rise in 2020,as we haven’t had a meaningful correction in the last year,and some uncertainties –such as the U.S. presidential election –are on the horizon. Last year was stellar for equity markets,with the S&P 500 up about 31%. However,with strong equity performance come higher valuations and the potential for more volatility. Historically,election years can be more volatile than non-election years;investors don’t know which candidates will win,and this makes it difficult to make certain projections that have an impact on valuation models. When the election is over,investors have more clarity and can move forward.

The SECURE Actincludes some new measures for your defined contribution (401k) plans. Among the many changes under the new law,Tribal Investment Committees that oversee retirement plans should be especially aware of two:1) the new law provides a new cap of 15% for safe-harbor automatic enrollment;and 2) annuities are now allowed in 401(k) plans.

For more details on the SECURE Act,see the Winter 2020 issue of Planning Matters,a newsletter from REDW Wealth.

Fixed Incomereturns were abnormally high in 2019 when compared to the long-term average. The Barclays Aggregate Bond index was up about 8.7% for 2019,nearly double its average over the last 15 years. Most of the year’s gain was attributed to capital appreciation as bond values rose with a decline in interest rates. Despite the strength of fixed income returns in 2019,it is important to lower your expectations for 2020. Although many Tribes have large fixed income holdings,and many of these holdings are funding operations,it’s important not to overestimate your return expectations for the year just started.

Feeswill most likely be higher in 2020. Most advisors and consultants charge their fees on a percentage of assets,and a basic 50/50 global stock and bond portfolio gained about 16% in 2019,so fees are bound to increase. Also,some hidden fees and/or commissions may add to the percentage of assets fees,so ask your advisor for a transparent breakdown of fees for your records. If your portfolio has grown significantly over the past couple of years,this may be a good time to negotiate a new fee structure. You may want to consider a competitive bid/quote process by putting out a Request for Proposal (RFP) or Request for Quote (RFQ). By doing this on a regular basis,you’ll satisfy your fiduciary duty and you may be able to discover new options,such as flat fees.

REDW’s tribal gaming experts are here to assist you in any of these areas,and many others not covered in this guide. To learn more about how any of these issues may apply to your gaming operations more specifically,please contact Anthony Gerlach at agerlach@redw.comor Adam Smith at adam.smith@redw.com.

What’s more,REDW is conducting a series of gaming seminars and webinars throughout 2020,so please visit redw.com/eventsfor more information or to register.

GASB 84and its requirements,effective for periods beginning after December 15,2018,call for tribal CFOs to re-assess their Tribe’s retirement plan governance. Many retirement plans that were not included in your overall financial statements,other than in a footnote,may now be required to be included as a Fiduciary Fund. Further,some minor or other per capita trust funds may require reclassification from Fiduciary Fund to Special Revenue Fund. Also see related information under "Retirement Plans."

GASB 87 - Leases,effective December 15,2019,establishes new requirements,and since tribes generally function as both lessee and lessor,leases will likely be accounted for as capital expenditures rather than operating expenses.

REDW has scheduled a 3-part webinar series on GASB 87,beginning in April. Check redw.com/eventsfor details.

The Data Collection Form (DCF)for the Federal Audit Clearinghouse (FAC) now requires Single Auditees to include the text of their Notes to the SEFA and their Corrective Action Plans for any findings. Auditors must also transfer the text of their audit findings to the DCF.

For more information,see the FAC's Instructions and Documents webpage.

Annual Reviews of Vendors are vital to ensure that tribal databases include active, legitimate vendors. This is also a good time to review your Tribe’s process of ensuring the accurate determination of 1099 and W-2 vendors, and to double-check that you have a current W-9 on file. This is a prime target for IRS reviews, so make sure your processes and compliance are up to date. We can help if you need training or assistance with getting in compliance for this area.

Accurate Audit Preparation is critical. The Government Auditing Standards and Single Audit requirements put the burden on the auditee to accurately prepare and understand your financial statements, SEFA and footnote disclosures. So to help our clients improve and streamline their Grants Management process, REDW's Software Solutions team has developed a powerful new Abila MIP module called SEFA Proâ„¢,which extracts SEFA Reports directly from your existing Abila MIP Fund Accounting software.

In addition to a webinar demonstration of SEFA Pro,REDW will be conducting a series of Grants Management seminars in select cities. Check redw.com/eventsfor details.

Broadband Rightsfor tribes was granted this month by the FCC,meaning tribes may now apply for licenses to help establish or expand internet access over their reservation lands. After August 3,2020,private companies will bid for those rights across the nation –including in Indian Country.

For more information on assessing your Tribe's ability to gain broadband access, check out this article published by NAFOA.

New Overtime Rules took effect on January 1, 2020. If your Tribe’s legal counsel has determined that you follow FSLA and DOL regulations, then those with non-executive, non-administrative or non-professional duties are subject to 1.5 times their regular pay rates when more than 40 hours are worked in a work week. The threshold for salary levels for exempt employees is now $35,568. Also see related information under "Human Resources."

Social Security Deductions for Tribal Council Members may be deducted and paid if your Tribe has a Section 218A agreement in place with the Social Security Administration.

For more information on the Tribal Social Security Fairness Act, click to read an article from NAFOA. And for guidance on the proper filing of W-2s for Tribal Council pay, including when no Section 218A agreement is in place, visit the IRS tribal government website.

Tribal Tax Enforcement and Collection. Although many tribal governments have laws in place that allow for taxation revenues, tribes sometimes have difficulty enforcing the laws and collecting taxes due. Tribal governments should focus on educating the community of the tax laws – including taxpayers doing business on tribal land and even tribal government members. A strong understanding of the tax laws will help the tax administration team to enforce and collect taxes, thereby increasing tax revenues.

Taxation of Online Sales. The U.S. Supreme Court recently overturned a 1992 precedent that barred states from requiring an out-of-state seller with no physical presence to collect sales tax on a sale to a resident of the state. Now, physical presence is no longer required for a state to impose a sales tax on sellers, which can allow states to collect sales taxes from remote sellers. Tribes should explore adopting laws similar to state economic nexus laws that require remote sellers to remit and collect sales tax if they had aggregate sales of tangible personal property or services within tribal territory over stated thresholds. An economic nexus law can enable a tribe to increase tax revenues by collecting sales tax on sales delivered onto trust lands from remote sellers.

Economic Development. To promote economic development on trust land – and increase tax revenues – tribes can offer incentives to businesses who locate to trust land. This is similar to many states that offer credits and incentives, such as Oklahoma’s Investment/New Job Tax Credit package. It provides growing manufacturers a significant tax credit based on either an investment in depreciable property or the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance.

Protecting Tribal Sovereignty. State and taxation can be complicated when it comes to trust versus fee lands. The U.S. Supreme Court has stated that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty. Tribes need to be aware of what a state can and cannot tax on both trust and fee lands.

Indian Employment Credit. The federal government just extended a tax credit to employers who hire American Indians or their spouses who live on or near a reservation and work for an employer on that reservation. The credits, which encourage employers to hire American Indians, give employers a tax credit on a portion of the qualified wages and employee health insurance costs paid to an enrolled member of an Indian tribe or the enrolled member’s spouse.

AML Update. The American Gaming Association (AGA) has released its updated Best Practices for Anti-Money Laundering (AML) Compliance. The new publication contains a more vigorous Risk Assessment section, as well as enhanced procedures for Know Your Customer/Customer Due Diligence. It also includes deepened analysis and updated recommendations regarding new and emerging forms of gaming, including sports betting and mobile gaming. Casino operators should carefully review the new publication and consider updating policies and procedures to remain current in an area subject to increasing scrutiny and oversight.

REDW's Tribal Gaming team is presenting a webinar on the Bank Secrecy Act/Title 31 on May 14,2020. Check redw.com/eventsfor details.

Sports Betting:An opportunity or a mirage? Why are investors not wagering on this new source of revenue for the gaming industry,and what does this mean for tribal gaming? Sports books contribute minimally to casino profits,so as legal sports betting increasingly takes shape,will the shift benefit all,or just a small segment of the gaming industry?

Is a Resort Casino in Your Future?Strategic planning and market evaluations are vital to projecting the next opportunity. Gone are the days of certain success in the gaming industry. Competition,new regulations,economic growth,and changes in game offerings have executives and decision makers questioning their next move. Exploring what it means to be a “resort destinationâ€versus a “local casinoâ€could make the difference between generational income or paying lenders for decades. Income versus cash is a significant distinction all executives must understand,no matter the casino size.

Having to wait for Reliable and Timely Financial Data?Decision-makers need timely and reliable financial information to strategically plan and execute both short- and long-term goals. In today’s data-driven environment,waiting two months for closed books is unacceptable.

Check out our webinar recording on "Data Extraction Tips to Ease Your Audit Pain"from May 2019.

Defined Contribution Plan Reportingnow requires additional effort by tribes,as a result of GASB 84,which established criteria for identifying and reporting fiduciary activities. Effective December 15,2018,defined contribution retirement plans likely fall under the definition of a fiduciary component unit. Thus,these types of plans require reporting on your Tribe’s financial statements as a fiduciary activity –a major change to previous reporting,as these plans have not typically been reported within the government-wide financial statements. Tribes must now gather the necessary information to complete the required financial reporting,as do auditors,who must test this information for the first time.

The SECURE Act of 2019(Setting Every Community Up for Retirement Enhancement) is viewed by some as the most significant retirement legislation in over a decade. Four changes will likely have the greatest impact on your tribal retirement plans,both governmental and commercial:

•  Increased Age for Required Start Date for Mandatory Distributions. The Act raises the Required Minimum Distribution (RMD) starting age from 70½to 72;individuals now have until April 1 of the year following the year they turned age 72 to take their first RMD. Participants age 72 and older in a retirement plan who are still employed may delay RMDs until retirement.

•  Long-term,Part-time Workers Must Be Allowed to Participate in 401(k) Plans. Employers with 401(k) plans must have a dual eligibility requirement for employees who complete either a one-year-of-service requirement (with the 1,000-hour rule) or three consecutive years of service with at least 500 hours of service.

•  Simplification of Safe Harbor Rules. The Act eliminates the annual safe harbor notice requirement for retirement plans that use the 3% safe harbor non-elective contribution.

•  Increased Penalty for Failure to File. The penalty for failing to file Form 5500 Annual Return/Report for Employee Benefit Plans has increased from $25 a day/$15,0 maximum to $250 a day/$150,0 maximum.

A culture of security awarenessis vital for protecting your Tribe’s information and ensuring it is safe from hackers and ransomware attacks in 2020. A continuous security awareness education program should include:

•  A Security Awareness Education Policy

•  Interactive training modules assigned to employees bi-monthly,or at least every two months

•  Phishing your team monthly,with remedial training assignments for those who get “hookedâ€

•  Assessments and quizzes

•  Educational materials,such as current cybersecurity events,posters,and videos.

Create,review and/or update IT Security Policies and Proceduresand ensure they are current with industry best practices. Be sure to share updates with all employees and have them acknowledge these policies and procedures annually.

Data backup and restoration proceduresmust be kept up to date and tested regularly. This will help to ensure that,if your data becomes encrypted with ransomware,you’ll avoid paying cyber criminals –and avoid the possibility of being targeted again.

Confirm IT best practices are in place. Perform an annual IT Risk Assessment to evaluate overall technology and architecture.

Implement Multi-Factor Authentication (MFA)as an added layer of security to prevent hackers from gaining access to your organization with compromised credentials. MFA helps to protect email,financial accounts,social media accounts and mobile devices.

Implement a robust vendor management processfor third-party providers. Ask what security practices are in place to protect your network and data,and review their SOC (Service Organization Controls) reports. Also,ensure a confidentiality agreement is in place.

Evaluate your current cyber-liability insurance policyor speak with a reputable broker if your organization does not have this insurance.

Changes to the Fair Labor Standards Act (FLSA),issued in September 2019 with compliance required as of January 1,2020,revised the criteria defining employees eligible for overtime pay (Non-Exempt employees) and those not eligible for overtime (Exempt employees). Certain executive,administrative,learned professional or computer-related technical positions earning a certain weekly salary are exempt from FLSA,meaning they are not eligible for overtime pay. Under the new regulations,the salary threshold for Exempt employees has increased to $684/week ($35,568/year). The duties test for exempt employees will still apply. Note that regional and industry pay differences are not considered in the new FLSA regulations.

Minimum wage increaseshave taken effect in many states,although the federal minimum wage has been at $7.25/hour for a decade. Employers should also check local wage rates,as they may be higher than the state rates. In some instances,the minimum wage rate may vary based on more than just the geographic location,and could be based on employer size and industry.

Pay compressioncould be an unintended consequence for employers who are increasing employee salaries to meet the new minimum salary requirements under the FLSA (see above) and keep these employees classified as exempt from overtime. Likewise,pay compression can become an issue when employers apply the increases to minimum wage rates in their organization. Pay compression occurs when the pay of one or more employees is very close to the pay for more experienced or longer-tenured employees in the same position,or when employees in entry-level type jobs are paid almost as much as colleagues in higher-level jobs,including supervisory or managerial positions. In both instances,employers should consider an adjustment to all related salary scales to avoid pay compression and ensure continued internal equity.

Compensation and benefitsmust be part of a viable structure that allows employers to retain top talent. Conducting a compensation study to determine whether your organization is competitive in the market in which you’re competing for talent is a good practice. It can ensure your organization is offering a competitive base wage,while also minimizing turnover and enhancing employee engagement. Intangible rewards also count! Talented,skilled employees value organizational cultures that include mentoring,feedback,career pathing and technology,as well as flexible work schedules,retirement plans,fitness incentives and work/life balance.

