06202223 - Level II Training Book

LEVEL II AGENDA June 20-22, 2023 ZOOM Virtual Class Training on 9:00 am MST Time

Tuesday, June 20

Licensing: Key Employees & Primary Officials Abe Martin, CFE, CSP Casino Cryptology

9:00 AM 10:30 AM

10:30 AM 10:45 AM Break

Licensing: Vendors & Facilities Abe Martin, CFE, CSP Casino Cryptology

10:45 AM 12:15 PM

12:15 PM 1:15 PM Lunch Break

Internal Auditing-What's Required & How it Should Be Approached Ryan Burns, CPA, Partner Blue Bird CPA's

1:15 PM 2:45 PM

2:45 PM 3:00 PM Break

Financial Controls & Accounting Standards Ryan Burns, CPA, Partner Blue Bird CPA's Wednesday, June 21

3:00 PM 4:30 PM

Employment Issues for Regulators Charlene Jackson, Jackson Law

9:00 AM 10:30 AM

10:30 AM 10:45 AM Break

Journey of Submission Peter Nikiper, Director of Technical Compliance, BMM Test Labs

10:45 AM 12:15 PM

12:15 PM 1:15 PM Lunch Break

Tribal Sovereign Immunity and The Gaming Regulator Liz Homer, Homer Law

1:15 PM 2:45 PM

2:45 PM 3:00 PM Break

Effective Regulatory Writing Liz Homer, Homer Law Thursday, June 22

3:00 PM 4:30 PM

Creating a new Approach to Surviellence Abe Martin, CFE, CSP Casino Cryptology

9:00 AM 10:30 AM

10:30 AM 10:45 AM Break 10:45 AM 12:15 PM

Surviellence Cheats & Scams Abe Martin, CFE, CSP Casino Cryptology

Please plan to stay for the entire class on each day to get your certificate of completion. Please be on time for sessions

6/20/23

YOUR SPEAKER

• BILLY DAVID, OWNER

BO-CO-PA & ASSOCIATES, LLC

BILLY.DAVID90@GMAIL,.COM 541-810-0700

6/20/23

LICENSING AUTHORITY: • WHERE DOES IT COME FROM?

YOUR DOCUMENTS The governing documents of licensing regulations: 1. Indian Gaming Regulatory Act 2. Tribal Gaming Ordinance 3. Compact Licensing Requirements (if applicable) 4. Tribal Gaming Authority Gaming Requirements

6/20/23

WHAT YOU SHOULD REALLY KNOW REGARDING THE LICENSING PROCESS?

1. UNDERSTAND EVERYONE'S ROLES AND RESPONSIBILITIES: I. GAMING COMMISSION/ERS II. TRIBAL COUNCIL/GOVERNMENTS

III. GAMING MANAGEMENT/DEPARTMENTS IV. CASINO/BUSINESS BOARD OF DIRECTORS V. OTHER GOVERNMENTAL AGENCIES

UNDERSTANDING EVERYONE'S ROLE • GAMING COMMISSIONS/ERS Ø LICENSING AUTHORITY Ø ENFORCEMENT Ø PROMULGATE RULES AND REGULATIONS

Ø APPROVE AND DEVELOP INTERNAL CONTROLS Ø HIGHER APPROPRIATE COMMISSION STAFF

Ø CONDUCT HEARING (SOME TRIBAL PROPERTIES HAVE ANOTHER ENTITY CONDUCT HEARINGS) Ø ACT AS THE OFFICIAL TRIBAL AUTHORITY AS PRESCRIBED IN THE TRIBAL GAMING ORDINANCE Ø PROTECT THE FAIRNESS, INTEGRITY, SECURITY, AND HONESTY OF THE TRIBAL GAMING OPERATION (F.I.S.H) Ø CONDUCT OR OVER SEE INTERNAL INVESTIGATIONS

Ø ENSURE COMPLIANCE WITH ALL REQUIRED REGULATING DOCUMENTS Ø AMONGST OTHER REQUIRED DUTIES, BUDGETS, FINANCIAL TRACKING ETC.

6/20/23

UNDERSTANDING EVERYONE’S ROLE • TRIBAL COUNCILS: Ø ULTIMATELY RESPONSIBLE FOR THE WHOLE CASINO OPERATIONS. Ø APPROVE TRIBAL GOVERNING DOCUMENTS Ø MEET WITH STATE AND FEDERAL AGENCIES REGARDING GAMING COMPACTS, ORDINANCES AS WELL AS OTHER APPLICABLE LAWS Ø APPOINTING OR HIRING COMMISSIONERS Ø ANY OTHER REQUIREMENTS AS DICTATED BY TRIBAL LAW(S)

UNDERSTANDING EVERYONE’S ROLE • GAMING MANAGEMENT/DEPARTMENTS Ø HIRE ALL QUALIFIED CASINO STAFF Ø FOLLOW THE CASINO BUSINESS PLAN Ø WRITE AND IMPLEMENT DEPARTMENT POLICY Ø WRITE AND IMPLEMENT DEPARTMENT PROCEDURES Ø ENSURE THAT COMPLIANCE IS ACHIEVED BY ALL REQUIRED DEPARTMENTS Ø GENERATE REVENUE TO BE DISTRIBUTED TO THE TRIBE PER THE GAMING ORDINANCE, REVENUE ALLOCATION PLAN OR

OTHER TRIBAL LAW DICTATING HOW GAMING REVENUE IS TO BE HANDLED. Ø ANY OTHER REQUIREMENTS PER THE GAMING BOARD OF DIRECTORS

6/20/23

UNDERSTANDING EVERYONE’S ROLE

• CASINO/BUSINESS BOARD OF DIRECTORS

Ø DEVELOP AND IMPLEMENT THE BUSINESS PLAN Ø HIGHER APPROPRIATE CASINOS CEO, GM. CFO ETC Ø APPROVE CERTAIN POLICY AND PROCEDURES

Ø HOLD UPPER MANAGEMENT ACCOUNTABLE FOR DAILY, QUARTERLY AND ANNUAL FINANCIAL STATEMENTS Ø ASSURE THE TRIBE THAT THE BUSINESS IS BEING OPERATED IN A MANNER THAT GENERATES REVENUE FOR THE TRIBE.

