[Federal Register: October 24, 2007 (Volume 72, Number 205)]
[Proposed Rules]
[Page 60495-60508]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24oc07-31]
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DEPARTMENT OF THE INTERIOR
National Indian Gaming Commission
25 CFR Parts 542 and 543
RIN 3141-AA37
Minimum Internal Control Standards for Class II Gaming
AGENCY: National Indian Gaming Commission (``NIGC'' or ``Commission''),
Interior.
ACTION: Proposed rule.
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SUMMARY: In response to the inherent risks and the need for effective
controls in tribal gaming, the Commission, in January 1999, developed
minimum internal control standards (MICS). Since their original
implementation, it has become obvious that the MICS require technical
adjustments and revisions so that they continue to be effective in
protecting tribal assets, while still allowing tribes to utilize
technological advances in the gaming industry. The current MICS are
specific to the conduct of a wagering game without regards to whether
the game is classified as a Class II or Class III game. This proposed
rule is intended to supersede certain specified sections of the current
MICS and replace them with a new part titled Minimum Internal Control
Standards for Class II Gaming.
DATES: Submit comments on or before December 10, 2007.
ADDRESSES: Mail Comments to ``Comments on Class II MICS'' National
Indian Gaming Commission, Suite 9100, 1441 L Street, NW., Washington,
DC 20005. Comments may be transmitted by facsimile to 202-632-7066, or
mailed or submitted to the above address. Comments may also be
submitted electronically to bingo_mics@nigc.gov.
FOR FURTHER INFORMATION CONTACT: Joe H. Smith, Director of Audits,
telephone 202-632-7003. This is not a toll free call.
SUPPLEMENTARY INFORMATION:
Preamble Table of Contents
I. Development of the Proposed Rule
II. MICS Structure
III. Tier Structure
IV. Small and Charitable Gaming Operations
V. Tribal Internal Control Standards
VI. Alternative Procedures
VII. Agents
VIII. Smart Cards
IX. Manual Payouts
X. Promotional Prize Payouts
XI. Patron Account Transaction Record
XII. Audit Tasks To Be Performed at Relevant Periods
XIII. Inter-tribal Prize Pools
XIV. Information Technology
[[Page 60496]]
I. Development of the Proposed Rule
On February 22, 2007, the Commission held a meeting of its
Classification Standards Advisory Committee. At this meeting the tribal
representatives on the committee presented to the Commission a final
draft of descriptive technical standards for Class II gaming. As the
technical standards were being developed the Commission realized that
many of the provisions considered for inclusion were not technical
standards but rather internal controls. After reviewing the final
technical standards draft, the Commission decided, that for the
technical standards to be effective, it would have to make changes to
its existing minimum internal control standards (MICS). The updating of
MICS will be done in phases with the first phase limited to those areas
that had a direct impact on the technical standards, specifically,
bingo and other games similar to bingo.
To complete this task, the Commission requested that its standing
MICS Advisory Committee embark on an aggressive schedule to complete
revisions to MICS to be published concurrently with the publishing of
technical standards. Additionally, the Commission requested that
members of the Classification Standards Advisory Committee assist in
drafting MICS revisions to ensure that any changes were consistent with
the draft technical standards. During a MICS Advisory Committee meeting
held on June 25, 2007, in Dallas, Texas, tribal representatives on the
MICS Committee urged the Commission to adopt a format for the new MICS
regulations different than the one originally proposed by the
Commission. This alternative format focused on functions within a
gaming facility rather than game type. Following this meeting the
Commission decided to go forward with the suggested alternative format.
The tribal representatives of the MICS Committee formed a working
group, referred to by them as the Tribal Gaming Working Group (TGWG),
to solicit information from tribal regulators, operators, and
manufacturers. Tribal representatives requested that they be allowed
time to consult with this group before providing advice to the
Commission. The Commission agreed and between June and September 2007,
the TGWG met several times in person and conducted numerous conference
calls. The Commission did not participate in the establishment of this
working group. However, Commission staff were invited to attend all of
the meetings and participate in some of the conference calls. The
Commission felt it was important to make staff available to this
working group to answer questions about the goals of the Commission in
drafting regulation revisions. Commission staff participated in this
capacity during in-person meetings on July 15, 2007, in Seattle,
Washington, on July 24, 2007, in Arlington, Virginia, and on August 13
and 27, 2007 in Las Vegas, Nevada.
The Commission is grateful to the tribal representatives on the
MICS Advisory Committee and to those who assisted the tribal
representatives for all of their hard work and for the high quality
draft minimum internal control regulations that resulted from their
efforts. The proposed rule is largely adopted from the final draft
MICS, delivered to the Commission by the tribal representatives of the
Advisory Committee on September 4, 2007.
The full committee including the Commission, met to discuss the
draft on September 12, 2007, in Arlington, Virginia. During this
meeting the Commission raised questions about the draft regulations and
received responses from the tribal representatives. The Commission also
allowed members of the audience to make comments on the draft MICS as
well as the process for developing them.
There are places, of course, where the Commission felt it could not
accept the MICS Committee's recommendations. As such, the Commission
has proposed rules more stringent than the tribal representatives to
the Advisory Committee would have preferred. Highlights of the new
part, as well as a discussion of Advisory Committee recommendations the
Commission did not accept are included below.
II. MICS Structure
Currently, MICS for Class II and Class III gaming are contained in
25 CFR 542. As there are some essential differences between Class II
and Class III gaming, the Commission decided that there should be
separate MICS for Class II and Class III gaming. Therefore, the
Commission is proposing a new part 543 that would be limited to Class
II gaming.
The Commission had originally planned on mimicking the structure of
part 542 in the drafting of new part 543. The controls in part 542 are
segregated by the type of Class II game they apply to or by an area
within the gaming operation. During the drafting process the MICS
Advisory Committee recommended that the Commission adopt an alternative
structure for the new part. The Commission has accepted the Advisory
Committee's recommendation to structure the proposed rule based on the
conceptual proposition that one set of controls can be made applicable
to all types and forms of the game of bingo and other games similar to
bingo whether the game is played manually or electronically.
While it will eventually be necessary to bring many of the controls
currently contained in part 542 into new part 543, in order to have
separate and independent MICS for Class II and Class III gaming, the
Commission felt it was necessary to structure this migration in phases.
The most immediate concern was the controls related to bingo and other
games similar to bingo. These controls were addressed first so that the
current MICS would not conflict with the new proposed technical
standards.
Accordingly, the proposed rule addresses only the game of bingo,
other games similar to bingo, and directly related information
technology controls. Many of the provisions of part 542 will remain
effective and applicable to class II games until such time as
replacement regulations are enacted by the Commission.
The second phase of this process of developing a comprehensive set
of Class II MICS will address forms of Class II gaming other than bingo
and games similar to bingo, such as pull-tabs and poker, and will
codify the rules governing the processes that support the games, such
as drop and count, cage, credit and internal audit. Furthermore, just
as with part 542, the concept of tier classification will be preserved,
so that smaller gaming operations will be held to a set of MICS better
tailored to the risks found in small gaming operations and the
resources available for addressing them.
III. Tier Structure
The proposed rule allows an exemption, commonly referred to as the
small and charitable exemption, for gaming operations earning less than
$1 million in gross gaming revenue. A proposal was made to increase the
threshold from $1 million to $3 million. The basis for the proposal was
the premise that the higher threshold would be more consistent with
other gaming jurisdictions, would acknowledge that smaller gaming
operations may not have the resources to invest in the specified
controls and, in all likelihood, the inherent risk associated with
their games do not justify them. The Commission appreciates that the
burden of compliance may be heavier on smaller gaming operations than
larger ones that may have greater resources to allocate to internal
controls. The
[[Page 60497]]
Commission has concluded that the tier structure mitigates impact on
small operations. Therefore, the Commission has decided to keep the $1
million dollar ceiling for the small and charitable gaming exemption.
IV. Small and Charitable Gaming Operations
Small and charitable operations are required to adopt tribal
internal controls that, at a minimum, protect the integrity of the
games offered and safeguard the assets used in connection with the
operation. The Commission has added a requirement that the gaming
operations must create, prepare and maintain records in accordance with
Generally Accepted Accounting Principles.
V. Tribal Internal Control Standards
The tribal representatives on the Advisory Committee proposed that
a regulation be included stipulating that only applicable standards
shall apply to the tribe's gaming operation(s). The Commission
disagrees. The proposed new section 543.3(c) addresses the issue by
requiring that the tribe's gaming regulatory body adopt tribal internal
control standards that equal or exceed those set forth in the proposed
rule. Furthermore, within the preamble to part 542 final rule,
published June 2002, the question was addressed as follows, ``Indian
gaming is and always will be very diverse. The Commission therefore
recognizes that developing one set of MICS to address all situations in
every tribal gaming operation is not possible. It is not intended for
Tribes to simply adopt these MICS verbatim as tribal internal control
standards. Instead, Tribal gaming regulatory authorities should utilize
the following to develop their own internal control standards as
provided for in section 542.3(c) of this part.''
