NIGC MICS Update
Presented by:
Steve Montoya, CPA
expertise.
Agenda
I.
History
II. Applicable NIGC MICS Requirements
IV. NIGC MICS Checklists
V. Questions
expertise.
History
•
Indian Gaming Regulatory Act – was enacted by the United
States Congress on October 17, 1988, to regulate the conduct of
gaming on Indian Lands. IGRA establishes the NIGC and a
regulatory structure for Indian gaming in the United States. –
Review IGRA
•
National Indian Gaming Commission (NIGC) – an independent
federal regulatory agency established pursuant to the Indian
Gaming Regulatory Act of 1988.
•
Code of Federal Regulations Title 25 (25 CFR) – implements the
Indian Gaming Regulatory Act (Pub. L. 100-497, 102 Stat. 2467)
•
25 CFR 542, 543, and 547 – Establishes minimum internal control
standards for Class II and Class III gaming
expertise.
MICS – Part 543 History
• August 2005 - CRIT Decision
• October 2008 - Initial Passing of 543 MICS
• November 2010 - the NIGC issued a Notice of Inquiry
and Notice of Consultation
• April 2011 - NIGC published a Notice of Regulatory
Review Schedule (NRR)
• February 2012 – Tribal Advisory Committee (TAC)
submitted its recommendations on 543
expertise.
Regulation
-
On October 22, 2012, the National Indian Gaming Commission (NIGC)
published two critical regulations that became effective for Class II
gaming:
- 25 CFR Part 543 Minimum Internal Control Standards (MICS) for
Class II Gaming (MICS), and
- 25 CFR 547 Minimum Technical Standards for Class II Gaming
Systems and Equipment
The new standards are critical to tribal gaming regulators as the
standards provide much needed updates to the control regulations
surrounding the Class II gaming environment
expertise.
Do these changes impact my casino?
expertise.
Applicable NIGC MICS Standards
Class I
Tribes
Class II
Class III
25 CFR 543
25 CFR 547
25 CFR 542
expertise.
Class I, II and III Definitions
•
Class I Gaming: means social games solely for prizes of minimal
value or traditional forms of Indian gaming engaged in by
individuals as a part of, or in connection with, tribal ceremonies or
celebrations.
•
Class II Gaming: means the game of chance commonly known as
bingo, pull-tabs, lotto, punch boards, tip jars, instant bingo, any
other games similar to bingo, and card games.
•
Class III Gaming: means all forms of gaming that are not Class I
gaming or Class II gaming.
expertise.
NIGC MICS
Requirements
Flowchart
expertise.
Exercises – NIGC MICS
Requirements
expertise.
1. A tribally owned casino offers the following gaming activities:
 Bingo
 Class III Gaming Machines
 Table Games
The State Gaming Compact and Tribal Gaming Ordinance does
not require the casino to comply with NIGC regulations for
Class III gaming activities. Based on this scenario, what is the
best answer to the following questions:
What NIGC MICS requirements, if any, is the Tribe required to
comply with:
A.
B.
C.
D.
Part 542
Part 543
Both
None
expertise.
1. A tribally owned casino offers the following gaming activities:
 Bingo
 Class III Gaming Machines
 Table Games
The State Gaming Compact and Tribal Gaming Ordinance does
not require the casino to comply with NIGC regulations for
Class III gaming activities. Based on this scenario, what is the
best answer to the following questions:
What NIGC MICS requirements, if any, is the Tribe required to
comply with:
A.
B.
C.
D.
Part 542
Part 543
Both
None
expertise.
2. A tribally owned casino offers the following gaming activities:
 Class III Gaming Machines
 Table Games
The State Gaming Compact and Tribal Gaming Ordinance does
not require the casino to comply with NIGC regulations for
Class III gaming activities. Based on this scenario, what is the
best answer to the following questions:
What NIGC MICS requirements, if any, is the Tribe required to
comply with:
A.
B.
C.
D.
