[Federal Register Volume 67, Number 124 (Thursday, June 27, 2002)]
[Rules and Regulations]
[Pages 43390-43445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15644]



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Part II





National Gaming Commission





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25 CFR Part 542



Minimum Internal Control Standards; Final Rule

  Federal Register / Vol. 67 , No. 124 / Thursday, June 27, 2002 / 
Rules and Regulations  

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NATIONAL INDIAN GAMING COMMISSION

25 CFR Part 542

RIN 3141-AA24


Minimum Internal Control Standards

AGENCY: National Indian Gaming Commission.

ACTION: Final rule.

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SUMMARY: In response to the inherent risks and the need for effective 
controls in tribal gaming operations, the Commission, in 1999, 
developed Minimum Internal Control Standards (MICS). Since their 
original implementation, it has become obvious that the MICS require 
technical adjustments and revisions so that they may continue to be 
effective in protecting tribal assets, while allowing Tribes to utilize 
technological advances in the gaming industry. To that end, this final 
rule contains numerous revisions to the Commission's existing MICS that 
provide clarification of the rules and the flexibility to allow tribal 
gaming operations to make use of technological advances.

DATES: Effective Date: July 29, 2002.
    Compliance Date: Each Tribal gaming regulatory authority shall, in 
accordance with the Tribal gaming ordinance, establish and implement 
tribal internal control standards within six (6) months of June 27, 
2002, that satisfy the requirements of Sec. 542.3 herein. For those 
Tribes whose tribal internal control standards already satisfy the 
requirements of Sec. 542.3, no action is necessary.

FOR FURTHER INFORMATION CONTACT: Joe H. Smith, 202-632-7003 or 503-326-
7050.

SUPPLEMENTARY INFORMATION:

Background

    On January 5, 1999, the Commission first published its Minimum 
Internal Control Standards (MICS) as a Final rule. Since this time, as 
gaming Tribes and the Commission gained practical experience with the 
MICS, it became apparent that some of the standards required 
clarification or modification to operate as the Commission had 
intended. Also recognizing the changes and advances in Indian gaming 
and gaming technology since implementation, on November 27, 2000, the 
Commission published an advanced notice of proposed rulemaking 
requesting public comments on the implementation of the MICS.
    Along with requesting public comments, the Commission also 
solicited input and guidance from our own employees, many of whom work 
closely with Indian country to monitor compliance with the existing 
regulation. In addition to receiving input from our senior staff within 
the Washington, DC office, we also obtained input from staff working 
directly with Tribal gaming operations. This gathering of information 
culminated with a series of conference calls with our Regional Offices 
and auditing staff where we reviewed each provision of the regulation. 
Also reviewed were the numerous comments received in response to the 
advance notice of proposed rulemaking. Comments and suggestions 
received from our employees, emanating from actual, hands-on experience 
with the MICS, helped identify certain areas with which Commission 
employees had found difficulty. This input proved critical over the 
next several months as we worked to revise the regulation.
    In keeping with its commitment to consultation and recognizing the 
government-to-government relationship it shares with Tribes, the 
Commission solicited nominations of individuals interested in serving 
on an Advisory Committee designed to assist in revising the MICS. Ten 
(10) tribal representatives were selected based on several factors, 
including the experiences and backgrounds of the individuals nominated, 
the size(s) of their gaming operation(s), the types of games played at 
their gaming operation(s), and the areas of the country their gaming 
operation(s) are located. The selection process was a difficult one as 
numerous highly qualified individuals expressed an interest in serving 
on this important Committee. As expected, the value added by involving 
tribal representatives who work daily with the MICS was immeasurable.
    Those participating on the behalf of Tribes as members of this 
Advisory Committee were: Jamie Hummingbird, Director, Cherokee Nation 
Gaming Commission, Cherokee Nation; Patrick H. Lambert, Executive 
Director, Eastern Band of Cherokee Gaming Commission, Eastern Band of 
Cherokee; Stephen R. Lewis, Commissioner, Gila River Gaming Commission, 
Gila River Indian Community; Kristin L. Lumley, Executive Director, 
Yakama Nation Gaming Commission, Yakama Nation; John Monforte, 
Executive Director, Acoma Gaming Commission, Pueblo of Acoma; Kevin F. 
O'Toole, Executive Director, Oneida Nation Gaming Commission, Oneida 
Nation of New York; Sandra Plawman, Treasurer, Ho-Chunk Nation Gaming 
Commission, Ho-Chuck Nation; Jerome J. Schultze, Director, Morongo 
Gaming Agency, Morongo Band of Mission Indians; Lisa B. Whetzel, 
Director, Kaw Nation Enterprise Development Authority, Kaw Nation; and 
Saunie K. Wilson, Executive Secretary, Oglala Sioux Tribal Gaming 
Commission, Oglala Sioux. The Advisory Committee also included the 
following Commission representatives: Teresa E. Poust, Commissioner; 
Joe H. Smith, Acting Director of Audits; Michele F. Mitchell, Attorney; 
Timothy B. Russ, Financial Analyst; and Denise Desiderio, Assistant to 
the Commission. Also important to the success of this process was the 
involvement of a professional facilitator, Juliette A. Falkner, of 
Carr, Falkner & Swanson. Ms. Falkner was instrumental in keeping the 
Committee focused on our goals and realizing our optimistic timeframe 
for completion.
    The tribal and federal representatives on the Advisory Committee 
worked together as a team, guided by a Partnership Agreement developed 
at its first meeting. An important component of this Partnership 
Agreement was that decision-making would be done by consensus. Without 
concurrence from all Committee members on a proposed change, none would 
be made. While a particular change may not be representative of an 
individual's first preference, it was something found to be within 
acceptable limits. As such, this rule represents a series of 
compromises made by all members of the Advisory Committee after much 
discussion.
    The Commission worked closely with the Advisory Committee to 
address their concerns about the existing MICS and to address the 
nearly one hundred comments received in response to the advanced notice 
of proposed rulemaking. Between May and November 2001, the Commission 
sponsored six working meetings. During these meetings, every clause of 
the existing MICS was reviewed and every comment submitted to the 
Commission was considered. Each meeting was held in a different region 
of the country, enabling visits to a number of tribal gaming 
operations. These visits provided valuable, first-hand experience with 
technological advances and concerns expressed during the comment 
period. Changes were made to the existing MICS based on comments, input 
from Advisory Committee members, and data gathered during site visits. 
At the conclusion of this process, the Commission published the 
Proposed Rule in the Federal Register on December 26, 2001.
    On February 5, 2002, the Commission hosted a public hearing on the 
Proposed Rule. This hearing provided an