VI. Alternative Procedures
The tribal representatives on the Advisory Committee proposed that
a regulation be adopted that would authorize the tribal gaming
regulatory authorities to approve without federal concurrence,
alternative procedures to those required by the new part. The
Commission is not prepared to adopt such a procedure at this time.
Consequently, the Commission continues to rely on the variance process
contained in 25 CFR 542.18.
VII. Agents
The proposed rule utilizes the term ``agent'' in many places
throughout part 543. In today's complex gaming environment it is not
uncommon for support functions such as an internal audit to be
outsourced, and vendors to actively participate in the maintenance of
gaming related equipment and software programs. MICS, therefore, need
to account for such variables. This definition is not intended,
however, to allow persons to circumvent the management contract
approval process or the need for licenses and background investigations
for primary management officials and key employees.
VIII. Smart Cards
The present definition of smart cards contained in part 542.13 is
unclear. Essentially, all smart cards are not prohibited by the MICS;
only those that possess the sole source of the patron account data. If
the card is accessing the account data within the cashless gaming
system or the system maintains a redundant record or the card has a
specified value that cannot change, used merely to transfer wagering
credits to a device, the smart card is not prohibited. Accordingly, the
Commission has specified which smart cards are prohibited.
IX. Manual Payouts
Proposed section 543.7(c) identifies controls applicable to manual
payouts and short pays. Prize payouts over a predetermined amount, not
to exceed $50,000 dollars, would require the signatures of two
authorized individuals, one of whom must be a supervisor. The
Commission has determined that it is an adequate control for the
associated risk.
X. Promotional Prize Payouts
Proposed section 543.7(c) also provides standards applicable to
promotional prize payouts. The Commission considers these types of
payouts to be of a high risk. Accordingly, the signatures of two
persons are required to authorize payouts exceeding $599 dollars.
XI. Patron Account Transaction Record
Proposed section 543.7(g) requires gaming operations to make
available to the patron or tribal gaming regulatory authority, upon
request of either, a record of the transactions occurring within a
patron's wagering account.
XII. Audit Tasks to be performed at Relevant Periods
Proposed section 543.7(i) includes standards pertaining to the
accounting and auditing function associated with the game of bingo and
other games similar to bingo. The auditing tasks represent procedures
deemed by the MICS Advisory Committee to be necessary to effectively
account for and detect anomalies in server-based games' performance
data. The established gaming jurisdictions provide little guidance on
what minimum controls should be required by a gaming oversight body.
The MICS Advisory Committee recognized that the accepted industry
practice of comparing the actual performance of a gaming machine to a
predetermined criterion, theoretical hold, has an awkward, if not
meaningless, application to the server-based game of bingo or other
games similar to bingo. The conclusion is based upon the greater
volatility of a bingo game, as compared to a random number generator
possessing a predetermined cycle, even if the game is affected by
skill. Consequently, to mitigate the risk of foregoing the typical
analysis process, alternative auditing tasks were identified and are
recommended.
XIII. Inter-tribal Prize Pools
Proposed section 543.7(i) contains standards pertaining to the
accounting and auditing function associated with the game of bingo and
games similar to bingo. Included are controls specific to the data that
a vendor would provide to a tribe relevant to the operation and
maintenance of a linked prize pool. Although the proposed controls are
more abbreviated than the corresponding standards in existing part 542
pertaining to linked electronic games and host and remote host
locations, the proposal appears to satisfy the overall regulatory
objectives of requiring the vendor to share game performance data with
the participating individual locations.
XIV. Information Technology
The standards proposed at new Sec. 543.16 reflect only those
controls directly related to and deemed necessary to augment the
controls pertaining to the game of bingo and other games similar to
bingo. During the second phase of this overall process of enacting MICS
for class II gaming, it is anticipated that additional standards will
be added.
Regulatory Matters
Regulatory Flexibility Act
This proposed rule will not have a significant economic effect on a
substantial number of small entities as defined under the Regulatory
Flexibility Act, 5 U.S.C. 601 et seq. Indian tribes are not considered
to be small entities for the purposes of the Regulatory Flexibility
Act.
[[Page 60498]]
Small Business Regulatory Enforcement Fairness Act
This proposed rule is not a major rule under 5 U.S.C. 804(2), the
Small Business Regulatory Enforcement Fairness Act. This rule does not
have an annual effect on the economy of $100 million dollars or more.
This rule will not cause a major increase in costs or prices for
consumers, individual industries, federal, state or local government
agencies or geographic regions and does not have a significant adverse
effect on competition, employment, investment, productivity,
innovation, or the ability of U.S. based enterprises to compete with
foreign-based enterprises. The Commission has determined that the cost
of compliance with this regulation shall be minimal for several
reasons. First, part 542 has been in effect since 1999 and requires
that all Indian gaming operations be in compliance with the MICS.
Second, considering that the Indian gaming industry spent approximately
$419 million in 2006 on regulation and given the testimony of various
tribal and industry leaders, it can be assumed that all gaming
operations are compliant with part 542 or more stringent tribal
internal control standards. Finally, given the widespread compliance
with part 542, the cost of complying with new part 543 should be
minimal.
Paperwork Reduction Act
This proposed regulation requires an information collection under
the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., as did the
regulation it replaces. There is no change to the paperwork
requirements created by this rule.
Unfunded Mandates Reform Act
The Commission, as an independent regulatory agency within the
Department of the Interior, is exempt from compliance with the Unfunded
Mandates Reform Act, 2 U.S.C. 1502(1); 2 U.S.C. 658(1).
Takings
In accordance with Executive Order 12630, the Commission has
determined that this proposed rule does not have significant takings
implications. A takings implication assessment is not required.
Civil Justice Reform
In accordance with Executive Order 12988, the Office of General
Counsel has determined that the proposed rule does not unduly burden
the judicial system and meets the requirements of sections 3(a) and
3(b)(2) of the Order.
National Environmental Policy Act
The Commission has determined that this proposed rule does not
constitute a major federal action significantly affecting the quality
of the human environment and that no detailed statement is required
pursuant to the National Environmental Policy Act of 1969, 42 U.S.C.
4321 et seq.
List of Subjects in 25 CFR Parts 542 and 543
Accounting, Auditing, Gambling, Indian-lands, Indian-tribal
government, Reporting and recordkeeping requirements.
Accordingly, for the reasons described in the preamble, the
Commission proposes to amend its regulations at 25 CFR chapter III as
follows:
PART 542--MINIMUM INTERNAL CONTROL STANDARDS
1. The authority citation for part 542 continues to read as
follows:
Authority: 25 U.S.C. 2702(c), 2706(b)(10).
Sec. 542.7 [Removed and Reserved]
2. Section 542.7 is removed and reserved effective [INSERT DATE ONE
YEAR FROM DATE OF PUBLICATION OF THE FINAL RULE IN THE FEDERAL
REGISTER].
Sec. 542.16 [Removed and Reserved]
3. Section 542.16 is removed and reserved effective [INSERT DATE
ONE YEAR FROM DATE OF PUBLICATION OF THE FINAL RULE IN THE FEDERAL
REGISTER].
4. Add new part 543 to read as follows:
PART 543--MINIMUM INTERNAL CONTROL STANDARDS FOR CLASS II GAMING
Sec.
543.1 What does this part cover?,
543.2 What are the definitions for this part?
543.3 How do I comply with this part?
543.4-543.5 [RESERVED]
543.6 Does this part apply to small and charitable gaming
operations?
543.7 What are the minimum internal control standards for bingo?
543.8-543.15 [RESERVED]
543.16 What are the minimum internal controls for information
technology?
Authority: 25 U.S.C. 2701 et seq.
Sec. 543.1 What does this part cover?
This part, along with Sec. Sec. 542.14 through 542.15, 542.17
through 542.23, 542.30 through 542.33, and 542.40 through 542.43 of
this chapter establishes the minimum internal control standards for the
conduct of Class II bingo and other games similar to bingo on Indian
lands as described in 25 U.S.C. 2701 et seq. Throughout this part the
term bingo includes other games similar to bingo.
Sec. 543.2 What are the definitions for this part?
The definitions in this section shall apply to all sections of this
part unless otherwise noted.
Account access component, A component within a Class II gaming
system that reads or recognizes account access media and gives a patron
the ability to interact with their account.
Account access medium, A magnetic stripe card or any other medium
inserted into, or otherwise made to interact with, an account access
component in order to give a patron the ability to interact with an
account.
Accountability, All financial instruments, receivables, and patron
deposits constituting the total amount for which the bankroll custodian
is responsible at a given time.
Actual bingo win percentage, The percentage calculated by dividing
the bingo win by the bingo sales. Can be calculated for individual
prize schedules or type of player interfaces on a per-day or cumulative
basis.