Part 542
Part 543
Both
None
expertise.
2. A tribally owned casino offers the following gaming activities:
 Class III Gaming Machines
 Table Games
The State Gaming Compact and Tribal Gaming Ordinance does
not require the casino to comply with NIGC regulations for
Class III gaming activities. Based on this scenario, what is the
best answer to the following questions:
What NIGC MICS requirements, if any, is the Tribe required to
comply with:
A.
B.
C.
D.
Part 542
Part 543
Both
None – No Class II Gaming Activities
expertise.
3. A tribally owned casino offers the following gaming activities:
 Bingo
 Class III Gaming Machines
 Table Games
The State Gaming Compact and Tribal Gaming Ordinance
requires the casino to comply with NIGC regulations for Class
III gaming activities. Based on this scenario, what is the best
answer to the following question:
What NIGC MICS requirements, if any, is the Tribe required to
comply with:
A.
B.
C.
D.
Part 542
Part 543
Both
None
expertise.
3. A tribally owned casino offers the following gaming activities:
 Bingo
 Class III Gaming Machines
 Table Games
The State Gaming Compact and Tribal Gaming Ordinance
requires the casino to comply with NIGC regulations for Class
III gaming activities. Based on this scenario, what is the best
answer to the following questions:
What NIGC MICS requirements, if any, is the Tribe required to
comply with:
A.
B.
C.
D.
Part 542
Part 543
Both
None
expertise.
4. A tribally owned casino offers the following gaming activities:
 Class III Gaming Machines
 Table Games
The State Gaming Compact and Tribal Gaming Ordinance
requires the casino to comply with NIGC regulations for Class
III gaming activities. Based on this scenario, what is the best
answer to the following questions:
What NIGC MICS requirements, if any, is the Tribe required to
comply with:
A.
B.
C.
D.
Part 542
Part 543
Both
None
expertise.
4. A tribally owned casino offers the following gaming activities:
 Class III Gaming Machines
 Table Games
The State Gaming Compact and Tribal Gaming Ordinance
requires the casino to comply with NIGC regulations for Class
III gaming activities. Based on this scenario, what is the best
answer to the following questions:
What NIGC MICS requirements, if any, is the Tribe required to
comply with:
A.
B.
C.
D.
Part 542
Part 543
Both
None
expertise.
Compliance with NIGC MICS
Parts 543 and 547 Class II Gaming
National Indian Gaming
Commission website
http://www.nigc.gov
expertise.
MICS – Part 543 Class II Gaming
•
Purpose: Establishes the minimum internal control standards for the
conduct of Class II games on Indian lands.
•
Tribal Internal Control Standards (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.
•
Evaluation of Existing TICS: Each TGRA must determine whether
and to what extent their TICS require revision to ensure compliance
with this part.
•
System of Internal Controls (SICS): Each gaming operation must
develop a SICS, as approved by the TGRA, to implement the TICS.
expertise.
MICS – Part 543 Class II Gaming
• Compliance Dates
– TICS Approval: TICS must be promulgated by October 22, 2013
– Implementation Date: Changes necessary to ensure compliance
with this part must be implemented at the beginning of the next
fiscal year. TGRA may extend an additional six months to come
into compliance with the TICS.
expertise.
Six month extension illustration:
Fiscal Year Begins
Establish TICS
Establish SICS/
Implementation
expected by
Implementation may
be extended to
January 1
October 22, 2013
January 1, 2014
July 1, 2014
October 1
October 22, 2013
October 1, 2014
April 1, 2015
expertise.
MICS – Part 543 Class II Gaming
Compliance Based Upon Tier:
•
Tier A Gaming Operation: Gaming operations with annual gross
gaming revenues of more than $3 million but not more than $8
million
•
Tier B Gaming Operation: Gaming operations with annual gross
gaming revenues of more than $8 million but not more than $15
million
•
Tier C Gaming Operation: Gaming operations with annual gross
gaming revenues of more than $15 million.
expertise.