OTHER GOVERNMENTAL AGENCIES

• NATIONAL INDIAN GAMING COMMISSION • STATE DEPARTMENT OF GAMING

6/20/23

WHEN SHOULD I EXERCISE MY AUTHORITY

WITH GREAT POWER COMES GREAT RESPONSIBILITY

6/20/23

ENFORCEMENT LICENSING:

• YOU ARE NOT LAW ENFORCEMENT (UNLESS TRIBAL ORDINANCE GIVES YOU THAT AUTHORITY) • YOU ARE AN ADMINISTRATIVE ENFORCEMENT OFFICER. • WORK WITHIN YOUR SCOPE OF AUTHORITY: DISCUSSION

LICENSING: SCOPE OF AUTHORITY

• WHAT IS YOUR RESPONSIBILITY WITH LICENSING? • GAMING COMMISSION, • GAMING COMMISSION STAFF, • MANAGEMENT, • POTENTIAL LICENSEE

6/20/23

GOVERNING DOCUMENTS: IGRA

Most licensing regulations must comply with the Federal licensing standards.

Those standards are found in the Indian Gaming Regulatory Act 1988

LICENSING: IGRA

Important items to know about IGRA

Not all licensing regulations need to comply with IRGA

National Indian Gaming Commission can only enforce their own standards

The Tribal licensing authority is responsible to ensure that the Tribe is in compliance with all licensing documents

6/20/23

IGRA REQUIREMENTS

25 CFR Part 556 – Addresses Background Investigations

for Key and PMO. • 25 CFR Part 558.

– Addresses Licensing for Key and PMO. • Changes were published in the CFR January 25, 2013 with a compliance date of February 25, 2013.

IGRA REQUIREMENTS

556.8 and 558.6 “Compliance with this part” both state: – All tribal gaming ordinances and ordinance amendments approved by the Chair prior to the February 25, 2013 and that reference this part, do not need to be amended to comply with this part. All future ordinance submissions, however, must comply.

6/20/23

IGRA REQUIREMENTS

• 25 CFR 502.14 AND 502.19 DEFINES KEY EMPLOYEE AND PMO MINIMUMS • • TRIBES ABLE TO EXPAND KEY AND PMO DEFINITIONS THROUGH ORDINANCE • – “ANY OTHER PERSON DESIGNATED BY THE TRIBE AS A PMO” • • ENSURE 556 AND 558 REGULATIONS APPLY TO KEY AND PMO EMPLOYEES

IGRA REQUIREMENTS: APPLICATION PROCESS 556.4 (1 – 14) Sets forth what the application must contain: Privacy Notice, False Statement Notice, name, social security number, address, employers, business relationships, previous gaming licenses, references, criminal history photograph and fingerprints (results).

6/20/23

IGRA LICENSING REQUIREMENTS

• 556.2 PRIVACY NOTICE. • • 556.3 NOTICE REGARDING FALSE STATEMENTS. • – CHANGES INCLUDED REPLACE ALL LANGUAGE REFERRING TO HIRING AND FIRING AND REPLACING IT WITH LICENSING LANGUAGE. • – EXACT LANGUAGE CAN BE FOUND IN CFR 556 AT NIGC.GOV • – ALL FORMS MUST BE UPDATE BY AUGUST 2013.

IGRA LICENSING REQUIREMENTS

• FOR EVERY PRIMARY MANAGEMENT OFFICIAL OR A KEY EMPLOYEE, A TRIBE SHALL: • • CREATE AND MAINTAIN AN INVESTIGATIVE REPORT ON EACH BACKGROUND INVESTIGATION. AN

INVESTIGATIVE REPORT SHALL INCLUDE ALL OF THE FOLLOWING: • – STEPS TAKEN IN CONDUCTING A BACKGROUND INVESTIGATION; • – RESULTS OBTAINED; • – CONCLUSIONS REACHED; AND • – THE BASIS FOR THOSE CONCLUSIONS .