Agent, An employee or licensed person authorized by the gaming
operation, as approved by the tribal gaming regulatory authority,
designated for certain authorizations, decisions, tasks and actions in
the gaming operation. This definition is not intended to eliminate nor
suggests that appropriate management contracts are not required, where
applicable, as referenced in 25 U.S.C. 2711.
Amount in, The total value of all financial instruments and
cashless transactions accepted by the Class II gaming system.
Amount out, The total value of all financial instruments and
cashless transactions paid by the Class II gaming system, plus the
total value of manual payments.
Bingo paper, A consumable physical object that has one or more
bingo cards on its face.
Bingo sales, The value of purchases made by players to participate
in bingo.
Bingo win, The result of bingo sales minus prize payouts.
Cage, A secure work area within the gaming operation for cashiers
which may include a storage area for the gaming operation bankroll.
Cash equivalents, The monetary value that a gaming operation may
assign to a document, financial instrument, or anything else of
representative value other than cash. A cash equivalent includes, but
is not limited to, tokens,
[[Page 60499]]
chips, coupons, vouchers, payout slips and tickets, and other items to
which a gaming operation has assigned an exchange value.
Cashless system, A system that performs cashless transactions and
maintains records of those cashless transactions.
Cashless transaction, A movement of funds electronically from one
component to another, often to or from a patron deposit account.
Class II game, A game as described in 25 U.S.C. 2703(7)(A).
Class II Gaming System, All components, whether or not technologic
aids in electronic, computer, mechanical, or other technologic form,
that function together to aid the play of one or more Class II games
including accounting functions mandated by part 547 of this chapter.
Commission, The National Indian Gaming Commission.
Count, The act of counting and recording the drop and/or other
funds.
Count room, A secured room where the count is performed.
Count team, Agents who perform the count.
Coupon, A financial instrument of fixed wagering value, usually
paper, that can only be used to acquire non-cashable credits through
interaction with a voucher system. This does not include instruments
such as printed advertising material that cannot be validated directly
by a voucher system.
Drop, The total amount of financial instruments removed from
financial instrument storage components in Class II gaming systems.
Drop period, The period of time that occurs between sequential
drops.
Electronic funds transfer, A transfer of funds to or from a Class
II gaming system through the use of a cashless system, which are
transfers from an external financial institution.
Financial instrument, Any tangible item of value tendered in Class
II game play including but not limited to bills, coins, vouchers, and
coupons.
Financial instrument acceptor, Any component that accepts financial
instruments.
Financial instrument storage component, Any component that stores
financial instruments.
Game software, The operational program or programs that govern the
play, display of results, and/or awarding of prizes or credits for
Class II games.
Gaming Equipment, All electronic, electro-mechanical, mechanical or
other physical components utilized in the play of Class II games.
Independent, The separation of functions so that the person or
process monitoring, reviewing or authorizing the controlled
transaction(s) is separate from the persons or process performing the
controlled transaction(s).
Inter-tribal prize pool, A fund to which multiple tribes contribute
from which prizes are paid to winning players at a participating tribal
gaming facility and which is administered by one of the participating
tribes or a third party, (e.g. progressive prize pools, shared prize
pools, etc.).
Internal audit, means persons who perform an audit function of a
gaming operation that are independent of the department subject to
audit. Independence is obtained through the organizational reporting
relationship, as the internal audit department shall not report to
management of the gaming operation. Internal audit activities should be
conducted in a manner that permits objective evaluation of areas
examined. Internal audit personnel may provide audit coverage to more
than one operation within a tribe's gaming operation holdings.
Kiosk, A self serve point of sale or other component capable of
accepting or dispensing financial instruments and may also be capable
of initiating cashless transactions of values to or from a patron
deposit account or promotional account.
Manual payout, The payment to a player of some or all of a player's
accumulated credits (e.g. short pays, cancelled credits, etc.) or an
amount owed as a result of a winning event by an agent of the gaming
operation.
MICS, Minimum internal control standards in this part.
Non-cashable credit, Credits given by an operator to a patron;
placed on a Class II gaming system through a coupon, cashless
transaction, or other approved means; and capable of activating play
but not being converted to cash.
Patron deposit account, An account maintained on behalf of a
patron, for the purpose of depositing and withdrawing cashable funds
for the primary purpose of interacting with a gaming activity.
Patron deposits, The funds placed with a designated cashier by
patrons for the patrons' use at a future time.
Player interface, Any component(s) of a Class II gaming system,
including an electronic or technological aid (not limited to terminals,
player stations, handhelds, fixed units, etc.) that directly enable(s)
player interaction in a Class II game.
Player tracking system, A system typically used by a gaming
operation to record the amount of play of an individual patron.
Prize payout, A transaction associated with a winning event.
Prize schedule, A set of prizes available to players for achieving
pre-designated patterns in Class II game(s).
Program Storage Media, An electronic data storage component, such
as a CD-ROM, EPROM, hard disk, or flash memory on which software is
stored and from which software is read.
Progressive prize, A prize that increases by a selectable or
predefined amount based on play of a Class II game.
Promotional account, A file, record, or other data structure that
records transactions involving a patron or patrons that are not
otherwise recorded in a patron deposit account.
Promotional prize payout, Merchandise or awards given to players by
the gaming operation which is based on gaming activity.
Random number generator (RNG), A software module, hardware
component or combination of these designed to produce outputs that are
effectively random.
Server, A computer which controls one or more applications or
environments.
Shift, An eight-hour period, unless otherwise approved by the
tribal gaming regulatory authority, not to exceed 24 hours.
Short pay, The payment of the unpaid balance of an incomplete
payout by a player interface.
Tier A, Gaming operations with annual gross gaming revenues of more
than $1 million but not more than $5 million.
Tier B, Gaming operations with annual gross gaming revenues of more
than $5 million but not more than $15 million.
Tier C, Gaming operations with annual gross gaming revenues of more
than $15 million.
Tribal Gaming Regulatory Authority, The entity authorized by tribal
law to regulate gaming conducted pursuant to the Indian Gaming
Regulatory Act.
Voucher, A financial instrument of fixed value that can only be
used to acquire an equivalent value of cashable credits or cash through
interaction with a voucher system.
Voucher System, A component of the Class II gaming system or an
external system that securely maintains records of vouchers and
coupons; validates payment of vouchers; records successful or failed
payments of vouchers and coupons; and controls the purging of expired
vouchers and coupons.
Sec. 543.3 How do I comply with this part?
(a) Compliance based upon tier.
[Reserved]
[[Page 60500]]
(b) Determination of tier. [Reserved]
(c) Tribal internal control standards. Within six months of [INSERT
DATE OF PUBLICATION OF THE FINAL RULE IN THE FEDERAL REGISTER], each
tribal gaming regulatory authority shall, in accordance with the tribal
gaming ordinance, establish or ensure that tribal internal control
standards are established and implemented that shall:
(1) Provide a level of control that equals or exceeds those set
forth in this part;
(2) Contain standards for currency transaction reporting that
comply with 31 CFR part 103; and
(3) Establish a deadline, which shall not exceed six months from
the date the tribal gaming regulatory authority establishes internal
controls by which a gaming operation must come into compliance with the
tribal internal control standards. However, the tribal gaming
regulatory authority may extend the deadline by an additional six
months if written notice citing justification is provided to the
Commission no later than two weeks before the expiration of the nine
month period.
(d) Gaming operations. Each gaming operation shall develop and
implement an internal control system that, at a minimum, complies with
the tribal internal control standards.
(1) Existing gaming operations. All gaming operations that are
operating on or before [INSERT DATE ONE YEAR FROM DATE OF PUBLICATION
OF THE FINAL RULE IN THE FEDERAL REGISTER], shall comply with this part
within the time requirements established in paragraph (c) of this
section. In the interim, such operations shall continue to comply with
existing tribal internal control standards.
(2) New gaming operations. All gaming operations that commence
operations after [INSERT DATE SIX MONTHS FROM DATE OF PUBICATION OF THE
FINAL RULE IN THE FEDERAL REGISTER], shall comply with this part before
commencement of operations.
(e) Submission to Commission. Tribal regulations promulgated
pursuant to this part shall not be required to be submitted to the
Commission pursuant to Sec. 522.3(b) of this chapter.
(f) CPA testing. (1) An independent certified public accountant
(CPA) shall be engaged to perform ``Agreed-Upon Procedures'' to verify
that the gaming operation is in compliance with the minimum internal
control standards (MICS) set forth in this part or a tribally approved
variance thereto that has received Commission concurrence. The CPA
shall report each event and procedure discovered by or brought to the
CPA's attention that the CPA believes does not satisfy the minimum
standards or tribally approved variance that has received Commission
concurrence. The ``Agreed-Upon Procedures'' may be performed in
conjunction with the annual audit. The CPA shall report his or her
findings to the tribe, tribal gaming regulatory authority, and
management. The tribe shall submit two copies of the report to the
Commission within 120 days of the gaming operation's fiscal year end.
