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Daily Rules, Proposed Rules, and Notices of the Federal Government

DEPARTMENT OF THE INTERIOR

National Indian Gaming Commission

25 CFR Part 543

RIN 3141-AA27

Minimum Internal Control Standards

AGENCY: National Indian Gaming Commission, Interior.
ACTION: Final rule.
SUMMARY: The National Indian Gaming Commission (NIGC) amends its minimum internal control standards for Class II gaming under the Indian Gaming Regulatory Act to provide comprehensive and updated standards for all aspects of Class II gaming. These amendments replace the partial standards published in 2008 with a set of comprehensive standards for the entire Class II gaming environment. The new sections include, for example: Card games; drop and count; surveillance; and gaming promotions and player tracking. The amendments also update and reorganize existing sections, such as bingo and information technology. The amendments reflect advancements in technology and provide auditable standards while leaving more areas in which the Tribal Gaming Regulatory Authorities (TGRAs) may exercise discretion.
DATES: This rule is effective on October 22, 2012.
FOR FURTHER INFORMATION CONTACT: Jennifer Ward, National Indian Gaming Commission, 1441 L Street NW., Suite 9100, Washington, DC 20005. Telephone: 202-632-7009; email:reg.review@nigc.gov.
SUPPLEMENTARY INFORMATION: I. Background

The Indian Gaming Regulatory Act (IGRA or Act), Public Law 100-497, 25 U.S.C. 2701et seq.,was signed into law on October 17, 1988. The Act establishes the NIGC and sets out a comprehensive framework for the regulation of gaming on Indian lands. On January 5, 1999, the NIGC published a final rule in theFederal RegistercalledMinimum Internal Control Standards.64 FR 590. The rule added a new part to the Commission's regulations establishing Minimum Internal Control Standards (MICS) to reduce the risk of loss because of customer or employee access to cash and cash equivalents within a casino. The part contains standards and procedures that govern cash handling, documentation, game integrity, auditing, surveillance, and variances, as well as other areas.

Part 543 addresses minimum internal control standards (MICS) for Class II gaming operations. The regulations require tribes establish controls and implement procedures at least as stringent as those described in this part to maintain the integrity of the gaming operation and minimize the risk of theft.

The Commission recognized from their inception that the MICS would require periodic review and updates to keep pace with technology, and has amended them three times since: June 27, 2002 (67 FR 43390), August 12, 2005 (70 FR 47108), and October 10, 2008 (73 FR 60498). In addition to making updates to account for advances in technology, the 2008 MICS also included part 543 and began the process of relocating all Class II controls into that part. The MICS do not classify games as Class II or Class III; rather, they provide minimum controls for gaming that is assumed to be Class II.

On November 18, 2010, the NIGC issued a Notice of Inquiry and Notice of Consultation advising the public that the NIGC endeavored to conduct a comprehensive review of its regulations and requesting public comment on which were most in need of revision, in what order the Commission should review its regulations, and the process NIGC should utilize to make revisions. 75 FR 70680. On April 4, 2011, after consulting with tribes and reviewing all comments, the NIGC published a Notice of Regulatory Review Schedule (NRR) setting out a consultation schedule and process for review. 76 FR 18457. The Commission's regulatory review process established a tribal consultation schedule with a description of the regulation groups to be covered at each consultation. Part 543 was included in this regulatory review.

II. Previous Rulemaking Activity

The Commission consulted with tribes as part of its review of part 543. In response to comments received, the Commission appointed a Tribal Advisory Committee (TAC) to review and recommend changes to part 543. The TAC submitted its recommendations for part 543 on February 14, 2012.

The Commission developed a preliminary discussion draft based upon recommendations from current and previous TACs, NIGC staff and subject matter experts. The Commission published the preliminary draft on its Web site on March 16, 2012, and requested that all comments from the public be provided to the Agency by April 27, 2012. The Commission held two consultations on the preliminary draft and received numerous written comments.

After reviewing comments and making revisions, the Commission published a Proposed Rule on June 1, 2012 (77 FR 32444). The Commission held several consultations. At the request of commenters, the Commission published a notice on July 24, 2012, extending the comment period to August 15, 2012 (77 FR 43196).

III. Review of Public Comments A. General Comments

Commenters generally stated that the rule is an improvement over the current MICS. Some commenters noted that these regulations provide tribes with more flexibility than the existing MICS or the 2010 proposal, but many stated that part 543 should be drafted to provide even more flexibility to tribal regulators and gaming operations. Commenters suggested removing the procedural requirements and measuring compliance by the extent to which tribes have successfully achieved a regulatory standard, rather than the extent to which tribes have followed step-by-step procedures in the MICS. The Commission declines to take this approach and believes the standards set forth in this part are both appropriate and sufficiently detailed to be implemented by tribes.

Commenters noted several provisions in the MICS—notably in the Bingo and Information Technology sections—that they argued either surpassed the requirements of 547 or would be more appropriately placed there. Necessarily, there is substantial interplay between the Technical Standards in part 547 and the MICS of this part, and many standards could arguably be placed in either. The Commission reviewed each of these comments and determined that the standards to which the commenters refer are best categorized as control standards and declines to move them to Part 547. Further, where a standard may unintentionally require older devices to produce a report that it is not capable of producing (bingo card sales tracking or kiosk reports, for example), the Commission has revised the standard to allow an exemption for the devices, so long as their limitations are noted.