Workplace harassment claimsand the #metoo movement both require annual,robust sexual harassment training for employees. Training can be especially important for managers,who may benefit from additional training about what constitutes inappropriate conduct with a subordinate,as well as how to identify sexually abusive behavior in those they supervise. Employers should also adopt clear sexual harassment policies,identify inappropriate behaviors,and give employees the tools and training they need to report instances of sexual harassment in the workplace. In California,employers are now mandated to provide sexual harassment training.

Employer drug testingand your organization’s drug policies must be thoughtful and intentional and should address current state laws,as well as the organization’s position. With more states legalizing marijuana for medical or recreational use,some states are also passing laws prohibiting discriminating against employees who use marijuana. Will you accommodate marijuana use? If not,what accommodations does your state require,if any? Are there certain job positions where no accommodation can be made due to safety sensitivities that may be governed by federal safety regulations? Of paramount importance,a reasonable-suspicion program must be in place,as well as providing training for staff and management about how to react when someone is impaired on the job.

Rebalancinghelps to keep your portfolio’s risk and return in line with long-term objectives. In 2019,U.S. equity and fixed markets performed extremely well,and your allocations may have drifted from your targets. By not rebalancing over extended periods of time,you may create a different risk/return profile than was initially set in the Investment Policy Statement.

Volatilitywill most likely rise in 2020,as we haven’t had a meaningful correction in the last year,and some uncertainties –such as the U.S. presidential election –are on the horizon. Last year was stellar for equity markets,with the S&P 500 up about 31%. However,with strong equity performance come higher valuations and the potential for more volatility. Historically,election years can be more volatile than non-election years;investors don’t know which candidates will win,and this makes it difficult to make certain projections that have an impact on valuation models. When the election is over,investors have more clarity and can move forward.

The SECURE Actincludes some new measures for your defined contribution (401k) plans. Among the many changes under the new law,Tribal Investment Committees that oversee retirement plans should be especially aware of two:1) the new law provides a new cap of 15% for safe-harbor automatic enrollment;and 2) annuities are now allowed in 401(k) plans.

For more details on the SECURE Act,see the Winter 2020 issue of Planning Matters,a newsletter from REDW Wealth.

Fixed Incomereturns were abnormally high in 2019 when compared to the long-term average. The Barclays Aggregate Bond index was up about 8.7% for 2019,nearly double its average over the last 15 years. Most of the year’s gain was attributed to capital appreciation as bond values rose with a decline in interest rates. Despite the strength of fixed income returns in 2019,it is important to lower your expectations for 2020. Although many Tribes have large fixed income holdings,and many of these holdings are funding operations,it’s important not to overestimate your return expectations for the year just started.

Feeswill most likely be higher in 2020. Most advisors and consultants charge their fees on a percentage of assets,and a basic 50/50 global stock and bond portfolio gained about 16% in 2019,so fees are bound to increase. Also,some hidden fees and/or commissions may add to the percentage of assets fees,so ask your advisor for a transparent breakdown of fees for your records. If your portfolio has grown significantly over the past couple of years,this may be a good time to negotiate a new fee structure. You may want to consider a competitive bid/quote process by putting out a Request for Proposal (RFP) or Request for Quote (RFQ). By doing this on a regular basis,you’ll satisfy your fiduciary duty and you may be able to discover new options,such as flat fees.

REDW’s tribal gaming experts are here to assist you in any of these areas,and many others not covered in this guide. To learn more about how any of these issues may apply to your gaming operations more specifically,please contact Anthony Gerlach at agerlach@redw.comor Adam Smith at adam.smith@redw.com.

What’s more,REDW is conducting a series of gaming seminars and webinars throughout 2020,so please visit redw.com/eventsfor more information or to register.

GASB 84 and its requirements, effective for periods beginning after December 15, 2018, call for tribal CFOs to re-assess their Tribe’s retirement plan governance. Many retirement plans that were not included in your overall financial statements, other than in a footnote, may now be required to be included as a Fiduciary Fund. Further, some minor or other per capita trust funds may require reclassification from Fiduciary Fund to Special Revenue Fund. Also see related information under "Retirement Plans."

GASB 87 - Leases, effective December 15, 2019, establishes new requirements, and since tribes generally function as both lessee and lessor, leases will likely be accounted for as capital expenditures rather than operating expenses.

REDW has scheduled a 3-part webinar series on GASB 87, beginning in April. Check redw.com/events for details.

The Data Collection Form (DCF) for the Federal Audit Clearinghouse (FAC) now requires Single Auditees to include the text of their Notes to the SEFA and their Corrective Action Plans for any findings. Auditors must also transfer the text of their audit findings to the DCF.

For more information, see the FAC's Instructions and Documents webpage.

Annual Reviews of Vendors are vital to ensure that tribal databases include active, legitimate vendors. This is also a good time to review your Tribe’s process of ensuring the accurate determination of 1099 and W-2 vendors, and to double-check that you have a current W-9 on file. This is a prime target for IRS reviews, so make sure your processes and compliance are up to date. We can help if you need training or assistance with getting in compliance for this area.

Accurate Audit Preparation is critical. The Government Auditing Standards and Single Audit requirements put the burden on the auditee to accurately prepare and understand your financial statements, SEFA and footnote disclosures. So to help our clients improve and streamline their Grants Management process, REDW's Software Solutions team has developed a powerful new Abila MIP module called SEFA Proâ„¢, which extracts SEFA Reports directly from your existing Abila MIP Fund Accounting software.

In addition to a webinar demonstration of SEFA Pro, REDW will be conducting a series of Grants Management seminars in select cities. Check redw.com/events for details.

Broadband Rights for tribes was granted this month by the FCC, meaning tribes may now apply for licenses to help establish or expand internet access over their reservation lands. After August 3, 2020, private companies will bid for those rights across the nation – including in Indian Country.

For more information on assessing your Tribe's ability to gain broadband access, check out this article published by NAFOA.

New Overtime Rules took effect on January 1, 2020. If your Tribe’s legal counsel has determined that you follow FSLA and DOL regulations, then those with non-executive, non-administrative or non-professional duties are subject to 1.5 times their regular pay rates when more than 40 hours are worked in a work week. The threshold for salary levels for exempt employees is now $35,568. Also see related information under "Human Resources."

Social Security Deductions for Tribal Council Members may be deducted and paid if your Tribe has a Section 218A agreement in place with the Social Security Administration.

For more information on the Tribal Social Security Fairness Act, click to read an article from NAFOA. And for guidance on the proper filing of W-2s for Tribal Council pay, including when no Section 218A agreement is in place, visit the IRS tribal government website.

Tribal Tax Enforcement and Collection. Although many tribal governments have laws in place that allow for taxation revenues, tribes sometimes have difficulty enforcing the laws and collecting taxes due. Tribal governments should focus on educating the community of the tax laws – including taxpayers doing business on tribal land and even tribal government members. A strong understanding of the tax laws will help the tax administration team to enforce and collect taxes, thereby increasing tax revenues.

Taxation of Online Sales. The U.S. Supreme Court recently overturned a 1992 precedent that barred states from requiring an out-of-state seller with no physical presence to collect sales tax on a sale to a resident of the state. Now, physical presence is no longer required for a state to impose a sales tax on sellers, which can allow states to collect sales taxes from remote sellers. Tribes should explore adopting laws similar to state economic nexus laws that require remote sellers to remit and collect sales tax if they had aggregate sales of tangible personal property or services within tribal territory over stated thresholds. An economic nexus law can enable a tribe to increase tax revenues by collecting sales tax on sales delivered onto trust lands from remote sellers.

Economic Development. To promote economic development on trust land – and increase tax revenues – tribes can offer incentives to businesses who locate to trust land. This is similar to many states that offer credits and incentives, such as Oklahoma’s Investment/New Job Tax Credit package. It provides growing manufacturers a significant tax credit based on either an investment in depreciable property or the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance.

Protecting Tribal Sovereignty. State and taxation can be complicated when it comes to trust versus fee lands. The U.S. Supreme Court has stated that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty. Tribes need to be aware of what a state can and cannot tax on both trust and fee lands.

Indian Employment Credit. The federal government just extended a tax credit to employers who hire American Indians or their spouses who live on or near a reservation and work for an employer on that reservation. The credits, which encourage employers to hire American Indians, give employers a tax credit on a portion of the qualified wages and employee health insurance costs paid to an enrolled member of an Indian tribe or the enrolled member’s spouse.

AML Update. The American Gaming Association (AGA) has released its updated Best Practices for Anti-Money Laundering (AML) Compliance. The new publication contains a more vigorous Risk Assessment section, as well as enhanced procedures for Know Your Customer/Customer Due Diligence. It also includes deepened analysis and updated recommendations regarding new and emerging forms of gaming, including sports betting and mobile gaming. Casino operators should carefully review the new publication and consider updating policies and procedures to remain current in an area subject to increasing scrutiny and oversight.

REDW's Tribal Gaming team is presenting a webinar on the Bank Secrecy Act/Title 31 on May 14, 2020. Check redw.com/events for details.

Sports Betting: An opportunity or a mirage? Why are investors not wagering on this new source of revenue for the gaming industry, and what does this mean for tribal gaming? Sports books contribute minimally to casino profits, so as legal sports betting increasingly takes shape, will the shift benefit all, or just a small segment of the gaming industry?

Is a Resort Casino in Your Future? Strategic planning and market evaluations are vital to projecting the next opportunity. Gone are the days of certain success in the gaming industry. Competition, new regulations, economic growth, and changes in game offerings have executives and decision makers questioning their next move. Exploring what it means to be a “resort destination†versus a “local casino†could make the difference between generational income or paying lenders for decades. Income versus cash is a significant distinction all executives must understand, no matter the casino size.

Having to wait for Reliable and Timely Financial Data? Decision-makers need timely and reliable financial information to strategically plan and execute both short- and long-term goals. In today’s data-driven environment, waiting two months for closed books is unacceptable.

Check out our webinar recording on "Data Extraction Tips to Ease Your Audit Pain" from May 2019.

Defined Contribution Plan Reporting now requires additional effort by tribes, as a result of GASB 84, which established criteria for identifying and reporting fiduciary activities. Effective December 15, 2018, defined contribution retirement plans likely fall under the definition of a fiduciary component unit. Thus, these types of plans require reporting on your Tribe’s financial statements as a fiduciary activity – a major change to previous reporting, as these plans have not typically been reported within the government-wide financial statements. Tribes must now gather the necessary information to complete the required financial reporting, as do auditors, who must test this information for the first time.

The SECURE Act of 2019 (Setting Every Community Up for Retirement Enhancement) is viewed by some as the most significant retirement legislation in over a decade. Four changes will likely have the greatest impact on your tribal retirement plans, both governmental and commercial:

•  Increased Age for Required Start Date for Mandatory Distributions. The Act raises the Required Minimum Distribution (RMD) starting age from 70½ to 72; individuals now have until April 1 of the year following the year they turned age 72 to take their first RMD. Participants age 72 and older in a retirement plan who are still employed may delay RMDs until retirement.

•  Long-term, Part-time Workers Must Be Allowed to Participate in 401(k) Plans. Employers with 401(k) plans must have a dual eligibility requirement for employees who complete either a one-year-of-service requirement (with the 1,000-hour rule) or three consecutive years of service with at least 500 hours of service.

•  Simplification of Safe Harbor Rules. The Act eliminates the annual safe harbor notice requirement for retirement plans that use the 3% safe harbor non-elective contribution.

•  Increased Penalty for Failure to File. The penalty for failing to file Form 5500 Annual Return/Report for Employee Benefit Plans has increased from $25 a day/$15,000 maximum to $250 a day/$150,000 maximum.

A culture of security awareness is vital for protecting your Tribe’s information and ensuring it is safe from hackers and ransomware attacks in 2020. A continuous security awareness education program should include:

•  A Security Awareness Education Policy

•  Interactive training modules assigned to employees bi-monthly, or at least every two months

•  Phishing your team monthly, with remedial training assignments for those who get “hookedâ€

•  Assessments and quizzes

•  Educational materials, such as current cybersecurity events, posters, and videos.

Create, review and/or update IT Security Policies and Procedures and ensure they are current with industry best practices. Be sure to share updates with all employees and have them acknowledge these policies and procedures annually.

Data backup and restoration procedures must be kept up to date and tested regularly. This will help to ensure that, if your data becomes encrypted with ransomware, you’ll avoid paying cyber criminals – and avoid the possibility of being targeted again.

Confirm IT best practices are in place. Perform an annual IT Risk Assessment to evaluate overall technology and architecture.

Implement Multi-Factor Authentication (MFA) as an added layer of security to prevent hackers from gaining access to your organization with compromised credentials. MFA helps to protect email, financial accounts, social media accounts and mobile devices.

Implement a robust vendor management process for third-party providers. Ask what security practices are in place to protect your network and data, and review their SOC (Service Organization Controls) reports. Also, ensure a confidentiality agreement is in place.

Evaluate your current cyber-liability insurance policy or speak with a reputable broker if your organization does not have this insurance.

Changes to the Fair Labor Standards Act (FLSA), issued in September 2019 with compliance required as of January 1, 2020, revised the criteria defining employees eligible for overtime pay (Non-Exempt employees) and those not eligible for overtime (Exempt employees). Certain executive, administrative, learned professional or computer-related technical positions earning a certain weekly salary are exempt from FLSA, meaning they are not eligible for overtime pay. Under the new regulations, the salary threshold for Exempt employees has increased to $684/week ($35,568/year). The duties test for exempt employees will still apply. Note that regional and industry pay differences are not considered in the new FLSA regulations.