This regulation is intended to communicate the Commission's position on
the minimum Agreed-Upon Procedures to be performed by the CPA.
Throughout these regulations, the CPA's engagement and reporting are
based on Statements on Standards for Attestation Engagements (SSAE's)
in effect as of December 31, 2003, specifically SSAE 10 (``Revision and
Recodification Agreed-Upon Procedures Engagements''). If future
revisions are made to the SSAE's or new SSAE's are adopted that are
applicable to this type of engagement, the CPA is to comply with any
new or revised professional standards in conducting engagements
pursuant to these regulations and the issuance of the agreed-upon
procedures report. The CPA shall perform the ``Agreed-Upon Procedures''
in accordance with the following:
(i) As a prerequisite to the evaluation of the gaming operation's
internal control systems, it is recommended that the CPA obtain and
review an organization chart depicting segregation of functions and
responsibilities, a description of the duties and responsibilities of
each position shown on the organization chart, and an accurate,
detailed narrative description of the gaming operation's procedures in
effect that demonstrate compliance.
(ii) Complete the CPA NIGC MICS Compliance checklists or other
comparable testing procedures. The checklists should measure compliance
on a sampling basis by performing inspections, observations and
substantive testing. The CPA shall complete separate checklists for
bingo and information technology. All questions on each applicable
checklist should be completed. Work-paper references are suggested for
all ``no'' responses for the results obtained during testing (unless a
note in the ``W/P Ref'' can explain the exception).
(iii) The CPA shall perform, at a minimum, the following procedures
in conjunction with the completion of the checklists:
(A) At least one unannounced observation of each of the following:
financial instrument acceptor drop and count. The AICPA's ``Audits of
Casinos'' Audit and Accounting Guide provides that observations in the
casino cage and count room should be unannounced. For purposes of these
procedures, ``unannounced'' means that no officers, directors, or
employees are given advance information regarding the dates or times of
such observations. The independent accountant should make arrangements
with the gaming operation and tribal gaming regulatory authority to
ensure proper identification of the CPA's personnel and to provide for
their prompt access to the count rooms. The checklists should provide
for drop and count observations. The count room should not be entered
until the count is in process and the CPA should not leave the room
until the monies have been counted and verified to the count sheet by
the CPA and accepted into accountability.
(B) Observations of the gaming operation's agents as they perform
their duties.
(C) Interviews with the gaming operation's agents who perform the
relevant procedures.
(D) Compliance testing of various documents relevant to the
procedures. The scope of such testing should be indicated on the
checklist where applicable.
(E) For new gaming operations that have been in operation for three
months or less at the end of their business year, performance of this
regulation, this section, is not required for the partial period.
(2) Alternatively, at the discretion of the tribe, the tribe may
engage an independent CPA to perform the testing, observations and
procedures reflected in paragraphs (f)(1)(i), (ii), and (iii) of this
section utilizing the tribal internal control standards adopted by the
tribal gaming regulatory authority or tribally approved variance that
has received Commission concurrence. Accordingly, the CPA will verify
compliance by the gaming operation with the tribal internal control
standards. Should the tribe elect this alternative, as a prerequisite,
the CPA will perform the following:
(i) The CPA shall compare the tribal internal control standards to
the MICS to ascertain whether the criteria set forth in the MICS or
Commission approved variances are adequately addressed.
(ii) The CPA may utilize personnel of the tribal gaming regulatory
authority to cross-reference the tribal internal control standards to
the MICS, provided the CPA performs a review of the tribal gaming
regulatory authority personnel's work and assumes complete
[[Page 60501]]
responsibility for the proper completion of the work product.
(iii) The CPA shall report each procedure discovered by or brought
to the CPA's attention that the CPA believes does not satisfy paragraph
(f)(2)(i) of this section.
(3) Reliance on Internal Auditors. (i) The CPA may rely on the work
of an internal auditor, to the extent allowed by the professional
standards, for the performance of the recommended procedures specified
in paragraphs (f)(1)(iii)(B), (C), and (D) of this section, and for the
completion of the checklists as they relate to the procedures covered
therein.
(ii) Agreed-upon procedures are to be performed by the CPA to
determine that the internal audit procedures performed for a past 12-
month period (includes two six month periods) encompassing a portion or
all of the most recent business year have been properly completed. The
CPA will apply the following agreed-upon procedures to the gaming
operation's written assertion:
(A) Obtain internal audit department work-papers completed for a
12-month period (includes two six month periods) encompassing a portion
or all of the most recent business year and determine whether the CPA
NIGC MICS Compliance Checklists or other comparable testing procedures
were included in the internal audit work-papers and all steps described
in the checklists were initialed or signed by an internal audit
representative.
(B) For the internal audit work-papers obtained in paragraph
(f)(3)(ii)(A) of this section, on a sample basis, re-perform the
procedures included in CPA NIGC MICS Compliance Checklists or other
comparable testing procedures prepared by internal audit and determine
if all instances of noncompliance noted in the sample were documented
as such by internal audit. The CPA NIGC MICS Compliance Checklists or
other comparable testing procedures for the applicable Drop and Count
procedures are not included in the sample re-performance of procedures
because the CPA is required to perform the drop and count observations
as required under paragraph (f)(1)(iii)(A) of this section of the
agreed-upon procedures. The CPA's sample should comprise a minimum of
three percent of the procedures required in each CPA NIGC MICS
Compliance Checklist or other comparable testing procedures for the
bingo department and five percent for the other departments completed
by internal audit in compliance with the internal audit MICS. The re-
performance of procedures is performed as follows:
(1) For inquiries, the CPA should either speak with the same
individual or an individual of the same job position as the internal
auditor did for the procedure indicated in the CPA checklist.
(2) For observations, the CPA should observe the same process as
the internal auditor did for the procedure as indicated in their
checklist.
(3) For document testing, the CPA should look at the same original
document as tested by the internal auditor for the procedure as
indicated in their checklist. The CPA need only retest the minimum
sample size required in the checklist.
(C) The CPA is to investigate and document any differences between
their re-performance results and the internal audit results.
(D) Documentation shall be maintained for five years by the CPA
indicating the procedures re-performed along with the results.
(E) When performing the procedures for paragraph (f)(3)(ii)(B) of
this section in subsequent years, the CPA must select a different
sample so that the CPA will re-perform substantially all of the
procedures after several years.
(F) Additional procedures performed at the request of the
Commission, the tribal gaming regulatory authority or management should
be included in the Agreed-Upon Procedures report transmitted to the
Commission.
(4) Report Format. The NIGC has concluded that the performance of
these procedures is an attestation engagement in which the CPA applies
such Agreed-Upon Procedures to the gaming operation's assertion that it
is in compliance with the MICS and, if applicable under paragraph
(f)(2) of this section, the tribal internal control standards and
approved variances, provide a level of control that equals or exceeds
that of the MICS. Accordingly, the Statements on Standards for
Attestation Engagements (SSAE's), specifically SSAE 10, issued by the
Auditing Standards Board is applicable. SSAE 10 provides current,
pertinent guidance regarding agreed-upon procedure engagements, and the
sample report formats included within those standards should be used,
as appropriate, in the preparation of the CPA's agreed-upon procedures
report. If future revisions are made to this standard or new SSAE's are
adopted that are applicable to this type of engagement, the CPA is to
comply with any revised professional standards in issuing their agreed
upon procedures report. The Commission will provide an example report
and letter formats upon request that may be used and contain all of the
information discussed below. The report must describe all instances of
procedural noncompliance (regardless of materiality) with the MICS or
approved variations, and all instances where the tribal gaming
regulatory authority's regulations do not comply with the MICS. When
describing the agreed-upon procedures performed, the CPA should also
indicate whether procedures performed by other individuals were
utilized to substitute for the procedures required to be performed by
the CPA. For each instance of noncompliance noted in the CPA's agreed-
upon procedures report, the following information must be included: The
citation of the applicable MICS for which the instance of noncompliance
was noted; a narrative description of the noncompliance, including the
number of exceptions and sample size tested.
(5) Report Submission Requirements. (i) The CPA shall prepare a
report of the findings for the tribe and management. The tribe shall
submit two copies of the report to the Commission no later than 120
days after the gaming operation's business year end. This report should
be provided in addition to any other reports required to be submitted
to the Commission.
(ii) The CPA should maintain the work-papers supporting the report
for a minimum of five years. Digital storage is acceptable. The
Commission may request access to these work-papers, through the tribe.
(6) CPA NIGC MICS Compliance Checklists. In connection with the CPA
testing pursuant to this section and as referenced therein, the
Commission will provide CPA MICS Compliance Checklists upon request.