Similarly, commenters suggested that provisions for vouchers and cash and cash equivalents should be relocated from individual sections to § 543.18 (Cage, vault, etc.). The Commission declines to relocate those provisions because the controls are specific to the section in which they appear. The exception is the vouchers subsection of§ 543.8 (Bingo), which is identical to the subsection added to § 543.18. It is needed in § 543.8 because bingo department agents, for example, sometimes pay vouchers on the floor. The subsection is also necessary in § 543.18 because the cage (and kiosks) redeems the majority of vouchers. Therefore, despite the redundancies, the Commission included the voucher subsection in both § 543.8 (Bingo) and § 543.18 (Cage, vault, etc.).

Additionally, two commenters provided extensive comments in red-line format. The Commission has reviewed those comments, and, to the extent those comments identified inconsistent language, noted grammatical errors, or suggested stylistic changes, the Commission has made changes where appropriate. One of the changes suggested in the red-line comments was to delete “authorized” where it modified “agent” because agents are necessarily authorized. The Commission understands that point, but stresses that, where the MICS require an “authorized agent”, the term refers to an agent specifically authorized for the particular department or function. The red-line comments also noted that variance thresholds are more appropriately determined by the gaming operation and approved by the TGRA. The Commission agrees and has revised the rule accordingly.

B. Definitions

Based on comments, the Commission added definitions for the following: cashless transaction, complimentary services or items, coupon, financial instrument storage component, voucher, and voucher system.

Commenters also suggested that the terms kiosk, sufficient clarity, and surveillance system be revised to avoid limiting technology. Accordingly, the Commission redefined kiosk to be a device capable of performing one of two core functions. Kiosks may perform additional functions beyond those in the definition, but only the devices that are able to perform those core functions are subject to the kiosk controls. “Sufficient clarity” was revised to allow for an equivalent to the 20 frames per second recording speed. The Commission declines, however, to revise the definition of surveillance system in response to commenters who suggested that the specified equipment, specifically “video” cameras may limit technology. Video cameras are not limited to tape formats and may be digital. The Commission also revised the definition of the TICS to provide a more complete definition.

Commenters also suggested that the definition of “Gaming promotion” should be limited to promotions requiring Class II game play as a condition of eligibility. The Commission declines to limit the definition, believing that NIGC's authority is already sufficiently described by the title of the part (Class II MICS). Promotions offered solely to Class III gaming participants are not covered by this part or the gaming promotion definition, in particular. However, where eligibility may be secured by playing either Class IIorIII games, this definition applies. Because the suggested revision fails to include “either II or III” promotions, the Commission declines to adopt it.

Finally, the Commission notes that commenters requested language requiring the implementation of procedures “to prevent unauthorized access, misappropriation, forgery, theft, or fraud.” Rather than repeat the language, the Commission added it to the definition of SICS so that it applies to all implementing procedures. Consequently, the Commission removed the language from individual provisions where it appeared.

C. Interpretive Provisions and Compliance

Commenters suggested adding five interpretive provisions to § 543.3. First, commenters requested a provision stating that nothing in this part is intended to limit technology. The Commission agrees that nothing in this part is intended to limit technology, but believes such a provision is properly located in the technical standards rather than control standards. Although the Commission declines to add a general statement that nothing in this part is intended to limit technology, it reviewed and made appropriate changes regarding all comments that specifically noted possible limitations. Similarly, several commenters requested that the Commission expand computer applications in § 543.3(e) to include other technologies. The Commission declines, but clarifies that computer applications include software regardless of whether it is commonly regarded as a “computer application”.

Second, commenters recommended that the Commission include a section specifying that only applicable control standards apply. The Commission addressed this concern by changing § 543.3(b) to require TGRAs to ensure that “TICS are established and implemented that provide a level of control that equals or exceedsthe applicable standardsset forth in this part.” (emphasis added). In other words, TGRAs need only establish TICS for applicable standards. The Commission does not believe any further clarification is necessary.

Third, some commenters advocated for the inclusion of a severability clause to ensure that, should a court conclude that any part of this regulation is invalid, such invalidity will not affect the rest of the part. The Commission also addressed this concern in the previous preamble, stating that severability clauses are not conclusive of an agency's intent (Canterbury Liquorsv.Sullivan,999 F. Supp. 144 (D.MA. 1994)) and that “the ultimate determination of severability will rarely turn on the presence or absence of such a clause.”Community for Creative Non-violencev.Turner,893 F. 2d 1387 (D.C. Cir. 1990), citingUnited Statesv.Jackson,390 U.S. 570, 585 n. 27 (1968). Again, the Commission declines to include a severability clause in this regulation because it believes that the regulations are not so intertwined that striking one provision would necessarily always require invalidation of the entire part, and the lack of a severability clause will not compel a court's finding on the issue.

Fourth, many commenters requested the inclusion of a provision recognizing that tribes are the primary regulatory authority for Class II gaming. The Commission declines to insert the requested language into the regulation. The Commission agrees that tribes are the primary regulators of Indian gaming, but has never understood that to mean that the regulatory authority of a TGRA is superior to that of the NIGC. Rather, the Commission recognizes that TGRAs are the day-to-day regulators of Indian gaming and the first line of oversight at every facility. Although the findings section of IGRA states that tribes have the exclusive right to regulate gaming activity on Indian lands, IGRA also establishes a regulatory scheme that includes the NIGC as well as tribes.