Minimum wage increases have taken effect in many states, although the federal minimum wage has been at $7.25/hour for a decade. Employers should also check local wage rates, as they may be higher than the state rates. In some instances, the minimum wage rate may vary based on more than just the geographic location, and could be based on employer size and industry.

Pay compression could be an unintended consequence for employers who are increasing employee salaries to meet the new minimum salary requirements under the FLSA (see above) and keep these employees classified as exempt from overtime. Likewise, pay compression can become an issue when employers apply the increases to minimum wage rates in their organization. Pay compression occurs when the pay of one or more employees is very close to the pay for more experienced or longer-tenured employees in the same position, or when employees in entry-level type jobs are paid almost as much as colleagues in higher-level jobs, including supervisory or managerial positions. In both instances, employers should consider an adjustment to all related salary scales to avoid pay compression and ensure continued internal equity.

Compensation and benefits must be part of a viable structure that allows employers to retain top talent. Conducting a compensation study to determine whether your organization is competitive in the market in which you’re competing for talent is a good practice. It can ensure your organization is offering a competitive base wage, while also minimizing turnover and enhancing employee engagement. Intangible rewards also count! Talented, skilled employees value organizational cultures that include mentoring, feedback, career pathing and technology, as well as flexible work schedules, retirement plans, fitness incentives and work/life balance.

Workplace harassment claims and the #metoo movement both require annual, robust sexual harassment training for employees. Training can be especially important for managers, who may benefit from additional training about what constitutes inappropriate conduct with a subordinate, as well as how to identify sexually abusive behavior in those they supervise. Employers should also adopt clear sexual harassment policies, identify inappropriate behaviors, and give employees the tools and training they need to report instances of sexual harassment in the workplace. In California, employers are now mandated to provide sexual harassment training.

Employer drug testing and your organization’s drug policies must be thoughtful and intentional and should address current state laws, as well as the organization’s position. With more states legalizing marijuana for medical or recreational use, some states are also passing laws prohibiting discriminating against employees who use marijuana. Will you accommodate marijuana use? If not, what accommodations does your state require, if any? Are there certain job positions where no accommodation can be made due to safety sensitivities that may be governed by federal safety regulations? Of paramount importance, a reasonable-suspicion program must be in place, as well as providing training for staff and management about how to react when someone is impaired on the job.

Rebalancing helps to keep your portfolio’s risk and return in line with long-term objectives. In 2019, U.S. equity and fixed markets performed extremely well, and your allocations may have drifted from your targets. By not rebalancing over extended periods of time, you may create a different risk/return profile than was initially set in the Investment Policy Statement.

Volatility will most likely rise in 2020, as we haven’t had a meaningful correction in the last year, and some uncertainties – such as the U.S. presidential election – are on the horizon. Last year was stellar for equity markets, with the S&P 500 up about 31%. However, with strong equity performance come higher valuations and the potential for more volatility. Historically, election years can be more volatile than non-election years; investors don’t know which candidates will win, and this makes it difficult to make certain projections that have an impact on valuation models. When the election is over, investors have more clarity and can move forward.

The SECURE Act includes some new measures for your defined contribution (401k) plans. Among the many changes under the new law, Tribal Investment Committees that oversee retirement plans should be especially aware of two: 1) the new law provides a new cap of 15% for safe-harbor automatic enrollment; and 2) annuities are now allowed in 401(k) plans.

For more details on the SECURE Act, see the Winter 2020 issue of Planning Matters, a newsletter from REDW Wealth.

Fixed Income returns were abnormally high in 2019 when compared to the long-term average. The Barclays Aggregate Bond index was up about 8.7% for 2019, nearly double its average over the last 15 years. Most of the year’s gain was attributed to capital appreciation as bond values rose with a decline in interest rates. Despite the strength of fixed income returns in 2019, it is important to lower your expectations for 2020. Although many Tribes have large fixed income holdings, and many of these holdings are funding operations, it’s important not to overestimate your return expectations for the year just started.

Fees will most likely be higher in 2020. Most advisors and consultants charge their fees on a percentage of assets, and a basic 50/50 global stock and bond portfolio gained about 16% in 2019, so fees are bound to increase. Also, some hidden fees and/or commissions may add to the percentage of assets fees, so ask your advisor for a transparent breakdown of fees for your records. If your portfolio has grown significantly over the past couple of years, this may be a good time to negotiate a new fee structure. You may want to consider a competitive bid/quote process by putting out a Request for Proposal (RFP) or Request for Quote (RFQ). By doing this on a regular basis, you’ll satisfy your fiduciary duty and you may be able to discover new options, such as flat fees.

REDW’s tribal gaming experts are here to assist you in any of these areas, and many others not covered in this guide. To learn more about how any of these issues may apply to your gaming operations more specifically, please contact Anthony Gerlach at agerlach@redw.com or Adam Smith at adam.smith@redw.com.

What’s more, REDW is conducting a series of gaming seminars and webinars throughout 2020, so please visit redw.com/events for more information or to register.

GASB 84 and its requirements, effective for periods beginning after December 15, 2018, call for tribal CFOs to re-assess their Tribe’s retirement plan governance. Many retirement plans that were not included in your overall financial statements, other than in a footnote, may now be required to be included as a Fiduciary Fund. Further, some minor or other per capita trust funds may require reclassification from Fiduciary Fund to Special Revenue Fund. Also see related information under "Retirement Plans."

GASB 87 - Leases, effective December 15, 2019, establishes new requirements, and since tribes generally function as both lessee and lessor, leases will likely be accounted for as capital expenditures rather than operating expenses.

REDW has scheduled a 3-part webinar series on GASB 87, beginning in April. Check redw.com/events for details.

The Data Collection Form (DCF) for the Federal Audit Clearinghouse (FAC) now requires Single Auditees to include the text of their Notes to the SEFA and their Corrective Action Plans for any findings. Auditors must also transfer the text of their audit findings to the DCF.

For more information, see the FAC's Instructions and Documents webpage.

Annual Reviews of Vendors are vital to ensure that tribal databases include active, legitimate vendors. This is also a good time to review your Tribe’s process of ensuring the accurate determination of 1099 and W-2 vendors, and to double-check that you have a current W-9 on file. This is a prime target for IRS reviews, so make sure your processes and compliance are up to date. We can help if you need training or assistance with getting in compliance for this area.

Accurate Audit Preparation is critical. The Government Auditing Standards and Single Audit requirements put the burden on the auditee to accurately prepare and understand your financial statements, SEFA and footnote disclosures. So to help our clients improve and streamline their Grants Management process, REDW's Software Solutions team has developed a powerful new Abila MIP module called SEFA Proâ„¢, which extracts SEFA Reports directly from your existing Abila MIP Fund Accounting software.

In addition to a webinar demonstration of SEFA Pro, REDW will be conducting a series of Grants Management seminars in select cities. Check redw.com/events for details.

Broadband Rights for tribes was granted this month by the FCC, meaning tribes may now apply for licenses to help establish or expand internet access over their reservation lands. After August 3, 2020, private companies will bid for those rights across the nation – including in Indian Country.

For more information on assessing your Tribe's ability to gain broadband access, check out this article published by NAFOA.

New Overtime Rules took effect on January 1, 2020. If your Tribe’s legal counsel has determined that you follow FSLA and DOL regulations, then those with non-executive, non-administrative or non-professional duties are subject to 1.5 times their regular pay rates when more than 40 hours are worked in a work week. The threshold for salary levels for exempt employees is now $35,568. Also see related information under "Human Resources."

Social Security Deductions for Tribal Council Members may be deducted and paid if your Tribe has a Section 218A agreement in place with the Social Security Administration.

For more information on the Tribal Social Security Fairness Act, click to read an article from NAFOA. And for guidance on the proper filing of W-2s for Tribal Council pay, including when no Section 218A agreement is in place, visit the IRS tribal government website.

Tribal Tax Enforcement and Collection. Although many tribal governments have laws in place that allow for taxation revenues, tribes sometimes have difficulty enforcing the laws and collecting taxes due. Tribal governments should focus on educating the community of the tax laws – including taxpayers doing business on tribal land and even tribal government members. A strong understanding of the tax laws will help the tax administration team to enforce and collect taxes, thereby increasing tax revenues.

Taxation of Online Sales. The U.S. Supreme Court recently overturned a 1992 precedent that barred states from requiring an out-of-state seller with no physical presence to collect sales tax on a sale to a resident of the state. Now, physical presence is no longer required for a state to impose a sales tax on sellers, which can allow states to collect sales taxes from remote sellers. Tribes should explore adopting laws similar to state economic nexus laws that require remote sellers to remit and collect sales tax if they had aggregate sales of tangible personal property or services within tribal territory over stated thresholds. An economic nexus law can enable a tribe to increase tax revenues by collecting sales tax on sales delivered onto trust lands from remote sellers.

Economic Development. To promote economic development on trust land – and increase tax revenues – tribes can offer incentives to businesses who locate to trust land. This is similar to many states that offer credits and incentives, such as Oklahoma’s Investment/New Job Tax Credit package. It provides growing manufacturers a significant tax credit based on either an investment in depreciable property or the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance.

Protecting Tribal Sovereignty. State and taxation can be complicated when it comes to trust versus fee lands. The U.S. Supreme Court has stated that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty. Tribes need to be aware of what a state can and cannot tax on both trust and fee lands.

Indian Employment Credit. The federal government just extended a tax credit to employers who hire American Indians or their spouses who live on or near a reservation and work for an employer on that reservation. The credits, which encourage employers to hire American Indians, give employers a tax credit on a portion of the qualified wages and employee health insurance costs paid to an enrolled member of an Indian tribe or the enrolled member’s spouse.

AML Update. The American Gaming Association (AGA) has released its updated Best Practices for Anti-Money Laundering (AML) Compliance. The new publication contains a more vigorous Risk Assessment section, as well as enhanced procedures for Know Your Customer/Customer Due Diligence. It also includes deepened analysis and updated recommendations regarding new and emerging forms of gaming, including sports betting and mobile gaming. Casino operators should carefully review the new publication and consider updating policies and procedures to remain current in an area subject to increasing scrutiny and oversight.

REDW's Tribal Gaming team is presenting a webinar on the Bank Secrecy Act/Title 31 on May 14, 2020. Check redw.com/events for details.

Sports Betting: An opportunity or a mirage? Why are investors not wagering on this new source of revenue for the gaming industry, and what does this mean for tribal gaming? Sports books contribute minimally to casino profits, so as legal sports betting increasingly takes shape, will the shift benefit all, or just a small segment of the gaming industry?

Is a Resort Casino in Your Future? Strategic planning and market evaluations are vital to projecting the next opportunity. Gone are the days of certain success in the gaming industry. Competition, new regulations, economic growth, and changes in game offerings have executives and decision makers questioning their next move. Exploring what it means to be a “resort destination†versus a “local casino†could make the difference between generational income or paying lenders for decades. Income versus cash is a significant distinction all executives must understand, no matter the casino size.

Having to wait for Reliable and Timely Financial Data? Decision-makers need timely and reliable financial information to strategically plan and execute both short- and long-term goals. In today’s data-driven environment, waiting two months for closed books is unacceptable.

Check out our webinar recording on "Data Extraction Tips to Ease Your Audit Pain" from May 2019.

Defined Contribution Plan Reporting now requires additional effort by tribes, as a result of GASB 84, which established criteria for identifying and reporting fiduciary activities. Effective December 15, 2018, defined contribution retirement plans likely fall under the definition of a fiduciary component unit. Thus, these types of plans require reporting on your Tribe’s financial statements as a fiduciary activity – a major change to previous reporting, as these plans have not typically been reported within the government-wide financial statements. Tribes must now gather the necessary information to complete the required financial reporting, as do auditors, who must test this information for the first time.

The SECURE Act of 2019 (Setting Every Community Up for Retirement Enhancement) is viewed by some as the most significant retirement legislation in over a decade. Four changes will likely have the greatest impact on your tribal retirement plans, both governmental and commercial:

•  Increased Age for Required Start Date for Mandatory Distributions. The Act raises the Required Minimum Distribution (RMD) starting age from 70½ to 72; individuals now have until April 1 of the year following the year they turned age 72 to take their first RMD. Participants age 72 and older in a retirement plan who are still employed may delay RMDs until retirement.

•  Long-term, Part-time Workers Must Be Allowed to Participate in 401(k) Plans. Employers with 401(k) plans must have a dual eligibility requirement for employees who complete either a one-year-of-service requirement (with the 1,000-hour rule) or three consecutive years of service with at least 500 hours of service.

•  Simplification of Safe Harbor Rules. The Act eliminates the annual safe harbor notice requirement for retirement plans that use the 3% safe harbor non-elective contribution.

•  Increased Penalty for Failure to File. The penalty for failing to file Form 5500 Annual Return/Report for Employee Benefit Plans has increased from $25 a day/$15,000 maximum to $250 a day/$150,000 maximum.

A culture of security awareness is vital for protecting your Tribe’s information and ensuring it is safe from hackers and ransomware attacks in 2020. A continuous security awareness education program should include:

•  A Security Awareness Education Policy

•  Interactive training modules assigned to employees bi-monthly, or at least every two months

•  Phishing your team monthly, with remedial training assignments for those who get “hookedâ€

•  Assessments and quizzes

•  Educational materials, such as current cybersecurity events, posters, and videos.

