Deloitte & Touche “Audit Status & Expected Summary” for Cherokee Nation FY ’97

Standard audit related fees for fiscal years: 1996, 1997 and 1998 amounted to $575,108.

However additional services requested by Byrd adminstration in the amount of $1,440,327 pushed the amount to $2,015,435.

The “additional services included:
Technology Assessment: Fee: $64,010 – Expenses: $7,512
Purchasing Polices & Procedures: $31,875 -Expenses: $2,500
Financial Management Improvement Project: $1,010,450 – Expenses: $99,600
1998 Business Planning Assistance: $186,000 – Expenses: $14,000
Compensation Consulting: $3,100
Other: $3,560 – Expenses: $904
LAN Adminstration: Fee: $15,860 – Expenses: $956

The fees and expenses paid for audit and other services since they were originally engaged in 1995, excluding services related to Cherokee Nation Enterprises (CNE) were presented in their report. So NOTE.. the amount EXCLUDES fees paid to the firm by Cherokee Nation Enterprise.

The audit services provided to Cherokee Nation include the following:

1. Annual audit of Cherokee Nation CAFR
2. Annual Single Audit in accordance with OMB Circulars A-128 and A-133
3. Annual audit of Tsa-La-Gi Viliage apartments in accordance with HUD requirements.
4. Facilitation of audit by the Department of Labor
5. Annual audit of Tribal membership as required by fuel tax agreement with State of Oklahoma
6. Extended audit procedures for Health Division
7. Tribal Motor Fuel sales audit as required by fuel tax agreements with the State of Oklahoma
8. Other miscellaneous matters.

In an audit status and expected summary of auditors’ results reported to Tribal Council, Exec. & Finance Committee on Dec. 17, 1998

1. The independent auditor’s report on the financial statements is expected to contain a disclaimer of opinion.

Professional standards require that we obtain communication from client’s attorneys as part of the evidence supporting our audit opinion. As several of the Cherokee Nation’s attorney’s are unwilling to respond to the Nation’s request to provide this communication we are unable to express an opinion on the financial statements.

2. Reportable conditions in internal control over financial reporting have been identified some of which are considered to be material weaknesses.

Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the Nation’s internal control that, in our judgement, could adversely affect the Nation’s ability to record, process, summarize, and report financial data consistent with the assertions of management in the general purpose financial statements. The reportable conditions we have noted thus far consist of:

*Accounting System and Related Polices and Procedures
*Budgetary Controls and Budetary Compliance
*Support for Internal Charges
*Continued Disharmony Between Units of Tribal Government
*Cash Management

A material weakness is a reportable condition in which the design or operation of one or more of the internal control componets does not reduce to a relatively low level the risk that misstatements caused by error or fraud, in amonts that would be material in relation to the general purpose financial statements being audited, may occur and not be detected within a timely period by employees n the normal course of performing their assigned functions. The following reportable conditions are, in our judgement, material weaknesses:

*Accounting System and Related Polices and Procedures
*Budgetary controls and Budgetary Compliance
*Support for Internal Charges

3. Instances of noncompliance considered material to the financial statements have been disclosed by the audit.

*Cost Allocations
*Issues reported on by Federal Auditors

4. Reportable conditions in internal control over compliance with requirements applicable to major federal award programs have been identified, some of which are considered to be material weaknesses.

Reportable conditions and material weaknesses are defined in Item 2 above. The following items described above also relate to the Nation’s major federal award programs:

*Accounting System and Related Polices and Procedures (material weaknesses)
*Support for Internal Charges (material weaknesses)
*Cash management (reportable condition)

5. The independent auditors report on compliance with requirements applicable to major federal award programs is expected to express an adverse opinion on compliance with respect to reporting and cash management for certain major programs and a qualifed opinion on other compliance requirements for all major programs.

*An adverse opinion will be expressed on the reporting compliance requirement for the majority of the major programs as the Nation did not meet annual reporting requirements for several major programs due to difficulties with the computer system conversion and the related delays in having fiscal 1997 information available.

*An adverse opinion will be expressed on the cash management reporting requirement for IHS and DOI Self Governance programs as the Nation made significant advances of these funds without adequate support to indicate that, at the time made, that there were sufficient expenditures of IHS and DOI funds to support the cash transfers to the General Fund bank account.

* A qualifed opinion on the other compliance requirements for all major programs will be expressed as various findings will be reported in the areas of allowable costs, eligibility and special tests and provisions.

6. The audit disclosed finding required to be reported by OMB Circular A-133.

Several of the significant findings are as follows:

*Information Systems
*Internal Cost Allocations
*Reporting
*Cash Management
*Summary of Agency Audits

7. Possible audit adjustments identified.

* Several reclassification entries
*Donated food activity and year end inventory
*Accrual of legal fees incurred prior to Sept. 30, 1997
$336,000 paid in October 1997 – $58,000 remaining unpaid.

8. Anticipated timing

The following dates are contingent upon timely resolution by the Nation personnel of all open issues:

*targeted preliminary drafts by Dec. 31, 1998
*targeted final report issuance by Jan. 31, 1998