Fifth, several commenters requested a provision stating that the regulations are not intended to require a particular organizational structure. The Commission declines to add the provision because it could be read too broadly, but clarifies that the terms “supervisor” or “manager”, as they are used within the MICS, reference the agent's authority level, not the agent's job title.

In addition to the five requested interpretative provisions, commenters also questioned the Commission's authority to require a System of Internal Controls (SICS) and the standard by which the Commission will judge deficiencies in the SICS. In response,the Commission has revised the part to clarify that Tribal Internal Control Standards (TICS) must be implemented, and that SICS are the policies and procedures to carry out the implementation. The enforcement provisions have also been revised to reflect the Commission's intent that it not judge the sufficiency of the SICS. The provision now provides that enforcement action may be initiated for deficiencies in the TICS or absence of SICS.

D. Charitable Operations

Commenters requested clarification that the charitable gaming operations described in § 543.4 are not limited to those with a 501(c)(3) designation. The Commission agrees that it does not intend to limit the definition of charitable organizations to those with a 501(c)(3) designation. For purposes of the MICS, an organization is charitable if the regulating tribe recognizes it as such.

Further, the Commission reviewed the exception for charitable operations. Rather than cause unnecessary confusion by removing it, the Commission has left the charitable gaming exception in place, despite any redundancy it may have with the small gaming operation exception.

E. Alternate Minimum Standard

The Commission received several comments at consultations asking for clarification of the process. Provisions were added to clarify that operations may implement an alternate standard once it has been approved by the TGRA, that operations may continue to implement the standard upon approval from the Chair, and that operations must revert to the relevant MICS if the Chair objects to the standard.

F. Bingo

Commenters generally supported the Commission's consolidation of manual and Class II gaming system bingo into a single Bingo section, but many of the other comments on this section were very specific.

In response to comments requesting that § 543.8(d)(1) be limited to “physical” objects, the Commission made the change, but also re-ordered the subsection to eliminate redundancy and better clarify which controls apply to physical objects.

Commenters objected to the installation testing requirements, suggesting that all testing standards should be included in part 547. The Commission disagrees and emphasizes that—contrary to technical standards, which test the system itself—installation testing standards are meant to ensure that components have been properly connected to associated equipment and are functioning as intended.

Commenters also objected to the removal, retirement and/or destruction standards, explaining that these details are often spelled out in their lease agreements. The Commission understands that tribes may not have control over the disposition of machines and software, and points out that the MICS do not require specific procedures, only that they address certain areas.

Many expressed confusion resulting from a missing line break between § 543.8(g)(8) Dispute resolution and (h) Operations. Dispute resolution is the final of eight areas for which procedures must be developed relating to the use of technological aids in bingo. “Operations” begins a new subsection.

Finally, some also questioned clarification for the term “other associated meter information” as it appears in Class II gaming system sales. This refers to meter information that reflects anomalies such as malfunctions.

G. Pull Tabs and Card Games

As a result of a number of comments that questioned the usefulness of analyzing pull tab statistical records before the deal is finished, the Commission eliminated requirements for conducting a statistical review at regular intervals. The Commission agrees that statistical analysis is useful for pull tabs only when the deal is finished or has been removed from play.

Regarding card room supervision, one commenter expressed concern that allowing a supervisor to function as a dealer without other supervision could result in inadequate supervision. The Commission specifically requested additional comments regarding that issue and received no additional comments. Therefore, the Commission declines to revise the provision, but notes that it is an area where TGRAs may wish to issue more stringent controls.

Some comments suggested that it is unheard of in the industry to require supervisory authorization for every exchange or transfer from a card table. These comments do not take into account the second half of the provision, which does not require supervisory authorization for banks maintained at an imprest level. Because nearly all card room banks are maintained at an imprest level, exchanges requiring supervisory authorization are very rare.

H. Player Tracking, Gaming Promotions, and Complimentary Items

Many commenters objected to the gaming promotion and player tracking standards, arguing that the Commission should defer to TGRAs to establish standards, and that the NIGC lacks authority to regulate these areas. The Commission agrees that TGRAs should establish standards, which is precisely the reason the standards do not detail requirements, and instead provide a general outline of areas that must be addressed and displayed to patrons. The Commission disagrees with commenters regarding its authority. Gaming promotions, as defined in the rule, require game play as a condition of eligibility. For example, the promotions standards are not applicable to the type of promotion in which a patron drops a free card into a tumbler drawing. This rule applies to promotions that are directly related to gaming activity and are, therefore, within the scope of the Commission's authority to establish Class II MICS. Further, although player tracking systems may be useful for gathering other customer data, their primary purpose is to track game play and issue rewards based upon that play. Because the player tracking and gaming promotions in this rule require game play to become eligible for rewards, the Commission concludes that they relate to gaming activities and are within the scope of its authority.

Commenters also questioned the inclusion of promotions, patron accounts, coupons and vouchers in the player tracking subsection because they are all controlled in separate sections. The Commission revised the heading to include both player tracking and promotions, but also points out that there are no coupon or voucher controls in this section. The standard requires that changes to the “player tracking systems * * * which control external bonusing system parameters such as the * * * issuance of * * * coupons or vouchers * * * must be performed under the authority of a supervisory agent * * *.” (§ 543.12(d)).

