Tribal Management Systems & Internal Controls

December 15 - 16, 2022

KIVA developed this course for tribes that seek guidance on developing internal controls to minimize risk and protect assets, ensure accuarcy of records and promote efficiency.

Indian tribes, tribal organizations, and nonprofit organizations all operate programs funded by the federal government. Federal funding agencies, and other funders hold tribes and tribal organizations accountable for use of federal funds, and often use of federal property; and that they have internal controls in place to manage, use, report on spending of funds; and complying with the terms and conditions of their federal awards. It is one thing to have written internal control policies, but it is more important that tribal governments are performing proper protocols and practices to protect tribal and federal assets.

A key requirement in annual audits is to test to determine whether tribes maintain a system of internal controls to protect federal funds and other assets.  Tribes that fail in this area may be subject to sanctions imposed by funding agencies that could compromise a tribe’s ability to continue receiving federal funds.  In some instances, tribes that do not meet the risk factor evaluation standards may be deemed as “high risk” tribes which may require additional layers of federal scrutiny.

An auditor’s opinion that accompanies financial statements is based on an audit of a tribe’s procedures and records used to produce them.  As part of the audit, auditors will test the tribe’s accounting processes and internal controls; and provide an opinion as to their effectiveness.  Internal audits evaluate internal controls including a tribe’s governance and accounting processes. They ensure compliance with laws and regulations and accurate and timely financial reporting and data collection; and help to maintain operational efficiency by identifying problems and correcting lapses before they are discovered in an external audit.

The Office of Management & Budget (OMB), in its Uniform Administrative Requirements (2 CFR Part 200); and the Indian Self-Determination Act and its regulations require that tribes maintain financial, procurement, and property management systems that prescribe procedures on the use federal funds.  In addition, federal programs also have certain inherent risks depending on the nature of the program and how funds are used.  Internal control systems must ensure that: (a) transactions are properly recorded and accounted for to permit the preparation of financial statements and federal reports, maintain accountability over assets, demonstrate compliance with federal statutes and regulations; and (b) that transactions are executed in compliance with grant terms and conditions; funds, property and other assets are safeguarded against loss. Internal controls are typically comprised of control activities, such as authorization, documentation, reconciliation, security, and the separation of duties, broadly divided into preventative and detective activities.

This course provides an insight into how tribes may adopt a system of checks and balances to improve on their grant management practices, and how to prevent adverse audit findings.

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