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NIGC MICS Update

NIGC MICS Update. Presented by: Steve Montoya, CPA . expertise. History Applicable NIGC MICS Requirements NIGC MICS Checklists Questions. Agenda. expertise.

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NIGC MICS Update

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  1. NIGC MICS Update Presented by: Steve Montoya, CPA

  2. expertise. • History • Applicable NIGC MICS Requirements • NIGC MICS Checklists • Questions Agenda

  3. expertise. • Indian Gaming Regulatory Act – was enacted by the United States Congress on October 17, 1988, to regulate the conduct of gaming on Indian Lands. IGRA establishes the NIGC and a regulatory structure for Indian gaming in the United States. – Review IGRA • National Indian Gaming Commission (NIGC) – an independent federal regulatory agency established pursuant to the Indian Gaming Regulatory Act of 1988. • Code of Federal Regulations Title 25 (25 CFR) – implements the Indian Gaming Regulatory Act (Pub. L. 100-497, 102 Stat. 2467) • 25 CFR 542, 543, and 547 – Establishes minimum internal control standards for Class II and Class III gaming History

  4. expertise. • August 2005 - CRIT Decision • October 2008 - Initial Passing of 543 MICS • November 2010 - the NIGC issued a Notice of Inquiry and Notice of Consultation • April 2011 - NIGC published a Notice of Regulatory Review Schedule (NRR) • February 2012 – Tribal Advisory Committee (TAC) submitted its recommendations on 543 MICS – Part 543 History

  5. expertise. Regulation • On October 22, 2012, the National Indian Gaming Commission (NIGC) published two critical regulations that became effective for Class II gaming: • 25 CFR Part 543 Minimum Internal Control Standards (MICS) for Class II Gaming (MICS),and • 25 CFR 547 Minimum Technical Standards for Class II Gaming Systems and Equipment The new standards are critical to tribal gaming regulators as the standards provide much needed updates to the control regulationssurrounding the Class II gaming environment

  6. Do these changes impact my casino? expertise.

  7. expertise. Class IClass II Class III ApplicableNIGC MICS Standards 25 CFR 543 25 CFR 547 25 CFR 542 Tribes

  8. expertise. • Class I Gaming: means social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as a part of, or in connection with, tribal ceremonies or celebrations. • Class II Gaming: means the game of chance commonly known as bingo, pull-tabs, lotto, punch boards, tip jars, instant bingo, any other games similar to bingo, and card games. • Class III Gaming: means all forms of gaming that are not Class I gaming or Class II gaming. Class I, II and III Definitions

  9. NIGC MICS Requirements Flowchart expertise.

  10. expertise. • Exercises – NIGC MICS Requirements

  11. expertise. • A tribally owned casino offers the following gaming activities: • Bingo • Class III Gaming Machines • Table Games • The State Gaming Compact and Tribal Gaming Ordinance does not require the casino to comply with NIGC regulations for Class III gaming activities. Based on this scenario, what is the best answer to the following questions: • What NIGC MICS requirements, if any, is the Tribe required to comply with: • Part 542 • Part 543 • Both • None

  12. expertise. • A tribally owned casino offers the following gaming activities: • Bingo • Class III Gaming Machines • Table Games • The State Gaming Compact and Tribal Gaming Ordinance does not require the casino to comply with NIGC regulations for Class III gaming activities.Based on this scenario, what is the best answer to the following questions: • What NIGC MICS requirements, if any, is the Tribe required to comply with: • Part 542 • Part 543 • Both • None

  13. expertise. • A tribally owned casino offers the following gaming activities: • Class III Gaming Machines • Table Games • The State Gaming Compact and Tribal Gaming Ordinance does not require the casino to comply with NIGC regulations for Class III gaming activities. Based on this scenario, what is the best answer to the following questions: • What NIGC MICS requirements, if any, is the Tribe required to comply with: • Part 542 • Part 543 • Both • None

