Master Class on Regulatory Compliance December 11 – 13, 2024 NYNY Hotel Casino – Las Vegas, Nevada Agenda (Subject to Change)
Tuesday, December 10, 2024 8:00 AM – 9:00 AM
Breakfast & Registration Opens
9:00 AM – 10:15 AM
Evaluating, Re-writing and Implementing Governing Documents” Bill Cornelius, Gaming Attorney
10:15 AM – 10:30 AM
Break
10:30 AM – Noon
Preparing Your Regulatory Authority for External Regulatory Authority Reviews Bill Cornelius, Gaming Attorney
NOON – 1:30 PM
LUNCH BREAK (On your own)
1:30 PM – 3:00 PM
Regulating Risk: Identifying and Mitigating Risk on Your Property Billy David, Owner Bo-Co-Pa & Associates
3:00 PM – 3:15 PM
Break
3:15 PM – 4:30 PM
Creating Good Working Relationships with Tribal Government, Gaming Operations and External Regulatory Authorities Billy David, Owner Bo-Co-Pa & Associates
Wednesday, December 11, 2024 8:00 AM – 9:00 AM
Breakfast
9:00 AM – 10:15 AM
Managing Data: Examining Best Methods That Can Help You Make Decisions Abe Martin, Owner Casino Cryptology
10:15 AM – 10:30 AM
Break
10:30 AM – Noon
High-Level Cheats, Scams, and Other Things That Can Harm Your Property Abe Martin, Owner Casino Cryptology
Noon – 1:30 PM
Lunch on our own
1:30 PM – 3:00 PM
Maximizing Your Independent Test Lab Sean Mason, Senior Director Tribal Services BMM Test Labs
3:00 PM – 3:15 PM
Break
3:15 PM – 4:30 PM
Advanced Slot Machine Oversight: Understanding All The Data That Your Slot Floor Produces Peter Nikiper, Director of Technical Services BMM Test Labs
5:45 PM – 11:00 PM
IGA/IAC WNFR Watch Party – KAOS at the Palms Casino
Please plan to stay for the entire class each day to receive your certificate of completion. - Please arrive on time for sessions.
Thursday, December 12, 2024 8:00 AM – 9:00 AM
Breakfast
9:00 AM – 10:15 AM
ABCs of the gaming floor WipFli, LLC
10:15 AM – 10:30 AM
Break
10:30 AM – Noon
Reading financial statements for Commissioners WipFli, LLC
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Evaluating, Rewriting, and Implementing Governing Documents Indian Gaming Association Master Certification New York, New York, Las Vegas William Cornelius, Attorney at Law
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Assessment of existing tribal gaming ordinances, By-Laws or Tribal Internal Control Standards for compliance and efficiency. - Review and implementation of National Indian Gaming Commission Model Ordinance - Review and Implementation of Gaming Commission By-Laws - Review and implementation of Tribal Internal Control Standards.
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Identifying areas for updates, including licensing, oversight, and internal controls. Examples of areas for updates: -Criminal Justice Information Services -Include provisions for emerging gaming technologies, such as mobile gaming or Sports Book platforms. -Update compliance standards for cybersecurity to protect sensitive data.
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Rewriting Ordinances, By-Laws, and Tribal Internal Control Standards to align with federal regulations and tribal objectives. - Review Ordinance updates to verify the updates meet the requirements of the National Indian Gaming Commission’s model ordinance. -Identify Areas of Concern for updating Gaming Commission By-Laws. - Reviewing and updating Tribal Internal Control Standards (TICS) to maintain the integrity, efficiency, and compliance of tribal gaming operations.
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Developing implementation strategies, including training and public communication. - Conduct a Needs Assessment. -Input from stakeholders (Gaming Operation, Governing Body, Commission Staff). -Develop of Clear Implementation Plan. -Provide Guidance or Training for Implementation.
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Establishing a timeline for enactment and periodic review.
-Create a rollout plan to prioritize critical updates before minor changes. -Introduce check-ins to monitor ordinance implementation progress. -Set a deadline for a full compliance review every two to three years. -Plan for stakeholder feedback sessions.
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Questions?
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Preparing Your Regulatory Authority for External Regulatory Agency Reviews Indian Gaming Association Master Certification New York, New York, Las Vegas, Nevada William Cornelius, Attorney at Law
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Understanding Regulatory Agency Reviews • What are external regulatory agency reviews? • Purpose of those reviews (compliance checks, audits, assessments) • Types of regulatory agencies (internal audit, state, and federal)
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The Review Process • Steps involved in the review process - Preparation stage - Data collection and documentation - Review and evaluation by the agency - Follow-up actions and recommendations • Common timelines and expectations
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Assessing Your Regulatory Authority’s Readiness
• Key elements of readiness: - Adequate documentation and records - Compliance with relevant regulations - Internal processes and procedures - Staff knowledge and capacity • Self-assessment tools and checklists
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Building Internal Capacity for a Successful Review
• Importance of training staff • Clear communication channels • Assigning responsibilities for key areas (e.g., documentation, data management)
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Documentation and Data Management • Importance of accurate and up-to-date documentation. • Types of documents typically requested by external agencies. • How to organize and present your documentation.
