543.9 What are the minimum internal control standards for card games?

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1 Card Games Purpose This section provides guidance on the development of internal controls, policies, and procedures for the operation of Class II card games. This guidance has been compiled by tribal regulators, Class II gaming operators, and other industry resources. It has been specifically designed to provide a variety of ways to implement controls to comply with Part However, because each gaming operation is different and subject to varying tribal laws and regulations it is not possible to provide specific controls or procedures. Each tribe must determine the specific controls and procedures that are most suitable for its gaming operations What are the minimum internal control standards for card games? (a) Internal Control Procedures. Subject to the approval and oversight of the TGRA, each gaming operation shall establish, implement and adhere to internal control policies and procedures that provide at least the level of control established by the standards of this section. (b) Computerized 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 section, as approved in writing by the TGRA, will be acceptable. (c) Variances. The TGRA shall establish the threshold level at which a variance shall be reviewed. Any such review shall be documented. (d) Supervision. Supervision shall be provided during the card room operations by an agent(s) with authority equal to or greater than those being supervised. (e) Inventory of playing cards. The playing card inventory must be controlled in a manner designed to prevent unauthorized access, misappropriation, or fraud. Such controls shall address cards exchanged between two agents, increases and decreases to inventory, and inventory reconciliation. (f) Shill funds. Issuance and return of shill funds shall be recorded and have the written approval of another agent. (g) Cash or cash equivalent controls. Cash or cash equivalents must be controlled in a manner designed to prevent unauthorized access, misappropriation, or fraud. Such controls shall include, but not be limited to the counting of funds, recording of increases and

2 543.9 What are the minimum internal control standards for card games? decreases to inventory, and inventory reconciliation. (h) Posted rules. The rules shall be displayed or available for patron review at the gaming operation, including rules governing contests, prize payouts, fees, etc. Promotional progressive pots and pools such as contests, tournaments, drawings and giveaway programs. Funds contributed by patrons to prize pools shall be returned and documented in accordance with the posted rules. (1) Promotional pool contributions shall be controlled in a manner to properly distinguish between gaming revenue and promotional pool contributions. Promotional pool contributions shall be placed in a locked container; Agents transporting the locked container shall be precluded from having access to the contents keys. (2) At least once a day, increases and decreases to the promotional pool amount shall be verified, supported by documentation, recorded and reconciled to the cash by an agent independent of the card room. (a) (b) (c) Internal Control Procedures. The TGRA should ensure that the gaming operation establishes a system of internal control standards (SICS) that are applicable to audit and accounting. Such SICS should address, at a minimum, how the department operates, agents responsibilities, and controls to protect assets. The TGRA should review and approve the SICS implemented. Computerized applications. A gaming operation may use computer applications, whether developed in-house or acquired externally, provided that controls are established in accordance with MICS and approved in writing by the TGRA. For any computer applications utilized, alternate documentation and/or procedures that provide at least the level of control established by the standards shall be implemented. If computerized systems are used, procedures must be designed to account for computerized system failure without compromising the effectiveness of the internal control standards. Variances. (1) Controls should set out the threshold at which variances must be investigated for each of the following areas: Card Inventory, card room table inventory, and card room bank inventory.

3 (2) When the relevant predetermined threshold is exceeded, the controls should require card room agents, preferably supervisory agents, to conduct a variance investigation. Variance investigation controls/procedures include, but are not be limited to: recalculation of inventory, recount of inventory, surveillance reviews, interviewing agents, and verification of other departments transactions. (3) The investigation results must be supported by documentation and forwarded to the accounting department for review and retention. (d) Supervision. (1) Controls should identify the job position in the card room responsible for ensuring the card room is operating in accordance with established policies and procedures (i.e., supervisory agent). (2) The written system of internal controls should also include: an organizational chart of the card room, job description chart, or a descriptive narrative stating reporting structure to show supervision is present with authority equal to or greater than those being supervised during all periods of operation. (3) The supervisory agent may be a dealer without any other supervision. However, if the supervisory agent is dealing a game, disputes must be resolved by another supervisory agent independent of the card games department. (e) Playing Cards. To ensure the integrity of the card games, a process should be established to control the physical inventory of playing cards from start to finish. Physical inventory controls should address the receipt, stocking, issuance, return, cancellation, and removal of playing card inventory to ensure that: the stock can be accounted for at all times; the card room has proper inventory to maintain the games; and (iii) playing cards have not been marked, altered or otherwise manipulated. Such controls should be followed for all items (i.e., dice and tiles) used in the play of card games. (1) Receipt from Vendor. When playing cards are initially received from the vendor, they must be inspected (without breaking the factory seals), counted, inventoried, and secured by an authorized agent independent of card games. Inventory records should include the following information: date received, quantities received and on hand, and the name of the individual conducting the inspection. (2) Storage.