MICS – Part 543 Class II Gaming
Determination of Tier:
•
Based upon the annual gross gaming revenues reported in audited
financial statements.
•
Gaming operations moving from one tier to another shall have nine
months from the date of the independent CPA audit report to
achieve compliance with the requirements of the new tier.
Gaming Operations:
•
Each gaming operation shall develop and implement an internal
control system that, at a minimum, complies with TICS.
expertise.
MICS – Part 543 Class II Gaming
NIGC provides MICS checklists for the following areas:
•
•
•
•
•
•
•
•
•
•
•
•
•
Bingo
Cage, Vault, Kiosk, Cash, and Cash Equivalents
Information Technology and Information Technology Data
Auditing & Accounting
Pull Tabs
Card Games
Complimentary Services or Items
Lines of Credit
Drop and Count
Surveillance
Auditing Revenue (Previously included in Accounting)
Patron Deposit Accounts and Cashless Systems (New)
Gaming Promotions & Player Tracking Systems (New)
expertise.
Applicable NIGC
MICS Standards
(continued)
Areas
Bingo
Audit & Accounting
Information technology (IT) and IT data
Pull tabs
Card games
Drop and Count
Complimentary services or items
Surveillance
Cage, vault, and cash & cash equivalents
Credit
Kiosk
Gaming promotions and player tracking systems
Keno
Pari-mutuel wagering
Table games
Gaming machines
543
x
x
x
x
x
x
x
x
x
x
x
x
547
x
x
x
542
x
x
x
x
x
x
x
x
x
x
x
x
x
x
expertise.
MICS – Part 543 Class II Gaming – Bingo
Traditional and Electronic Gaming Device Bingo
Major areas include:
• Supervision
• Bingo Cards
• Bingo Card Sales
• Draw
• Prize Payout
• Cash and Cash Equivalent Controls
• Technologic aids to the play of bingo (Expanded)
• Operations
• Vouchers
• Variances
Areas no longer included:
• Standards for Players Accounts (Now Patron Deposit Accounts and
Cashless Systems)
• Computer Applications
expertise.
MICS – Part 543 Class II Gaming – Bingo
Draw:
• Electronic aid – certification in accordance with 547.14
Variance
• Establish a threshold level for reviews
• Reviews must be documented
Technologic aids to the play of bingo:
• Safeguarding the integrity of the technology
• Shipping and receiving
• Suppliers
• Restricted Access
• Recordkeeping and audit process
• Signature verification
• Installation
• Dispute resolution
expertise.
MICS – Part 543 Class II Gaming – Cage
Major areas include:
• Supervision
• Check Cashing
• Cage and Vault Accountability
• Kiosks
• Patron Deposited Funds
• Promotional Payments, drawings and giveaways
• Chips and tokens
• Vouchers (Used to be in gaming machines)
• Cage and Vault Access
• Variances
Areas no longer included:
• Coupon Standards
• Computer applications
• NIGC Fees
expertise.
MICS – Part 543 Class II Gaming – Cage
Kiosks:
• Accountability and Independence
• Cash counts and reconciliation
• Physical security
Promotional Payments, drawings and giveaways:
• Supporting documentation
• Approval
Vouchers:
• Authenticity and validity
• Expired/ stolen/ lost vouchers
• Approval
• Voided vouchers
Cage and Vault Access:
• Restricted access
expertise.
MICS – Part 543 Class II Gaming – IT
Major areas include:
• Supervision
• Class II gaming systems logical and physical
• Physical Security
• Logical Security
• User Controls
• Installation and/or modification
• Remote Access
• Incident monitoring and reporting
• Data Backups
• Software downloads
• Verify downloads
Areas no longer included:
• Gaming program changes
• Remote dial-up
expertise.
MICS – Part 543 Class II Gaming – IT
Class II gaming systems logical and physical controls:
• Restricted access
• Storage media
• Independence
Gaming system - any computerized system that is integral to
the gaming environment, including the server and
peripherals for Class II gaming system, accounting,
surveillance, essential phone system, and door access and
warning systems.