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Handling Questions and Feedback from Regulatory Agencies • Anticipating possible questions and areas of focus • Responding to requests for clarification or additional information • Strategies for constructive engagement with external agencies • Dealing with non-compliance or findings
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Post-Review Actions • Addressing findings and implementing corrective actions • Reporting back to the regulatory agency • Continuous improvement and monitoring • Preparing for future reviews
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Best Practices for Preparing for External Reviews
• Summary of key strategies: - Early and proactive preparation - Clear, transparent communication - Consistent documentation practices - Ongoing staff training
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Questions
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Identifying and Mitigating Risk on your Property
billy@bo-co-pa.com
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Session Overview
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General Discussion of Risk Management
Reasons Why Risk Management Is Important • Protects Organizations Reputation • Minimizes Losses • Encourages Innovation Growth • Enhances Decision Making
(Harvard Business School)
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How Do You Currently Manage Risk?
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Who Is Responsible To Manage Risk?
• Tribal Council? • Casino Management? • Regulatory Authority?
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Why Risk Management for Regulators?
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Protects Organizations Reputation
What “reputation” are we trying to protect?
Discussion:
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Protects Organizations Reputation
Gaming Examples?
Non-Gaming Examples?
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• Gaming Examples? • Cage? • Table Games? • Slots?
Protects Organizations Reputation
• Accounting? • Licensees? • Others?
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Protects Organizations Reputation
• Non-Gaming Examples? • Players Club? • Food and Beverage? • EVS? • Marketing?
• Guest? • Others?
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Protects Organizations Reputation
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Discussion
Minimizes Losses
Let’s define losses. Do we go beyond $$$$?
If so, what are they?
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Minimizes Losses
• What do you use to minimize losses? • Discussion?
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Minimizes Losses
• Can you minimize all losses? If not, how do you choose what losses you minimize?
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Encourages Innovation Growth
Discussion Has your casino embraced innovation growth?
Examples?
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Encourages Innovation Growth • Examples? • Cashless opportunities • Sports Betting • Mobile or on-premise Gaming • New gaming platforms • Others?
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Enhances Decision Making
How do you make decision?
Discussion
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Enhances Decision Making
• When you are presented, risk how do you make decisions? • What is your decision-making process when addressing risk?
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Or another perspective
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1. Identify What Needs to Change : First, you have to identify it before you can fix it. 2. Analyze your pain points : Analyze what’s happening and how to improve it realistically. 3. Get Buy-In : You must get authorization and support from your gaming partners (Tribal Leadership and Casino Leadership). 4. Design the improvement process : Work with those people who are intimate with the process on how to improve it. 5. What do you need to do to get it done? Any plan is going to need resources; what are yours? 6. Make the Change : What do you need to implement the plan you are creating? 7. Review : Every plan needs monitoring to proceed as designed or planned.
How Can You Apply Risk Management To The Regulatory Agency? 7
Steps to Improve Processes
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Group Discussions
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Let's Practice: Using the Risk Management methods Scenario #1: • You are performing a risk assessment of the Players Club at the Casino. Discuss the risk using the Risk Management Process. Scenario #2: • The Casino is introducing a brand-new table game at the casino. Using the Risk Management method how would you go about approving or denying the game to come into play.
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Let's Practice: Using the Risk Management methods Scenario #3: • You have an applicant, slots director, with a license revoked in another jurisdiction. The Tribal Council would like you to license this individual, as they are a Tribal member.
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Let's Practice: Using the Risk Management methods Scenario #4: • You have performed a facility license review, and it was shown that the Casino continually is not complying with your facility license requirements, specifically not requiring the I.T. department to comply with cyber security protocols. They have convinced the Tribal Council that this is not necessary. You now need to prove to T.C. that it is necessary. How would you deal with this.
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“Creating Good Working Relationships with Tribal Government, Gaming Operations and External Regulatory Authorities”
Presented by Billy David, Owner Bo-Co-Pa & Associates billy@bo-co-pa.com Ph: 541.810.0700
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Meetings (we just love meetings!)