Finally, commenters requested clarification of the use of “tracking” in the complimentary services and items section. The Commission agrees that the term caused confusion and revised the standard to require “documenting and recording the authorization, issuance, andredemption” of complimentary services or items.

I. Patron Deposit Accounts

As a result of comments, the Commission added a provision specifically allowing for a PersonalIdentification Number as a method of verifying identity. The Commission rejected comments suggesting that the industry standard definition of smart card conflicts with this section because it prohibits smart cards from being the only source of account data. While that may have been the case at one time, today, a smart card must not be the only source of account data in this section because it must retrieve the data from some other source.

J. Drop and Count

Many commented generally that the section is too procedural and it should be one streamlined standard instead of separated by game. The Commission agrees this section is more procedural than others, but drop is a process that differs by game and count is necessarily detailed.

Some comments suggested using one term for both financial instrument storage components and drop boxes. Although they serve the same purpose, financial instrument storage components are an industry term specific to player interfaces, while drop boxes are specific to card tables. Applying either of the terms universally could create confusion. The Commission revised the card game drop and player interface drop standards in response to comments suggesting that the two should mirror each other where they address the same control (notifying surveillance of the drop, for example).

The Commission also agrees with comments suggesting that a cage/vault agent should be allowed to be on the count team if they are not the sole recorder of the count and do not participate in the transfer of drop proceeds to the cage/vault. The Commission declines to revise the provisions requiring supervisory participation because it is a necessary control.

K. Cage, Vault, Kiosk, Cash and Cash Equivalents

The Commission accepted numerous suggestions in this section. Most notably, the Commission revised the kiosk section to require a series of reconciliation reports be available on demand. If the system is not capable of producing a report(s), the limitation must be documented. Commenters stated that the physical and logical controls from the kiosk subsection are already addressed in the information technology section, but the Commission does not agree that the redundancy is clear and declines to remove them.

The Commission agrees with a suggestion to eliminate the $100 minimum threshold for requiring specific documentation on cage increases or decreases. Specific documentation is now required for all increases or decreases to cage inventory.

Finally, the Commission accepted a suggestion to raise the threshold from $100 to $600 for specifically documenting card game promotional payouts.

L. Information and Technology

Some commenters were concerned that the requirement to secure communications from Network Communication Equipment, or to secure some of the more portable equipment, such as cell phones, may be an impossible standard. The Commission clarifies that, where endpoints of communication are controlled by an entity other than a tribe, an attestation by the third party confirming the security of the communications is sufficient. Further, a procedure ensuring that highly portable Network Communication Equipment, such as tablets and cell phones, are distributed only to appropriate persons will satisfy the standard for that equipment.

Commenters also requested a provision requiring operations to consult with a manufacturer before disabling ports suspected of being unused. While consulting with manufacturers regarding services and ports may be worthwhile, it is more appropriately included as a suggestion in future guidance documents.

Finally, commenters suggested deleting the annual requirement for testing recovery procedures. The Commission disagrees, and notes that removing the phrase would not change the standard, because an independent auditor conducts yearly reviews to determine whether each requirement has been met.

M. Surveillance

Several commenters questioned the need for surveillance of all jackpot meters. The Commission agrees and has limited the standard to progressive prize meters exceeding specified thresholds. The Commission believes this revision more adequately reflects the risks addressed by the standard.

One commenter expressed concern that the one-year retention period for surveillance footage of suspected crimes, suspicious activity, and security detentions is arbitrary. The Commission invited further comment on this concern. After clarifying that digital copies of surveillance are acceptable forms of retention, the Commission received no further comment and declines to revise the standard. The Commission emphasizes, however, that it intentionally declined to provide a definition of suspicious activity and believes that TGRAs are in the best position to define the term for their operations.

N. Audit and Accounting and Revenue Audit

Many commenters requested that the Commission limit the instances of noncompliance requiring action or reporting to “material” instances. The Commission disagrees. Although most instances of noncompliance would not be deemed material, they may pose a significant risk, individually or collectively, to the gaming operation and must, therefore, be reported and corrected as required in this part.

The Commission accepts commenters' request to clarify that independent accountants may, but are not required to, create journal entries.

The Commission accepted several comments for § 543.24. It agreed that the title “Revenue Audit” may be misleading for operations who have departments by that name. As clarification, the Commission has retitled § 543.24 “Auditing Revenue”. It also agreed that once per quarter may not be a frequent enough interval for review of player tracking systems. One comment suggested weekly review, but the Commission determined that monthly is a more appropriate minimum interval. Additionally, the Commission understands commenters' concerns with the list of entities required to be provided with a report detailing complimentary services and items and has revised it to include entities authorized by the TGRA or by tribal law or ordinance.

Finally, the Commission reviewed the provision that required reconciling lines of credit payments with sequential receipts as a result of comments requesting clarification. Upon review, the Commission realizes that the provision was mis-numbered and should have been included in (7)(i). The Commission clarified and reordered the provision.

IV. Regulatory Matters Regulatory Flexibility Act

The rule will not have a significant impact on a substantial number of small entities as defined under the Regulatory Flexibility Act, 5 U.S.C. 601,et seq.Moreover, Indian tribes are not considered to be small entities for the purposes of the Regulatory Flexibility Act.

Small Business Regulatory Enforcement Fairness Act

The rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. The rule does not have an effect on the economy of $100 million or more. The rule will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, local government agencies or geographic regions, nor will the rule have a significant adverse effect on competition, employment, investment, productivity, innovation, or the ability of the enterprises, to compete with foreign based enterprises.