6/20/23

IGRA LICENSING REQUIREMENTS • REGULATION’S REQUIRE A TWO-PART SUBMISSION • – A NOTICE OF RESULTS (NOR) OF BACKGROUND INVESTIGATIONS, 25 CFR 556 • – A NOTICE OF LICENSING DETERMINATION, 25 CFR 558 • • NOTIFICATIONS SUBMISSION METHODS. • – ENCRYPTED EMAIL TO THE REGIONAL OFFICE. • – FAX. • – MAIL. • • THE TWO PART SUBMISSIONS MUST NOT BE MADE AT THE SAME TIME

IGRA LICENSING REQUIREMENTS • A TRIBE MUST NOTIFY NIGC OF THE RESULTS OF THE BACKGROUND INVESTIGATION WITHIN 60 DAYS OF AN INDIVIDUAL BEGINNING WORK. • – A TRIBE SHALL CONDUCT AN INVESTIGATION SUFFICIENT TO MAKE AN ELIGIBILITY DETERMINATION

• • NOR MUST INCLUDE: • – APPLICANTS NAME • – DOB • – SOCIAL SECURITY NUMBER

• – DATE ON WHICH THEY WILL BEGIN WORK • – COPY OF THE ELIGIBILITY DETERMINATION

• • AN ELIGIBILITY DETERMINATION IS TO MAKE A FINDING CONCERNING THE ELIGIBILITY OF A KEY EMPLOYEE OR PRIMARY MANAGEMENT OFFICIAL FOR GRANTING OF A GAMING LICENSE, AN AUTHORIZED TRIBAL OFFICIAL SHALL REVIEW THE RESULTS OF A PERSON'S INVESTIGATION TAKING INTO CONSIDERATION A PERSON CRIMINAL HISTORY, REPUTATION, HABITS, AND ASSOCIATIONS.

6/20/23

IGRA LICENSING REQUIREMENTS

• A SUMMARY AND LISTING OF THE INFORMATION PRESENTED IN THE INVESTIGATIVE REPORT MUST BE INCLUDED IN THE NOR: • – PREVIOUSLY DENIED LICENSES • – REVOKED LICENSES • – CRIMINAL CHARGES BROUGHT WITHIN 10 YEARS OF THE APPLICATION • – EVERY FELONY CONVICTION OR ON-GOING PROSECUTION • • A DEFERRED SENTENCE IS CONSIDERED AN ONGOING PROSECUTION.

IGRA LICENSING REQUIREMENTS

• A TRIBE SHALL RETAIN THE FOLLOWING FOR INSPECTION BY THE CHAIR OR HIS OR HER DESIGNEE FOR NO LESS THAN THREE YEARS FROM THE DATE OF

TERMINATION OF EMPLOYMENT: • – APPLICATIONS FOR LICENSING; • – INVESTIGATIVE REPORTS; AND • – ELIGIBILITY DETERMINATIONS

6/20/23

TRIBAL-STATE PROTOCOLS FOR LICENSING PMO AND KEYS

This will differ and is subject to each individual State and Tribal negotiations. There are similar differences that can be found in many Tribal-State Compacts.

COMPACT LICENSING SIMILARITIES

Many similarities would include: • Definition of how Class III licenses will be handled in the State • Who will the Tribe have to submit information to within the State • Who from the State will have availability to Tribal licensing records

6/20/23

TRIBAL ORDINANCE: LICENSING REQUIREMENTS

In many Tribal Gaming Ordinances there are criteria that the Tribe has lined out for the regulatory authority has outlined.

Do you know what your Tribal licensing standards are??? Discussion

TOOLS AND TIPS TO HELP UNDERSTANDING LICENSING STANDARDS

To be an effective and productive licensing authority you need to understand not only the licensing regulations used by the Tribe, NIGC and your State but you need to know the internal details used by your licensing/background department.

6/20/23

TIPS AND TOOLS: 1. Learn your internal processes I.

The different regulatory/law enforcement agencies you will have to work with II. Timelines for submission to all regulatory agencies involved with the licensing processes III. What your Tribal standards are for denials and revocations 2. Understand the vocabulary of the industry: Fingerprint results, law enforcement reports for the different jurisdictions, 3. Don’t be ashamed to ask questions 4. Network with your fellow Commissioners 5. Be knowledgeable of what technology your background/licensing department utilizes 6. Be respectful, confidential and ethical

LICENSING AND BACKGROUNDING

Licensing and back grounding potential PMOs and/or Key casino employees could be one of the most single important directives of a regulatory authority. Be diligent and through DISCUSSION

6/20/23

LICENSEES

Primary Management Official

Key Employee

High Security

Help!!

Dual License

Low Security

Class III

DEVELOP TRACKING PROCESSES:EXAMPLE

Name

Position

Id Number/Classification Application Date Received

Date Submitted for Approval

Date submitted to NIGC/State

Joe schmoo Blackjack dealer 13-012/Key

10/2/13 04/2/12

Judy schmoo T.G. Director

12-001

6/5/12

6/10/12

6/20/23

SCENARIOS

• DISCUSSION

#1 • PMO HAD A SPOUSE PASS AWAY FROM CANCER. SHE BATTLED IT FOR YEARS AND IT COSTED THEM DEARLY. MEDICAL COSTS FOR FIVE YEARS EXHAUSTED THEIR SAVINGS, EXHAUSTED KIDS COLLEGE SAVINGS, MAXED OUT THEIR CREDIT, AND THEY LOST THEIR HOME. • IN THE END HIS SPOUSE PASSED AWAY AND HE LITERALLY LOST EVERYTHING HE HELD DEAR. THE ONLY THING HE HAD WAS HIS OWN HEALTH, COLLEGE DEGREE AND HIS GAMING EXPERIENCE. • WHAT ARE THE ISSUES AS YOU SEE IT?