(g) Enforcement of Commission Minimum Internal Control Standards.
(1) Each tribal gaming regulatory authority is required to establish
and implement internal control standards pursuant to paragraph (c) of
this section. Each gaming operation is then required, pursuant to
paragraph (d) of this section, to develop and implement an internal
control system that complies with the tribal internal control
standards. Failure to do so may subject the tribal operator of the
gaming operation, or the management contractor, to penalties under 25
U.S.C. 2713.
(2) Recognizing that tribes are the primary regulator of their
gaming operation(s), enforcement action by the Commission will not be
initiated under this part without first informing the tribe and tribal
gaming regulatory authority of deficiencies in the internal controls of
its gaming operation and
[[Page 60502]]
allowing a reasonable period of time to address such deficiencies. Such
prior notice and opportunity for corrective action is not required
where the threat to the integrity of the gaming operation is immediate
and severe.
Sec. Sec. 543.4-543.5 [Reserved]
Sec. 543.6 Does this part apply to small and charitable gaming
operations?
(a) Small gaming operations. This part shall not apply to small
gaming operations provided that:
(1) The tribal gaming regulatory authority permits the operation to
be exempt from this part;
(2) The annual gross gaming revenue of the operation does not
exceed $1 million; and
(3) The tribal gaming regulatory authority develops and the
operation complies with alternate procedures that:
(i) Protect the integrity of games offered;
(ii) Safeguard the assets used in connection with the operation;
and
(iii) Create, prepare and maintain records in accordance with
Generally Accepted Accounting Principles.
(b) Charitable gaming operations. This part shall not apply to
charitable gaming operations provided that:
(1) All proceeds are for the benefit of a charitable organization;
(2) The tribal gaming regulatory authority permits the charitable
organization to be exempt from this part;
(3) The charitable gaming operation is operated wholly by the
charitable organization's agents;
(4) The annual gross gaming revenue of the charitable operation
does not exceed $1 million; and
(5) The tribal gaming regulatory authority develops and the
charitable gaming operation complies with alternate procedures that:
(i) Protect the integrity of the games offered;
(ii) Safeguard the assets used in connection with the gaming
operation; and
(iii) Create, prepare and maintain records in accordance with
Generally Accepted Accounting Principles.
(c) Independent operators. Nothing in this section shall exempt
gaming operations conducted by independent operators for the benefit of
a charitable organization.
Sec. 543.7 What are the minimum internal control standards for bingo?
(a) Bingo Cards--(1) Inventory of bingo paper. (i) The bingo paper
inventory shall be controlled so as to assure the integrity of the
bingo paper being used as follows:
(A) When received, bingo paper shall be inventoried and secured by
an authorized agent(s) independent of bingo sales;
(B) The issue of bingo paper to the cashiers shall be documented
and signed for by the authorized agent(s) responsible for inventory
control and a cashier. The bingo control log shall include the series
number of the bingo paper;
(C) The bingo control log shall be utilized by the gaming operation
to verify the integrity of the bingo paper being used; and
(D) Once each month, an authorized agent(s) independent of both
bingo paper sales and bingo paper inventory control shall verify the
accuracy of the ending balance in the bingo control log by reconciling
it with the bingo paper inventory.
(ii) Paragraph (a)(1) of this section does not apply where no
physical inventory is applicable.
(2) Bingo Sales. (i) There shall be an accurate accounting of all
bingo sales.
(ii) All bingo sales records shall include the following
information:
(A) Date;
(B) Time;
(C) Shift or session;
(D) Sales transaction identifiers, which may be the unique card
identifier(s) sold or when electronic bingo card faces are sold, the
unique identifiers of the card faces sold;
(E) Quantity of bingo cards sold;
(F) Dollar amount of bingo sales;
(G) Signature, initials, or identification of the agent or device
who conducted the bingo sales; and
(H) When bingo sales are recorded manually, total sales are
verified by an authorized agent independent of the bingo sales being
verified and the signature, initials, or identification of the
authorized agent who verified the bingo sales is recorded.
(iii) No person shall have unrestricted access to modify bingo
sales records.
(iv) An authorized agent independent of the seller shall perform
the following standards for each seller at the end of each session:
(A) Reconcile the documented total dollar amount of cards sold to
the documented quantity of cards sold;
(B) Note any variances; and
(C) Appropriately investigate any noted variances with the results
of the follow-up documented.
(3) Voiding bingo cards. (i) Procedures shall be established and
implemented to prevent the voiding of card sales after the start of the
calling of the game for which the bingo card was sold. Cards may not be
voided after the start of a game for which the card was sold.
(ii) When a bingo card must be voided the following controls shall
apply as relevant:
(A) A non-electronic bingo card shall be marked void; and
(B) The authorization of the void, by an authorized agent
independent of the original sale transaction (supervisor recommended),
shall be recorded either by signature on the bingo card or by
electronically associating the void authorization to the sale
transaction of the voided bingo card.
(4) Re-issue of previously sold bingo cards. When one or more
previously sold bingo cards need to be reissued, the following controls
shall apply: the original sale of the bingo cards must be verified; and
the reissue of the bingo cards must be documented, including the
identity of the agent authorizing re-issuance.
(b) Draw--(1) Verification and display. (i) Procedures shall be
established and implemented to ensure the identity of each object drawn
is accurately recorded and transmitted to the participants. The
procedures must identify the method used to ensure the identity of each
object drawn.
(ii) For all games offering a prize payout of $1,200 or more, as
the objects are drawn the identity of the objects shall be immediately
recorded and maintained for a minimum of 24 hours.
(iii) Controls shall be present to assure that all objects eligible
for the draw are available to be drawn prior to the next draw.
(c) Manual Payouts and Short Pays. (1) Procedures shall be
established and implemented to prevent unauthorized access or
fraudulent transactions using manual payout documents, including:
(i) Payout documents shall be controlled and completed in a manner
that is intended to prevent a custodian of funds from altering the
dollar amount on all parts of the payout document subsequent to the
manual payout and misappropriating the funds.
(ii) Payout documents shall be controlled and completed in a manner
that deters any one individual from initiating and producing a
fraudulent payout document, obtaining the funds, forging signatures on
the payout document, routing all parts of the document, and
misappropriating the funds. Recommended procedures of this standard
include but are not limited to the following:
(A) Funds are issued either to a second verifier of the manual
payout (i.e., someone other than the agents who generated/requested the
payout) or to two agents concurrently (i.e., the generator/requestor of
the document
[[Page 60503]]
and the verifier of the manual payout). Both witness the manual payout;
or
(B) The routing of one part of the completed document is under the
physical control (e.g., dropped in a locked box) of an agent other than
the agent that obtained/issued the funds and the agent that obtained/
issued the funds must not be able to place the document in the locked
box.
(iii) Segregation of responsibilities. The functions of sales and
prize payout verification shall be segregated, if performed manually.
Agents who sell bingo cards on the floor shall not verify bingo cards
for prize payouts with bingo cards in their possession of the same type
as the bingo card being verified for the game. Floor clerks who sell
bingo cards on the floor are permitted to announce the identifiers of
winning bingo cards.
(iv) Validation. Procedures shall be established and implemented to
determine the validity of the claim prior to the payment of a prize
(i.e., bingo card was sold for the game played, not voided, etc.) by at
least two persons.
(v) Verification. Procedures shall be established and implemented
to ensure that at least two persons verify the winning pattern has been
achieved on the winning card prior to the payment of a prize.
(vi) Authorization and Signatures. (A) A Class II gaming system may
substitute as one authorization/signature verifying, validating or
authorizing a winning card of less than $1,200 or other manual payout.
Where a Class II gaming system substitutes as an authorization/
signature, the manual payout is subject to the limitations provided in
this section.
(B) For manual prize payouts of $1,200 or more and less than a
predetermined amount not to exceed $50,000, at least two agents must
authorize, sign and witness the manual prize payout.
(1) Manual prize payouts over a predetermined amount not to exceed
$50,000 shall require one of the two signatures and verifications to be
a supervisory or management employee independent of the operation of
bingo.
(2) This predetermined amount, not to exceed $50,000, shall be
authorized by management, approved by the tribal gaming regulatory
authority, documented, and maintained.
(2) Documentation, including;
(i) Manual payouts and short-pays exceeding $10 shall be documented
on a two-part form, of which a restricted system record can be
considered one part of the form, and documentation shall include the
following information:
(A) Date and time;
(B) Player interface identifier or game identifier;
(C) Dollar amount paid (both alpha and numeric) or description of
personal property awarded, including fair market value. Alpha is
optional if another unalterable method is used for evidencing the
amount paid;
(D) Type of manual payout (e.g., Prize payout, external bonus
payout, short pay, etc.);
(E) Game outcome (e.g., patterns, symbols, bingo card identifier/
description, etc.) for manual prize payouts, external bonus
description, reason for short pay, etc.;
(F) Preprinted or concurrently printed sequential manual payout
identifier; and
(G) Signatures or other authorizations, as required by this part.