Create, review and/or update IT Security Policies and Procedures and ensure they are current with industry best practices. Be sure to share updates with all employees and have them acknowledge these policies and procedures annually.

Data backup and restoration procedures must be kept up to date and tested regularly. This will help to ensure that, if your data becomes encrypted with ransomware, you’ll avoid paying cyber criminals – and avoid the possibility of being targeted again.

Confirm IT best practices are in place. Perform an annual IT Risk Assessment to evaluate overall technology and architecture.

Implement Multi-Factor Authentication (MFA) as an added layer of security to prevent hackers from gaining access to your organization with compromised credentials. MFA helps to protect email, financial accounts, social media accounts and mobile devices.

Implement a robust vendor management process for third-party providers. Ask what security practices are in place to protect your network and data, and review their SOC (Service Organization Controls) reports. Also, ensure a confidentiality agreement is in place.

Evaluate your current cyber-liability insurance policy or speak with a reputable broker if your organization does not have this insurance.

Changes to the Fair Labor Standards Act (FLSA), issued in September 2019 with compliance required as of January 1, 2020, revised the criteria defining employees eligible for overtime pay (Non-Exempt employees) and those not eligible for overtime (Exempt employees). Certain executive, administrative, learned professional or computer-related technical positions earning a certain weekly salary are exempt from FLSA, meaning they are not eligible for overtime pay. Under the new regulations, the salary threshold for Exempt employees has increased to $684/week ($35,568/year). The duties test for exempt employees will still apply. Note that regional and industry pay differences are not considered in the new FLSA regulations.

Minimum wage increases have taken effect in many states, although the federal minimum wage has been at $7.25/hour for a decade. Employers should also check local wage rates, as they may be higher than the state rates. In some instances, the minimum wage rate may vary based on more than just the geographic location, and could be based on employer size and industry.

Pay compression could be an unintended consequence for employers who are increasing employee salaries to meet the new minimum salary requirements under the FLSA (see above) and keep these employees classified as exempt from overtime. Likewise, pay compression can become an issue when employers apply the increases to minimum wage rates in their organization. Pay compression occurs when the pay of one or more employees is very close to the pay for more experienced or longer-tenured employees in the same position, or when employees in entry-level type jobs are paid almost as much as colleagues in higher-level jobs, including supervisory or managerial positions. In both instances, employers should consider an adjustment to all related salary scales to avoid pay compression and ensure continued internal equity.

Compensation and benefits must be part of a viable structure that allows employers to retain top talent. Conducting a compensation study to determine whether your organization is competitive in the market in which you’re competing for talent is a good practice. It can ensure your organization is offering a competitive base wage, while also minimizing turnover and enhancing employee engagement. Intangible rewards also count! Talented, skilled employees value organizational cultures that include mentoring, feedback, career pathing and technology, as well as flexible work schedules, retirement plans, fitness incentives and work/life balance.

Workplace harassment claims and the #metoo movement both require annual, robust sexual harassment training for employees. Training can be especially important for managers, who may benefit from additional training about what constitutes inappropriate conduct with a subordinate, as well as how to identify sexually abusive behavior in those they supervise. Employers should also adopt clear sexual harassment policies, identify inappropriate behaviors, and give employees the tools and training they need to report instances of sexual harassment in the workplace. In California, employers are now mandated to provide sexual harassment training.

Employer drug testing and your organization’s drug policies must be thoughtful and intentional and should address current state laws, as well as the organization’s position. With more states legalizing marijuana for medical or recreational use, some states are also passing laws prohibiting discriminating against employees who use marijuana. Will you accommodate marijuana use? If not, what accommodations does your state require, if any? Are there certain job positions where no accommodation can be made due to safety sensitivities that may be governed by federal safety regulations? Of paramount importance, a reasonable-suspicion program must be in place, as well as providing training for staff and management about how to react when someone is impaired on the job.

Rebalancing helps to keep your portfolio’s risk and return in line with long-term objectives. In 2019, U.S. equity and fixed markets performed extremely well, and your allocations may have drifted from your targets. By not rebalancing over extended periods of time, you may create a different risk/return profile than was initially set in the Investment Policy Statement.

Volatility will most likely rise in 2020, as we haven’t had a meaningful correction in the last year, and some uncertainties – such as the U.S. presidential election – are on the horizon. Last year was stellar for equity markets, with the S&P 500 up about 31%. However, with strong equity performance come higher valuations and the potential for more volatility. Historically, election years can be more volatile than non-election years; investors don’t know which candidates will win, and this makes it difficult to make certain projections that have an impact on valuation models. When the election is over, investors have more clarity and can move forward.

The SECURE Act includes some new measures for your defined contribution (401k) plans. Among the many changes under the new law, Tribal Investment Committees that oversee retirement plans should be especially aware of two: 1) the new law provides a new cap of 15% for safe-harbor automatic enrollment; and 2) annuities are now allowed in 401(k) plans.

For more details on the SECURE Act, see the Winter 2020 issue of Planning Matters, a newsletter from REDW Wealth.

Fixed Income returns were abnormally high in 2019 when compared to the long-term average. The Barclays Aggregate Bond index was up about 8.7% for 2019, nearly double its average over the last 15 years. Most of the year’s gain was attributed to capital appreciation as bond values rose with a decline in interest rates. Despite the strength of fixed income returns in 2019, it is important to lower your expectations for 2020. Although many Tribes have large fixed income holdings, and many of these holdings are funding operations, it’s important not to overestimate your return expectations for the year just started.

Fees will most likely be higher in 2020. Most advisors and consultants charge their fees on a percentage of assets, and a basic 50/50 global stock and bond portfolio gained about 16% in 2019, so fees are bound to increase. Also, some hidden fees and/or commissions may add to the percentage of assets fees, so ask your advisor for a transparent breakdown of fees for your records. If your portfolio has grown significantly over the past couple of years, this may be a good time to negotiate a new fee structure. You may want to consider a competitive bid/quote process by putting out a Request for Proposal (RFP) or Request for Quote (RFQ). By doing this on a regular basis, you’ll satisfy your fiduciary duty and you may be able to discover new options, such as flat fees.

REDW’s tribal gaming experts are here to assist you in any of these areas, and many others not covered in this guide. To learn more about how any of these issues may apply to your gaming operations more specifically, please contact Anthony Gerlach at agerlach@redw.com or Adam Smith at adam.smith@redw.com.

What’s more, REDW is conducting a series of gaming seminars and webinars throughout 2020, so please visit redw.com/events for more information or to register.

-
Categories
Resources

Top Issues for CFOs and Other Tribal Leaders in 2020

The first year of the new decade is already very busy for tribal leaders. At REDW, we want to share with you our in-depth understanding of the key finance, accounting and business issues you need to be aware of as you look ahead to 2020 and beyond.

As expert tribal advisors with more than three decades serving tribes and their entities, we have a keen perspective on many new or recently enacted federal regulations, as well as important operational processes. Below, our experts share what they consider to be the most important issues for tribal CFOs, CIOs, HR Directors, Investment Committees and other professionals in leadership positions.

Top Issues:

GASB 84and its requirements,effective for periods beginning after December 15,2018,call for tribal CFOs to re-assess their Tribe’s retirement plan governance. Many retirement plans that were not included in your overall financial statements,other than in a footnote,may now be required to be included as a Fiduciary Fund. Further,some minor or other per capita trust funds may require reclassification from Fiduciary Fund to Special Revenue Fund. Also see related information under "Retirement Plans."

GASB 87 - Leases,effective December 15,2019,establishes new requirements,and since tribes generally function as both lessee and lessor,leases will likely be accounted for as capital expenditures rather than operating expenses.

REDW has scheduled a 3-part webinar series on GASB 87,beginning in April. Check redw.com/eventsfor details.

The Data Collection Form (DCF)for the Federal Audit Clearinghouse (FAC) now requires Single Auditees to include the text of their Notes to the SEFA and their Corrective Action Plans for any findings. Auditors must also transfer the text of their audit findings to the DCF.

For more information,see the FAC's Instructions and Documents webpage.

Annual Reviews of Vendors are vital to ensure that tribal databases include active, legitimate vendors. This is also a good time to review your Tribe’s process of ensuring the accurate determination of 1099 and W-2 vendors, and to double-check that you have a current W-9 on file. This is a prime target for IRS reviews, so make sure your processes and compliance are up to date. We can help if you need training or assistance with getting in compliance for this area.

Accurate Audit Preparation is critical. The Government Auditing Standards and Single Audit requirements put the burden on the auditee to accurately prepare and understand your financial statements, SEFA and footnote disclosures. So to help our clients improve and streamline their Grants Management process, REDW's Software Solutions team has developed a powerful new Abila MIP module called SEFA Proâ„¢,which extracts SEFA Reports directly from your existing Abila MIP Fund Accounting software.

In addition to a webinar demonstration of SEFA Pro,REDW will be conducting a series of Grants Management seminars in select cities. Check redw.com/eventsfor details.

Broadband Rightsfor tribes was granted this month by the FCC,meaning tribes may now apply for licenses to help establish or expand internet access over their reservation lands. After August 3,2020,private companies will bid for those rights across the nation –including in Indian Country.

For more information on assessing your Tribe's ability to gain broadband access, check out this article published by NAFOA.

New Overtime Rules took effect on January 1, 2020. If your Tribe’s legal counsel has determined that you follow FSLA and DOL regulations, then those with non-executive, non-administrative or non-professional duties are subject to 1.5 times their regular pay rates when more than 40 hours are worked in a work week. The threshold for salary levels for exempt employees is now $35,568. Also see related information under "Human Resources."

Social Security Deductions for Tribal Council Members may be deducted and paid if your Tribe has a Section 218A agreement in place with the Social Security Administration.

For more information on the Tribal Social Security Fairness Act, click to read an article from NAFOA. And for guidance on the proper filing of W-2s for Tribal Council pay, including when no Section 218A agreement is in place, visit the IRS tribal government website.

Tribal Tax Enforcement and Collection. Although many tribal governments have laws in place that allow for taxation revenues, tribes sometimes have difficulty enforcing the laws and collecting taxes due. Tribal governments should focus on educating the community of the tax laws – including taxpayers doing business on tribal land and even tribal government members. A strong understanding of the tax laws will help the tax administration team to enforce and collect taxes, thereby increasing tax revenues.

Taxation of Online Sales. The U.S. Supreme Court recently overturned a 1992 precedent that barred states from requiring an out-of-state seller with no physical presence to collect sales tax on a sale to a resident of the state. Now, physical presence is no longer required for a state to impose a sales tax on sellers, which can allow states to collect sales taxes from remote sellers. Tribes should explore adopting laws similar to state economic nexus laws that require remote sellers to remit and collect sales tax if they had aggregate sales of tangible personal property or services within tribal territory over stated thresholds. An economic nexus law can enable a tribe to increase tax revenues by collecting sales tax on sales delivered onto trust lands from remote sellers.

Economic Development. To promote economic development on trust land – and increase tax revenues – tribes can offer incentives to businesses who locate to trust land. This is similar to many states that offer credits and incentives, such as Oklahoma’s Investment/New Job Tax Credit package. It provides growing manufacturers a significant tax credit based on either an investment in depreciable property or the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance.

Protecting Tribal Sovereignty. State and taxation can be complicated when it comes to trust versus fee lands. The U.S. Supreme Court has stated that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty. Tribes need to be aware of what a state can and cannot tax on both trust and fee lands.

Indian Employment Credit. The federal government just extended a tax credit to employers who hire American Indians or their spouses who live on or near a reservation and work for an employer on that reservation. The credits, which encourage employers to hire American Indians, give employers a tax credit on a portion of the qualified wages and employee health insurance costs paid to an enrolled member of an Indian tribe or the enrolled member’s spouse.

AML Update. The American Gaming Association (AGA) has released its updated Best Practices for Anti-Money Laundering (AML) Compliance. The new publication contains a more vigorous Risk Assessment section, as well as enhanced procedures for Know Your Customer/Customer Due Diligence. It also includes deepened analysis and updated recommendations regarding new and emerging forms of gaming, including sports betting and mobile gaming. Casino operators should carefully review the new publication and consider updating policies and procedures to remain current in an area subject to increasing scrutiny and oversight.

REDW's Tribal Gaming team is presenting a webinar on the Bank Secrecy Act/Title 31 on May 14,2020. Check redw.com/eventsfor details.

Sports Betting:An opportunity or a mirage? Why are investors not wagering on this new source of revenue for the gaming industry,and what does this mean for tribal gaming? Sports books contribute minimally to casino profits,so as legal sports betting increasingly takes shape,will the shift benefit all,or just a small segment of the gaming industry?

Is a Resort Casino in Your Future?Strategic planning and market evaluations are vital to projecting the next opportunity. Gone are the days of certain success in the gaming industry. Competition,new regulations,economic growth,and changes in game offerings have executives and decision makers questioning their next move. Exploring what it means to be a “resort destinationâ€versus a “local casinoâ€could make the difference between generational income or paying lenders for decades. Income versus cash is a significant distinction all executives must understand,no matter the casino size.

Having to wait for Reliable and Timely Financial Data?Decision-makers need timely and reliable financial information to strategically plan and execute both short- and long-term goals. In today’s data-driven environment,waiting two months for closed books is unacceptable.

Check out our webinar recording on "Data Extraction Tips to Ease Your Audit Pain"from May 2019.

Defined Contribution Plan Reportingnow requires additional effort by tribes,as a result of GASB 84,which established criteria for identifying and reporting fiduciary activities. Effective December 15,2018,defined contribution retirement plans likely fall under the definition of a fiduciary component unit. Thus,these types of plans require reporting on your Tribe’s financial statements as a fiduciary activity –a major change to previous reporting,as these plans have not typically been reported within the government-wide financial statements. Tribes must now gather the necessary information to complete the required financial reporting,as do auditors,who must test this information for the first time.