6/20/23

#2 • A POTENTIAL PMO WAS AFFECTED BY THE RECESSION IN 2008; • JOBS CLOSED AND SHE LOST HER JOB AFTER 20 YEARS. SHE HAD A DIFFICULT TIME GETTING BACK INTO THE JOB MARKET WITH LIMITED JOBS AVAILABLE. HER HUSBAND LOST HIS JOB AS WELL, THEY LOST THEIR HOME AND SAVINGS. • THEY ACCEPTED JOBS AT A LOWER PAY RATE AND LIVED OFF OF THEIR CREDIT FOR SEVERAL YEARS UNTIL THEIR CREDIT DRIED UP. • THEY ARE APPLYING FOR A DIRECTOR POSITION, ONE OF THE JOB DUTIES IS APPROVING PURCHASES AND DEVELOPING BUDGETS, • THIS POTENTIAL LICENSEE IS A TRIBAL MEMBER, • WHAT CONCERNS WOULD YOU SEE WITH LICENSING THIS PMO?

#3 • KEY EMPLOY APPLIED FOR TABLES DEALER POSITION. • SHE FILLED OUT HER APPLICATION IN THE OFFICE AND SHE LOOKED STRESSED OUT, SHAKING, CRYING, ETC. SHE LEFT OUT PORTIONS OF HER RESIDENCY IN THE UNITED STATES AND VIETNAM. • THIS PROMPTED YOUR BACKGROUND PERSON TO SIT DOWN AND ASK ME TO VISIT WITH HER TO SEE WHAT WAS GOING ON WITH HER. SHE HAD A FEELING THAT SHE WAS HOLDING BACK BUT DID NOT KNOW HOW TO APPROACH HER. SO YOU SET THERE WITH HER IN SILENCE FOR 5 MINUTES AND ALLOWED HER EMOTIONS TO POUR THROUGH HER. YOU HAND HER TISSUES AND WATER AND SAY SOFTLY, IT’S OK TO SPEAK OPENLY ABOUT YOUR PAST. YOU ASK IF THERE WAS SOMETHING IN HER PAST THAT GAVE THE IMPRESSION THAT SHE WAS TIED TO ORGANIZED CRIME, • ASSOCIATED WITH BY DEFAULT, MARRIAGE OR RELATIONSHIP IN ANY SHAPE OR FORM. SHE WAS CRYING REALLY HARD AND TALKED ABOUT HER RELATIONSHIP WITH ONE OF THE LEADERS FROM THE TRAN ORGANIZATION. HER LAST NAME WAS TRAN, VENTED ABOUT HER EXPERIENCE AND HOW SHE GOT CAUGHT IN THE MIDDLE OF SOMETHING THAT SHE DID NOT WANT TO GET CAUGHT UP IN. • CONCERNS???

6/20/23

• KEY EMPLOYEE APPLIED FOR A GAMING LICENSE. WHEN THE FBI RESULTS CAME BACK, SHE CAME UP AS DECEASED. • SHE WAS A FALSE POSITIVE AND THERE WAS AN ERROR ON THE FBI DATABASE. • WHAT CONCERNS WOULD YOU HAVE WITH THIS APPLICATION?

6/20/23

THANK YOU!

Billy David, Owner Bo-Co-Pa & Associates Phone: 541-810-0700 Email: billy.david90@gmail.com www.bo-co-pa.com

6/20/23

YOUR SPEAKER

• BILLY DAVID, OWNER

BO-CO-PA & ASSOCIATES, LLC

BILLY.DAVID90@GMAIL,.COM 541-810-0700

6/20/23

LICENSING AUTHORITY: • WHERE DOES IT COME FROM?

6/20/23

WHAT YOU SHOULD REALLY KNOW REGARDING THE LICENSING PROCESS?

1. UNDERSTAND EVERYONE'S ROLES AND RESPONSIBILITIES: I. GAMING COMMISSION/ERS II. TRIBAL COUNCIL/GOVERNMENTS

III. GAMING MANAGEMENT/DEPARTMENTS IV. CASINO/BUSINESS BOARD OF DIRECTORS V. OTHER GOVERNMENTAL AGENCIES

UNDERSTANDING EVERYONE'S ROLE • GAMING COMMISSIONS/ERS Ø LICENSING AUTHORITY Ø ENFORCEMENT Ø PROMULGATE RULES AND REGULATIONS

Ø APPROVE AND DEVELOP INTERNAL CONTROLS Ø HIGHER APPROPRIATE COMMISSION STAFF

Ø ENSURE COMPLIANCE WITH ALL REQUIRED REGULATING DOCUMENTS Ø AMONGST OTHER REQUIRED DUTIES, BUDGETS, FINANCIAL TRACKING ETC.

6/20/23

OTHER TRIBAL LAW DICTATING HOW GAMING REVENUE IS TO BE HANDLED. Ø ANY OTHER REQUIREMENTS PER THE GAMING BOARD OF DIRECTORS

6/20/23

UNDERSTANDING EVERYONE’S ROLE

• CASINO/BUSINESS BOARD OF DIRECTORS

Ø DEVELOP AND IMPLEMENT THE BUSINESS PLAN Ø HIGHER APPROPRIATE CASINOS CEO, GM. CFO ETC Ø APPROVE CERTAIN POLICY AND PROCEDURES

Ø HOLD UPPER MANAGEMENT ACCOUNTABLE FOR DAILY, QUARTERLY AND ANNUAL FINANCIAL STATEMENTS Ø ASSURE THE TRIBE THAT THE BUSINESS IS BEING OPERATED IN A MANNER THAT GENERATES REVENUE FOR THE TRIBE.