(ii) For short-pays of $10 or less, the documentation (single-part
form or log is acceptable) shall include the following information:
(A) Date and time;
(B) Player interface number;
(C) Dollar amount paid (both alpha and numeric). Alpha is optional
if another unalterable method is used for evidencing the amount paid;
(D) The signature of at least one agent verifying and witnessing
the short pay; and
(E) Reason for short pay.
(iii) In other situations that allow an agent to input a prize
payout or change the dollar amount of the prize payout by more than $1
in a Class II gaming system that has an automated prize payout
component, two agents, one of which is a supervisory employee, must be
physically involved in verifying and witnessing the prize payout.
(iv) For manually paid promotional prize payouts, as a result of
the play of a game and where the amount paid is not included in the
prize schedule, the documentation (single-part form or log is
acceptable) shall include the following information:
(A) Date and time;
(B) Player interface number;
(C) Dollar amount paid (both alpha and numeric). Alpha is optional
if another unalterable method is used for evidencing the amount paid;
(D) The signature of at least one agent verifying and witnessing
the manual promotional prize payout of $599 or less and two agents
verifying and witnessing the manual promotional prize payout exceeding
$599;
(E) Description or name of the promotion; and
(F) Total amount of manual promotional prize payouts shall be
recorded by shift, session or other relevant time period.
(v) When a controlled manual payout document is voided, the agent
completing the void shall clearly mark ``void'' across the face of the
document, sign across the face of the document and all parts of the
document shall be retained for accountability.
(d) Operational controls. (1) Procedures shall be established and
implemented with the intent to prevent unauthorized access to or
fraudulent transactions involving cash or cash equivalents.
(2) Cash or cash equivalents exchanged between two persons shall be
counted independently by at least two persons and reconciled to the
recorded amounts at the end of each shift or if applicable each
session. Unexplained variances shall be documented and maintained.
Unverified transfers of cash or cash equivalents are prohibited.
(3) Procedures shall be established and implemented to control cash
or cash equivalents in accordance with this section and based on the
amount of the transaction. These procedures include but are not limited
to, counting and recording on an accountability form by shift, session
or relevant time period the following:
(i) Inventory, including any increases or decreases;
(ii) Transfers;
(iii) Exchanges, including acknowledging signatures or initials;
and
(iv) Resulting variances.
(4) Any change of control of accountability, exchange or transfer
shall require the cash or cash equivalents be counted and recorded
independently by at least two persons and reconciled to the recorded
amount.
(e) Gaming equipment. (1) Procedures shall be established and
implemented with the intention to restrict access to agents for the
following:
(i) Controlled gaming equipment/components (e.g., draw objects, and
back-up draw objects); and
(ii) Random number generator software. (Additional information
technology security standards can be found in Sec. 543.16 of this
part)
(2) The critical proprietary software components of a Class II
gaming system will be identified in the test laboratory report. When
initially received, the software shall be verified to be authentic
copies, as certified by the independent testing laboratory.
(3) Procedures shall be established relating to the periodic
inspection, maintenance, testing, and documentation of a random
sampling of gaming equipment/components, including but not limited to:
[[Page 60504]]
(i) Software related to game outcome shall be authenticated semi-
annually by an agent independent of bingo operations by comparing
signatures against the test laboratory letter on file with the tribal
gaming regulatory authority for that version.
(ii) Class II gaming system interfaces to external systems shall be
tested annually for accurate communications and appropriate logging of
events.
(4) Records shall be maintained for each player interface that
indicate the date the player interface was placed into service or made
available for play, the date the player interface was removed from
service and not available for play, and any changes in player interface
identifiers.
(f) Voucher systems. (1) The voucher system shall be utilized to
verify the authenticity of each voucher or coupon redeemed.
(2) If the voucher is valid, the patron is paid the appropriate
amount.
(3) Procedures shall be established and implemented to document the
payment of a claim on a voucher that is not physically available or a
voucher that cannot be validated (e.g., mutilated, expired, lost,
stolen, etc.).
(i) If paid, appropriate documentation is retained for
reconciliation purposes.
(ii) Payment of a voucher for $50 or more, a supervisory employee
shall review the applicable voucher system, player interface or other
transaction history records to verify the validity of the voucher and
initial the voucher or documentation prior to payment.
(4) Vouchers redeemed shall remain in the cashier's accountability
for reconciliation purposes. The voucher redemption system reports
shall be used to ensure all paid vouchers have been validated.
(5) Vouchers paid during a period while the voucher system is
temporarily out of operation shall be marked ``paid'', initialed and
dated by the cashier. If the voucher is greater than a predetermined
amount approved (not to exceed $500), a supervisory employee shall
approve the payment and evidence that approval by initialing the
voucher prior to payment.
(6) Paid vouchers are maintained in the cashier's accountability
for reconciliation purposes.
(7) Upon restored operation of the voucher system, vouchers
redeemed while the voucher system was temporarily out of operation
shall be validated as expeditiously as possible.
(8) Unredeemed vouchers can only be voided in the voucher system by
supervisory employees. The supervisory employee completing the void
shall clearly mark ``void'' across the face of the voucher and sign
across the face of the voucher, if available. The accounting department
will maintain the voided voucher, if available.
(g) Patron accounts and cashless systems. (1) All smart cards
(i.e., cards that possess the means to electronically store or retrieve
data) that maintain the only source of account data are prohibited.
(2) For patron deposit accounts the following standards shall
apply:
(i) For each patron deposit account, an agent shall:
(A) Require the patron to personally appear at the gaming
operation;
(B) Record the type of identification credential examined, the
credential number, the expiration date of credential, and the date
credential was examined. (Note: A patron's driver's license is the
preferred method for verifying the patron's identity. A passport, non-
resident alien identification card, other government issued
identification credential or another picture identification credential
normally acceptable as a means of identification when cashing checks,
may also be used.);
(C) Record the patron's name and may include another identifier
(e.g., nickname, title, etc.) of the patron, if requested by patron;
(D) Record a unique identity for each patron deposit account;
(E) Record the date the account was opened; and
(F) Provide the account holder with a secure method of access to
the account.
(ii) Patron deposit accounts shall be established for patrons at
designated areas of accountability and the creation of the account must
meet all the controls of paragraph (g)(2)(i) of this section when the
patron makes an initial deposit of cash or cash equivalents.
(iii) If patron deposit account adjustments may be made by the
operation, the operation must be authorized by the account holder to
make necessary adjustments. This requirement can be met through the
collection of a single authorization that covers the life of the patron
deposit account.
(iv) Patron deposits & withdrawals. (A) Prior to the patron making
a withdrawal from a patron deposit account, the cashier shall verify
the identity of the patron and availability of funds. Reliance on a
secured Personal Identification Number (PIN) entered by the patron is
an acceptable method of verifying patron identity.
(B) A multi-part deposit/withdrawal record shall be created when
the transaction is processed by a cashier, including;
(1) Same document number on all copies;
(2) Type of transaction, deposit or withdrawal;
(3) Name or other identifier of the patron;
(4) At least the last four digits of the account identifier;
(5) Patron signature for withdrawals, unless a secured PIN is
utilized by the patron;
(6) Date of transaction;
(7) Dollar amount of transaction;
(8) Nature of deposit or withdrawal (e.g., cash, check, chips); and
(9) Signature of the cashier processing the transaction.
(C) A copy of the transaction record shall be secured for
reconciliation of the cashier's bank for each shift. All transactions
involving patron deposit accounts shall be accurately tracked.
(D) The copy of the transaction record shall be forwarded to the
accounting department at the end of the gaming day.
(E) When a cashier is not involved in the deposit/withdrawal of
funds, procedures shall be established that safeguard the integrity of
the process used.
(v) Patron Deposit Account Adjustments. (A) Adjustments to the
patron deposit accounts shall be performed by an agent.
(B) A record shall be created when the transaction is processed,
including;
(1) Unique transaction identifier;
(2) Type of transaction, adjustment;
(3) Name or other identifier of the patron;
(4) At least the last four digits of the account identifier;
(5) Date of transaction;
(6) Dollar amount of transaction;
(7) Reason for the adjustment; and
(8) Signature or unique identifier for the agent who made the
adjustment.
(C) The transaction record shall be forwarded to the accounting
department at the end of the gaming day.
(vi) Where available, systems reports that indicate the dollar
amount of transactions for patron deposit accounts (e.g., deposits,
withdrawals, account adjustments, etc.) that should be reflected in
each cashier's accountability shall be utilized at the conclusion of
each shift in the reconciling of funds.
(vii) Cashless transactions and electronic funds transfers to and
from patron deposit accounts shall be recorded and maintained at the
end of the gaming operations specified 24-hour accounting period.