  14. expertise. • A tribally owned casino offers the following gaming activities: • Class III Gaming Machines • Table Games • The State Gaming Compact and Tribal Gaming Ordinance does not require the casino to comply with NIGC regulations for Class III gaming activities.Based on this scenario, what is the best answer to the following questions: • What NIGC MICS requirements, if any, is the Tribe required to comply with: • Part 542 • Part 543 • Both • None – No Class II Gaming Activities

  15. expertise. • A tribally owned casino offers the following gaming activities: • Bingo • Class III Gaming Machines • Table Games • The State Gaming Compact and Tribal Gaming Ordinance requires the casino to comply with NIGC regulations for Class III gaming activities. Based on this scenario, what is the best answer to the following question: • What NIGC MICS requirements, if any, is the Tribe required to comply with: • Part 542 • Part 543 • Both • None

  16. expertise. • A tribally owned casino offers the following gaming activities: • Bingo • Class III Gaming Machines • Table Games • The State Gaming Compact and Tribal Gaming Ordinance requiresthe casino to comply with NIGC regulations for Class III gaming activities.Based on this scenario, what is the best answer to the following questions: • What NIGC MICS requirements, if any, is the Tribe required to comply with: • Part 542 • Part 543 • Both • None

  17. expertise. • A tribally owned casino offers the following gaming activities: • Class III Gaming Machines • Table Games • The State Gaming Compact and Tribal Gaming Ordinance requires the casino to comply with NIGC regulations for Class III gaming activities. Based on this scenario, what is the best answer to the following questions: • What NIGC MICS requirements, if any, is the Tribe required to comply with: • Part 542 • Part 543 • Both • None

  18. expertise. • A tribally owned casino offers the following gaming activities: • Class III Gaming Machines • Table Games • The State Gaming Compact and Tribal Gaming Ordinance requires the casino to comply with NIGC regulations for Class III gaming activities. Based on this scenario, what is the best answer to the following questions: • What NIGC MICS requirements, if any, is the Tribe required to comply with: • Part 542 • Part 543 • Both • None

  19. expertise. • Compliance with NIGC MICS • Parts 543 and 547 Class II Gaming • National Indian Gaming Commission website http://www.nigc.gov

  20. expertise. • Purpose: Establishes the minimum internal control standards for the conduct of Class II games on Indian lands. • Tribal Internal Control Standards (TICS): TGRAs must ensure that TICS are established and implemented that provide a level of control that equals or exceeds the applicable standards set forth in this part. • Evaluation of Existing TICS: Each TGRA must determine whether and to what extent their TICS require revision to ensure compliance with this part. • System of Internal Controls (SICS): Each gaming operation must develop a SICS, as approved by the TGRA, to implement the TICS. MICS – Part 543 Class II Gaming

  21. expertise. • Compliance Dates • TICS Approval: TICS must be promulgated by October 22, 2013 • Implementation Date: Changes necessary to ensure compliance with this part must be implemented at the beginning of the next fiscal year. TGRA may extend an additional six months to come into compliance with the TICS. MICS – Part 543 Class II Gaming

  22. expertise. Six month extension illustration:

  23. expertise. Compliance Based Upon Tier: • Tier A Gaming Operation: Gaming operations with annual gross gaming revenues of more than $3 million but not more than $8 million • Tier B Gaming Operation: Gaming operations with annual gross gaming revenues of more than $8 million but not more than $15 million • Tier C Gaming Operation: Gaming operations with annual gross gaming revenues of more than $15 million. MICS – Part 543 Class II Gaming

  24. expertise. Determination of Tier: • Based upon the annual gross gaming revenues reported in audited financial statements. • Gaming operations moving from one tier to another shall have nine months from the date of the independent CPA audit report to achieve compliance with the requirements of the new tier. Gaming Operations: • Each gaming operation shall develop and implement an internal control system that, at a minimum, complies with TICS. MICS – Part 543 Class II Gaming

  25. expertise. • Bingo • Cage, Vault, Kiosk, Cash, and Cash Equivalents • Information Technology and Information Technology Data • Auditing & Accounting • Pull Tabs • Card Games • Complimentary Services or Items • Lines of Credit • Drop and Count • Surveillance • Auditing Revenue (Previously included in Accounting) • Patron Deposit Accounts and Cashless Systems (New) • Gaming Promotions & Player Tracking Systems (New) MICS – Part 543 Class II Gaming NIGC provides MICS checklists for the following areas:

  26. expertise. Applicable NIGC MICS Standards (continued)

  27. expertise. Major areas include: • Supervision • Bingo Cards • Bingo Card Sales • Draw • Prize Payout • Cash and Cash Equivalent Controls • Technologic aids to the play of bingo (Expanded) • Operations • Vouchers • Variances Areas no longer included: • Standards for Players Accounts (Now Patron Deposit Accounts and Cashless Systems) • Computer Applications MICS – Part 543 Class II Gaming – Bingo Traditional and Electronic Gaming Device Bingo

  28. expertise. Draw: • Electronic aid – certification in accordance with 547.14 Variance • Establish a threshold level for reviews • Reviews must be documented Technologic aids to the play of bingo: • Safeguarding the integrity of the technology • Shipping and receiving • Suppliers • Restricted Access • Recordkeeping and audit process • Signature verification • Installation • Dispute resolution MICS – Part 543 Class II Gaming – Bingo

  29. expertise. MICS – Part 543 Class II Gaming –Cage • Major areas include: • Supervision • Check Cashing • Cage and Vault Accountability • Kiosks • Patron Deposited Funds • Promotional Payments, drawings and giveaways • Chips and tokens • Vouchers (Used to be in gaming machines) • Cage and Vault Access • Variances • Areas no longer included: • Coupon Standards • Computer applications • NIGC Fees

  30. expertise. MICS – Part 543 Class II Gaming – Cage • Kiosks: • Accountability and Independence • Cash counts and reconciliation • Physical security • Promotional Payments, drawings and giveaways: • Supporting documentation • Approval • Vouchers: • Authenticity and validity • Expired/ stolen/ lost vouchers • Approval • Voided vouchers • Cage and Vault Access: • Restricted access

  31. expertise. MICS – Part 543 Class II Gaming – IT • Major areas include: • Supervision • Class II gaming systems logical and physical • Physical Security • Logical Security • User Controls • Installation and/or modification • Remote Access • Incident monitoring and reporting • Data Backups • Software downloads • Verify downloads • Areas no longer included: • Gaming program changes • Remote dial-up

  32. expertise. MICS – Part 543 Class II Gaming – IT • Class II gaming systems logical and physical controls: • Restricted access • Storage media • Independence • Gaming system - any computerized system that is integral to the gaming environment, including the server and peripherals for Class II gaming system, accounting, surveillance, essential phone system, and door access and warning systems. • Software downloads: • Performed in accordance with 25 CFR 547.12

  33. expertise. MICS – Part 543 Class II Gaming – Accounting • Major areas include: • Conflict of standards • Accounting • Internal audit • Annual requirements • Areas no longer included: • Gross gaming revenue computations (included in Auditing Revenue) • Periodic payments • Wide area payouts • Cash-out tickets • Credit • Write off credit

  34. expertise. MICS – Part 543 Class II Gaming – continued • Annual Requirements • Agreed-upon procedures, a CPA must be engaged to perform an assessment to verify whether the gaming operation is in compliance with the MICS and/or TICS. • A CPA must determine compliance by the gaming operation with the internal audit requirements by: • Completing the internal audit checklist. • Ensuring that the internal auditor completed all applicable checklists. • Verifying that any areas of non-compliance have been identified. • Ensuring that audit reports are completed and include responses from management. • Verifying that appropriate follow-up on audit findings have been conducted and corrective measures have been taken to effectively mitigate risk.

  35. expertise. MICS – Part 543 Class II Gaming – continued Annual Requirements – continued • The Tribe must submit two copies of the AUP report and the annual financial audit report to the NIGC within 120 days of the gaming operation’s fiscal year-end. • If the CPA determines that the internal audit procedures performed during the fiscal year have been properly completed, the CPA may rely on the work of the internal audit for the completion of the MICS checklists. • All noted instances of noncompliance must be documented in the report with a narrative description, the number of exceptions and sample size tested.