OTHER GOVERNMENTAL AGENCIES

• NATIONAL INDIAN GAMING COMMISSION • STATE DEPARTMENT OF GAMING

6/20/23

WHEN SHOULD I EXERCISE MY AUTHORITY

WITH GREAT POWER COMES GREAT RESPONSIBILITY

6/20/23

ENFORCEMENT LICENSING:

• YOU ARE NOT LAW ENFORCEMENT (UNLESS TRIBAL ORDINANCE GIVES YOU THAT AUTHORITY) • YOU ARE AN ADMINISTRATIVE ENFORCEMENT OFFICER. • WORK WITHIN YOUR SCOPE OF AUTHORITY: DISCUSSION

LICENSING: SCOPE OF AUTHORITY

• WHAT IS YOUR RESPONSIBILITY WITH LICENSING? • GAMING COMMISSION, • GAMING COMMISSION STAFF, • MANAGEMENT, • POTENTIAL LICENSEE

6/20/23

GOVERNING DOCUMENTS: IGRA

Most licensing regulations must comply with the Federal licensing standards.

Those standards are found in the Indian Gaming Regulatory Act 1988

LICENSING: IGRA

Important items to know about IGRA

Not all licensing regulations need to comply with IRGA

National Indian Gaming Commission can only enforce their own standards

The Tribal licensing authority is responsible to ensure that the Tribe is in compliance with all licensing documents

6/20/23

IGRA REQUIREMENTS

25 CFR Part 556 – Addresses Background Investigations

for Key and PMO. • 25 CFR Part 558.

– Addresses Licensing for Key and PMO. • Changes were published in the CFR January 25, 2013 with a compliance date of February 25, 2013.

IGRA REQUIREMENTS

6/20/23

IGRA REQUIREMENTS

6/20/23

IGRA LICENSING REQUIREMENTS

• FOR EVERY PRIMARY MANAGEMENT OFFICIAL OR A KEY EMPLOYEE, A TRIBE SHALL: • • CREATE AND MAINTAIN AN INVESTIGATIVE REPORT ON EACH BACKGROUND INVESTIGATION. AN

6/20/23

• • NOR MUST INCLUDE: • – APPLICANTS NAME • – DOB • – SOCIAL SECURITY NUMBER

• – DATE ON WHICH THEY WILL BEGIN WORK • – COPY OF THE ELIGIBILITY DETERMINATION

6/20/23

IGRA LICENSING REQUIREMENTS

• A TRIBE SHALL RETAIN THE FOLLOWING FOR INSPECTION BY THE CHAIR OR HIS OR HER DESIGNEE FOR NO LESS THAN THREE YEARS FROM THE DATE OF

TERMINATION OF EMPLOYMENT: • – APPLICATIONS FOR LICENSING; • – INVESTIGATIVE REPORTS; AND • – ELIGIBILITY DETERMINATIONS

6/20/23

TRIBAL-STATE PROTOCOLS FOR LICENSING PMO AND KEYS

This will differ and is subject to each individual State and Tribal negotiations. There are similar differences that can be found in many Tribal-State Compacts.

COMPACT LICENSING SIMILARITIES

6/20/23

TRIBAL ORDINANCE: LICENSING REQUIREMENTS

In many Tribal Gaming Ordinances there are criteria that the Tribe has lined out for the regulatory authority has outlined.

Do you know what your Tribal licensing standards are??? Discussion

TOOLS AND TIPS TO HELP UNDERSTANDING LICENSING STANDARDS

6/20/23

TIPS AND TOOLS: 1. Learn your internal processes I.

LICENSING AND BACKGROUNDING

Licensing and back grounding potential PMOs and/or Key casino employees could be one of the most single important directives of a regulatory authority. Be diligent and through DISCUSSION

6/20/23

LICENSEES

Primary Management Official

Key Employee

High Security

Help!!

Dual License

Low Security

Class III

DEVELOP TRACKING PROCESSES:EXAMPLE

Name

Position

Id Number/Classification Application Date Received

Date Submitted for Approval

Date submitted to NIGC/State

Joe schmoo Blackjack dealer 13-012/Key

10/2/13 04/2/12

Judy schmoo T.G. Director

12-001

6/5/12

6/10/12

6/20/23

SCENARIOS

• DISCUSSION

6/20/23

THANK YOU!

Billy David, Owner Bo-Co-Pa & Associates Phone: 541-810-0700 Email: billy.david90@gmail.com www.bo-co-pa.com

Internal Audit What is Required? & How Should It Be Approached?

Ryan Burns, CPA Partner, BlueBird CPAs

What is an Internal Audit? • An independent appraisal function to examine and evaluate the organization’s activities as a service to the organization

• Monitoring how management is achieving their objectives on an on-going basis

BlueBird CPAs

Compliance Audits • NIGC MICS • Title 31 • IRS Reporting • Tribal Regulations • System of Internal Control

Audit Charter • Defines the role of the internal auditor within the organization

• Forms the basis for his/her authority

• Must be defined in a formal document and be adopted, usually by the Tribal Council or the Tribal Gaming Commission

BlueBird CPAs

Audit Charter

• Internal audit should have access to all areas of the Casino without any limitation on the information or areas subject to audit. This includes access to the:

o Financial statements, o General ledger detail, o Revenue Audit documentation, o Departmental budgets, o Annual audit results, o Payroll, o Expenses (especially credit cards and travel costs), and o Non-gaming revenue centers.

Internal Auditor Communication & Independence • Internal auditors can communicate anything but surprise observations or when a special investigation is in progress, such as: o Audit plans o Timing of audit fieldwork • Communicate findings to management prior to the issuance of a report • Document the results of work performed • Timing of management responses • For independence, report to Tribal Council/Gaming Commission, Audit Committee or Board

BlueBird CPAs

Internal Auditor Required Testing • All Gaming & • Relevant Support Areas

Should be tested at least once a year (or more frequently based on internal requirements.)