Unfunded Mandate Reform Act

The Commission, as an independent regulatory agency, is exempt from compliance with the Unfunded Mandates Reform Act, 2 U.S.C. 1502(1); 2 U.S.C. 658(1).

Takings

In accordance with Executive Order 12630, the Commission has determined that the rule does not have significant takings implications. A takings implication assessment is not required.

Civil Justice Reform

In accordance with Executive Order 12988, the Commission has determined that the rule does not unduly burden the judicial system and meets the requirements of sections 3(a) and 3(b)(2) of the Order.

National Environmental Policy Act

The Commission has determined that the rule does not constitute a major federal action significantly affecting the quality of the human environment and that no detailed statement is required pursuant to the National Environmental Policy Act of 1969, 42 U.S.C. 4321,et seq.

Paperwork Reduction Act

The information collection requirements contained in this rule were previously approved by the Office of Management and Budget (OMB) as required by 44 U.S.C. 3501et seq.and assigned OMB Control Number 3141- 0012, which expired in August of 2011. The NIGC published a notice to reinstate that control number on April 25, 2012. 77 FR 24731. There is no change to the paperwork created by this revision.

List of Subjects in 25 CFR Part 543

Gambling, Indian—Indian lands, Indian—tribal government.

For the reasons set forth in the preamble, the Commission revises 25 CFR Part 543 to read as follows: PART 543—MINIMUM INTERNAL CONTROL STANDARDS FOR CLASS II GAMING Sec. 543.1 What does this part cover? 543.2 What are the definitions for this part? 543.3 How do tribal governments comply with this part? 543.4 Does this part apply to small and charitable gaming operations? 543.5 How does a gaming operation apply to use an alternate minimum standard from those set forth in this part? 543.6 [Reserved] 543.7 [Reserved] 543.8 What are the minimum internal control standards for bingo? 543.9 What are the minimum internal control standards for pull tabs? 543.10 What are the minimum internal control standards for card games? 543.11 [Reserved] 543.12 What are the minimum internal control standards for gaming promotions and player tracking systems? 543.13 What are the minimum internal control standards for complimentary services or items? 543.14 What are the minimum internal control standards for patron deposit accounts and cashless systems? 543.15 What are the minimum internal control standards for lines of credit? 543.16 [Reserved] 543.17 What are the minimum internal control standards for drop and count? 543.18 What are the minimum internal control standards for the cage, vault, kiosk, cash and cash equivalents? 543.19 [Reserved] 543.20 What are the minimum internal control standards for information technology and information technology data? 543.21 What are the minimum internal control standards for surveillance? 543.22 [Reserved] 543.23 What are the minimum internal control standards for audit and accounting? 543.24 What are the minimum internal control standards for auditing revenue? 543.25-543.49 [Reserved] Authority:

25 U.S.C. 2702(2), 2706(b)(1-4), 2706(b)(10).

§ 543.1 What does this part cover?

This part establishes the minimum internal control standards for the conduct of Class II games on Indian lands as defined in 25 U.S.C. 2701et seq.

§ 543.2 What are the definitions for this part?

The definitions in this section apply to all sections of this part unless otherwise noted.

Accountability.All financial instruments, receivables, and patron deposits constituting the total amount for which the bankroll custodian is responsible at a given time.

Agent.A person authorized by the gaming operation, as approved by the TGRA, to make decisions or perform assigned tasks or actions on behalf of the gaming operation.

Automated payout.Payment issued by a machine.

Cage.A secure work area within the gaming operation for cashiers, which may include a storage area for the gaming operation bankroll.

Cash equivalents.Documents, financial instruments other than cash, or anything else of representative value to which the gaming operation has assigned a monetary value. A cash equivalent includes, but is not limited to, tokens, chips, coupons, vouchers, payout slips and tickets, and other items to which a gaming operation has assigned an exchange value.

Cashless system.A system that performs cashless transactions and maintains records of those cashless transactions.

Cashless transaction.A movement of funds electronically from one component to another, such as to or from a patron deposit account.

Chair.The Chair of the National Indian Gaming Commission.

Class II gaming.Class II gaming has the same meaning as defined in 25 U.S.C. 2703(7)(A).

Class II gaming system.All components, whether or not technologic aids in electronic, computer, mechanical, or other technologic form, that function together to aid the play of one or more Class II games, including accounting functions mandated by these regulations or part 547 of this chapter.

Commission.The National Indian Gaming Commission, established by the Indian Gaming Regulatory Act, 25 U.S.C. 2701et seq.

Complimentary services and items.Services and items provided to a patron at the discretion of an agent on behalf of the gaming operation or by a third party on behalf of the gaming operation. Services and items may include, but are not limited to, travel, lodging, food, beverages, or entertainment expenses.

Count.The act of counting and recording the drop and/or other funds. Also, the total funds counted for a particular game, player interface, shift, or other period.

Count room.A secured room where the count is performed in which the cash and cash equivalents are counted.

Coupon.A financial instrument of fixed wagering value, that can only be used to acquire non-cashable credits through interaction with a vouchersystem. This does not include instruments such as printed advertising material that cannot be validated directly by a voucher system.

Dedicated camera.A video camera that continuously records a specific activity.

Drop box.A locked container in which cash or cash equivalents are placed at the time of a transaction, typically used in card games.