4 New and used playing cards must be maintained in a secure location, under lock and key, with appropriate surveillance coverage, which is accessible only to authorized agents to prevent unauthorized access and reduce the possibility of tampering. Best practice suggests that card inventory should be stored in a card storage room and the room be under surveillance at all times. For smaller card room operations, inventory can be stored in a card room podium in a separate secured area from the working inventory. In this instance, a general overview of the card inventory should be covered by surveillance at all times. (3) Issuance. Issuance of inventory can be from a storage room to a podium and/or table, podium to a table. When playing cards are issued to a table, best practice suggests that the card game supervisor: (a) opens the decks; (b) records the time and date issued and table number; and (c) initials the flap of the box. The dealer should inspect the front and back of the cards and look for completeness of the deck and any marks, alterations, or other manipulation. (4) Removal from Table. When playing cards are removed from a table, best practice suggests that the card games supervisor retrieves the original box, records the time and date returned, and initials the flap of the box. (This process allows a trail of custody in case an investigation is required.) (5) Return of Inventory. Return of inventory can be from a podium and/or table to a storage room, a table to a podium, and should be recorded on the appropriate log. Upon return to inventory, playing cards should be inspected to ensure that the playing cards have not been marked, altered or otherwise manipulated. If any marks, alterations, or other flaws are detected an investigation should be performed to determine the origin (i.e., table number, date, shift, and dealer(s)) of the cards. Marked, altered, or otherwise flawed cards should be sealed and removed from inventory. Best practice suggests such cards, and investigation results, should be turned over to security (or an independent department) for further investigation, including surveillance review.

5 (6) Cancellation and Removal. (iii) Used playing cards that are not to be re-used shall be properly canceled and removed from service to ensure that old playing cards do not get back into play on a card game. Cancellation methods may include: drilling, corner cutting, permanent ink marking, and edge shaving. These cancelled cards may then be removed from inventory and recorded on the appropriate log. Best practice suggests that the cancellation process be under surveillance to assure proper controls have been followed. In the event of an investigation, other than for a flawed card, the cards associated with the investigation must be retained intact outside of the established retention and cancellation policy. These cards should be sealed and forwarded to a security or surveillance supervisory agent. (7) Logs. The playing card inventory should be tracked through each step in the process on a log(s). Management should determine, based on the size of their operation and inventory needs, where card inventory logs are required to ensure the integrity of playing cards in use. The log(s) should include: day, shift, time, location, inventory received, inventory returned, inventory issued, inventory removed, and agent performing transaction, agent performing the reconciliation, any variance, beginning and ending inventory, and comments. Examples of logs: Log maintained in the card storage room that shows inventory of all cards: Beginning Receipt Inventory (+) (+) Returns from Issuance to Removal podium (+) podium(- ) (- ) =Ending Inventory Inventory Count (- ) = Variance Agent Signature Joe C. Control Sally C. Control Date Shift 1/1/11 Day 1/1/11 Swing Log maintained in the podium that tracks card movement: Date Shift Activity Inventory Agent 1/1/11 Day Received 10 decks 10 Bob Poker 1/1/11 Day Opened 5 tables 5 Bob Poker 1/1/11 Swing Received 20 decks 25 Pete Poker 1/1/11 Swing Returned 10 decks 15 Pete Poker

6 (8) Risk Assessments. A risk assessment of the card control area should be conducted to determine how often an independent count of card inventory should be performed. At that interval, an agent independent of card games and the card control area should perform a physical count and verify that count to the inventory log. If a variance is noted, it should be investigated by the agent who performed the physical count utilizing the methods mentioned above. (f) Shill Funds. (1) Controls should be developed and implemented regarding the use of shills. Such controls should address the following: (iii) (iv) (v) (vi) (vii) When shills may be used; Agent(s) authorized to make the decision to use a shill; Shill rules of play; Shill fund amounts; Obtaining shill funds; Returning the funds; and Monitoring and reviewing shill activities. (2) Best practice suggests that shill funds be issued from, and returned to, the cage. If properly documented, shill funds could be issued from, and returned to, the card room bank. Such transactions should be documented on a form signed by the cage agent performing the transaction and the shill agent accepting the funds. This form should include: date, shift, time, location, agent issuing/receiving funds, shill signature, and amount. (g) Cash and Cash Equivalent Inventory. Controls should be developed with respect to cash or cash equivalents designed to prevent unauthorized access, misappropriation, or fraud. Such controls should address the counting, reconciliation, and recording of increases and decreases to the inventory. (1) Issuance. When a bank is obtained, the agent obtaining the bank must count the bank to ensure accuracy of the funds. A form must be completed and should include: date, time, shift, location, amount, signature of agent issuing funds, and signature of agent obtaining the funds. When a bank is transferred from one agent to another, both agents must make an independent count of the funds. A form must be completed and should include: date, time, shift, location, amount, signature of agent transferring the funds and signature of agent receiving the funds.