Software downloads:
• Performed in accordance with 25 CFR 547.12
expertise.
MICS – Part 543 Class II Gaming –
Accounting
Major areas include:
• Conflict of standards
• Accounting
• Internal audit
• Annual requirements
Areas no longer included:
• Gross gaming revenue computations (included in Auditing
Revenue)
• Periodic payments
• Wide area payouts
• Cash-out tickets
• Credit
• Write off credit
expertise.
MICS – Part 543 Class II Gaming – continued
Annual Requirements
• Agreed-upon procedures, a CPA must be engaged to perform an
assessment to verify whether the gaming operation is in compliance
with the MICS and/or TICS.
•
A CPA must determine compliance by the gaming operation with the
internal audit requirements by:
– Completing the internal audit checklist.
– Ensuring that the internal auditor completed all applicable
checklists.
– Verifying that any areas of non-compliance have been identified.
– Ensuring that audit reports are completed and include responses
from management.
– Verifying that appropriate follow-up on audit findings have been
conducted and corrective measures have been taken to
effectively mitigate risk.
expertise.
MICS – Part 543 Class II Gaming – continued
Annual Requirements – continued
•
The Tribe must submit two copies of the AUP report and the annual
financial audit report to the NIGC within 120 days of the gaming
operation’s fiscal year-end.
•
If the CPA determines that the internal audit procedures performed
during the fiscal year have been properly completed, the CPA may rely
on the work of the internal audit for the completion of the MICS
checklists.
•
All noted instances of noncompliance must be documented in the
report with a narrative description, the number of exceptions and
sample size tested.
expertise.
What about Class III Reporting Requirements?
CPA Testing includes 3 Options:
(1) CPA completes all applicable NIGC MICS checklists.
(2) CPA tests compliance with the Tribal Internal Control Standards.
(3) Reliance on the Internal Auditor
- Unannounced drop and count.
- Re-perform 3% of gaming machines and table games
- Re-perform 5% of all other Checklists.
expertise.
MICS – Part 543 Class II Gaming –
Pull Tabs
Major areas include:
• Supervision
• Pull tab inventory
• Pull tab sales
• Winning pull tabs
• Pull tab operating funds
• Statistical records
• Variances
Areas no longer included:
•
•
•
Accountability form
Electronic equipment
Computer applications
expertise.
MICS – Part 543 Class II Gaming –
Card Games
Major areas include:
• Supervision
• Exchanges or transfers
• Standards for playing cards
• Shill Funds
• Standards for reconciliation of card room bank
• Posted Rules
• Promotional progressive pots and pools
• Variances
Areas no longer included:
• Standards for drop and count (Included in drop and count)
• Plastic cards
• Computer applications
expertise.
MICS – Part 543 Class II Gaming –
Complimentary Services and Items
Major areas include:
• Supervision
• Complimentary services and items
• Complimentary service and items records
• Variances
Areas no longer included:
• NONE
expertise.
MICS – Part 543 Class II Gaming –
Line of Credit
Major areas include:
• Supervision
• Credit standards
• Variances
Areas no longer included:
• Accounting/ auditing standards (included in Auditing and
Accounting)
• Computer applications
expertise.
MICS – Part 543 Class II Gaming –
Drop and Count
Major areas include:
• Supervision
• Count room access
• Count team
• Card game drop standards
• Player interface and financial instrument storage component
drop standard
• Card game standards
• Player interface financial instrument count standards
• Controlled keys (New)
• Variances (New)
Areas no longer included:
• All standards related to table games and gaming machines
expertise.
MICS – Part 543 Class II Gaming –
Drop and Count
Card game drop standards:
• Security and surveillance
• Dual control
• Emergency drops
• Shift changes
Player interface and financial instrument storage component drop
standard:
• Surveillance
• Dual control
• Emergency drops
• Transportation
expertise.