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excellent opportunity for individuals to provide comment about the 
regulation to both the Commission and to members of the Advisory 
Committee. A total of twenty (20) individuals presented testimony at 
this hearing.
    The Commission received approximately ninety (90) comments in 
response to publication of the Proposed Rule. During the final meeting 
of the Advisory Committee, held in April 2002, each comment was 
reviewed and utilized to draft a Final Rule. The full Commission then 
approved this Final Rule.

General Comments

Authority

    More than half of the commenters, as well as members of the 
Advisory Committee, question the Commission's authority to promulgate 
this rule, particularly as it pertains to class III gaming. Members of 
the Advisory Committee agreed to participate in the process of revising 
the MICS, despite their position that the Commission may be without 
authority to promulgate minimum internal controls for class III gaming. 
The Commission acknowledges that the participation of tribal 
representatives in this process does not in any way indicate 
concurrence in the Commission's determination that it does have the 
statutory authority to establish and enforce these regulations.
    Internal controls are the primary procedures used to protect the 
integrity of casino funds and games, and are a vitally important part 
of properly regulated gaming. Inherent in gaming operations are 
problems of customer and employee access to cash, unrecorded cash 
transactions at table games, questions of the fairness of games, and 
the threat of collusion to circumvent controls. Internal control 
standards are therefore commonplace in the gaming industry and the 
Commission recognizes that many Tribes had sophisticated internal 
control standards in place prior to the Commission's original 
promulgation of the MICS.
    For the Commission to appropriately fulfill it responsibilities 
under the Indian Gaming Regulatory Act (IGRA), it follows that there 
must exist some rules for the handling of cash and the tracking of 
transactions that occur with great frequency in a gaming operation. 
These MICS are designed to establish baseline, or minimum standards, 
required of Indian gaming operations. There is no doubt that the MICS 
provide the Commission with a significant tool for achieving the stated 
purposes of IGRA. The Commission firmly believes that minimum internal 
control standards are necessary, and that the promulgation of these 
standards is a permissible exercise of its statutory authority to 
promulgate such regulations and guidelines as it deems appropriate to 
implement the provisions of IGRA.
    The lengthy discussion amongst members of the Advisory Committee 
regarding authority also included a discussion as to whether the MICS 
should be promulgated as recommended guidelines versus a mandatory 
rule. Several commenters also made this proposal. The Commission 
continues to believe that the MICS should be issued as a rule.