Drop proceeds.The total amount of financial instruments removed from drop boxes and financial instrument storage components.

Exception report.A listing of occurrences, transactions or items that fall outside a predetermined range of acceptability.

Financial instrument.Any tangible item of value tendered in Class II game play, including, but not limited to bills, coins, vouchers, and coupons.

Financial instrument storage component.Any component that stores financial instruments, such as a drop box, but typically used in connection with player interfaces.

Gaming promotion.Any promotional activity or award that requires game play as a condition of eligibility.

Generally Accepted Accounting Principles (GAAP).A widely accepted set of rules, conventions, standards, and procedures for reporting financial information, as established by the Financial Accounting Standards Board (FASB), including, but not limited to, the standards for casino accounting published by the American Institute of Certified Public Accountants (AICPA).

Generally Accepted Auditing Standards (GAAS).A widely accepted set of standards that provide a measure of audit quality and the objectives to be achieved in an audit, as established by the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA).

Governmental Accounting Standards Board (GASB).Generally accepted accounting principles used by state and local governments.

Independent.The separation of functions to ensure that the agent or process monitoring, reviewing, or authorizing the controlled activity, function, or transaction is separate from the agents or process performing the controlled activity, function, or transaction.

Kiosk.A device capable of redeeming vouchers and/or wagering credits or initiating electronic transfers of money to or from a patron deposit account.

Lines of credit.The privilege granted by a gaming operation to a patron to:

(1) Defer payment of debt; or

(2) Incur debt and defer its payment under specific terms and conditions.

Manual payout.Any non-automated payout.

Marker.A document, signed by the patron, promising to repay credit issued by the gaming operation.

MICS.Minimum internal control standards in this part.

Network communication equipment.A device or collection of devices that controls data communication in a system including, but not limited to, cables, switches, hubs, routers, wireless access points, landline telephones and cellular telephones.

Patron.A person who is a customer or guest of the gaming operation and may interact with a Class II game. Also may be referred to as a “player.”

Patron deposit account.An account maintained on behalf of a patron, for the deposit and withdrawal of funds for the primary purpose of interacting with a gaming activity.

Player interface.Any component(s) of a Class II gaming system, including an electronic or technologic aid (not limited to terminals, player stations, handhelds, fixed units, etc.), that directly enables player interaction in a Class II game.

Prize payout.Payment to a player associated with a winning or qualifying event.

Promotional progressive pots and/or pools.Funds contributed to a game by and for the benefit of players that are distributed to players based on a predetermined event.

Shift.A time period, unless otherwise approved by the tribal gaming regulatory authority, not to exceed 24 hours.

Shill.An agent financed by the gaming operation and acting as a player.

Smart card.A card with embedded integrated circuits that possesses the means to electronically store or retrieve account data.

Sufficient clarity.The capacity of a surveillance system to record images at a minimum of 20 frames per second or equivalent recording speed and at a resolution sufficient to clearly identify the intended activity, person, object, or location.

Surveillance operation room(s).The secured area(s) where surveillance takes place and/or where active surveillance equipment is located.

Surveillance system.A system of video cameras, monitors, recorders, video printers, switches, selectors, and other equipment used for surveillance.

SICS (System of Internal Control Standards).An overall operational framework for a gaming operation that incorporates principles of independence and segregation of function, and is comprised of written policies, procedures, and standard practices based on overarching regulatory standards specifically designed to create a system of checks and balances to safeguard the integrity of a gaming operation and protect its assets from unauthorized access, misappropriation, forgery, theft, or fraud.

Tier A.Gaming operations with annual gross gaming revenues of more than $3 million but not more than $8 million.

Tier B.Gaming operations with annual gross gaming revenues of more than $8 million but not more than $15 million.

Tier C.Gaming operations with annual gross gaming revenues of more than $15 million.

TGRA.Tribal gaming regulatory authority, which is the entity authorized by tribal law to regulate gaming conducted pursuant to the Indian Gaming Regulatory Act.

TICS.Tribal Internal Control Standards established by the TGRA that are at least as stringent as the standards set forth in this part.

Vault.A secure area where cash and cash equivalents are stored.

Voucher.A financial instrument of fixed wagering value, usually paper, that can be used only to acquire an equivalent value of cashable credits or cash through interaction with a voucher system.

Voucher system.A system that securely maintains records of vouchers and coupons; validates payment of vouchers; records successful or failed payments of vouchers and coupons; and controls the purging of expired vouchers and coupons.

§ 543.3 How do tribal governments comply with this part?

(a)Minimum standards.These are minimum standards and a TGRA may establish and implement additional controls that do not conflict with those set out in this part.

(b)TICS.TGRAs must ensure that TICS are established and implemented that provide a level of control that equals or exceeds the applicable standards set forth in this part.

(1)Evaluation of existing TICS.Each TGRA must, in accordance with the tribal gaming ordinance, determine whether and to what extent their TICS require revision to ensure compliance with this part.

(2)Compliance date.All changes necessary to ensure compliance with this part must be promulgated within twelve months of the effective date of this part and implemented at thecommencement of the next fiscal year. At the discretion of the TGRA, gaming operations may have an additional six months to come into compliance with the TICS.

(c)SICS.Each gaming operation must develop a SICS, as approved by the TGRA, to implement the TICS.