MICS – Part 543 Class II Gaming –
Drop and Count
Card game count standards:
• Restricted access
• Separation of multiple revenue centers
• Documentation and Verification
• Currency counter interface
• Manual counting
• Variances and corrections
Player interface financial instrument count standards:
• Restricted access
• Separation of multiple revenue centers
• Documentation a Verification
• Currency counter interface
• Manual counting
• Variances and corrections
expertise.
MICS – Part 543 Class II Gaming –
Surveillance
Major areas include:
• Supervision
• Surveillance equipment and control room
• Additional surveillance requirements
• Reporting requirements
• Recording retention
• Logs
Areas no longer included:
• General
• Keno
• Pari-mutuel
• Table games
• Progressive table games
• Gaming machines
• Fills and credits
• Change booths
expertise.
MICS – Part 543 Class II Gaming
NIGC provides MICS checklists for the following new areas:
• Patron Deposit Accounts and Cashless Systems
• Auditing Revenue
• Gaming Promotions & Player Tracking Systems
expertise.
MICS – Part 543 Class II Gaming – Patron
Deposit Accounts and Cashless Systems
Major areas include:
•
•
•
•
Supervision
Patron deposit accounts and cashless systems
Patron deposits, withdrawals, and adjustments
Variances
expertise.
MICS – Part 543 Class II Gaming –
Auditing Revenue
Major areas include:
•
•
•
•
Supervision
Independence
Documentation
Operational Areas
expertise.
MICS – Part 543 Class II Gaming – Gaming
Promotions & Player Tracking Systems
Major areas include:
•
•
•
•
Supervision
Gaming promotions
Player tracking systems and gaming promotions
Variances
expertise.
Compliance with MICS Part 547
Class II Gaming Systems &
Equipment
expertise.
Part 547-Minimum Technical Standards For
Class II Gaming Systems and Equipment
― Section 547 – Background and How to
Comply
― Overview of Section 547 requirements
expertise.
Why is 547 applicable?
-
The Indian Gaming Regulatory Act (IGRA), 25 U.S.C. 2703(7)(A)(i),
permits the use of electronic, computer, or other technologic aids in
connection with the play of Class II games. This part establishes the
minimum technical standards governing the use of such aids.
-
IGRA established a regulatory scheme that includes the NIGC as well
as Tribes
expertise.
547.3 Responsibility for implementing these
standards?
• Section 547 are the minimum requirements. TGRA may establish
and implement additional technical standards that do not conflict
with the standards set out in this part.
• This part should not be interpreted to limit the use of technology
or to preclude the use of technology not specifically referenced.
• Only applicable standards apply
• Nothing in this part should be construed to grant to a state
jurisdiction over Class II gaming or to extend a state's jurisdiction
over Class III gaming
expertise.
547.4 General application (Class II gaming)
Fairness
• No gaming system may cheat or mislead users
• All prizes advertised must be available to win during the game
• A test laboratory must calculate and/or verify the mathematical
expectations of game play in accordance with the manufacturer stated
submission.
Approved gaming equipment and software only
• All gaming equipment and software used with gaming systems must
be identical in all respects to a prototype reviewed and tested by a
testing laboratory and approved for use by the TGRA
Proper functioning
• All gaming equipment and software must perform according to the
manufacturer’s design and operating specifications
expertise.
547.5 How to comply with this part?
-
547 technical standards were designed to protect the security and
integrity of gaming systems
- NIGC originally implemented a five-year “grandfather period”
for eligible systems
- Some existing Class II gaming systems might not meet all the
requirements of 547 within five years
- The Commission received numerous comments related to the
five-year grandfather provisions due to potential significant
economic and practical consequences
-
Grandfather systems must be brought into compliance by November
10, 2018
expertise.