MICS Structure

    During both comment periods, several suggested that the Commission 
develop separate MICS for class II and class III gaming. Along these 
lines, several Advisory Committee members submitted proposals 
structuring the MICS so that the document itself was divided into class 
II and class III MICS. During consideration, a second alternative was 
discussed: that is, separating the MICS based upon tiers. A common 
complaint of tier A and B operations is that the existing MICS are 
confusing as to which requirements apply and which do not.
    As with the original rule, this rule is not designed to classify 
games into class II or class III. Rather, the MICS address the control 
issues related to the particular game. Pull tabs, for example, can be 
played as a class II or a class III game depending on the nature and 
circumstances of their play. Section 542.8 pertaining to pull tabs 
applies regardless of whether they are being played as class II or 
class III gaming.
    After extensive discussion, the Committee reached consensus on 
dividing the MICS along tier lines rather than game classification, 
recognizing that the requirements placed upon tribal gaming operations 
should differ based upon their annual gross gaming revenue. A number of 
commenters on the proposed rule indicated that they found this new 
structure helpful.
    This final rule is organized essentially in two parts. Sections 
542.1 through 542.18 contain both general provisions and standards 
relating to particular categories of games. Beginning with Sec. 542.20, 
the rule is then divided based upon tier. Sections 542.20 through 
542.23 apply only to Tier A gaming operations; Secs. 542.30 through 
542.33 apply only to Tier B operations; and Secs. 542.40 through 542.43 
apply only to Tier C operations. The Commission continues to believe 
that this structure provides the clearest guidance to Tribes of their 
obligations under the MICS.
    The Commission recognizes that some Tribes may find it beneficial 
to have separate internal control standards for class II and class III 
games. The most effective method of tailoring these MICS for class II 
and/or class III operations is in the development of tribal internal 
control standards as discussed below.

Tribal Internal Control Standards

    Indian gaming is and always will be very diverse. The Commission 
therefore recognizes that developing one set of MICS to address all 
situations in every tribal gaming operation is not possible. It is not 
intended for Tribes to simply adopt these MICS verbatim as tribal 
internal control standards. Instead, Tribal gaming regulatory 
authorities should utilize the following to develop their own internal 
control standards as provided for in Sec. 542.3(c) of this part.
    For example, a number of commenters suggested removing Sec. 542.15 
(establishing minimum internal control standards for credit) from the 
MICS because their operation does not extend credit, or because they 
are prohibited from doing so by their Tribal-State compact. Similarly, 
many operations do not participate in pari-mutuel wagering, or offer 
roulette. The Commission realizes that gaming operations do not play 
all games or utilize all procedures contained herein, and it is for 
this reason that we do not call for wholesale adoption of these MICS.
    If an operation does not utilize credit, these provisions of the 
MICS do not have to be included in the tribal internal control 
standards. If craps, roulette, or poker, are not offered, standards 
regarding these games do not have to be included in the tribal internal 
control standards. If the Tribal gaming regulatory authority prefers 
having separate internal controls for class II and class III games, the 
tribal internal control standards can be written in this fashion. 
Tribal internal control standards should be developed in a manner that 
addresses the particular needs and desires of the Tribe. Doing so 
allows tailoring of the MICS to meet the individual needs of a diverse 
industry.
    It is also within the tribal internal control standards that the 
Tribal gaming regulatory authority can elect to develop standards that 
are more stringent than those contained herein. Many commenters made 
recommendations that would increase the minimum standards set by this 
regulation. Although the Commission appreciates and commends the desire 
of some to increase the stringency of these standards, these MICS are 
considered

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minimums; the base upon which tribal regulators should build their 
regulatory structure. It was the Commission's determination that some 
of the suggestions exceeded the minimum standards appropriate for all 
gaming operations, and they therefore were not incorporated.

Tribal Gaming Regulatory Authority

    One of the terms used throughout the rule is ``Tribal gaming 
regulatory authority.'' Tribes are responsible for the primary, day-to-
day regulation of their operations, and the Commission recognizes that 
tribal governments have chosen different approaches of exercising their 
regulatory authority. A vast majority of Tribes have implemented 
independent tribal gaming commissions, which in most cases the 
Commission believes to be the most effective way of ensuring the proper 
regulation of gaming operations. Alternate regulatory structures have 
also been developed, such as utilizing existing tribal governments, 
business, or economic development agencies, when determined to be more 
appropriate to the needs of the Tribe. The term ``Tribal gaming 
regulatory authority'' is intended to refer to the tribally designated 
entity responsible for gaming regulation.
    In order to clarify the role of Tribal gaming regulatory 
authorities and recognize their immense value, the requirement that the 
Tribal gaming regulatory authority approve procedures, in a manner as 
determined by the Tribe, before being implemented by the gaming 
operation has been added where appropriate. While the MICS require 
prior approval, it is important to note that they do not specify the 
manner in which the Tribal gaming regulatory authority should carry out 
this approval. The type of approval process implemented is a decision 
to be made by the Tribe. Some may desire issuance of an approval 
letter, while some may stipulate that failure to object within a 
specified period of time signifies approval. Others may wish to 
prescribe varying degrees of approval based upon the significance of 
the individual procedure. Regardless, this flexibility further enables 
the Tribe to tailor the MICS to their particular needs.
    Overall, commenters commend the fact that revisions to the MICS 
specifically acknowledge that Tribes are responsible for the primary 
regulation of their gaming operation.

