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Report Number : 2016-036

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

March 7, 2017 2016-036

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

As required by California Government Code section 12717, the California State Auditor presents this audit report concerning allocation and use of money from the Indian Gaming Special Distribution Fund (distribution fund).

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

Additionally, two of the three Indian gaming local community benefit committees (benefit committees) we reviewed did not ensure compliance with state law when awarding funding for mitigation grants. Specifically, for fiscal year 2013–14, Fresno County’s benefit committee awarded a grant of $362,000 and San Diego County’s benefit committee awarded $250,000 without requiring the grant applicants to provide sufficient documentation demonstrating the proportion of their respective project costs that was attributable to casino impacts, as required by state law.

Respectfully submitted,

State Auditor

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