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1. Define your meeting objectives: Why do we need to meet or why are we hear. 2. Create an Agenda: Its only fair to know what I am meeting about! 3. Send our invites: Don’t get mad if no one shows up because they didn’t know. 4. Open meeting and conversation: Not all meeting can be open but it you're trying to accomplish task let everyone have a voice. 5. Don’t wander in the meeting: Stay on point and stay within the allotted time. 6. End of the meeting: Recap the meeting as well as who will be doing what task or what is the “Take away” from the meeting. 7. Notes: Make sure you take good notes for a follow up email.
Meeting tips/techniques
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Email Communication
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1. Be as clear and concise as possible: Not everyone may understand, make sure you are clear in your correspondence. 2. Be as professional as possible: DON’T push send if your mad! Once its gone its gone! 3. Have a good structure to your email: Structure your email in a manner that is easy for the reader to understand your key points to your email. 4. Don’t be ambiguous: We are regulators do need to worry about this! Do we? We are normally pretty straight forward. 5. It is ok to be direct: Depending on the topic you may have to be direct…no beating around the bush!
Tips for effective emails
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Phone Communication
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Phone etiquette
• Phone etiquette is the way you represent yourself and your business to customers and coworkers through telephone communication. • Show professionalism : remember you represent the Commission, the Casino and even the Tribe. • Be positive and friendly : This helps increase the callers trust in you, don’t be dismissive or rude. • Speak clearly : Try not to mumble or be disengaged
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One on One meetings
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One on one meeting
• Regular one-on-one meetings are essential for building trust, providing feedback, and addressing challenges between managers and employees as well as Regulators and Casino mangers. • These meetings help employees feel valued and supported, fostering a positive work environment. • Positive one on one meetings with Casino management are also a good way to establish a good relationship between the two organization.
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Texting
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Where do we start and what to you allow? If you do some things to think about
• Make sure the team prioritizes work task: Are they texting for work or are the using it for personal communication? • Everyone needs to be discreet: Be professional….but what does that really mean with the form of communication? • How much it too much? One a minute, hour or day? What's realistic? • Be professional: Do we understand text language? • If there are policies make sure everyone follows them.
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Anxiety of Communication
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Difficulty Speaking Common Anxiety Symptom Descriptions
• Difficulty or unusual awkwardness speaking or pronouncing words, syllables, or vowels. • Difficulty moving your mouth, tongue, or lips. • Suddenly become self-conscious of your problems talking, speaking, moving your mouth, tongue, or lips. • Uncharacteristically slurring your speech. • Uncharacteristically speaking much slower or faster than normal. • Uncharacteristically jumbling up words or fumbling over your words when speaking. • Mouth, tongue, or lips aren’t moving normally. • Mouth, tongue, lips, or facial muscles aren’t responding normally. • Face muscles feel unusually stiff, making talking difficult and forced. • Face feels like it has been anesthetized, making speaking or moving your mouth, tongue, or lips difficult. This symptom is often described as “slurred speech.”
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Difficulty Speaking Common Anxiety Symptom Descriptions
Difficulty Speaking can: • Occur occasionally, frequently, or persistently.
• Precede, accompany, or follow an escalation of other anxiety symptoms or occur by itself. • Precede, accompany, or follow a period of nervousness, anxiety, fear, and stress, or occur "out of the blue" for no reason. • Range in intensity from mild to moderate too severe. • Come in waves where it’s strong one moment and eases off the next. • Occur for a while, subside, and then return for no reason. • Change from day to day, moment to moment, or remain as a constant background during your struggle with anxiety disorder.
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Difficulty speaking or moving your mouth, tongue, or lips can seem more troublesome when in social, professional, or public settings.
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How do we apply that with our professional working relationships?
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Who do we Communicate with?
This Photo by Unknown Author is licensed under CC BY-SA
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Who do we communicate best with?
This Photo by Unknown Author is licensed under CC BY
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• Work colleagues/Teammates • Leadership • Patrons • Licensees/Employees
Who do we Communicate
with? On property
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Gaming Commissioners Commission Management Commission Team members
Regulatory Authority Officials
On property communication
Management Mid- Management Front Line Team members
Casino
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Regulatory Authority Communication (internal) • How do we communicate with each other or in our workspaces?
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Regulatory Authority Communication (external)
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Who do we communicate with off property?
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Tribal Leadership
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Tribal Leadership
Sometimes it can be a little stressful, tense, or even uncomfortable. Remember they are overseeing all aspects of the Tribe, that alone is a huge burden. Stick to our communication training, have an agenda, stick to the agenda and be prepared. Don’t listen to respond, listed to offer clarity is necessary. Be able to education in a manner that is respectful. Be knowledgeable.