(viii) Procedures shall be established to maintain a detailed
record for each
[[Page 60505]]
patron deposit account that includes the dollar amount of all funds
deposited and withdrawn, account adjustments made, and the transfers to
or from player interfaces.
(ix) Detailed patron deposit account transaction records shall be
available to the patron upon reasonable request and to the tribal
gaming regulatory authority upon request.
(x) Only dedicated gaming operation bank accounts shall be used to
record electronic funds transfers to or from the patron deposit
accounts. Gaming operation bank accounts dedicated to electronic funds
transfers to or from the patron deposit accounts shall not be used for
any other types of transactions.
(3) For promotional and other accounts the following standards
shall apply:
(i) Changes to promotional and other accounts shall be performed by
an agent.
(ii) The following standards apply if a player tracking system is
utilized:
(A) In the absence of the patron, modifications to balances on a
promotional or other account must be made under the authorization of
supervisory employees and shall be sufficiently documented (including
substantiation of reasons for modification). Modifications are randomly
verified by independent agents on a quarterly basis. This standard does
not apply to the deletion of balances related to inactive or closed
accounts through an automated process.
(B) Access to inactive or closed accounts is restricted to
supervisory employees.
(C) Patron identification is required when redeeming values.
Reliance on a secured Personal Identification Number (PIN) by the
patron is an acceptable method of verifying patron identification.
(h) Promotions. (1) The conditions for participating in promotional
programs, including drawings and giveaway programs shall be approved
and available for patron review at the gaming operation.
(2) Changes to the player tracking systems, promotional accounts,
promotion and external bonusing system parameters which control
features such as the awarding of bonuses, the issuance of cashable
credits, non-cashable credits, coupons and vouchers, shall be performed
under the authority of supervisory employees, independent of the
department initiating the change. Alternatively, the changes may be
performed by supervisory employees of the department initiating the
change if sufficient documentation is generated and the propriety of
the changes are randomly verified by supervisory employees independent
of the department initiating the change on a monthly basis.
(3) All other changes to the player tracking system shall be
appropriately documented.
(4) All relevant controls from Sec. 543.16 of this part will
apply.
(i) Accounting. (1) Accounting/audit standards. (i) Accounting/
auditing procedures shall be performed by agents who are independent of
the persons who performed the transactions being reviewed.
(ii) All accounting/audit procedures and actions shall be
documented (e.g., log, checklist, investigations and notation on
reports), maintained for inspection and provided to the tribal gaming
regulatory authority upon request.
(ii) Accounting/audit procedures shall be performed reviewing
transactions for relevant accounting periods, including a 24-hour
accounting period and reconciled in total for those time periods.
(iv) Accounting/audit procedures shall be performed within seven
days of the transaction's occurrence date being reviewed.
(v) Accounting/audit procedures shall be in place to review
variances related to bingo accounting data, which shall include at a
minimum any variance noted by the Class II gaming system for cashless
transactions in and out, electronic funds transfer in and out, external
bonus payouts, vouchers out and coupon promotion out.
(vi) At least monthly, an accounting/audit agent shall confirm that
the appropriate investigation has been completed for the review of
variances.
(2) Audit tasks to be performed for each day's business.
(i) Records of bingo card sales shall be reviewed for proper
authorization, completion and accurate calculations.
(ii) Manual payout summary report, if applicable, shall be reviewed
for proper authorizations, completion, accurate calculations, and
authorization confirming manual payout summary report totals.
(iii) A random sampling of records of manual payouts shall be
reviewed for proper authorizations and completion for manual payouts
less than $1,200.
(iv) Records of all manual prize payouts of $1,200 or more shall be
reviewed for proper authorizations and completion.
(v) Where manual payout information is available per player
interface, records of manual payouts shall be reviewed against the
recorded manual payout amounts per player interface.
(vi) Manual payout forms shall be reconciled to each cashier's
accountability documents and in total for each relevant period (e.g.,
session, shift, day, etc.).
(vii) Records of voided manual payouts shall be reviewed for proper
authorization and completion.
(viii) Records of voided bingo cards shall be reviewed for proper
authorization and completion.
(ix) Use of controlled forms shall be reviewed to ensure each form
is accounted for.
(x) Where bingo sales are available per player interface, bingo
sales shall be reviewed for reasonableness.
(xi) Amount of financial instruments accepted per financial
instrument type and per financial instrument acceptor shall be reviewed
for reasonableness, to include but not limited to zero amounts.
(xii) Where total prize payouts are available per player interface,
total prize payouts shall be reviewed for reasonableness.
(xiii) Amount of financial instruments dispensed per financial
instrument type and per financial instrument dispenser shall be
reviewed for reasonableness, to include but not limited to zero
amounts.
(xiv) For a random sampling, foot the vouchers redeemed and trace
the totals to the totals recorded in the voucher system and to the
amount recorded in the applicable cashier's accountability document.
(xv) Daily exception information provided by systems used in the
operation of bingo shall be reviewed for propriety of transactions and
unusual occurrences.
(xvi) Ensure promotional coupons which are not financial
instruments are properly cancelled to prevent improper recirculation.
(xvii) Reconcile all parts of the form used to document transfers
that increase/decrease the inventory of an accountability (includes
booths and any other accountability areas).
(xviii) Reconcile voucher liability (e.g., issued-voided-redeemed-
expired = unpaid) to the voucher system records.
(xix) The total of all patron deposit accounts shall be reconciled,
as follows:
(A) A report shall be generated that details each day's beginning
and ending balance of patron deposit accounts, adjustments to patron
deposit accounts, and all patron deposit account transactions.
(B) Reconcile the beginning and ending balances to the summary of
manual deposit/withdrawal and account adjustment documentation to the
patron deposit account report.
[[Page 60506]]
(xx) Reconcile each day's patron deposit account liability (e.g.,
deposits +/-adjustments-withdrawals = total account balance) to the
system records.
(xxi) Reconcile electronic funds transfers to the cashless system
records, the records of the outside entity which processed the
transactions and the operations dedicated cashless account bank
records.
(xxii) Accounting data used in performance analysis may only be
altered to correct amounts that were determined to be in error. When
correcting accounting data, the correct amount shall be indicated in
any Class II gaming system exception reports generated.
(xxiii) Accounting/auditing agents shall reconcile the audited
bingo totals report to the audited bingo accounting data for each day.
(xxiv) Accounting/auditing agents shall ensure each day's bingo
accounting data used in performance reports has been audited and
reconciled.
(xxv) If the Class II gaming system produces exception reports they
shall be reviewed on a daily basis for propriety of transactions and
unusual occurrences.
(3) Audit tasks to be performed at relevant periods:
(i) Financial instrument acceptor data shall be recorded
immediately prior to or subsequent to a financial instrument acceptor
drop. The financial instrument acceptor amount-in data must be recorded
at least weekly. The time between recordings may extend beyond one week
in order for a recording to coincide with the end of an accounting
period only if such extension is for no longer than six additional
days.
(ii) When a player interface is removed from the floor, the
financial instrument acceptor contents shall be protected to prevent
the misappropriation of stored funds.
(iii) When a player interface is permanently removed from the
floor, the financial instrument acceptor contents shall be counted and
recorded.
(iv) For currency interface systems, accounting/auditing agents
shall make appropriate comparisons of system generated count as
recorded in the statistical report at least one drop period per month.
Discrepancies shall be resolved prior to generation/distribution of
reports.
(v) For each drop period, accounting/auditing agents shall compare
the amount-in per financial instrument accepted by the financial
instrument acceptors to the drop amount counted for the period.
Discrepancies shall be resolved before the generation/distribution of
statistical reports.
(vi) Investigation shall be performed for any one player interface
having an unresolved drop variance in excess of an amount that is both
more than $25 and at least three percent (3%) of the actual drop. The
investigation performed and results of the investigation shall be
documented, maintained for inspection, and provided to the tribal
gaming regulatory authority upon request.
(vii) The results of variance investigations, including the date
and personnel involved in the investigations, will be documented in the
appropriate report and retained. The results will also include any
corrective action taken (e.g., accounting data storage component
replaced, interface component repaired, software debugged, etc.). The
investigation will be completed and the results documented within seven
days of the day the variance was noted, unless otherwise justified.
(viii) Procedures shall be established and implemented to perform
the following on a regular basis, at a minimum of monthly, and using
predetermined thresholds:
(A) Where the Class II gaming system is capable of providing
information per player interface, identify and investigate player
interfaces with total prize payouts exceeding bingo sales;
(B) Where bingo sales is available per player interface,
investigate any percentage of increase/decrease exceeding a
predetermined threshold, not to exceed 20%, in total bingo sales as
compared to a similar period of time that represents consistency in
prior performance.
(C) Investigate any exception noted in paragraphs (i)(3)(viii)(A)
and (B) of this section and document the findings. The investigation
may include procedures to review one or more of the following:
(1) Verify days on floor are comparable.
