RubinBrown Gaming Stats 2013

Focus on Tribal Gaming: NIGC Minimum Internal Control Standard Changes On October 22, 2012, the National Indian Gaming Commission (NIGC) revisions of two critical regulations became effective: 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 regulations, which had recently fallen behind technology, and will ensure the integrity of Indian Gaming is upheld for years to come. History of the Changes The announcement of the revisions becoming official regulations is the end of a long process for the NIGC. The process began in 2008 when the NIGC first announced plans to develop section CFR 543, to be applicable exclusively for Class II gaming; however, concerns over the initial changes and the NIGC’s regulatory authority prompted extended delays in implementing all of the 2008 changes. In November 2010, the NIGC revised its regulatory review process which led to the development of the Tribal Advisory Committee (TAC), whose purpose is to receive, review, and provide input on the proposed MICS changes. After two years and regular tribal consultation sessions the NIGC concluded on the final rules. Impact of the Changes Class II Games: Sections CFR 543 and 547 are explicitly applicable to Class II games operated on Indian lands. Casinos operating prior to October 22, 2012 will have 1 year to update their control standards to ensure compliance with the minimum standards. Casinos opening after October 22, 2012 must meet the minimum standards upon opening. Class III Games: While Sections 543 and 547 are only applicable to Class II games, the adoption of the new controls standards for Class III games will remain contingent upon individual state negotiated tribal gaming compacts and the decision of the independent Tribal Gaming Regulatory Authorities (TGRAs). Highlight of Significant Changes Section 543 – Minimum Standards for Class II Gaming The revisions to Section 543 adds additional control standards to the existing framework outlined in Section 542 and reorganizes the partial Section 543 standards published in September 2008. Additions and significant changes to the 543 standards include: Section 547 – MICS for Class II Gaming Systems and Equipment The revisions to Section 547 were designed to update the wording and standards to match advances in technology. Additionally, the revision reopens the “grandfathered” application process, providing Class II systems, existing prior to 2008, an additional five years to achieve compliance. Additions and significant changes to the 547 standards include: • Amends the standards for test labs • Provides guidance and amends the definition for downloadable games • Modifies the requirements for displaying minimum odds • Clarifies the term “alternate standard” Impact on Tribal Gaming Regulatory Authorities While existing casinos will have a year to comply with the new standards, Tribal Gaming Regulatory Authorities will need to begin charting the path towards compliance immediately. In achieving compliance with the new standards, regulators should focus on the following: • Outline a plan for governed properties achieving compliance with measurable milestones, ensuring full compliance is attained within the permitted time • Evaluate IT skill sets available to oversee compliance with both the IT operational and technical standards • Assess current structural (e.g. surveillance) compliance gaps that may require capital investment to achieve compliance and consider the adoption of alternative standards • Develop new internal audit programs to evaluate compliance • Addition of “Patron Deposit Accounts and Cashless Wagering” standards • Addition of “Gaming Promotions and Player Tracking Systems” standards • Addition of credit issuance standards • Inclusion of kiosk controls within the cage and vault section • Inclusion of the accounting and other essential systems within the IT standards • Provides clearer framework for TGRAs to exercise greater discretion

Article originally published on October 22, 2012. Please visit www.RubinBrown.com for more E-Focus Newsletters featuring regular updates and technical summaries focusing on the gaming industry and other accounting matters.