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Board of Directors (Folks above Casino management)
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• This is tough, we sometimes are at odds with the BoD. • Determine what is the best course of action to communicate. Email, Video, phone or one on one. • Why are we at odds…..Everyone is there for the best interest of the Tribe right????? • Understand their role and educate them on what your role is….but don’t say “without us you can’t be open” • Be firm but fair, don’t listen to respond.
Board of Directors (Folks above Casino management)
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Meetings with Tribal Leadership, Casino BoD and the Regulatory Authority
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Why are we at odds?
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Everyone knowns everyone….including our personal history.
Cold hard truth communicating within our Tribal structure
No one thinks anyone knows anything, and honestly sometimes we are right!
Some folks have alternative motives, and regulators don’t like that!
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Set aside your personal opinions of others 01
Respect the position even if you can respect the person 02
Be knowledgeable of the topic, issue or issues. Don’t speak if you don’t know 03
Be open to meeting, be prepared and most of all be open to constructive criticism 04
Ideas to work through negativity
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Results take time and commitment
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Communicating with external agencies
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Communicating with other agencies
Know who you're meeting with
Know who decision makers are
Be respectful, but be firm on your mission
Stay within your scope of authority, and don’t speak out of turn. We all have limitations on what we can and can’t do or commit to.
Are you going there or are they coming to you? Why does that matter?
Be clear on why you are meeting
Correspond professionally, clearly and timely.
Many outside agencies do not know or understand your Tribes specific processes, needs or infrastructure. You may have to take time to educate them on that.
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Know the difference
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Is the agency an administrative agency? • NIGC • Health Service • Government officials Is the agency a Law Enforcement agency? • Municipalities • State • Federal • FBI • Homeland Security • ICE
•
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Tailor your conversation
Read the room 01
Understand the terminology 02
Know their role(s) 03
Know what they can have access to and what they can’t 04
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Master the art of communication
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Maximizing Your Independent Testing Lab
company confidential
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Overview
• What is an Independent Test Lab • The Role of Independent Testing Labs • Testing Process • Why Testing Matters for Tribal Gaming • Certification Explained • Compliance Standards for Tribal Gaming • Enhancing Tribal Gaming Operations
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What is an Independent Test Lab
• A Bill Breaking Kiosk is a self-service machine found in most casinos that allows patrons to exchange large bills for smaller denominations. These kiosks offer convenience and efficiency, improving the customer experience by enabling quick access to the right amount of cash for gameplay. Here’s an overview: Function : Breaks down large denomination bills (e.g., $100, $50) into smaller denominations like $20, $10, or $5. Purpose : Allows players to obtain smaller bills for use in slot machines, table games, or other services without needing to visit a cashier. Benefits : • Provides convenience for players by reducing wait times. • Enables faster access to cash for continued gameplay. • Alleviates pressure on cashier windows, allowing staff to focus on other customer service needs. Efficiency : Streamlines cash handling, allowing the casino to improve operational flow and guest satisfaction.
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The Role of Independent Testing Labs The role of an independent testing lab (ITL) in the gaming industry is critical to ensuring the integrity, fairness, and compliance of gaming systems and devices. Here are the primary functions and responsibilities of an ITL. Independent testing labs act as a bridge between game manufacturers, operators, and regulators, ensuring that the gaming industry operates transparently and ethically. For tribal gaming, ITLs help protect the sovereignty and financial interests of tribal nations while maintaining trust with players and stakeholders
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Testing Process • The testing process of Independent Testing Labs (ITLs) is a structured approach to ensure that gaming systems, devices, and software meet regulatory, technical, and fairness standards. Below is an outline of the typical steps involved: • Submission • Review or the submission • Functional Testing • Random Number Generator (RNG) • Compliance Testing • Security and Penetration Testing • System Compatibility Testing
• Field Testing • Certification • Post-Certification Support
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The Submission Process Submission Manufacturer/Operator Action : • The game developer or system manufacturer submits the gaming product (e.g., slot machine, table game, online platform) to the testing lab. • Includes detailed documentation such as game rules, source code, hardware specifications, and intended jurisdictional compliance standards. Lab Action : • Acknowledge receipt and conduct an initial review to ensure all required materials are provided. Preliminary Review Objective : • Verify that the submission aligns with jurisdictional requirements and industry standards. Actions Taken : • Check documentation completeness. • Conduct an initial assessment of hardware and software for compatibility and regulatory requirements.
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Testing Process
Functional Testing Objective : • Validate the operation of the gaming product under normal and stress conditions. Tests Performed : • Ensure the game functions as intended, including user interfaces, game logic, and reward mechanisms. • Identify potential errors, glitches, or malfunctions. Random Number Generator (RNG) Testing Objective : • Ensure game outcomes are fair and truly random. Tests Performed : • Statistical analysis of RNG algorithms to confirm randomness and absence of bias. • Validation against regulatory standards for randomness .