  36. expertise. What about Class III Reporting Requirements? CPA Testing includes 3 Options: (1) CPA completes all applicable NIGC MICS checklists. (2) CPA tests compliance with the Tribal Internal Control Standards. (3) Reliance on the Internal Auditor - Unannounced drop and count. - Re-perform 3% of gaming machines and table games - Re-perform 5% of all other Checklists.

  37. expertise. MICS – Part 543 Class II Gaming – Pull Tabs • Major areas include: • Supervision • Pull tab inventory • Pull tab sales • Winning pull tabs • Pull tab operating funds • Statistical records • Variances • Areas no longer included: • Accountability form • Electronic equipment • Computer applications

  38. expertise. MICS – Part 543 Class II Gaming – Card Games • Major areas include: • Supervision • Exchanges or transfers • Standards for playing cards • Shill Funds • Standards for reconciliation of card room bank • Posted Rules • Promotional progressive pots and pools • Variances • Areas no longer included: • Standards for drop and count (Included in drop and count) • Plastic cards • Computer applications

  39. expertise. MICS – Part 543 Class II Gaming – Complimentary Services and Items • Major areas include: • Supervision • Complimentary services and items • Complimentary service and items records • Variances • Areas no longer included: • NONE

  40. expertise. MICS – Part 543 Class II Gaming – Line of Credit • Major areas include: • Supervision • Credit standards • Variances • Areas no longer included: • Accounting/ auditing standards (included in Auditing and Accounting) • Computer applications

  41. expertise. MICS – Part 543 Class II Gaming – Drop and Count • Major areas include: • Supervision • Count room access • Count team • Card game drop standards • Player interface and financial instrument storage component drop standard • Card game standards • Player interface financial instrument count standards • Controlled keys (New) • Variances (New) • Areas no longer included: • All standards related to table games and gaming machines

  42. expertise. MICS – Part 543 Class II Gaming – Drop and Count • Card game drop standards: • Security and surveillance • Dual control • Emergency drops • Shift changes • Player interface and financial instrument storage component drop standard: • Surveillance • Dual control • Emergency drops • Transportation

  43. expertise. MICS – Part 543 Class II Gaming – Drop and Count • Card game count standards: • Restricted access • Separation of multiple revenue centers • Documentation and Verification • Currency counter interface • Manual counting • Variances and corrections • Player interface financial instrument count standards: • Restricted access • Separation of multiple revenue centers • Documentation a Verification • Currency counter interface • Manual counting • Variances and corrections

  44. expertise. MICS – Part 543 Class II Gaming – Surveillance • Major areas include: • Supervision • Surveillance equipment and control room • Additional surveillance requirements • Reporting requirements • Recording retention • Logs • Areas no longer included: • General • Keno • Pari-mutuel • Table games • Progressive table games • Gaming machines • Fills and credits • Change booths

  45. expertise. MICS – Part 543 Class II Gaming • NIGC provides MICS checklists for the following new areas: • Patron Deposit Accounts and Cashless Systems • Auditing Revenue • Gaming Promotions & Player Tracking Systems

  46. expertise. MICS – Part 543 Class II Gaming – Patron Deposit Accounts and Cashless Systems • Major areas include: • Supervision • Patron deposit accounts and cashless systems • Patron deposits, withdrawals, and adjustments • Variances

  47. expertise. MICS – Part 543 Class II Gaming – Auditing Revenue • Major areas include: • Supervision • Independence • Documentation • Operational Areas

  48. expertise. MICS – Part 543 Class II Gaming – Gaming Promotions & Player Tracking Systems • Major areas include: • Supervision • Gaming promotions • Player tracking systems and gaming promotions • Variances

  49. expertise. • Compliance with MICS Part 547 Class II Gaming Systems & Equipment

  50. expertise. Part 547-Minimum Technical Standards For Class II Gaming Systems and Equipment • Section 547 – Background and How to Comply • Overview of Section 547 requirements

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