Internal Audit Standards (IIA) • Independence o Organization status o Objectivity • Professional proficiency • Scope of work • Performance of audit • Management of internal audit department

BlueBird CPAs

Five Steps of Internal Audits First, let’s look at the five steps for performing internal audits.

Performance of Audit Work • Planning • Developing/customizing master plan • Performing the fieldwork (checklist, audit program)

• Evaluating and documenting evidence • Communicating results & follow-up

BlueBird CPAs

Step 1: Planning • Evaluate overall control environment • Risk assessment & monitoring • Evaluate the written policies and procedures • Evaluate communication process

Audit Planning - Obtain An Understanding

• Regulatory Environment - Working Knowledge of Industry, Tribal- State Gaming Compact, Tribal Gaming Ordinance, and applicable Tribal Minimum Internal Control Standards (TMICS).

• Operating Environment – Type and Volume of Transactions, Management Attitude, Computer Information Systems, Data Flow, Documented Control Systems, etc.

• External Environment – Regulators, Lenders, Tribal Membership, Competitive Environment, etc.

BlueBird CPAs

Audit Planning – Risk Assessment

• What can go wrong? – Who is relying on the numbers? • Which accounts have more risk? • What controls are in place? • Which compliance areas are most important or subject to scrutiny? • Potential for fraud? • Materiality of account? • Assess the level of risk (Low, Medium, High)

Inherent Risk - Indicators • Prior audit compliance findings, prior areas that required adjustment.

• Changing environments (industry conditions, regulatory requirements, political, management, accounting policies).

• Non-routine transactions, complex calculations, change in estimates or accounting principles.

BlueBird CPAs

Inherent Risk • Common examples:

o Complex Accounting Cycles (Gaming Revenue) o State Fees, Management Fees, Interfund Accounts o Related Party Transactions (Management Company) o Complex Regulations or Accounting Standards o Prior unresponsiveness to identified control weaknesses • Importance of follow-up of risk monitoring and assessment • Prioritizing corrective action based on significance / likelihood of occurrence

Fraud Risk Assessment TWO TYPES OF FRAUD RISK: o RISK OF FRAUDULENT FINANCIAL REPORTING (Cooking the Books) o RISK OF MISAPPROPRIATION OF ASSETS (Stealing Company Assets)

BlueBird CPAs

Fraud Risk Factors 3 RISK FACTORS: • Incentive / Pressure to Commit Fraud • Opportunity (Lack of Controls, Override, Collusion) • Rationalization

AS ANY ONE FACTOR GROWS – THE RISK OF FRAUD INCREASES

Red Flag Warnings • Audit requested items concealed by withholding evidence, requested items. • Misrepresentation (aka – lying) • False or Altered Documents • Reports of Alleged Fraud • Ratios / performance different than industry norms or past performance (Analytics)

BlueBird CPAs

Fraud Indicators • Questions of integrity and competence • Unusual pressure within or on the entity • Unusual transactions • Problems in obtaining sufficient and appropriate audit evidence • Factors unique to information technology

Control Risk - Assessment & Testing

• Determine major transaction cycles (for example: gaming revenues).

• Walkthroughs of transactions – inception to recording to reconciliation.

• Compliance with documented control systems.

BlueBird CPAs

Control Risk - Continued • Inquiry alone is not sufficient to test controls.

• Determine if control system design satisfies general segregation of duties (Authorization, Recording, Custody).

• Perform tests of transactions.

Gaining an Understanding…

NIGC, State………… NIGC MICS

State Compact

Step 1

Tribal Gaming

Tribal MICS

Regulatory Authority

Or TICS

Step 2

Implement Internal Control System (SICS) including Title 31

Tribal Gaming Operations……………

Step 3 Auditor verify SICS is in substantial compliance with Tribal MICS As soon as Step 2 is done

Internal Auditor………………………..

BlueBird CPAs

Gaining an Understanding

Step 4

Verify the Gaming Operation implemented SICS and is in substantial compliance with SICS As soon as Step 3 is done or in conjunction with the

Internal Auditor………………………….

annual audits

Step 5

CPA prepare a report of findings to the Tribe &

CPA ………………………………….

Management (542.3 (f)/543.23)

Step 6

Submit a copy of the CPAs report to the NIGC by 120 days after the fiscal

Tribal Gaming

Regulatory Authority ……

year end

Step 2: Developing/Monitoring Master Plan • Establishing objectives • Establishing criteria & scope of work • Determining nature of testing o Substantive, attribute, compliance

o Reliance on internal controls o Testing of internal controls

BlueBird CPAs

Prioritize Audit Work • Compliance with NIGC MICS, Tribal MICS, & Compact

• Risk Based Selection of Audit Areas

• Assist External Audit

• Special Projects (Rotation of Cycles)

Step 3: Performing the Fieldwork • Using checklists & audit programs • Use professional skepticism • Sampling consideration o Statistical vs. Judgmental o Sample size • Gathering evidence (quality and quantity of evidence) • Conclusion

BlueBird CPAs

Attribute Sampling • Is the most common for Internal Auditors - usually concerns yes/no or error/non-error propositions

• It tests the effectiveness of controls because it can estimate a rate of occurrence of control deviations in a population

• Attribute sampling requires the existence of evidence indicating performance of the control being tested

Sampling Based On NIGC Checklist Within the checklists provided by the NIGC, unless specified otherwise, the standard document testing for gaming machines and table games involves a sample size of two (2) days, all shifts. One test date should be selected from the first six (6) months of the audit period and the second test date selected from the six (6) month period immediately preceding the examination.