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Testing Process continued Compliance Testing Objective : • Verify that the product meets jurisdictional regulations and technical standards. Tests Performed : • Evaluate payout percentages (Return to Player or RTP). • Test interoperability with existing gaming systems, such as casino management or accounting systems. • Assess adherence to jurisdiction-specific security and operational standards. Security and Penetration Testing Objective : • Assess the cybersecurity posture of the product to protect against hacking, fraud, and unauthorized access. Tests Performed : • Network security tests to identify vulnerabilities in system architecture. • Simulated attacks to test data encryption, firewall robustness, and anti-tampering measures.
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Testing Process continued Tests Performed :
• Network security tests to identify vulnerabilities in system architecture. • Simulated attacks to test data encryption, firewall robustness, and anti-tampering measures. System Compatibility Testing Objective : • Ensure the product integrates seamlessly with other gaming systems. Tests Performed : • Evaluate hardware and software interactions, including communication protocols. • Test across multiple platforms and configurations (e.g., land-based, online, mobile). Field Testing (Optional) Objective : • Conduct real-world testing in a live environment if required by regulations or requested by the manufacturer. Actions Taken : • Deploy the product in a limited setting and monitor its performance. • Collect and analyze data from real users and systems
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Testing Process continued Reporting Objective : • Provide comprehensive documentation of testing results. Deliverables : • Detailed test report outlining findings, compliance status, and any required modifications. • Certification of compliance if the product passes all tests. • Feedback for further development or refinement if issues are identified. Certification Outcome : • If all tests are passed, the ITL issues a formal certification stating the product meets all necessary standards and regulations. Next Steps : • The certified product can now be deployed in the approved jurisdiction.
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Why Testing Matters for Tribal Gaming
Casino game testing is crucial for tribal gaming due to the unique regulatory, financial, and reputational factors that influence tribal gaming operations. Here’s why it matters: Ensuring Compliance with Tribal-State Compacts Importance : • Tribal gaming operates under agreements between tribal governments and state authorities (tribal-state compacts). • These compacts require compliance with specific gaming regulations, often mirroring state or federal standards. How Testing Helps : • Independent labs certify that games meet compact requirements, protecting tribal sovereignty and avoiding legal disputes. Protecting Tribal Sovereignty Importance : • Tribal governments maintain autonomy over gaming operations as part of their sovereign rights. • Ensuring compliance and fairness safeguards this autonomy. How Testing Helps : • Validates that tribal gaming operations meet high standards, reducing scrutiny and interference from external regulators. Maintaining Player Trust Importance : • Players expect fair and transparent gaming experiences. • Trust drives revenue and supports tribal economic development.
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Certification Explained
Gaming certification is the process by which an independent testing lab (ITL) verifies and certifies that a gaming product (e.g., slot machines, table games, online platforms) complies with technical, regulatory, and operational standards. This certification ensures that the product is fair, secure, and meets jurisdictional requirements Key Aspects of Gaming Certification What is Certified? Gaming Machines : • Slot machines, video poker, and other electronic gaming devices. Random Number Generators (RNGs) : • Algorithms that ensure the randomness of game outcomes. Game Software : • The code behind how games operate, including payout percentages and bonus features. Casino Management Systems (CMS) : • Systems for tracking player activity, financial transactions, and game performance. Online and Mobile Gaming Platforms : • Ensures compliance for digital platforms offering games of chance. Electronic Table Games : • Verifies the functionality of electronic or automated table games.
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Compliance Standards for Tribal Gaming Compliance standards for tribal gaming are a set of legal, technical, and operational guidelines that tribal gaming operations must follow to ensure fair play, secure systems, and adherence to tribal, state, and federal laws. These standards protect tribal sovereignty while ensuring the integrity of gaming operations and player trust. Tribal gaming compliance standards are derived from multiple sources, including: Indian Gaming Regulatory Act (IGRA) • Established in 1988, IGRA provides the federal framework for tribal gaming. • Divides gaming into three classes: • Class I : Traditional tribal games. • Class II : Bingo and similar games, regulated by tribal governments and the National Indian Gaming Commission (NIGC). • Class III : Casino-style games like slot machines and table games, regulated under tribal-state compacts. Tribal-State Compacts • Agreements between tribal governments and state authorities for regulating Class III gaming. • Outline specific operational requirements such as game types, revenue sharing, and regulatory oversight.