The SECURE Act of 2019(Setting Every Community Up for Retirement Enhancement) is viewed by some as the most significant retirement legislation in over a decade. Four changes will likely have the greatest impact on your tribal retirement plans,both governmental and commercial:

•  Increased Age for Required Start Date for Mandatory Distributions. The Act raises the Required Minimum Distribution (RMD) starting age from 70½to 72;individuals now have until April 1 of the year following the year they turned age 72 to take their first RMD. Participants age 72 and older in a retirement plan who are still employed may delay RMDs until retirement.

•  Long-term,Part-time Workers Must Be Allowed to Participate in 401(k) Plans. Employers with 401(k) plans must have a dual eligibility requirement for employees who complete either a one-year-of-service requirement (with the 1,000-hour rule) or three consecutive years of service with at least 500 hours of service.

•  Simplification of Safe Harbor Rules. The Act eliminates the annual safe harbor notice requirement for retirement plans that use the 3% safe harbor non-elective contribution.

•  Increased Penalty for Failure to File. The penalty for failing to file Form 5500 Annual Return/Report for Employee Benefit Plans has increased from $25 a day/$15,0 maximum to $250 a day/$150,0 maximum.

A culture of security awarenessis vital for protecting your Tribe’s information and ensuring it is safe from hackers and ransomware attacks in 2020. A continuous security awareness education program should include:

•  A Security Awareness Education Policy

•  Interactive training modules assigned to employees bi-monthly,or at least every two months

•  Phishing your team monthly,with remedial training assignments for those who get “hookedâ€

•  Assessments and quizzes

•  Educational materials,such as current cybersecurity events,posters,and videos.

Create,review and/or update IT Security Policies and Proceduresand ensure they are current with industry best practices. Be sure to share updates with all employees and have them acknowledge these policies and procedures annually.

Data backup and restoration proceduresmust be kept up to date and tested regularly. This will help to ensure that,if your data becomes encrypted with ransomware,you’ll avoid paying cyber criminals –and avoid the possibility of being targeted again.

Confirm IT best practices are in place. Perform an annual IT Risk Assessment to evaluate overall technology and architecture.

Implement Multi-Factor Authentication (MFA)as an added layer of security to prevent hackers from gaining access to your organization with compromised credentials. MFA helps to protect email,financial accounts,social media accounts and mobile devices.

Implement a robust vendor management processfor third-party providers. Ask what security practices are in place to protect your network and data,and review their SOC (Service Organization Controls) reports. Also,ensure a confidentiality agreement is in place.

Evaluate your current cyber-liability insurance policyor speak with a reputable broker if your organization does not have this insurance.

Changes to the Fair Labor Standards Act (FLSA),issued in September 2019 with compliance required as of January 1,2020,revised the criteria defining employees eligible for overtime pay (Non-Exempt employees) and those not eligible for overtime (Exempt employees). Certain executive,administrative,learned professional or computer-related technical positions earning a certain weekly salary are exempt from FLSA,meaning they are not eligible for overtime pay. Under the new regulations,the salary threshold for Exempt employees has increased to $684/week ($35,568/year). The duties test for exempt employees will still apply. Note that regional and industry pay differences are not considered in the new FLSA regulations.

Minimum wage increaseshave taken effect in many states,although the federal minimum wage has been at $7.25/hour for a decade. Employers should also check local wage rates,as they may be higher than the state rates. In some instances,the minimum wage rate may vary based on more than just the geographic location,and could be based on employer size and industry.

Pay compressioncould be an unintended consequence for employers who are increasing employee salaries to meet the new minimum salary requirements under the FLSA (see above) and keep these employees classified as exempt from overtime. Likewise,pay compression can become an issue when employers apply the increases to minimum wage rates in their organization. Pay compression occurs when the pay of one or more employees is very close to the pay for more experienced or longer-tenured employees in the same position,or when employees in entry-level type jobs are paid almost as much as colleagues in higher-level jobs,including supervisory or managerial positions. In both instances,employers should consider an adjustment to all related salary scales to avoid pay compression and ensure continued internal equity.

Construction and trades positionsare steadily recovering after a net loss of over two million jobs in the last decade. In most states,construction is enjoying solid growth –but experiencing a shortage of qualified employees for more complex projects. The new generation of workers is not embracing the industry as an option with a viable career path,and turnover in construction is already about twice the national average. Employers need to find a way to retain their construction and trades employees,as well as identify how to resonate with the millennial mindset. This means designing attractive compensation and competitive benefits to hire and retain highly skilled employees.

Compensation and benefitsmust be part of a viable structure that allows employers to retain top talent. Conducting a compensation study to determine whether your organization is competitive in the market in which you’re competing for talent is a good practice. It can ensure your organization is offering a competitive base wage,while also minimizing turnover and enhancing employee engagement. Intangible rewards also count! Talented,skilled employees value organizational cultures that include mentoring,feedback,career pathing and technology,as well as flexible work schedules,retirement plans,fitness incentives and work/life balance.

Workplace harassment claimsand the #metoo movement both require annual,robust sexual harassment training for employees. Training can be especially important for managers,who may benefit from additional training about what constitutes inappropriate conduct with a subordinate,as well as how to identify sexually abusive behavior in those they supervise. Employers should also adopt clear sexual harassment policies,identify inappropriate behaviors,and give employees the tools and training they need to report instances of sexual harassment in the workplace. In California,employers are now mandated to provide sexual harassment training.

Employer drug testingand your organization’s drug policies must be thoughtful and intentional and should address current state laws,as well as the organization’s position. With more states legalizing marijuana for medical or recreational use,some states are also passing laws prohibiting discriminating against employees who use marijuana. Will you accommodate marijuana use? If not,what accommodations does your state require,if any? Are there certain job positions where no accommodation can be made due to safety sensitivities that may be governed by federal safety regulations? Of paramount importance,a reasonable-suspicion program must be in place,as well as providing training for staff and management about how to react when someone is impaired on the job.

Rebalancinghelps to keep your portfolio’s risk and return in line with long-term objectives. In 2019,U.S. equity and fixed markets performed extremely well,and your allocations may have drifted from your targets. By not rebalancing over extended periods of time,you may create a different risk/return profile than was initially set in the Investment Policy Statement.

Volatilitywill most likely rise in 2020,as we haven’t had a meaningful correction in the last year,and some uncertainties –such as the U.S. presidential election –are on the horizon. Last year was stellar for equity markets,with the S&P 500 up about 31%. However,with strong equity performance come higher valuations and the potential for more volatility. Historically,election years can be more volatile than non-election years;investors don’t know which candidates will win,and this makes it difficult to make certain projections that have an impact on valuation models. When the election is over,investors have more clarity and can move forward.

The SECURE Actincludes some new measures for your defined contribution (401k) plans. Among the many changes under the new law,Tribal Investment Committees that oversee retirement plans should be especially aware of two:1) the new law provides a new cap of 15% for safe-harbor automatic enrollment;and 2) annuities are now allowed in 401(k) plans.

For more details on the SECURE Act,see the Winter 2020 issue of Planning Matters,a newsletter from REDW Wealth.

Fixed Incomereturns were abnormally high in 2019 when compared to the long-term average. The Barclays Aggregate Bond index was up about 8.7% for 2019,nearly double its average over the last 15 years. Most of the year’s gain was attributed to capital appreciation as bond values rose with a decline in interest rates. Despite the strength of fixed income returns in 2019,it is important to lower your expectations for 2020. Although many Tribes have large fixed income holdings,and many of these holdings are funding operations,it’s important not to overestimate your return expectations for the year just started.

Feeswill most likely be higher in 2020. Most advisors and consultants charge their fees on a percentage of assets,and a basic 50/50 global stock and bond portfolio gained about 16% in 2019,so fees are bound to increase. Also,some hidden fees and/or commissions may add to the percentage of assets fees,so ask your advisor for a transparent breakdown of fees for your records. If your portfolio has grown significantly over the past couple of years,this may be a good time to negotiate a new fee structure. You may want to consider a competitive bid/quote process by putting out a Request for Proposal (RFP) or Request for Quote (RFQ). By doing this on a regular basis,you’ll satisfy your fiduciary duty and you may be able to discover new options,such as flat fees.

REDW’s tribal experts are here to assist you in any of these areas,and many others not covered in this guide. To learn more about how any of these issues may apply to your Tribe or tribal entities more specifically,please contact Corrine Wilson at cwilson@redw.comor 602.730.3609.

GASB 84and its requirements,effective for periods beginning after December 15,2018,call for tribal CFOs to re-assess their Tribe’s retirement plan governance. Many retirement plans that were not included in your overall financial statements,other than in a footnote,may now be required to be included as a Fiduciary Fund. Further,some minor or other per capita trust funds may require reclassification from Fiduciary Fund to Special Revenue Fund. Also see related information under "Retirement Plans."

GASB 87 - Leases,effective December 15,2019,establishes new requirements,and since tribes generally function as both lessee and lessor,leases will likely be accounted for as capital expenditures rather than operating expenses.

REDW has scheduled a 3-part webinar series on GASB 87,beginning in April. Check redw.com/eventsfor details.

The Data Collection Form (DCF)for the Federal Audit Clearinghouse (FAC) now requires Single Auditees to include the text of their Notes to the SEFA and their Corrective Action Plans for any findings. Auditors must also transfer the text of their audit findings to the DCF.

For more information,see the FAC's Instructions and Documents webpage.

Annual Reviews of Vendors are vital to ensure that tribal databases include active, legitimate vendors. This is also a good time to review your Tribe’s process of ensuring the accurate determination of 1099 and W-2 vendors, and to double-check that you have a current W-9 on file. This is a prime target for IRS reviews, so make sure your processes and compliance are up to date. We can help if you need training or assistance with getting in compliance for this area.

Accurate Audit Preparation is critical. The Government Auditing Standards and Single Audit requirements put the burden on the auditee to accurately prepare and understand your financial statements, SEFA and footnote disclosures. So to help our clients improve and streamline their Grants Management process, REDW's Software Solutions team has developed a powerful new Abila MIP module called SEFA Proâ„¢,which extracts SEFA Reports directly from your existing Abila MIP Fund Accounting software.

In addition to a webinar demonstration of SEFA Pro,REDW will be conducting a series of Grants Management seminars in select cities. Check redw.com/eventsfor details.

Broadband Rightsfor tribes was granted this month by the FCC,meaning tribes may now apply for licenses to help establish or expand internet access over their reservation lands. After August 3,2020,private companies will bid for those rights across the nation –including in Indian Country.

For more information on assessing your Tribe's ability to gain broadband access, check out this article published by NAFOA.

New Overtime Rules took effect on January 1, 2020. If your Tribe’s legal counsel has determined that you follow FSLA and DOL regulations, then those with non-executive, non-administrative or non-professional duties are subject to 1.5 times their regular pay rates when more than 40 hours are worked in a work week. The threshold for salary levels for exempt employees is now $35,568. Also see related information under "Human Resources."

Social Security Deductions for Tribal Council Members may be deducted and paid if your Tribe has a Section 218A agreement in place with the Social Security Administration.

For more information on the Tribal Social Security Fairness Act, click to read an article from NAFOA. And for guidance on the proper filing of W-2s for Tribal Council pay, including when no Section 218A agreement is in place, visit the IRS tribal government website.

Tribal Tax Enforcement and Collection. Although many tribal governments have laws in place that allow for taxation revenues, tribes sometimes have difficulty enforcing the laws and collecting taxes due. Tribal governments should focus on educating the community of the tax laws – including taxpayers doing business on tribal land and even tribal government members. A strong understanding of the tax laws will help the tax administration team to enforce and collect taxes, thereby increasing tax revenues.

Taxation of Online Sales. The U.S. Supreme Court recently overturned a 1992 precedent that barred states from requiring an out-of-state seller with no physical presence to collect sales tax on a sale to a resident of the state. Now, physical presence is no longer required for a state to impose a sales tax on sellers, which can allow states to collect sales taxes from remote sellers. Tribes should explore adopting laws similar to state economic nexus laws that require remote sellers to remit and collect sales tax if they had aggregate sales of tangible personal property or services within tribal territory over stated thresholds. An economic nexus law can enable a tribe to increase tax revenues by collecting sales tax on sales delivered onto trust lands from remote sellers.

Economic Development. To promote economic development on trust land – and increase tax revenues – tribes can offer incentives to businesses who locate to trust land. This is similar to many states that offer credits and incentives, such as Oklahoma’s Investment/New Job Tax Credit package. It provides growing manufacturers a significant tax credit based on either an investment in depreciable property or the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance.

Protecting Tribal Sovereignty. State and taxation can be complicated when it comes to trust versus fee lands. The U.S. Supreme Court has stated that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty. Tribes need to be aware of what a state can and cannot tax on both trust and fee lands.

Indian Employment Credit. The federal government just extended a tax credit to employers who hire American Indians or their spouses who live on or near a reservation and work for an employer on that reservation. The credits, which encourage employers to hire American Indians, give employers a tax credit on a portion of the qualified wages and employee health insurance costs paid to an enrolled member of an Indian tribe or the enrolled member’s spouse.