(2) Non-prize payouts for authenticity and propriety.
(3) Player interface out of service periods.
(4) Unusual fluctuations in manual payouts.
(D) If the investigation does not identify an explanation for
exceptions then a physical check procedure shall be performed, as
required by paragraph (i)(3)(viii)(E) of this section.
(E) Document any investigation of unresolved exceptions using a
predefined player interface physical check procedure and checklist, to
include a minimum of the following as applicable:
(1) Verify game software;
(2) Verify player interface configurations;
(3) Test amount in accounting data for accuracy upon insertion of
financial instruments into the financial instrument acceptor;
(4) Test amount out accounting data for accuracy upon dispensing of
financial instruments from the financial instrument dispenser;
(5) Record findings and repairs or modifications made to resolve
malfunctions, including date and time, player interface identifier and
signature of the agent performing the player interface physical check,
and additional signatures as required; and
(6) Maintain player interface physical check records, either in
physical or electronic form, for the period prescribed by the
procedure.
(ix) For Class II gaming systems, procedures shall be performed at
least monthly to verify that the system accounting data is accurate.
(x) For Tier C, at least weekly:
(A) Financial instruments accepted at a kiosk shall be removed and
counted by at least two agents; and
(B) Kiosk transactions shall be reconciled to the beginning and
ending balances for each kiosk.
(xi) At the conclusion of a promotion, accounting/audit agents
shall perform procedures (e.g., interviews, review of payout
documentation, etc.) to ensure that promotional prize payouts,
drawings, and giveaway programs are conducted in accordance with the
rules provided to the patrons.
(4) Inter-tribal prize pools. Procedures shall be established and
implemented to govern the participation in inter-tribal prize pools,
which at a minimum shall include the review, verification and
maintenance of the following records, which shall be made available,
within a reasonable time of the request, to the tribal gaming
regulatory authority upon request:
(i) Summary of contributions in total made to an inter-tribal prize
pool;
(ii) Summary of disbursements in total from an inter-tribal prize
pool; and
(iii) Summary of inter-tribal prize pool funds availability.
(5) Performance Analysis. (i) Bingo performance data shall be
recorded at the end of the gaming operations specified 24-hour
accounting period. Such data shall include:
(A) Amount-in and amount-out for each Class II gaming system.
(B) The total value of all financial instruments accepted by the
Class II gaming system by each financial instrument acceptor and by
each financial instrument type.
(C) The total value of all financial instruments dispensed by the
Class II
[[Page 60507]]
gaming system and by each financial instrument type.
(D) The total value of all manual payouts by each Class II gaming
system.
(E) The total value of bingo purchases for each Class II gaming
system.
(F) The total value of prizes paid for each Class II gaming system.
(ii) Procedures shall be established and implemented that ensure
the reliability of the performance data.
(iii) Upon receipt of the summary of the data, the accounting
department shall review it for reasonableness using pre-established
parameters defined by the gaming operation.
(iv) An agent shall record and maintain all required data before
and after any maintenance or modifications that involves the clearing
of the data (e.g., system software upgrades, data storage media
replacement, etc.). The information recorded shall be used when
reviewing performance reports to ensure that the maintenance or
modifications did not improperly affect the data in the reports.
(6) Statistical reporting. (i) The bingo sales, prize payouts,
bingo win, and actual bingo win percentages shall be recorded for:
(A) Each shift or session;
(B) Each day;
(C) Month-to-date; and
(D) Year-to-date or fiscal year-to-date.
(ii) A monthly comparison for reasonableness shall be made of the
amount of bingo paper sold from the bingo paper control log to the
amount of bingo paper sales revenue recognized.
(iii) Management employees independent of the bingo department
shall review bingo statistical information on at least a monthly basis.
(iv) Agents independent of the bingo department shall investigate
any large or unusual statistical fluctuations, as defined by the gaming
operation.
(v) Such investigations shall be documented, maintained for
inspection, and provided to the tribal gaming regulatory authority upon
request.
(vi) The actual bingo win percentages used in the statistical
reports should not include operating expenses (e.g., a percentage
payment to administrators of inter-tribal prize pools), promotional
prize payouts or bonus payouts not included in the prize schedule.
(7) Progressive prize pools. (i) A display that shows the amount of
the progressive prize shall be conspicuously displayed at or near the
player interface(s) to which the prize applies.
(ii) At least once each day, each gaming operation shall record the
total amount of each progressive prize pool offered at the gaming
operation on the progressive log.
(iii) When a manual payment for a progressive prize is made from a
progressive prize pool, the amount shall be recorded on the progressive
log.
(iv) Each gaming operation shall record, on the progressive log,
the base reset amount of each progressive prize the gaming operation
offers.
(v) Procedures shall be established and implemented specific to the
transfer of progressive amounts in excess of the base reset amount to
other awards or prizes. Such procedures may also include other methods
of distribution that accrue to the benefit of the gaming public.
Sec. Sec. 543.8-543.15 [Reserved]
Sec. 543.16 What are the minimum internal controls for information
technology?
(a) Physical security measures restricting access to agents,
including vendors, shall exist over the servers, including computer
terminals, storage media, software and data files to prevent
unauthorized access and loss of integrity of data and processing.
(b) Unauthorized individuals shall be precluded from having access
to the secured computer area(s).
(c) User controls. (1) Computer systems, including application
software, shall be secured through the use of passwords or other
approved means.
(2) Procedures shall be established and implemented to ensure that
management or independent agents assign and control access to computer
system functions.
(3) Passwords shall be controlled as follows unless otherwise
addressed in the standards in this section.
(i) Each user shall have his or her own individual user
identification and password.
(ii) When an individual has multiple user profiles, only one user
profile per application may be used at a time.
(iii) Passwords must be changed at least quarterly with changes
documented. Documentation is not required if the system prompts users
to change passwords and then denies access if the change is not
completed.
(iv) The system must be updated to change the status of terminated
users from active to inactive status within 72 hours of termination.
(v) At least quarterly, independent agents shall review user access
records for appropriate assignment of access and to ensure that
terminated users do not have access to system functions.
(vi) Documentation of the quarterly user access review shall be
maintained.
(vii) System exception information (e.g., changes to system
parameters, corrections, overrides, voids, etc.) must be maintained.
(4) Procedures shall be established and implemented to ensure
access listings are maintained which include at a minimum:
(i) User name or identification number (or equivalent); and
(ii) Listing of functions the user can perform or equivalent means
of identifying same.
(d) Adequate backup and recovery procedures shall be in place that
include:
(1) Daily backup of data files--(i) Backup of all programs. Backup
of programs is not required if the program can be reinstalled.
(ii) Secured storage of all backup data files and programs, or
other adequate protection to prevent the permanent loss of any data.
(iii) Backup data files and programs may be stored in a secured
manner in another building that is physically separated from the
building where the system's hardware and software are located. They may
also be stored in the same building as the hardware/software as long as
they are secured in a fireproof safe or some other manner that will
ensure the safety of the files and programs in the event of a fire or
other disaster.
(2) Recovery procedures shall be tested on a sample basis at least
annually with documentation of results.
(e) Access records. (1) Procedures must be established to ensure
computer access records, if capable of being generated by the computer
system, are reviewed for propriety for the following at a minimum:
(i) Class II gaming systems;
(ii) Accounting/auditing systems;
(iii) Cashless systems;
(iv) Voucher systems;
(v) Player tracking systems; and
(vi) External bonusing systems.
(2) If the computer system cannot deny access after a predetermined
number of consecutive unsuccessful attempts to log on, the system shall
record unsuccessful log on attempts.
(f) Remote access controls. (1) For computer systems that can be
accessed remotely, the written system of internal controls must
specifically address remote access procedures including, at a minimum:
(i) Record the application remotely accessed, authorized user's
name and business address and version number, if applicable;
(ii) Require approved secured connection;
(iii) The procedures used in establishing and using passwords to
allow authorized users to access the computer system through remote
access;
(iv) The agents involved and procedures performed to enable the
[[Page 60508]]
physical connection to the computer system when the authorized user
requires access to the system through remote access; and
(v) The agents involved and procedures performed to ensure the
remote access connection is disconnected when the remote access is no
longer required.
(2) In the event of remote access, the information technology
employees shall prepare a complete record of the access to include:
(i) Name or identifier of the employee authorizing access;
(ii) Name or identifier of the authorized user accessing system;
(iii) Date, time, and duration of access; and
(iv) Description of work performed in adequate detail to include
the old and new version numbers, if applicable of any software that was
modified, and details regarding any other changes made to the system.
Dated: October 17, 2007.
Philip N. Hogen,
Chairman.
Norman H. DesRosiers,
Commissioner.
Cloyce V. Choney,
Commissioner.
[FR Doc. E7-20778 Filed 10-23-07; 8:45 am]
BILLING CODE 7565-01-P