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Enhancing Tribal Gaming Operations Independent Testing Labs (ITLs) play a crucial role in optimizing tribal gaming operations by ensuring compliance, improving operational efficiency, and protecting tribal sovereignty. Here are the keyways ITLs support and enhance tribal gaming: Ensuring Regulatory Compliance Role : ITLs verify that gaming equipment and systems meet regulatory requirements set by tribal, state, and federal authorities, including the National Indian Gaming Commission (NIGC) and tribal-state compacts. Benefit to Tribal Gaming : • Avoids fines, penalties, or operational interruptions due to non-compliance. • Maintains good standing with regulatory bodies and preserves tribal sovereignty. Certifying Gaming Equipment Role : ITLs test and certify gaming machines, Random Number Generators (RNGs), and casino management systems to ensure they function as intended and meet jurisdictional standards. Benefit to Tribal Gaming : • Guarantees fair play, boosting player trust and satisfaction. • Enables the deployment of certified, compliant equipment, reducing risk of disputes with regulators. Enhancing Game Fairness and Player Trust Role : ITLs conduct thorough testing of game fairness, payout percentages, and RNGs to validate randomness and transparency. Benefit to Tribal Gaming :
• Builds credibility with players, encouraging repeat visits and long-term loyalty. • Reduces the risk of fraudulent games that could harm reputation and revenue.
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December 12, 2024
Indian Gaming Association Masters of Regulatory Compliance The ABC’s of the Gaming Floor and the flow to the Financial Statements
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Table Games Revenue
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Overview
Slot Revenue
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Promotional Allowances
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Analysis of comps and Player’s Club liability 04
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Table Games Revenue
Customer initiates a request for chips on credit or exchanges money for chips
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Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
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Table Game revenue is calculated as follows: Box Drop +Markers Issued - Change in Table Inventory (Openers + Fills – Credits – Closers) = Win (Revenue)
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Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
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Table Games Hold is calculated as Win divided by Total Drop (Box Drop + Markers Issued).
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Main Cage
Soft Count Room
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Table Games Pit
Customer initiates a request for chips on credit or exchanges money for chips
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Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
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1. Pit Opening Table inventory of chips are recorded on opener forms and opener is dropped into the table drop box for each table at the beginning of the shift. Various controls exist over access to table inventory and drop boxes as well as the contents of such boxes.
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Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
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Main Cage
Soft Count Room
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Table Games Pit
Customer initiates a request for chips on credit or exchanges money for chips
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Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
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2. Credit transaction If a patron has previously established credit with the casino, they may request an advance of chips on their credit (marker). After appropriate approval, the customer is then given the chips and must sign the documents associated with the extension of credit. Appropriate documentation is recorded and dropped into the table drop box to ensure accountability for computation of table win/loss. Cash transaction A cash customer presents cash to the dealer who exchanges the cash for an equivalent amount in chips. The cash is dropped by the dealer into the table drop box
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Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
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Main Cage
Soft Count Room
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Table Games Pit
Customer initiates a request for chips on credit or exchanges money for chips
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Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
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3. At the Table Patron places a bet at the table prior to the beginning of the hand or particular round of play. Controls are in place to monitor the customer’s activities to ensure that the customer plays within the guidelines and rules of the game. If the hand or round of play results in a winning bet to the customer, the dealer pays the customer the appropriate amount of chips from table inventory. If the customer loses the dealer collects the customers bet and puts the chips in the table inventory.
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Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
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Main Cage
Soft Count Room
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Table Games Pit
Customer initiates a request for chips on credit or exchanges money for chips
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Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
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4 . Fills and credits Pit personnel monitor individual table inventory levels. If table levels fall below minimum levels necessary to operate the game based on the current volume of play the supervisor request a “fill” from the cage to the table. If table levels exceed a level , necessary for secure or safe operation or if credit instruments need to be transferred to the cage, then a pit supervisor initiates a “credit” to the cage. Controls for fills/credit exist to ensure proper accountability and documentation. Separate controls exist over cage accountability to ensure the proper accountability for all components of the cage. Do you know the levels at your property?
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Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
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Main Cage
Soft Count Room
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Table Games Pit
Customer initiates a request for chips on credit or exchanges money for chips
2
Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
3
5. End of shift/ Drop At the end of each shift, an opener/closer form is completed by Pit personnel. The closer piece of the form is dropped into the drop box The drop team pulls all boxes and inserts new empty drop boxes into each table. Or with multi-shift drop boxes, security or the designated team keys the shift change on the drop box. Drop boxes are transported to the soft count room Controls over the custody and access to keys associated with the drop boxes as well as the locked cages – who can access and when they may access the keys. Count time and count room controls over drop boxes.