BlueBird CPAs

Sampling Based On NIGC Checklist • Standard document testing for all other areas involves a sample selection of one (1) day, all shifts, from the twelve (12) month period immediately preceding the audit.

• The days are to be randomly selected.

• Where monthly testing is required, the months used will be the months that include the selected test dates.

Sampling Based On NIGC Checklist • “Review supporting documentation” means to test the most recent documents to the standard.

• “Examination of records” means to use the sample test dates, unless an expansion of scope is justified by the auditor.

BlueBird CPAs

Sampling Based On NIGC Checklist • “Review policies and procedures” (or SICS) means to examine written internal controls or policies and procedures of the gaming operation. • “Review TGRA approval” means to complete the following: o Review TGRA approval o Review supporting documentation of the gaming operations submission to the TGRA o Review TGRA’s policy for approval or disapproval.

Sampling Based On NIGC Checklist • “Inquiry” means to question personnel knowledgeable of the standard.

• “Observation” means to physically observe the performance of the standard.

• “Review other” means to review/test named documents.

BlueBird CPAs

Quality Control • Workpaper documentation

Step 4: Evaluating & Documenting Evidence • Materiality vs. Significance • Quantify • Fraud Indicators • Finding Worksheet

BlueBird CPAs

Step 5: Communicating Results & Follow-Up • Verbal & written • Interim vs. final • Levels of management involved in communication • Whom to report to • Management responses • Encyclopedic coverage not desirable

Findings should include: • What should be? (criteria)

• What is? (statement of condition)

• So what? (effect)

• Why did it happen? (cause)

• What should be done? (recommendation)

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Report Writing Techniques • The NIGC Guidelines recommend that the following information be included in the internal audit report: • Audit objectives. • Audit procedures and scope. • A narrative description of the noncompliance, including the number of exceptions. • The citation of the applicable National Indian Gaming Commission Minimum Internal Control Standard, Tribal Internal Control Standard, and State Compact, as applicable, for which the instance of noncompliance was noted. • Recommendations, if applicable. 37

Report Writing Techniques

• The NIGC Guidelines recommend that the following information be included in the internal audit report (cont.): • Management’s responses to the noted instances of noncompliance. • If the instance of noncompliance is determined to be immaterial, a broad management response acknowledging the instances of immaterial noncompliance is acceptable. The immaterial instances of noncompliance may be disclosed as a separate section of the report. • Instances in which the written system of internal control does not reflect the actual control procedures in effect as they relate to compliance with the NIGC MICS and approved MICS variances.

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Advice to a New Internal Auditor • Present the audit as a tool to help all people within the organization.

• Discuss preliminary audit findings prior to report issuance – clear up misunderstandings.

• Try to avoid adversarial relationships.

Ryan Burns, Partner rburns@bluebirdcpas.com Thank you!

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Financial Controls & Accounting Standards

Ryan Burns, CPA Partner, BlueBird CPAs

Session Agenda • Financial Statements - Financial Controls • Accounting Standards • Gaming Audit & Accounting Guide

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Various Financial Statements • External Financial Statements – Lenders, Regulatory Agencies (NIGC, Compacts), Tribal Council & Tribal Gaming Commissions • Internal Financial Statements - Property Management for Analysis (Flash Reports, P/L Summaries, Condensed Financial Information)

Financial Statements & Financial Controls

Ryan Burns, CPA Partner, BlueBird CPAs

BlueBird CPAs

Enterprise Financial Statements • Management’s Discussion & Analysis (RSI) • Balance Sheets / Statement of Net Position • Statement of Revenues, Expenses, and Changes in Net Position • Cash Flow Statement • Notes to Financial Statements • Combining Financial Statements (SI)

Balance Sheet (aka the Statement of Net Position) • Assets - Things of value owned by the entity • Liabilities - Things of value owed by the entity • Equity = Assets – Liabilities

• Equity Classifications (Invested in Capital Assets, Net of Related Debt, Restricted, Unrestricted)

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Balance Sheets – Appendix B

Balance Sheets – Appendix B Continued

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Statement of Revenues, Expenses, and Changes in Net Position • The connection between the current year balance sheet and previous year balance sheet.

• Shows how and why tribal equity changed from what it was last year to what it is this year.

• Why did the business get richer or poorer?

Income Statement GASB Structure • Revenues o Direct operating expenses o General and administrative operating expenses • Equals Operating Income o -/+ Non operating Items (Interest) • Equals Net Income o Transfers to the Tribe • Equals Net Change in Net Position

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Statements of Revenues, Expenses, and Changes in Net Position – App. B

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The Statement of Cash Flows • Where the cash came from and where it went o Cash flow from operating activities o Cash flow from non capital investing activities o Cash flow from capital and related financing o Cash flow from investing activities

Income Statement vs. Cash Flow • Accrual vs. Cash • Where the cash comes from & goes • Big differences: o Depreciation, Loss on Disposal, etc.

o Cash needed to replace assets o Cash needed to pay off loans o Cash received from loans o Cash loaned/transferred to Tribe

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Statements of Cash Flows – Appendix B

Statements of Cash Flows – Appendix B Continued

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What is unique about Tribal Casino Accounting? • GAAP Issues (Net Win, State Fees, GASB, etc.) • Layers of Regulations (TRGC, State, NIGC) • Cage/Vault Accountability • 24-Hour Operations / Staggered Drop • Volume of Cash Transactions • No source revenue documentation (invoice, shipping document, etc.)