(1)Existing gaming operations.All gaming operations that are operating on or before the effective date of this part, must comply with this part within the time requirements established in paragraph (b) of this section. In the interim, such operations must continue to comply with existing TICS.

(2)New gaming operations.All gaming operations that commence operations after the effective date of this part must comply with this part before commencement of operations.

(d)Variances.Where referenced throughout this part, the gaming operation must set a reasonable threshold, approved by the TGRA, for when a variance must be reviewed to determine the cause, and the results of the review must be documented and maintained.

(e)Computer applications.For any computer applications utilized, alternate documentation and/or procedures that provide at least the level of control established by the standards of this part, as approved in writing by the TGRA, will be acceptable.

(f)Determination of tier.

(1) The determination of tier level will be made based upon the annual gross gaming revenues indicated within the gaming operation's audited financial statements.

(2) Gaming operations moving from one tier to another will have nine months from the date of the independent certified public accountant's audit report to achieve compliance with the requirements of the new tier. The TGRA may extend the deadline by an additional six months if written notice is provided to the Commission no later than two weeks before the expiration of the nine month period.

(g)Submission to Commission.Tribal regulations promulgated pursuant to this part are not required to be submitted to the Commission pursuant to § 522.3(b) of this chapter.

(h)Enforcement of Commission MICS.

(1) Each TGRA is required to establish and implement TICS pursuant to paragraph (b) of this section. Each gaming operation is then required, pursuant to paragraph (c) of this section, to develop a SICS that implements the TICS. Failure to comply with this subsection may subject the tribal operator of the gaming operation, or the management contractor, to penalties under 25 U.S.C. 2713.

(2) Enforcement action by the Commission will not be initiated under this part without first informing the tribe and TGRA of deficiencies in the TICS or absence of SICS for its gaming operation and allowing a reasonable period of time to address such deficiencies. Such prior notice and opportunity for corrective action are not required where the threat to the integrity of the gaming operation is immediate and severe.

§ 543.4 Does this part apply to small and charitable gaming operations?

(a)Small gaming operations.This part does not apply to small gaming operations provided that:

(1) The TGRA permits the operation to be exempt from this part;

(2) The annual gross gaming revenue of the operation does not exceed $3 million; and

(3) The TGRA develops, and the operation complies with, alternate procedures that:

(i) Protect the integrity of games offered;

(ii) Safeguard the assets used in connection with the operation; and

(iii) Create, prepare and maintain records in accordance with Generally Accepted Accounting Principles.

(b)Charitable gaming operations.This part does not apply to charitable gaming operations provided that:

(1) All proceeds are for the benefit of a charitable organization;

(2) The TGRA permits the charitable organization to be exempt from this part;

(3) The charitable gaming operation is operated wholly by the charitable organization's agents;

(4) The annual gross gaming revenue of the charitable operation does not exceed $3 million; and

(5) The TGRA develops, and the charitable gaming operation complies with, alternate procedures that:

(i) Protect the integrity of the games offered;

(ii) Safeguard the assets used in connection with the gaming operation; and

(iii) Create, prepare and maintain records in accordance with Generally Accepted Accounting Principles.

(c)Independent operators.Nothing in this section exempts gaming operations conducted by independent operators for the benefit of a charitable organization.

§ 543.5 How does a gaming operation apply to use an alternate minimum standard from those set forth in this part?

(a)TGRA approval.

(1) A TGRA may approve an alternate standard from those required by this part if it has determined that the alternate standard will achieve a level of security and integrity sufficient to accomplish the purpose of the standard it is to replace. A gaming operation may implement an alternate standard upon TGRA approval subject to the Chair's decision pursuant to paragraph (b) of this section.

(2) For each enumerated standard for which the TGRA approves an alternate standard, it must submit to the Chair within 30 days a detailed report, which must include the following:

(i) An explanation of how the alternate standard achieves a level of security and integrity sufficient to accomplish the purpose of the standard it is to replace; and

(ii) The alternate standard as approved and the record on which it is based.

(3) In the event that the TGRA or the tribal government chooses to submit an alternate standard request directly to the Chair for joint government to government review, the TGRA or tribal government may do so without the approval requirement set forth in paragraph (a)(1) of this section.

(b)Chair review.

(1) The Chair may approve or object to an alternate standard approved by a TGRA.

(2) If the Chair approves the alternate standard, the Tribe may continue to use it as authorized by the TGRA.

(3) If the Chair objects, the operation may no longer use the alternate standard and must follow the relevant MICS set forth in this part.

(4) Any objection by the Chair must be in writing and provide reasons that the alternate standard, as approved by the TGRA, does not provide a level of security or integrity sufficient to accomplish the purpose of the standard it is to replace.

(5) If the Chair fails to approve or object in writing within 60 days after the date of receipt of a complete submission, the alternate standard is considered approved by the Chair. The Chair may, upon notification to the TGRA, extend this deadline an additional 60 days.

(c)Appeal of Chair decision. A TGRA may appeal the Chair's decision pursuant to 25 CFR chapter III, subchapter H.

§ 543.6 [Reserved]
§ 543.7 [Reserved]
§ 543.8 What are the minimum internal control standards for bingo?

(a)Supervision.Supervision must be provided as needed for bingo operations by an agent(s) with authority equal to or greater than those being supervised.

(b)Bingo cards.