4
Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
5
6
Main Cage
Soft Count Room
7
9
9
1
Table Games Pit
Customer initiates a request for chips on credit or exchanges money for chips
2
Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
3
6. Count and transfer to cage Procedures are specified and published regarding the count process and the accountability for funds and paperwork associated with fill/credits and opener/closers. Win/loss by table is computed for each shift The money is counted in total and reconciled Count team members sign documents attesting to the drop results. Drop is transferred to the cage. Cage Procedures Controls exist over the transfer into the cage of funds and the associated paperwork
4
Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
5
6
Main Cage
Soft Count Room
7
10
10
5
12/6/24
1
Table Games Pit
Customer initiates a request for chips on credit or exchanges money for chips
2
Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
3
7. Revenue Audit Drop and count original documents are transported to accounting A daily revenue audit is performed A reconciliation is performed The revenue audit process also monitors and tests for compliance with applicable gaming MICS and internal controls system compliance The journal entries necessary to record the revenue from the count are prepared, reviewed, approved and processed through the daily revenue audit process This flows to the financials for the casino
4
Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
5
6
Main Cage
Soft Count Room
7
11
11
1
Table Games Pit
Customer initiates a request for chips on credit or exchanges money for chips
2
Blackjack Craps Roulette Big 6 Baccarat Other
Table Games Revenue
Customer Initiates a Wager/receives winnings in Chips
3
Other – Statistical information is captured and maintained in the above processes Gaming regulators require the casino to monitor actual win/hold percentages compared to theoretical win/hold percentages for the game. Do you know the theoretical hold for each table game(s) on your property? There is no practical process in place to record individual wagers and transactions that occur at the tables. A surrogate for handle is used in the industry which is the dollar amount dropped (counted in the drop) at the table adjusted for credit play at the table
4
Soft Drop/Opener/ Closer Process
Fills/Credits to/ from Individual Tables
5
6
Main Cage
Soft Count Room
7
12
12
6
13 02 13 Slot Revenue
12/6/24
Slot Revenue
1
Slot revenue is calculated as follows: Gross Drop (including cash and tickets in) less Jackpots and Tickets Out = Slot Revenue. Hold percentage is calculated as slot revenue divided by coin-in. Each machine has a stated payout percentage. Hold percentage is the inverse of payout percentage. Example: • Posted average payout =93% • Hold percentage is 7% Analysis – are there machines on the floor that the hold percentage, or payout percentage +-3% from it’s stated value? Questions to ask: Was there a malfunction reported? Was there a jackpot in the period under review (month)? Has this variance been ongoing for longer than a couple of months?
Slot Floor
2
Drop and Count Procedures
4
3
Soft Count Room
Main Cage
Is the machine monitored by ops? Do we need to test the machine?
14
14
7
12/6/24
1
Slot Revenue
Slot Floor
1. Slot Floor
Slot machines are played by casino patrons and either cash, card free play or tickets are entered into the machine accounting for “coin-in” Various controls exist over the access to bill validators as well as the contents. Controls such as who, when, how many people must be involved, notifications required, etc.
15
15
1
Slot Revenue
Slot Floor
2. Drop and Count The drop team pulls all bill validators and inserts new empty validators into each machine Bill validators are transported by the drop team to the soft count room Controls exist over the custody and access to keys associated with the bill validators Count times are documented Count rooms are monitored by surveillance Security and surveillance are aware of authorized count times as an additional control over unauthorized access of the bill validators until the count commences
2
Drop and Count Procedures
16
16
8
12/6/24
1
Slot Revenue
Slot Floor
3 . Soft Count Drop and Count frequency is at preset times Rules and regulations for “emergency drop” The slot system is connected to all machines on the floor and records the change in meters as the machine is played including coin in, bill drop, ticket in, ticket out and jackpots After the count, the money is counted in total and reconciled to the totals from the slot system The money counted from the drop is transferred to the cage Cage procedures and controls
2
Drop and Count Procedures
3
Soft Count Room
Main Cage
17
17
1
Slot Revenue
Slot Floor
4 . Revenue Audit Drop and count original documents are transported to accounting A daily revenue audit is performed A reconciliation is performed The revenue audit process also monitors and tests for compliance with applicable gaming MICS and internal controls system compliance The journal entries necessary to record the revenue from the count are prepared, reviewed, approved and processed through the daily revenue audit process This flows to the financials for the casino
2
Drop and Count Procedures
4
3
Soft Count Room
Main Cage
Accounting/ Revenue Audit
18
18
9
19 03 19 Promo Allowance
12/6/24
Promotional Allowance Comps
• Promotional allowances (complimentaries or “comps”) represent goods and services which would be accounted for as revenue, if sold, that a casino gives to customers as an inducement to gamble at its property. • Examples include rooms, food, beverage, entertainment, and/or gifts. In addition, promotional allowances include slot club bonus points and bonus play dollars. • On a consolidated level, a reclassification entry is required in order to present the comps as a “contra” to the gross revenue presented on the consolidated statements of operations. The rooms, food and beverage, and other comps are reclassified from each of the department’s income statements into the contra revenue account, “Promotional Allowances.” • Question: would the casino’s bottom line improve if no comps ? • The net effect of comps on the overall casino/ resort financial presentation is $0 as the revenue reported includes comp revenue and the comp expense (promotional allowance) reduces the revenue. • However, not having comps would negatively affect the gaming floor and gaming overall revenue.