AML Update. The American Gaming Association (AGA) has released its updated Best Practices for Anti-Money Laundering (AML) Compliance. The new publication contains a more vigorous Risk Assessment section, as well as enhanced procedures for Know Your Customer/Customer Due Diligence. It also includes deepened analysis and updated recommendations regarding new and emerging forms of gaming, including sports betting and mobile gaming. Casino operators should carefully review the new publication and consider updating policies and procedures to remain current in an area subject to increasing scrutiny and oversight.

REDW's Tribal Gaming team is presenting a webinar on the Bank Secrecy Act/Title 31 on May 14,2020. Check redw.com/eventsfor details.

Sports Betting:An opportunity or a mirage? Why are investors not wagering on this new source of revenue for the gaming industry,and what does this mean for tribal gaming? Sports books contribute minimally to casino profits,so as legal sports betting increasingly takes shape,will the shift benefit all,or just a small segment of the gaming industry?

Is a Resort Casino in Your Future?Strategic planning and market evaluations are vital to projecting the next opportunity. Gone are the days of certain success in the gaming industry. Competition,new regulations,economic growth,and changes in game offerings have executives and decision makers questioning their next move. Exploring what it means to be a “resort destinationâ€versus a “local casinoâ€could make the difference between generational income or paying lenders for decades. Income versus cash is a significant distinction all executives must understand,no matter the casino size.

Having to wait for Reliable and Timely Financial Data?Decision-makers need timely and reliable financial information to strategically plan and execute both short- and long-term goals. In today’s data-driven environment,waiting two months for closed books is unacceptable.

Check out our webinar recording on "Data Extraction Tips to Ease Your Audit Pain"from May 2019.

Defined Contribution Plan Reportingnow requires additional effort by tribes,as a result of GASB 84,which established criteria for identifying and reporting fiduciary activities. Effective December 15,2018,defined contribution retirement plans likely fall under the definition of a fiduciary component unit. Thus,these types of plans require reporting on your Tribe’s financial statements as a fiduciary activity –a major change to previous reporting,as these plans have not typically been reported within the government-wide financial statements. Tribes must now gather the necessary information to complete the required financial reporting,as do auditors,who must test this information for the first time.

The SECURE Act of 2019(Setting Every Community Up for Retirement Enhancement) is viewed by some as the most significant retirement legislation in over a decade. Four changes will likely have the greatest impact on your tribal retirement plans,both governmental and commercial:

•  Increased Age for Required Start Date for Mandatory Distributions. The Act raises the Required Minimum Distribution (RMD) starting age from 70½to 72;individuals now have until April 1 of the year following the year they turned age 72 to take their first RMD. Participants age 72 and older in a retirement plan who are still employed may delay RMDs until retirement.

•  Long-term,Part-time Workers Must Be Allowed to Participate in 401(k) Plans. Employers with 401(k) plans must have a dual eligibility requirement for employees who complete either a one-year-of-service requirement (with the 1,000-hour rule) or three consecutive years of service with at least 500 hours of service.

•  Simplification of Safe Harbor Rules. The Act eliminates the annual safe harbor notice requirement for retirement plans that use the 3% safe harbor non-elective contribution.

•  Increased Penalty for Failure to File. The penalty for failing to file Form 5500 Annual Return/Report for Employee Benefit Plans has increased from $25 a day/$15,0 maximum to $250 a day/$150,0 maximum.

A culture of security awarenessis vital for protecting your Tribe’s information and ensuring it is safe from hackers and ransomware attacks in 2020. A continuous security awareness education program should include:

•  A Security Awareness Education Policy

•  Interactive training modules assigned to employees bi-monthly,or at least every two months

•  Phishing your team monthly,with remedial training assignments for those who get “hookedâ€

•  Assessments and quizzes

•  Educational materials,such as current cybersecurity events,posters,and videos.

Create,review and/or update IT Security Policies and Proceduresand ensure they are current with industry best practices. Be sure to share updates with all employees and have them acknowledge these policies and procedures annually.

Data backup and restoration proceduresmust be kept up to date and tested regularly. This will help to ensure that,if your data becomes encrypted with ransomware,you’ll avoid paying cyber criminals –and avoid the possibility of being targeted again.

Confirm IT best practices are in place. Perform an annual IT Risk Assessment to evaluate overall technology and architecture.

Implement Multi-Factor Authentication (MFA)as an added layer of security to prevent hackers from gaining access to your organization with compromised credentials. MFA helps to protect email,financial accounts,social media accounts and mobile devices.

Implement a robust vendor management processfor third-party providers. Ask what security practices are in place to protect your network and data,and review their SOC (Service Organization Controls) reports. Also,ensure a confidentiality agreement is in place.

Evaluate your current cyber-liability insurance policyor speak with a reputable broker if your organization does not have this insurance.

Changes to the Fair Labor Standards Act (FLSA),issued in September 2019 with compliance required as of January 1,2020,revised the criteria defining employees eligible for overtime pay (Non-Exempt employees) and those not eligible for overtime (Exempt employees). Certain executive,administrative,learned professional or computer-related technical positions earning a certain weekly salary are exempt from FLSA,meaning they are not eligible for overtime pay. Under the new regulations,the salary threshold for Exempt employees has increased to $684/week ($35,568/year). The duties test for exempt employees will still apply. Note that regional and industry pay differences are not considered in the new FLSA regulations.

Minimum wage increaseshave taken effect in many states,although the federal minimum wage has been at $7.25/hour for a decade. Employers should also check local wage rates,as they may be higher than the state rates. In some instances,the minimum wage rate may vary based on more than just the geographic location,and could be based on employer size and industry.

Pay compressioncould be an unintended consequence for employers who are increasing employee salaries to meet the new minimum salary requirements under the FLSA (see above) and keep these employees classified as exempt from overtime. Likewise,pay compression can become an issue when employers apply the increases to minimum wage rates in their organization. Pay compression occurs when the pay of one or more employees is very close to the pay for more experienced or longer-tenured employees in the same position,or when employees in entry-level type jobs are paid almost as much as colleagues in higher-level jobs,including supervisory or managerial positions. In both instances,employers should consider an adjustment to all related salary scales to avoid pay compression and ensure continued internal equity.

Construction and trades positionsare steadily recovering after a net loss of over two million jobs in the last decade. In most states,construction is enjoying solid growth –but experiencing a shortage of qualified employees for more complex projects. The new generation of workers is not embracing the industry as an option with a viable career path,and turnover in construction is already about twice the national average. Employers need to find a way to retain their construction and trades employees,as well as identify how to resonate with the millennial mindset. This means designing attractive compensation and competitive benefits to hire and retain highly skilled employees.

Compensation and benefitsmust be part of a viable structure that allows employers to retain top talent. Conducting a compensation study to determine whether your organization is competitive in the market in which you’re competing for talent is a good practice. It can ensure your organization is offering a competitive base wage,while also minimizing turnover and enhancing employee engagement. Intangible rewards also count! Talented,skilled employees value organizational cultures that include mentoring,feedback,career pathing and technology,as well as flexible work schedules,retirement plans,fitness incentives and work/life balance.

Workplace harassment claimsand the #metoo movement both require annual,robust sexual harassment training for employees. Training can be especially important for managers,who may benefit from additional training about what constitutes inappropriate conduct with a subordinate,as well as how to identify sexually abusive behavior in those they supervise. Employers should also adopt clear sexual harassment policies,identify inappropriate behaviors,and give employees the tools and training they need to report instances of sexual harassment in the workplace. In California,employers are now mandated to provide sexual harassment training.

Employer drug testingand your organization’s drug policies must be thoughtful and intentional and should address current state laws,as well as the organization’s position. With more states legalizing marijuana for medical or recreational use,some states are also passing laws prohibiting discriminating against employees who use marijuana. Will you accommodate marijuana use? If not,what accommodations does your state require,if any? Are there certain job positions where no accommodation can be made due to safety sensitivities that may be governed by federal safety regulations? Of paramount importance,a reasonable-suspicion program must be in place,as well as providing training for staff and management about how to react when someone is impaired on the job.

Rebalancinghelps to keep your portfolio’s risk and return in line with long-term objectives. In 2019,U.S. equity and fixed markets performed extremely well,and your allocations may have drifted from your targets. By not rebalancing over extended periods of time,you may create a different risk/return profile than was initially set in the Investment Policy Statement.

Volatilitywill most likely rise in 2020,as we haven’t had a meaningful correction in the last year,and some uncertainties –such as the U.S. presidential election –are on the horizon. Last year was stellar for equity markets,with the S&P 500 up about 31%. However,with strong equity performance come higher valuations and the potential for more volatility. Historically,election years can be more volatile than non-election years;investors don’t know which candidates will win,and this makes it difficult to make certain projections that have an impact on valuation models. When the election is over,investors have more clarity and can move forward.

The SECURE Actincludes some new measures for your defined contribution (401k) plans. Among the many changes under the new law,Tribal Investment Committees that oversee retirement plans should be especially aware of two:1) the new law provides a new cap of 15% for safe-harbor automatic enrollment;and 2) annuities are now allowed in 401(k) plans.

For more details on the SECURE Act,see the Winter 2020 issue of Planning Matters,a newsletter from REDW Wealth.

Fixed Incomereturns were abnormally high in 2019 when compared to the long-term average. The Barclays Aggregate Bond index was up about 8.7% for 2019,nearly double its average over the last 15 years. Most of the year’s gain was attributed to capital appreciation as bond values rose with a decline in interest rates. Despite the strength of fixed income returns in 2019,it is important to lower your expectations for 2020. Although many Tribes have large fixed income holdings,and many of these holdings are funding operations,it’s important not to overestimate your return expectations for the year just started.

Feeswill most likely be higher in 2020. Most advisors and consultants charge their fees on a percentage of assets,and a basic 50/50 global stock and bond portfolio gained about 16% in 2019,so fees are bound to increase. Also,some hidden fees and/or commissions may add to the percentage of assets fees,so ask your advisor for a transparent breakdown of fees for your records. If your portfolio has grown significantly over the past couple of years,this may be a good time to negotiate a new fee structure. You may want to consider a competitive bid/quote process by putting out a Request for Proposal (RFP) or Request for Quote (RFQ). By doing this on a regular basis,you’ll satisfy your fiduciary duty and you may be able to discover new options,such as flat fees.

REDW’s tribal experts are here to assist you in any of these areas,and many others not covered in this guide. To learn more about how any of these issues may apply to your Tribe or tribal entities more specifically,please contact Corrine Wilson at cwilson@redw.comor 602.730.3609.

GASB 84 and its requirements, effective for periods beginning after December 15, 2018, call for tribal CFOs to re-assess their Tribe’s retirement plan governance. Many retirement plans that were not included in your overall financial statements, other than in a footnote, may now be required to be included as a Fiduciary Fund. Further, some minor or other per capita trust funds may require reclassification from Fiduciary Fund to Special Revenue Fund. Also see related information under "Retirement Plans."

GASB 87 - Leases, effective December 15, 2019, establishes new requirements, and since tribes generally function as both lessee and lessor, leases will likely be accounted for as capital expenditures rather than operating expenses.

REDW has scheduled a 3-part webinar series on GASB 87, beginning in April. Check redw.com/events for details.

The Data Collection Form (DCF) for the Federal Audit Clearinghouse (FAC) now requires Single Auditees to include the text of their Notes to the SEFA and their Corrective Action Plans for any findings. Auditors must also transfer the text of their audit findings to the DCF.

For more information, see the FAC's Instructions and Documents webpage.

Annual Reviews of Vendors are vital to ensure that tribal databases include active, legitimate vendors. This is also a good time to review your Tribe’s process of ensuring the accurate determination of 1099 and W-2 vendors, and to double-check that you have a current W-9 on file. This is a prime target for IRS reviews, so make sure your processes and compliance are up to date. We can help if you need training or assistance with getting in compliance for this area.

Accurate Audit Preparation is critical. The Government Auditing Standards and Single Audit requirements put the burden on the auditee to accurately prepare and understand your financial statements, SEFA and footnote disclosures. So to help our clients improve and streamline their Grants Management process, REDW's Software Solutions team has developed a powerful new Abila MIP module called SEFA Proâ„¢, which extracts SEFA Reports directly from your existing Abila MIP Fund Accounting software.

In addition to a webinar demonstration of SEFA Pro, REDW will be conducting a series of Grants Management seminars in select cities. Check redw.com/events for details.

Broadband Rights for tribes was granted this month by the FCC, meaning tribes may now apply for licenses to help establish or expand internet access over their reservation lands. After August 3, 2020, private companies will bid for those rights across the nation – including in Indian Country.

For more information on assessing your Tribe's ability to gain broadband access, check out this article published by NAFOA.

New Overtime Rules took effect on January 1, 2020. If your Tribe’s legal counsel has determined that you follow FSLA and DOL regulations, then those with non-executive, non-administrative or non-professional duties are subject to 1.5 times their regular pay rates when more than 40 hours are worked in a work week. The threshold for salary levels for exempt employees is now $35,568. Also see related information under "Human Resources."

Social Security Deductions for Tribal Council Members may be deducted and paid if your Tribe has a Section 218A agreement in place with the Social Security Administration.

For more information on the Tribal Social Security Fairness Act, click to read an article from NAFOA. And for guidance on the proper filing of W-2s for Tribal Council pay, including when no Section 218A agreement is in place, visit the IRS tribal government website.

Tribal Tax Enforcement and Collection. Although many tribal governments have laws in place that allow for taxation revenues, tribes sometimes have difficulty enforcing the laws and collecting taxes due. Tribal governments should focus on educating the community of the tax laws – including taxpayers doing business on tribal land and even tribal government members. A strong understanding of the tax laws will help the tax administration team to enforce and collect taxes, thereby increasing tax revenues.