Accounting Standards

    Information was presented to the Commission regarding the addition 
of accounting standards to the MICS. Data was reviewed from multiple 
gaming jurisdictions indicating that such standards are a typical 
element of a gaming regulatory framework. After much consideration, it 
was the Committee's consensus that promulgation of accounting standards 
should be reserved for the Tribal gaming regulatory authority. 
Furthermore, it was recommended that the Commission provide guidance to 
the Tribes in the development of the standards and that such guidance 
be in the form of a bulletin.

Technological Advances in Gaming

    One of the most widely mentioned issues was that of technological 
advances. Many commenters felt that the existing MICS did not 
adequately address those areas in which new computer technology 
provides a level of control that equals or exceeds the standards set 
forth in this part. The Commission and the Committee have attempted to 
address this issue in two ways. First, where appropriate, specific 
sections of the MICS were modified to accommodate technological 
advances. Second, language was added to each section increasing 
flexibility by allowing use of computer applications that provide at 
least the level of control described by the standards in that section. 
Such usage would have to first be approved by the Tribal gaming 
regulatory authority. A variance would not be necessary, so long as the 
level of control required by the MICS is maintained and conflict with 
another standard is not created.

Investigation Results

    In several instances throughout the MICS, the gaming operation is 
required to conduct investigations of statistical fluctuations. Several 
commenters suggested requiring that the results of these investigations 
be brought to the attention of the Tribal gaming regulatory authority. 
The Commission agrees and has added appropriate language.

Grandfathering

    One commenter asked that their operation be ``grandfathered,'' and 
not be required to comply with this final rule. The Commission believes 
that in most instances, the standards included in the revised MICS have 
not been increased. Any gaming operation in compliance with the 
existing MICS should, in most respects, be in compliance with this 
final rule. Further, the Commission has increased the time for gaming 
operations to come into compliance with any new tribal internal control 
standards developed in response to this final rule. Therefore, 
grandfathering was not incorporated.

Language Clarification

    Several commenters suggested language and grammatical changes to 
clarify certain provisions of these standards. The Commission agrees 
with many of these recommendations and appropriate changes have been 
made.

Improvement to Existing MICS

    A number of commenters stated that the proposed rule was a great 
improvement over the existing MICS and commended the Committee for its 
work. Commenters indicated that both the structure and content was more 
understandable and better organized.

Section 542.2  Definitions

    Many commenters suggested changes to the definitions section of the 
MICS. Changes were made in response to these comments to clarify the 
meaning of a number of terms used. Definitions for ``Tribal gaming 
regulatory authority'' and ``weigh scale calibration module'' were 
added to the standard. The definitions for ``bank or bankroll,'' 
``document acceptor,'' and ``gaming machine fill'' have been deleted.
    Two commenters requested a change to ``sufficient clarity.'' 
Industry standards were examined in developing the definition used in 
the proposed rule and this definition is believed to be appropriate. 
The Commission disagrees with the need for any change.
    In some instances, commenters requested that definitions be 
developed for terms that are not used in the body of the MICS. The 
Commission decided that this may create confusion and chose not to add 
definitions of terms not used in the body of the MICS.

Section 542.3  Compliance

    One commenter asked whether the determination of tier level 
discussed in Sec. 542.3(b) would be made based on the collective annual 
gross gaming revenues of all gaming operations operated by a Tribe (for 
those Tribes operating more than one gaming operation). This is not the 
intent of the Commission. Rather, the determination of tier level will 
be made on a per operation basis. In other words, if a Tribe operates 
two separate gaming operations, one with annual gross gaming revenues 
of $4 million, and the other with gross gaming revenues of $14 million, 
the $4 million operation would be treated as a Tier A operation, and 
the $14 million operation would be treated as a Tier B operation. The 
two would not be combined to require compliance with Tier C standards.

