What every Tribal government should know about audit preparation is simple: it can bolster a Nation’s sovereign immunity.
That’s because getting the financial numbers in order before the auditors arrive makes it far less likely a Tribe will have an audit finding that leaves its funding challenged, according to Sean McCabe, a Native certified public accountant.
McCabe, who heads the Albuquerque-based McCabe CPA Group, has made Native accounting and audit prep the focus of his business (the group has also started doing actual audits in the last couple of years). A Navajo, he works almost exclusively for Native governments and their entities like housing authorities, schools and casinos, and he has a passion to hire and train Native accountants.
He also has some advice for those who think they need a big brand name like KPMG on their audits: save yourself some money. You’re paying for a lot of partner salaries and overhead, he feels, and audits are basically a commodity that can be done just as well by smaller firms like his.
“We have to all follow the same procedures,” he tells Native Business Magazine. “There’s no need to buy the brand name.”
He prides himself that his firm is agile and technology-responsive so overhead is small. Physical office space is shared space that is only used to meet clients, with a lot of data stored in the cloud and people working from their own homes.
“We have embraced technology completely. We’re very mobile. Technology is an equalizer,” he feels.
“At the end of the day I’m just a Native guy who loves to help our people and utilize as many Native American people as possible” is how he sums himself up.
Currently 75 percent of his professional staff is Native American. The McCabe Group currently has about 25-30 clients and has served more than 100 Tribal governments and entities since he started it nearly 13 years ago after about 10 years working for gaming operations and other private firms. He was with a regional operation in Albuquerque for four years and did another six years with CEO/CFO jobs with casinos.
He decided to go out on his own when a federal regulation created an opportunity for a niche market. In the wake of the Enron scandal, the advent of the Sarbanes-Oxley law created accounting rules that made it impossible for companies to do audits for the same clients they did consultant work for.
“We did nothing but accounting service and audit prep the first 10 years of the company,” he notes.
With audit prep, “We make sure you’re ready for the audit,” he says. “Tribes really need that.”
Audit prep generally takes from between two to six weeks, he says, depending on the size of the client and the complexity of the operation. “We come in for reviewing prior year financial statements and doing whatever reconciliations are necessary,” he says. The summer is actually a busy time for his firm, since many Tribal governments close their fiscal years on June 30 and all Tribes and their associated schools, casinos and other entities need an annual audit.
“If the balance sheet is correct, everything else falls into place on the income statement,” he says. His firm will look at cash balances, accounts receivable, prepaid expenditures, capital assets and other items.
The company doesn’t run out when it is ready to hand over the data to the auditor, either. “My firm will be there during the audit,” he says. “We’re there to help every step of the way.” And that’s not just to rack up the billable hours. McCabe works for a flat fee each time.
The larger Nations, such as the Navajo, have many entities with their own accounting departments, he says, including dozens of schools.
“We rarely do all the entities,” he says. “We come in for one or more of them.”
There are not many Native CPA firms, says McCabe, though many accounting firms have Natives working for them and are profiting from their labor. “It’s almost a marketing thing for them,” he said. “And they should hire Native Americans. They’re getting rich off Native American Tribes.”
“My firm’s actually pretty rare,” says the graduate of Fort Lewis College, who is from the Fort Defiance chapter of the Navajo Nation. “I want to hire nothing but Natives. Anyone can learn the profession. Someone just needs to give them the opportunity.
“If that takes me a little more time, and a little more patience,” he says, “then I’m going to do it. I’ll take the Native over somebody else every day of the week.”
McCabe also was a consultant to the production of the Native American Finance Officers Association’s GASB 34 implementation guide and is a recognized speaker on the National Indian Gaming Commission’s speaker series on governmental audits and operational issues. McCabe was recently named to the American Institute for Certified Public Accountants Minority Initiative Committee.
He is a licensed Certified Public Accountant in the State of New Mexico and a member of the New Mexico Society of and American Institute of Certified Public Accountants.
The McCabe Group website underlines its commitment to Tribes. “We are Native American owned and operated and understand the nuances that are unique to Native governments,” it claims.
Business accounting and business consulting are its biggest areas of expertise, it claims, with specialties including accounting consulting, audit prep, audits, forensic audits, litigation support, payroll services, Chief Financial Officer/controller services, bookkeeping and Tribal consulting.
In an earlier interview with Native Business Magazine, McCabe said “Speaking as an entrepreneur, Native America has started to become very sophisticated in its business practices and its business development. There’s a real opportunity for all Natives, if we can learn how to hire each other and work with each other. There’s opportunities for growth in business sectors like professional services providers like accountants, lawyers, and doctors all the way down to retail and food service.”
Research assistant: Priestess J. Bearstops, Oglala Lakota, contributed to this article.