Taxation of Online Sales. The U.S. Supreme Court recently overturned a 1992 precedent that barred states from requiring an out-of-state seller with no physical presence to collect sales tax on a sale to a resident of the state. Now, physical presence is no longer required for a state to impose a sales tax on sellers, which can allow states to collect sales taxes from remote sellers. Tribes should explore adopting laws similar to state economic nexus laws that require remote sellers to remit and collect sales tax if they had aggregate sales of tangible personal property or services within tribal territory over stated thresholds. An economic nexus law can enable a tribe to increase tax revenues by collecting sales tax on sales delivered onto trust lands from remote sellers.

Economic Development. To promote economic development on trust land – and increase tax revenues – tribes can offer incentives to businesses who locate to trust land. This is similar to many states that offer credits and incentives, such as Oklahoma’s Investment/New Job Tax Credit package. It provides growing manufacturers a significant tax credit based on either an investment in depreciable property or the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance.

Protecting Tribal Sovereignty. State and taxation can be complicated when it comes to trust versus fee lands. The U.S. Supreme Court has stated that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty. Tribes need to be aware of what a state can and cannot tax on both trust and fee lands.

Indian Employment Credit. The federal government just extended a tax credit to employers who hire American Indians or their spouses who live on or near a reservation and work for an employer on that reservation. The credits, which encourage employers to hire American Indians, give employers a tax credit on a portion of the qualified wages and employee health insurance costs paid to an enrolled member of an Indian tribe or the enrolled member’s spouse.

AML Update. The American Gaming Association (AGA) has released its updated Best Practices for Anti-Money Laundering (AML) Compliance. The new publication contains a more vigorous Risk Assessment section, as well as enhanced procedures for Know Your Customer/Customer Due Diligence. It also includes deepened analysis and updated recommendations regarding new and emerging forms of gaming, including sports betting and mobile gaming. Casino operators should carefully review the new publication and consider updating policies and procedures to remain current in an area subject to increasing scrutiny and oversight.

REDW's Tribal Gaming team is presenting a webinar on the Bank Secrecy Act/Title 31 on May 14, 2020. Check redw.com/events for details.

Sports Betting: An opportunity or a mirage? Why are investors not wagering on this new source of revenue for the gaming industry, and what does this mean for tribal gaming? Sports books contribute minimally to casino profits, so as legal sports betting increasingly takes shape, will the shift benefit all, or just a small segment of the gaming industry?

Is a Resort Casino in Your Future? Strategic planning and market evaluations are vital to projecting the next opportunity. Gone are the days of certain success in the gaming industry. Competition, new regulations, economic growth, and changes in game offerings have executives and decision makers questioning their next move. Exploring what it means to be a “resort destination†versus a “local casino†could make the difference between generational income or paying lenders for decades. Income versus cash is a significant distinction all executives must understand, no matter the casino size.

Having to wait for Reliable and Timely Financial Data? Decision-makers need timely and reliable financial information to strategically plan and execute both short- and long-term goals. In today’s data-driven environment, waiting two months for closed books is unacceptable.

Check out our webinar recording on "Data Extraction Tips to Ease Your Audit Pain" from May 2019.

Defined Contribution Plan Reporting now requires additional effort by tribes, as a result of GASB 84, which established criteria for identifying and reporting fiduciary activities. Effective December 15, 2018, defined contribution retirement plans likely fall under the definition of a fiduciary component unit. Thus, these types of plans require reporting on your Tribe’s financial statements as a fiduciary activity – a major change to previous reporting, as these plans have not typically been reported within the government-wide financial statements. Tribes must now gather the necessary information to complete the required financial reporting, as do auditors, who must test this information for the first time.

The SECURE Act of 2019 (Setting Every Community Up for Retirement Enhancement) is viewed by some as the most significant retirement legislation in over a decade. Four changes will likely have the greatest impact on your tribal retirement plans, both governmental and commercial:

•  Increased Age for Required Start Date for Mandatory Distributions. The Act raises the Required Minimum Distribution (RMD) starting age from 70½ to 72; individuals now have until April 1 of the year following the year they turned age 72 to take their first RMD. Participants age 72 and older in a retirement plan who are still employed may delay RMDs until retirement.

•  Long-term, Part-time Workers Must Be Allowed to Participate in 401(k) Plans. Employers with 401(k) plans must have a dual eligibility requirement for employees who complete either a one-year-of-service requirement (with the 1,000-hour rule) or three consecutive years of service with at least 500 hours of service.

•  Simplification of Safe Harbor Rules. The Act eliminates the annual safe harbor notice requirement for retirement plans that use the 3% safe harbor non-elective contribution.

•  Increased Penalty for Failure to File. The penalty for failing to file Form 5500 Annual Return/Report for Employee Benefit Plans has increased from $25 a day/$15,000 maximum to $250 a day/$150,000 maximum.

A culture of security awareness is vital for protecting your Tribe’s information and ensuring it is safe from hackers and ransomware attacks in 2020. A continuous security awareness education program should include:

•  A Security Awareness Education Policy

•  Interactive training modules assigned to employees bi-monthly, or at least every two months

•  Phishing your team monthly, with remedial training assignments for those who get “hookedâ€

•  Assessments and quizzes

•  Educational materials, such as current cybersecurity events, posters, and videos.

Create, review and/or update IT Security Policies and Procedures and ensure they are current with industry best practices. Be sure to share updates with all employees and have them acknowledge these policies and procedures annually.

Data backup and restoration procedures must be kept up to date and tested regularly. This will help to ensure that, if your data becomes encrypted with ransomware, you’ll avoid paying cyber criminals – and avoid the possibility of being targeted again.

Confirm IT best practices are in place. Perform an annual IT Risk Assessment to evaluate overall technology and architecture.

Implement Multi-Factor Authentication (MFA) as an added layer of security to prevent hackers from gaining access to your organization with compromised credentials. MFA helps to protect email, financial accounts, social media accounts and mobile devices.

Implement a robust vendor management process for third-party providers. Ask what security practices are in place to protect your network and data, and review their SOC (Service Organization Controls) reports. Also, ensure a confidentiality agreement is in place.

Evaluate your current cyber-liability insurance policy or speak with a reputable broker if your organization does not have this insurance.

Changes to the Fair Labor Standards Act (FLSA), issued in September 2019 with compliance required as of January 1, 2020, revised the criteria defining employees eligible for overtime pay (Non-Exempt employees) and those not eligible for overtime (Exempt employees). Certain executive, administrative, learned professional or computer-related technical positions earning a certain weekly salary are exempt from FLSA, meaning they are not eligible for overtime pay. Under the new regulations, the salary threshold for Exempt employees has increased to $684/week ($35,568/year). The duties test for exempt employees will still apply. Note that regional and industry pay differences are not considered in the new FLSA regulations.

Minimum wage increases have taken effect in many states, although the federal minimum wage has been at $7.25/hour for a decade. Employers should also check local wage rates, as they may be higher than the state rates. In some instances, the minimum wage rate may vary based on more than just the geographic location, and could be based on employer size and industry.

Pay compression could be an unintended consequence for employers who are increasing employee salaries to meet the new minimum salary requirements under the FLSA (see above) and keep these employees classified as exempt from overtime. Likewise, pay compression can become an issue when employers apply the increases to minimum wage rates in their organization. Pay compression occurs when the pay of one or more employees is very close to the pay for more experienced or longer-tenured employees in the same position, or when employees in entry-level type jobs are paid almost as much as colleagues in higher-level jobs, including supervisory or managerial positions. In both instances, employers should consider an adjustment to all related salary scales to avoid pay compression and ensure continued internal equity.

Construction and trades positions are steadily recovering after a net loss of over two million jobs in the last decade. In most states, construction is enjoying solid growth – but experiencing a shortage of qualified employees for more complex projects. The new generation of workers is not embracing the industry as an option with a viable career path, and turnover in construction is already about twice the national average. Employers need to find a way to retain their construction and trades employees, as well as identify how to resonate with the millennial mindset. This means designing attractive compensation and competitive benefits to hire and retain highly skilled employees.

Compensation and benefits must be part of a viable structure that allows employers to retain top talent. Conducting a compensation study to determine whether your organization is competitive in the market in which you’re competing for talent is a good practice. It can ensure your organization is offering a competitive base wage, while also minimizing turnover and enhancing employee engagement. Intangible rewards also count! Talented, skilled employees value organizational cultures that include mentoring, feedback, career pathing and technology, as well as flexible work schedules, retirement plans, fitness incentives and work/life balance.

Workplace harassment claims and the #metoo movement both require annual, robust sexual harassment training for employees. Training can be especially important for managers, who may benefit from additional training about what constitutes inappropriate conduct with a subordinate, as well as how to identify sexually abusive behavior in those they supervise. Employers should also adopt clear sexual harassment policies, identify inappropriate behaviors, and give employees the tools and training they need to report instances of sexual harassment in the workplace. In California, employers are now mandated to provide sexual harassment training.

Employer drug testing and your organization’s drug policies must be thoughtful and intentional and should address current state laws, as well as the organization’s position. With more states legalizing marijuana for medical or recreational use, some states are also passing laws prohibiting discriminating against employees who use marijuana. Will you accommodate marijuana use? If not, what accommodations does your state require, if any? Are there certain job positions where no accommodation can be made due to safety sensitivities that may be governed by federal safety regulations? Of paramount importance, a reasonable-suspicion program must be in place, as well as providing training for staff and management about how to react when someone is impaired on the job.

Rebalancing helps to keep your portfolio’s risk and return in line with long-term objectives. In 2019, U.S. equity and fixed markets performed extremely well, and your allocations may have drifted from your targets. By not rebalancing over extended periods of time, you may create a different risk/return profile than was initially set in the Investment Policy Statement.

Volatility will most likely rise in 2020, as we haven’t had a meaningful correction in the last year, and some uncertainties – such as the U.S. presidential election – are on the horizon. Last year was stellar for equity markets, with the S&P 500 up about 31%. However, with strong equity performance come higher valuations and the potential for more volatility. Historically, election years can be more volatile than non-election years; investors don’t know which candidates will win, and this makes it difficult to make certain projections that have an impact on valuation models. When the election is over, investors have more clarity and can move forward.

The SECURE Act includes some new measures for your defined contribution (401k) plans. Among the many changes under the new law, Tribal Investment Committees that oversee retirement plans should be especially aware of two: 1) the new law provides a new cap of 15% for safe-harbor automatic enrollment; and 2) annuities are now allowed in 401(k) plans.

For more details on the SECURE Act, see the Winter 2020 issue of Planning Matters, a newsletter from REDW Wealth.

Fixed Income returns were abnormally high in 2019 when compared to the long-term average. The Barclays Aggregate Bond index was up about 8.7% for 2019, nearly double its average over the last 15 years. Most of the year’s gain was attributed to capital appreciation as bond values rose with a decline in interest rates. Despite the strength of fixed income returns in 2019, it is important to lower your expectations for 2020. Although many Tribes have large fixed income holdings, and many of these holdings are funding operations, it’s important not to overestimate your return expectations for the year just started.

Fees will most likely be higher in 2020. Most advisors and consultants charge their fees on a percentage of assets, and a basic 50/50 global stock and bond portfolio gained about 16% in 2019, so fees are bound to increase. Also, some hidden fees and/or commissions may add to the percentage of assets fees, so ask your advisor for a transparent breakdown of fees for your records. If your portfolio has grown significantly over the past couple of years, this may be a good time to negotiate a new fee structure. You may want to consider a competitive bid/quote process by putting out a Request for Proposal (RFP) or Request for Quote (RFQ). By doing this on a regular basis, you’ll satisfy your fiduciary duty and you may be able to discover new options, such as flat fees.

REDW’s tribal experts are here to assist you in any of these areas, and many others not covered in this guide. To learn more about how any of these issues may apply to your Tribe or tribal entities more specifically, please contact Corrine Wilson at cwilson@redw.com or 602.730.3609.

GASB 84 and its requirements, effective for periods beginning after December 15, 2018, call for tribal CFOs to re-assess their Tribe’s retirement plan governance. Many retirement plans that were not included in your overall financial statements, other than in a footnote, may now be required to be included as a Fiduciary Fund. Further, some minor or other per capita trust funds may require reclassification from Fiduciary Fund to Special Revenue Fund. Also see related information under "Retirement Plans."

GASB 87 - Leases, effective December 15, 2019, establishes new requirements, and since tribes generally function as both lessee and lessor, leases will likely be accounted for as capital expenditures rather than operating expenses.

REDW has scheduled a 3-part webinar series on GASB 87, beginning in April. Check redw.com/events for details.

The Data Collection Form (DCF) for the Federal Audit Clearinghouse (FAC) now requires Single Auditees to include the text of their Notes to the SEFA and their Corrective Action Plans for any findings. Auditors must also transfer the text of their audit findings to the DCF.

For more information, see the FAC's Instructions and Documents webpage.

Annual Reviews of Vendors are vital to ensure that tribal databases include active, legitimate vendors. This is also a good time to review your Tribe’s process of ensuring the accurate determination of 1099 and W-2 vendors, and to double-check that you have a current W-9 on file. This is a prime target for IRS reviews, so make sure your processes and compliance are up to date. We can help if you need training or assistance with getting in compliance for this area.

Accurate Audit Preparation is critical. The Government Auditing Standards and Single Audit requirements put the burden on the auditee to accurately prepare and understand your financial statements, SEFA and footnote disclosures. So to help our clients improve and streamline their Grants Management process, REDW's Software Solutions team has developed a powerful new Abila MIP module called SEFA Proâ„¢, which extracts SEFA Reports directly from your existing Abila MIP Fund Accounting software.