20
20
10
12/6/24
Concepts Overview
The creation of “Net Revenues” – Promotional Allowance method Revenues 2009
2008
Casino
$4,000 $3,500
Rooms
500
450
Inclusive of comp revenue
F & B
500
450
Other
200
175
Gross Revenues
5,200
4,575
Less: Promotional Allowance
585
415
Net Revenues
4,615
4,160
21
21
Promo Allowance
• Value of the comp varies based on each operation’s internal consideration – i.e. retail etc. More specifically, this includes estimating the costs of providing a complimentary room (i.e. cost to turn the room), food or beverage (retail value) and recording the comp expense. • Generally accounted for as comp expense or promotional allowance in the department giving the comp, unless SEC a registrant (covered later). • The value of promotional allowances is included as revenue in the department which provides goods or services for the comp, with the corresponding expense to the department that is providing the comp. • Comps show, from a departmental financial perspective, revenue in the “selling” department and expense to the department giving the comp, i.e. – hotel room comped to a slot patron. In most cases, this would be the casino department. • Recording the comp revenue helps the providing department’s cost of sales ratios from being skewed.
22
22
11
12/6/24
Promo Allowance -SEC
• SEC accounting rules require that the estimated cost associated with providing the complimentary rooms, food and beverage and other services be classified in the income statement in the department which benefited from the complimentary. • In most cases, this would be the casino department. Compliance with the regs requires reclassifying this estimated cost from the hotel department or food and beverage department to the casino department • These reclassifications are performed on a consolidated basis.
23
23
Financial Statement Disclosure Example
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition and Promotional Allowances Gaming revenue represents the net win from gaming activities, which is the aggregate difference between gaming wins and losses. The majority of our gaming revenue is counted in the form of cash and chips and therefore is not subject to any significant or complex estimation procedures. Cash discounts, commissions and other cash incentives to customers related to gaming play are recorded as a reduction of gross gaming revenues. Room revenue recognition criteria are met at the time of occupancy. Food and beverage revenue recognition criteria are met at the time of service. Gross revenues include the estimated retail value of rooms, food and beverage, and other goods and services provided to customers on a complimentary basis, or without charge. Such amounts are then deducted as promotional allowances. The estimated departmental cost of providing such promotional allowances is included primarily in gaming expenses as follows: Promotional allowances also include incentives such as cash, goods and services (such as complimentary rooms and food and beverages) earned in our slot bonus point program. We reward customers, through the use of bonus programs, with points based on amounts wagered or won that can be redeemed for a specified period of time, principally for cash, and to a lesser extent for goods or services, depending upon the property. We record the estimated retail value of these goods and services as revenue and then deduct them as promotional allowances.
2023
2022
Room
29,766
25,271
F&B
114,711
123,444
Other
3,031
8,418
Total
$150,508
$157,133
24
24
12
25 04 Analysis of comps and Player’s Club liability 25 Promo Allowance
12/6/24
Auditing & Analyzing Comps and Promo Allowance Understand the competitive environment. More supply = increased comps (usually)
Perform year-over-year analytical review of comp revenue and amounts recorded as comp expense (reclassified to casino expense) and compute the cost of promotional allowances. • This can be analytically tested using prior year comp levels and market consistent estimations if there is sufficient support and historical information available to develop a reliable expectation.
Understand the assumptions underlying the cost of sales percentages. If reclass, percetageimplicit in the casino reclass.
26
26
13
12/6/24
Promo Allowance Analytics
Questions to ask:
Who is authorized to issue a comp and at what value? Any restrictions on personnel who issue comps? Is the actual allowance reasonable? If not, why? If promotional allowance is increasing or decreasing, why?
27
27
Promo Allowance Analytic Example
Gross Gaming Revenue - $800K Actual Promo Allowance - $100K (12.5%) 3 year average as a % of revenue (13.5%)
Expected Promotional Allowance recorded - $800K * 13.5% = $108K Establish research threshold before running analytic procedures. In this example, the actual is within $8K of 3 year average.
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28
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