• Reliance on Computer Systems • Tribal Government Transactions

Accounting Issues Specific to Gaming Operations • Cage Accountability – The central artery system of your daily financial accountability and recording processes.

• Revenue Audit – Independent verification of gaming departments’ sources and uses. (Matching transfers, verifying actual to meters, over / short review, etc.)

• Casino Bankroll – Cash, Chips, Tokens, Preprinted Tickets, Redemption Machines, Uncounted Drop Proceeds, Etc.

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Accounting Issues Specific to Gaming Operations – Cont’d • Progressive Jackpots – In House vs. Externally Funded / Wide Area

• Players’ Club – Accounting for Free Play, Cash & Coupons

• Accounting for Complimentary Items

• Reliance on Controls & Computer Systems

Common Internal Control Weaknesses – A/P • Stale Policies and Procedures – Purchasing/Procurement, Payable Processing, Processing Payments, Maintaining Vendor Master Files. • Training and Staff Development • Improper Timing and Routing of Purchase Orders • Paying from Invoice Duplicates (copies) • Inadequate Segregation of Duties (ARC-Authorization, Recording, Custody)

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Common Internal Control Weaknesses – Payroll • Stale Policies and Procedures – Timekeeping System & Payroll Preparation Policies, HR Policies, Payroll Distribution • Training and Staff Development • PTO Authorization and Perpetual Tracking System • Inadequate Segregation of Duties (ARC-Authorization, Recording, Custody)- HR & Payroll Functions

Common Internal Control Weaknesses – Financial Reporting • Stale Policies and Procedures • General Ledger Access Controls • Training and Staff Development • Untimely Account Reconciliations

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Common Internal Control Weaknesses – Financial Reporting • Recognition of Unique Events or Transactions (Asset Impairments, Losses Due to Asset Disposals, Natural Disasters, Insurance Recoveries, Derivatives, Long-Term Financing Arrangements, New Acquisitions or Business Lines) • Inadequate Segregation of Duties (ARC-Authorization, Recording, Custody)

CAGE PAPERWORK

BANK STATEMENT

GENERAL JOURNAL

PAYROLL REGISTER

CHECK REGISTER

THE GENERAL LEDGER

THE TRIAL BALANCE

COMPUTER SLOT SYSTEM

ADJUSTMENTS

FINANCIAL STATEMENTS

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Accounting Standards

Ryan Burns, CPA Partner, BlueBird CPAs

What is GAAP? • What is GAAP?

• Who establishes GAAP?

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Governing Structure of Standard- Setting Boards

Fi nanci al Account i ngFoundat i on (FAF)

Financial Account ing Standards Advi sory Counci l

Financial Account ing Standards Board(FASB)

Government al Account ing Standards Board(GASB)

Government al Account ing Standards Advi sory Counci l

Financial Reporting – Different GAAP for Different Folks • Type of Entity: GAAP Set By: • Government GASB • Business FASB • Non-Profits FASB • Public Companies PCAOB / FASB

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Why Are Tribes Considered Gov’ts for Financial Reporting? • Power to Enact and Enforce a Tax Levy? • Established via Governmental Legislation? • Provide Services in Lieu of Another Government? • Ability to Issue Tax-Exempt Debt? • Tribes are considered Sovereign entities, similar to state governments by the United States Federal Government.

Tribal Entities – GASB Applies to All!

• Tribal Enterprises (Casinos, Hotel, Retail, Mini-Mart, Tobacco, Etc.) • Tribal Government • Tribally Sponsored Benefit Plans • Component Units

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GASB’s Authority • Has no authority to require compliance with any of its standards. GAAP is not a regulation.

• Governmental entity must follow GASB standards to conform with generally accepted accounting principles (GAAP) and receive a “clean” audit opinion.

• Other bond covenants, state law, local ordinances, grantor agencies, etc., may require compliance with GAAP.

GASB Board Members and Director of Research and Technical Activities

www.gasb.org They set your accounting standards!

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Important GASB Statements for Your Tribe’s Gaming & Non-Gaming Businesses

GAAP Hierarchy – GASB 76 • GASB Statements (Category A)

• GASB Technical Bulletins; GASB Implementation Guides, and literature of the AICPA ‘Cleared’ by the GASB (Category B) • Then, non-authoritative accounting literature:

o GASB Concepts Statements o FASB, FASAB, IPSASB, IASB o AICPA literature not cleared by GASB o Practices that are widely recognized & prevalent

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AICPA Gaming Audit & Accounting Guide

Ryan Burns, CPA Partner, BlueBird CPAs

AICPA Gaming Accounting & Audit Guide

• AICPA Casino Audit Guide o The AICPA Audit and Accounting Guide Audits of Casinos (the Guide) was originally issued in 1984. The Guide was not revised or amended, other than for conforming changes, since its issuance until 2011 (updated in 2014, 2017 and 2020).

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AICPA Gaming Accounting & Audit Guide

• Why the need for change? o Change in accounting principles. o Impact of technology. o Impact of multiple jurisdictions and the introduction of Native American gaming. o Diversity in practice. o Accounting and auditing issues not contemplated in the existing Guide.

AICPA Gaming Audit & Accounting Guide

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