(1) Physical bingo card inventory controls must address the placement of orders, receipt, storage, issuance, removal, and cancellation of bingo card inventory to ensure that:

(i) The bingo card inventory can be accounted for at all times; and

(ii) Bingo cards have not been marked, altered, or otherwise manipulated.

(2)Receipt from supplier.

(i) When bingo card inventory is initially received from the supplier, it must be inspected (without breaking the factory seals, if any), counted, inventoried, and secured by an authorized agent.

(ii) Bingo card inventory records must include the date received, quantities received, and the name of the individual conducting the inspection.

(3)Storage.

(i) Bingo cards must be maintained in a secure location, accessible only to authorized agents, and with surveillance coverage adequate to identify persons accessing the storage area.

(ii) For Tier A operations, bingo card inventory may be stored in a cabinet, closet, or other similar area; however, such area must be secured and separate from the working inventory.

(4)Issuance and returns of inventory.

(i) Controls must be established for the issuance and return of bingo card inventory. Records signed by the issuer and recipient must be created under the following events:

(A) Issuance of inventory from storage to a staging area;

(B) Issuance of inventory from a staging area to the cage or sellers;

(C) Return of inventory from a staging area to storage; and

(D) Return of inventory from cage or seller to staging area or storage.

(ii) [Reserved]

(5)Cancellation and removal.

(i) Bingo cards removed from inventory that are deemed out of sequence, flawed, or misprinted and not returned to the supplier must be cancelled to ensure that they are not utilized in the play of a bingo game. Bingo cards that are removed from inventory and returned to the supplier or cancelled must be logged as removed from inventory.

(ii) Bingo cards associated with an investigation must be retained intact outside of the established removal and cancellation policy.

(6)Logs.

(i) The inventory of bingo cards must be tracked and logged from receipt until use or permanent removal from inventory.

(ii) The bingo card inventory record(s) must include:

(A) Date;

(B) Shift or session;

(C) Time;

(D) Location;

(E) Inventory received, issued, removed, and returned;

(F) Signature of agent performing transaction;

(G) Signature of agent performing the reconciliation;

(H) Any variance;

(I) Beginning and ending inventory; and

(J) Description of inventory transaction being performed.

(c)Bingo card sales.

(1) Agents who sell bingo cards must not be the sole verifier of bingo cards for prize payouts.

(2) Manual bingo card sales: In order to adequately record, track, and reconcile sales of bingo cards, the following information must be documented:

(i) Date;

(ii) Shift or session;

(iii) Number of bingo cards issued, sold, and returned;

(iv) Dollar amount of bingo card sales;

(v) Signature, initials, or identification number of the agent preparing the record; and

(vi) Signature, initials, or identification number of an independent agent who verified the bingo cards returned to inventory and dollar amount of bingo card sales.

(3) Bingo card sale voids must be processed in accordance with the rules of the game and established controls that must include the following:

(i) Patron refunds;

(ii) Adjustments to bingo card sales to reflect voids;

(iii) Adjustment to bingo card inventory;

(iv) Documentation of the reason for the void; and

(v) Authorization for all voids.

(4) Class II gaming system bingo card sales. In order to adequately record, track and reconcile sales of bingo cards, the following information must be documented from the server (this is not required if the system does not track the information, but system limitation(s) must be noted):

(i) Date;

(ii) Time;

(iii) Number of bingo cards sold;

(iv) Dollar amount of bingo card sales; and

(v) Amount in, amount out and other associated meter information.

(d)Draw.

(1) Controls must be established and procedures implemented to ensure that all eligible objects used in the conduct of the bingo game are available to be drawn and have not been damaged or altered. Verification of physical objects must be performed by two agents before the start of the first bingo game/session. At least one of the verifying agents must be a supervisory agent or independent of the bingo games department.

(2) Where the selection is made through an electronic aid, certification in accordance with 25 CFR 547.14 is acceptable for verifying the randomness of the draw and satisfies the requirements of paragraph (d)(1) of this section.

(3) Controls must be established and procedures implemented to provide a method of recall of the draw, which includes the order and identity of the objects drawn, for dispute resolution purposes.

(4)Verification and display of draw.Controls must be established and procedures implemented to ensure that:

(i) The identity of each object drawn is accurately recorded and transmitted to the participants. The procedures must identify the method used to ensure the identity of each object drawn.

(ii) For all games offering a prize payout of $1,200 or more, as the objects are drawn, the identity of the objects are immediately recorded and maintained for a minimum of 24 hours.

(e)Prize payout.

(1) Controls must be established and procedures implemented for cash or cash equivalents that address the following:

(i) Identification of the agent authorized (by position) to make a payout;

(ii) Predetermined payout authorization levels (by position); and

(iii) Documentation procedures ensuring separate control of the cash accountability functions.

(2)Verification of validity.

(i) Controls must be established and procedures implemented to verify that the following is valid for the game in play prior to payment of a winning prize:

(A) Winning card(s);

(B) Objects drawn; and

(C) The previously designated arrangement of numbers or designations on such cards, as described in 25 U.S.C. 2703(7)(A).

(ii) At least two agents must verify that the card, objects drawn, andpreviously designated arrangement were valid for the game in play.

(iii) Where an automated verification method is available, verification by such method is acceptable.

(3)Validation.

(i) For manual payouts, at least two agents must determine the validity of the claim prior to the payment of a prize. The system may serve as one of the validators.

(ii) For automated payouts, the system may serve as the sole validator of the claim.

(4)Verification.