7 (2) Exchanges. Even Exchanges. Even Exchanges can occur between a table and the card room bank, a table and the cage, and the card room bank and the cage. Even Exchanges between a table and the card room bank must be evidenced by the placement of a lammer on the table. Other Exchanges. Best practice suggests all other exchanges should be accompanied by a multi-part form. The multi-part form should include: date, time, shift, location, amount (by denomination) being released, amount (by denomination) being requested, signature of the agent releasing the funds, signature of the agent transferring the funds (runner), and signature of the agent exchanging the funds. One part of the form should remain at the location where the funds were released until the exchange is complete. One part goes with the funds during the exchange and is returned with the signature of the agent who exchanged the funds. All copies are forwarded to accounting. (3) Return. When a bank is returned, the agent returning the bank must count the bank to ensure accuracy of the funds. A form must be completed and should include: date, time, shift, location, amount, signature of agent returning funds, and signature of agent receiving the funds. When a bank is transferred from one agent to another, both agents must make an independent count of the funds. A form must be completed and should include: date, time, shift, location, amount, signature of agent transferring the funds, and signature of agent receiving the funds. (4) Variances. Any variances noted in the count of cash and cash equivalents should be documented on the appropriate form. (5) Increases/Decreases. For any floating bank maintained in the card room, increases and decreases to inventory must be properly documented. The documentation should include: Count of the table inventory at the opening of the table and closing of the table which would be performed independently by two agents who should be of supervisory authority. The form should contain all information necessary to perform a reconciliation, this would include; date, shift, table number, amount by denomination, amount in total, and signatures. Fill and Credit transactions authorized by supervisory agents. The form should be multi-part and include; date, shift, table number, amount by denomination, amount in total, signatures of the authorizing agent, the

8 runner, the dealer and the cashier. Original should be dropped in the card game drop box; and one copy should stay with the cage. (iii) Markers and Marker payments authorized by supervisory agents. The form should be multi-part and include; name of the patron, patron account number, amount issued/paid, table number, authorizing agent signature, date and time. Additionally, the marker would include the patron signature upon issuance. The marker payment would include the nature of payment, i.e. chips, cash, check, etc. If manual, we believe there is more than two copies for this: have to drop an issue slip (a copy) in the card game drop box of the issue; original gets transferred to the cage as part of the cage accountability; and another copy may stay in the pit as a transaction. Payments are same way, give customer back marker and drop copy in the drop box. (h) Posted Rules. (1) General Rules. Controls should require agents to post, or make available, for patron review rules to ensure the patron is informed of any conditions required for the patron to participate in the game (i.e. minimum buy in, rebuy, bankroll). In addition, rules of the games offered, fee schedules for the games offered, any related promotions (i.e. any contest, tournament, progressives), should also be available. Best practice also suggests that the process for resolving disputes also be posted or available for patron review. (2) Promotions. Controls should ensure that conditions for participating in card game promotional offerings are documented and available for patron review. Documentation should include; amount of funds to be contributed from the patrons (i.e. per pot, contribution), administrative fees, qualifying hand to win, prize table, allocation of the promotional prize payout, and amount of each promotional pool and aggregate of all pools. (3) Tournaments. Controls should ensure that conditions for participating in card game tournaments are documented and available for patron review. Documentation shall include; name and date of the tournament, administrative fees, entry fees, prize table, allocation of tournament prize payout, rules of play and progression through the tournament. Promotional Progressive Pots and Pools. Controls should be developed to properly account for the funds contributed by patrons to promotional pots or pools. These controls should include: (1) Collections. Procedures for taking the amount posted in the rules out of the pot and dropping it in a locked container separate from the card game drop box.

9 Agents transporting the locked container must be precluded from having access to the content key. Alternatively, methods can be developed to distinguish the promotional contribution from gaming revenue and dropped into the card game drop box. For example: converting the gaming chip into a nonredeemable promotional chip of the same value. (2) Counting and Recording. Best practice suggests that the counting and recording of the promotional locked box contents should be performed by agents independent of the card game department. Additionally, this count should be performed under a surveillance camera. (3) Reconciliation. Best practice suggests that the reconciliation to the promotional pool amount should be performed by agents independent of the card room and those who performed the count. Such reconciliation must include verification of the beginning balance, increases from the count and decreases from prize payouts, and calculation of the ending balance. The agent performing the reconciliation should notify the card room of the ending balance for posting. Alternatively, if the posted promotional pool amount is maintained by card room agents then agents independent of the card room should verify the posted amount to the reconciliation at least once a day. (j) Audit and Accounting. Best practices suggest that each operational area secure daily audit and accounting records, forms, and documents prior to audit. For example a cashier may place records in a locked box for next-day delivery to accounting for audit.