547.6 – 547.17
•
•
•
•
•
•
•
•
•
•
•
Enrolling and enabling Class II gaming system components
Hardware standards applicable to Class II gaming systems
Class II gaming system accounting functions
Class II gaming system critical events
Money and credit handling for a Class II gaming system
Downloading information on a Class II gaming system
Program storage media for a Class II gaming system
Electronic random number generation (547.14)
Electronic date communication between system components
Game artwork, glass and rules
How gaming regulatory authorities can apply to implement an
alternative minimum standard to those required by this part
expertise.
543 MICS Checklist Questions
Bingo Checklist
Question #51 - Is the selection (of bingo balls/numbers) made through an
electronic aid? (Certification in accordance with 25 CFR 547.14
acceptable for verifying the randomness of the draw and satisfies the
requirements of paragraph (d)(1) of this section (as applicable)).
(Observation and inquiry) (N/A and YES answers only)
… 547.14(b) Statistical randomness (1) Numbers or other designations
produced by a random number generator (RNG) must be statistically
random individually and in the permutations and combinations used in
the application under the rules of the game. …
expertise.
543 MICS Checklist Questions
Bingo Checklist
Question #96 - Shipping and receiving: - Is a communication procedure
established between the supplier, the gaming operation, and the TGRA to
properly control the shipping and receiving of all software and hardware
components do such procedures include the following:
Certification in accordance with 25 CFR part 547? (As applicable). (N/A
and YES answers only) (Inquiry and review SICS)
expertise.
543 MICS Checklist Questions
Bingo Checklist
Question #117 - System software signature verification - Are procedures
implemented for system software verifications and do the procedures
include the following:
Comparing signatures generated by the verification programs required
by 25 CFR 547.8, to the signatures provided in the independent test
laboratory letter for the software version? (Review supporting
documentation)
… (f) Software signature verification. The manufacturer or developer of
the Class II gaming system must provide to the testing laboratory and to
the TGRA an industry-standard methodology, acceptable to the TGRA, for
verifying the Class II gaming system game software. For example, for
game software stored on rewritable media, such methodologies include
signature algorithms and hashing formulas such as SHA-1. …
expertise.
543 MICS Checklist Questions
Bingo Checklist
Question #133 - Does the TGRA or the operation verify that all game
rules and disclaimers are displayed at all times or made readily available
to the player upon request, as required by 25 CFR part 547? (Inquiry and
review SICS)
― Rules, instructions, and prize schedules
― “Malfunctions void all prizes and plays” or equivalent
expertise.
543 MICS Checklist Questions
Bingo Checklist
Question #135 - Does all Class II gaming equipment comply with
25 CFR part 547, Minimum Technical Standards for Gaming
Equipment Used With the Play of Class II Games?
(Inquiry and review supporting documentation)
― Certification
expertise.
543 MICS Checklist Questions
Bingo Checklist
Question #167 - Has the operation established a threshold level at which
a variance including deviations from the mathematical expectations
required by 25 CFR 547.4, must be reviewed?
(Inquiry) State the variance level or percentage_______________ (and include
in Comment Section).
… 25 CFR 547.4 (a) Fairness. No Class II gaming system may cheat or
mislead users. All prizes advertised must be available to win during the
game. A test laboratory must calculate and/or verify the mathematical
expectations of game play, where applicable, in accordance with the
manufacturer stated submission
expertise.
543 MICS Checklist Questions
Information Technology and Information Technology Data
Question #61 - Are downloads, either automatic or manual, performed in
accordance with 25 CFR 547.12, which are as follows:
― Must use secure methodologies that will deliver the download data
without alteration or modification
― Must be performed in a manner that will not affect game play
― Must maintain integrity of accounting data
― System must be able to provide the time, date, components and
versions downloaded (software signature), outcome of download
(success or failure), name and ID number of individual conducting or
scheduling the download, and must be capable of being verified
expertise.
Resources:
National Indian Gaming Commission website – http://www.nigc.gov
Stephen A. Montoya, CPA
Audit and Consulting Senior Manager
D: 505.998.3275 | C: 505.331.2969 | smontoya@redw.com
expertise.
QUESTIONS?