In addition to a webinar demonstration of SEFA Pro, REDW will be conducting a series of Grants Management seminars in select cities. Check redw.com/events for details.

Broadband Rights for tribes was granted this month by the FCC, meaning tribes may now apply for licenses to help establish or expand internet access over their reservation lands. After August 3, 2020, private companies will bid for those rights across the nation – including in Indian Country.

For more information on assessing your Tribe's ability to gain broadband access, check out this article published by NAFOA.

New Overtime Rules took effect on January 1, 2020. If your Tribe’s legal counsel has determined that you follow FSLA and DOL regulations, then those with non-executive, non-administrative or non-professional duties are subject to 1.5 times their regular pay rates when more than 40 hours are worked in a work week. The threshold for salary levels for exempt employees is now $35,568. Also see related information under "Human Resources."

Social Security Deductions for Tribal Council Members may be deducted and paid if your Tribe has a Section 218A agreement in place with the Social Security Administration.

For more information on the Tribal Social Security Fairness Act, click to read an article from NAFOA. And for guidance on the proper filing of W-2s for Tribal Council pay, including when no Section 218A agreement is in place, visit the IRS tribal government website.

Tribal Tax Enforcement and Collection. Although many tribal governments have laws in place that allow for taxation revenues, tribes sometimes have difficulty enforcing the laws and collecting taxes due. Tribal governments should focus on educating the community of the tax laws – including taxpayers doing business on tribal land and even tribal government members. A strong understanding of the tax laws will help the tax administration team to enforce and collect taxes, thereby increasing tax revenues.

Taxation of Online Sales. The U.S. Supreme Court recently overturned a 1992 precedent that barred states from requiring an out-of-state seller with no physical presence to collect sales tax on a sale to a resident of the state. Now, physical presence is no longer required for a state to impose a sales tax on sellers, which can allow states to collect sales taxes from remote sellers. Tribes should explore adopting laws similar to state economic nexus laws that require remote sellers to remit and collect sales tax if they had aggregate sales of tangible personal property or services within tribal territory over stated thresholds. An economic nexus law can enable a tribe to increase tax revenues by collecting sales tax on sales delivered onto trust lands from remote sellers.

Economic Development. To promote economic development on trust land – and increase tax revenues – tribes can offer incentives to businesses who locate to trust land. This is similar to many states that offer credits and incentives, such as Oklahoma’s Investment/New Job Tax Credit package. It provides growing manufacturers a significant tax credit based on either an investment in depreciable property or the addition of full-time-equivalent employees engaged in manufacturing, processing or aircraft maintenance.

Protecting Tribal Sovereignty. State and taxation can be complicated when it comes to trust versus fee lands. The U.S. Supreme Court has stated that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty. Tribes need to be aware of what a state can and cannot tax on both trust and fee lands.

Indian Employment Credit. The federal government just extended a tax credit to employers who hire American Indians or their spouses who live on or near a reservation and work for an employer on that reservation. The credits, which encourage employers to hire American Indians, give employers a tax credit on a portion of the qualified wages and employee health insurance costs paid to an enrolled member of an Indian tribe or the enrolled member’s spouse.

AML Update. The American Gaming Association (AGA) has released its updated Best Practices for Anti-Money Laundering (AML) Compliance. The new publication contains a more vigorous Risk Assessment section, as well as enhanced procedures for Know Your Customer/Customer Due Diligence. It also includes deepened analysis and updated recommendations regarding new and emerging forms of gaming, including sports betting and mobile gaming. Casino operators should carefully review the new publication and consider updating policies and procedures to remain current in an area subject to increasing scrutiny and oversight.

REDW's Tribal Gaming team is presenting a webinar on the Bank Secrecy Act/Title 31 on May 14, 2020. Check redw.com/events for details.

Sports Betting: An opportunity or a mirage? Why are investors not wagering on this new source of revenue for the gaming industry, and what does this mean for tribal gaming? Sports books contribute minimally to casino profits, so as legal sports betting increasingly takes shape, will the shift benefit all, or just a small segment of the gaming industry?

Is a Resort Casino in Your Future? Strategic planning and market evaluations are vital to projecting the next opportunity. Gone are the days of certain success in the gaming industry. Competition, new regulations, economic growth, and changes in game offerings have executives and decision makers questioning their next move. Exploring what it means to be a “resort destination†versus a “local casino†could make the difference between generational income or paying lenders for decades. Income versus cash is a significant distinction all executives must understand, no matter the casino size.

Having to wait for Reliable and Timely Financial Data? Decision-makers need timely and reliable financial information to strategically plan and execute both short- and long-term goals. In today’s data-driven environment, waiting two months for closed books is unacceptable.

Check out our webinar recording on "Data Extraction Tips to Ease Your Audit Pain" from May 2019.

Defined Contribution Plan Reporting now requires additional effort by tribes, as a result of GASB 84, which established criteria for identifying and reporting fiduciary activities. Effective December 15, 2018, defined contribution retirement plans likely fall under the definition of a fiduciary component unit. Thus, these types of plans require reporting on your Tribe’s financial statements as a fiduciary activity – a major change to previous reporting, as these plans have not typically been reported within the government-wide financial statements. Tribes must now gather the necessary information to complete the required financial reporting, as do auditors, who must test this information for the first time.

The SECURE Act of 2019 (Setting Every Community Up for Retirement Enhancement) is viewed by some as the most significant retirement legislation in over a decade. Four changes will likely have the greatest impact on your tribal retirement plans, both governmental and commercial:

•  Increased Age for Required Start Date for Mandatory Distributions. The Act raises the Required Minimum Distribution (RMD) starting age from 70½ to 72; individuals now have until April 1 of the year following the year they turned age 72 to take their first RMD. Participants age 72 and older in a retirement plan who are still employed may delay RMDs until retirement.

•  Long-term, Part-time Workers Must Be Allowed to Participate in 401(k) Plans. Employers with 401(k) plans must have a dual eligibility requirement for employees who complete either a one-year-of-service requirement (with the 1,000-hour rule) or three consecutive years of service with at least 500 hours of service.

•  Simplification of Safe Harbor Rules. The Act eliminates the annual safe harbor notice requirement for retirement plans that use the 3% safe harbor non-elective contribution.

•  Increased Penalty for Failure to File. The penalty for failing to file Form 5500 Annual Return/Report for Employee Benefit Plans has increased from $25 a day/$15,000 maximum to $250 a day/$150,000 maximum.

A culture of security awareness is vital for protecting your Tribe’s information and ensuring it is safe from hackers and ransomware attacks in 2020. A continuous security awareness education program should include:

•  A Security Awareness Education Policy

•  Interactive training modules assigned to employees bi-monthly, or at least every two months

•  Phishing your team monthly, with remedial training assignments for those who get “hookedâ€

•  Assessments and quizzes

•  Educational materials, such as current cybersecurity events, posters, and videos.

Create, review and/or update IT Security Policies and Procedures and ensure they are current with industry best practices. Be sure to share updates with all employees and have them acknowledge these policies and procedures annually.

Data backup and restoration procedures must be kept up to date and tested regularly. This will help to ensure that, if your data becomes encrypted with ransomware, you’ll avoid paying cyber criminals – and avoid the possibility of being targeted again.

Confirm IT best practices are in place. Perform an annual IT Risk Assessment to evaluate overall technology and architecture.

Implement Multi-Factor Authentication (MFA) as an added layer of security to prevent hackers from gaining access to your organization with compromised credentials. MFA helps to protect email, financial accounts, social media accounts and mobile devices.

Implement a robust vendor management process for third-party providers. Ask what security practices are in place to protect your network and data, and review their SOC (Service Organization Controls) reports. Also, ensure a confidentiality agreement is in place.

Evaluate your current cyber-liability insurance policy or speak with a reputable broker if your organization does not have this insurance.

Changes to the Fair Labor Standards Act (FLSA), issued in September 2019 with compliance required as of January 1, 2020, revised the criteria defining employees eligible for overtime pay (Non-Exempt employees) and those not eligible for overtime (Exempt employees). Certain executive, administrative, learned professional or computer-related technical positions earning a certain weekly salary are exempt from FLSA, meaning they are not eligible for overtime pay. Under the new regulations, the salary threshold for Exempt employees has increased to $684/week ($35,568/year). The duties test for exempt employees will still apply. Note that regional and industry pay differences are not considered in the new FLSA regulations.

Minimum wage increases have taken effect in many states, although the federal minimum wage has been at $7.25/hour for a decade. Employers should also check local wage rates, as they may be higher than the state rates. In some instances, the minimum wage rate may vary based on more than just the geographic location, and could be based on employer size and industry.

Pay compression could be an unintended consequence for employers who are increasing employee salaries to meet the new minimum salary requirements under the FLSA (see above) and keep these employees classified as exempt from overtime. Likewise, pay compression can become an issue when employers apply the increases to minimum wage rates in their organization. Pay compression occurs when the pay of one or more employees is very close to the pay for more experienced or longer-tenured employees in the same position, or when employees in entry-level type jobs are paid almost as much as colleagues in higher-level jobs, including supervisory or managerial positions. In both instances, employers should consider an adjustment to all related salary scales to avoid pay compression and ensure continued internal equity.

Construction and trades positions are steadily recovering after a net loss of over two million jobs in the last decade. In most states, construction is enjoying solid growth – but experiencing a shortage of qualified employees for more complex projects. The new generation of workers is not embracing the industry as an option with a viable career path, and turnover in construction is already about twice the national average. Employers need to find a way to retain their construction and trades employees, as well as identify how to resonate with the millennial mindset. This means designing attractive compensation and competitive benefits to hire and retain highly skilled employees.

Compensation and benefits must be part of a viable structure that allows employers to retain top talent. Conducting a compensation study to determine whether your organization is competitive in the market in which you’re competing for talent is a good practice. It can ensure your organization is offering a competitive base wage, while also minimizing turnover and enhancing employee engagement. Intangible rewards also count! Talented, skilled employees value organizational cultures that include mentoring, feedback, career pathing and technology, as well as flexible work schedules, retirement plans, fitness incentives and work/life balance.

Workplace harassment claims and the #metoo movement both require annual, robust sexual harassment training for employees. Training can be especially important for managers, who may benefit from additional training about what constitutes inappropriate conduct with a subordinate, as well as how to identify sexually abusive behavior in those they supervise. Employers should also adopt clear sexual harassment policies, identify inappropriate behaviors, and give employees the tools and training they need to report instances of sexual harassment in the workplace. In California, employers are now mandated to provide sexual harassment training.

Employer drug testing and your organization’s drug policies must be thoughtful and intentional and should address current state laws, as well as the organization’s position. With more states legalizing marijuana for medical or recreational use, some states are also passing laws prohibiting discriminating against employees who use marijuana. Will you accommodate marijuana use? If not, what accommodations does your state require, if any? Are there certain job positions where no accommodation can be made due to safety sensitivities that may be governed by federal safety regulations? Of paramount importance, a reasonable-suspicion program must be in place, as well as providing training for staff and management about how to react when someone is impaired on the job.

Rebalancing helps to keep your portfolio’s risk and return in line with long-term objectives. In 2019, U.S. equity and fixed markets performed extremely well, and your allocations may have drifted from your targets. By not rebalancing over extended periods of time, you may create a different risk/return profile than was initially set in the Investment Policy Statement.

Volatility will most likely rise in 2020, as we haven’t had a meaningful correction in the last year, and some uncertainties – such as the U.S. presidential election – are on the horizon. Last year was stellar for equity markets, with the S&P 500 up about 31%. However, with strong equity performance come higher valuations and the potential for more volatility. Historically, election years can be more volatile than non-election years; investors don’t know which candidates will win, and this makes it difficult to make certain projections that have an impact on valuation models. When the election is over, investors have more clarity and can move forward.

The SECURE Act includes some new measures for your defined contribution (401k) plans. Among the many changes under the new law, Tribal Investment Committees that oversee retirement plans should be especially aware of two: 1) the new law provides a new cap of 15% for safe-harbor automatic enrollment; and 2) annuities are now allowed in 401(k) plans.

For more details on the SECURE Act, see the Winter 2020 issue of Planning Matters, a newsletter from REDW Wealth.

Fixed Income returns were abnormally high in 2019 when compared to the long-term average. The Barclays Aggregate Bond index was up about 8.7% for 2019, nearly double its average over the last 15 years. Most of the year’s gain was attributed to capital appreciation as bond values rose with a decline in interest rates. Despite the strength of fixed income returns in 2019, it is important to lower your expectations for 2020. Although many Tribes have large fixed income holdings, and many of these holdings are funding operations, it’s important not to overestimate your return expectations for the year just started.

Fees will most likely be higher in 2020. Most advisors and consultants charge their fees on a percentage of assets, and a basic 50/50 global stock and bond portfolio gained about 16% in 2019, so fees are bound to increase. Also, some hidden fees and/or commissions may add to the percentage of assets fees, so ask your advisor for a transparent breakdown of fees for your records. If your portfolio has grown significantly over the past couple of years, this may be a good time to negotiate a new fee structure. You may want to consider a competitive bid/quote process by putting out a Request for Proposal (RFP) or Request for Quote (RFQ). By doing this on a regular basis, you’ll satisfy your fiduciary duty and you may be able to discover new options, such as flat fees.

REDW’s tribal experts are here to assist you in any of these areas, and many others not covered in this guide. To learn more about how any of these issues may apply to your Tribe or tribal entities more specifically, please contact Corrine Wilson at cwilson@redw.com or 602.730.3609.

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