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    Several commenters requested that the time limits contained within 
Sec. 542.3(c) be extended. The Commission agrees in part and extends 
the deadline contained within Sec. 542.3(c)(4) to nine (9) months by 
which a gaming operation must come into compliance with the tribal 
internal control standards.
    Modification was also made to the ability of the Tribal gaming 
regulatory authority to extend this nine (9) month period by an 
additional six (6) months. Rather than requiring that a Tribal gaming 
regulatory authority request permission from the Commission to extend 
this time frame, the Tribal gaming regulatory authority now need only 
notify the Commission of its decision to extend the deadline.
    One commenter suggested that the language used in Sec. 542.3(c)(1) 
requiring standards adopted by Tribal gaming regulatory authorities be 
``at least as stringent as those set forth in this part,'' should be 
changed to ``provide a level of control that equals or exceeds those 
set forth in this part.'' The Commission agrees that this language more 
clearly states the objective of the MICS as minimum standards.
    Within Sec. 542.3(c)(2), several commenters requested that the 
Commission develop and adopt standards that provide additional guidance 
for currency transaction reporting under 31 CFR part 103. While the 
Commission recognizes the importance of standards for currency 
transaction reporting, it does not believe it is the proper source of 
such guidance. Instead, gaming operations and Tribal gaming regulatory 
authorities should consult directly with the Internal Revenue Service 
to obtain assistance with 31 CFR part 103.
    Regarding the requirement of Sec. 542.3(f) that a certified public 
accountant (CPA) perform independent testing of the tribal internal 
control standards, several commenters suggested that, to save expense, 
the CPA should only perform testing of compliance with the Commission 
MICS. Both the Commission and the Committee agree that testing only 
against the Commission MICS would not be useful to those Tribes who 
have adopted tribal internal control standards tailored to meet the 
needs of their operation, particularly where certain standards have 
been made more stringent. As the primary regulator of their gaming 
operation, Tribal gaming regulatory authorities are equally, if not 
more, concerned with compliance with tribal internal control standards.
    Several commenters asked that auditing standards be included in the 
MICS. The Commission believes that generally accepted auditing 
standards should be utilized, and therefore do not need to be included 
in the MICS. CPA guidelines continue to be available by request from 
the Commission.
    Several commenters suggested adding language that tribal 
administrative remedies should be exhausted prior to any enforcement 
action being taken by the Commission. It is not the Commission's 
practice to take enforcement action without first informing the Tribe 
and Tribal gaming regulatory authority of deficiencies and allowing a 
reasonable period of time for resolution. Unless the deficiencies 
create an immediate and severe threat to the integrity of the gaming 
operation, the Commission will work with the Tribe and Tribal gaming 
regulatory authority to remedy the deficiencies. It is only after 
failure to address noted deficiencies within a reasonable period of 
time that the Commission would contemplate enforcement action. In 
response to these comments, the Commission has added language at 
Sec. 542.3(g) recognizing this practice.

Section 542.4  Tribal-State Compacts

    Commenters and members of the Committee requested clarification on 
the effect of the MICS on internal control standards contained within a 
Tribal-State compact. Advisory Committee members put forth wording that 
would require standards within a Tribal-State compact to take priority 
over these MICS. The Commission does not fully support this approach 
because some compacts do not contain internal control standards, or 
contain only limited standards insufficient alone to adequately protect 
the integrity of Indian gaming.
    A number of Tribal-State compacts, however, do contain detailed 
internal control standards. In recognition, Sec. 542.4 has been 
restructured to provide deference to internal control standards within 
a Tribal-State compact where they provide ``a level of control that 
equals or exceeds the level of control under an internal control 
standard or requirement set forth in this part.'' The Commission 
believes this language provides appropriate deference to Tribal-State 
compacts containing detailed internal control standards, while also 
addressing those situations where compacts contain more limited 
standards.

Section 542.7  Bingo

    Several commenters asked for clarification of the term 
``independent person'' as used in Sec. 542.7(b)(5). It is intended that 
a person independent of the bingo caller responsible for calling the 
speed bingo game verify the ball drawn. It is not necessary that this 
person is an employee, and in fact, some small operations use a 
customer for this purpose. This would meet the level of control 
required by the standard. Modification has been made to more clearly 
state the intent of this standard. It is worth noting, however, that 
Sec. 542.7(b)(9), requiring ``personnel independent of the 
transaction'' to approve payouts in excess of $1,200, does require 
utilization of an employee of the gaming operation.
    One commenter suggested that only promotional payouts or awards 
exceeding a fair-market value of over $100.00 be recorded. The 
Commission believes that, for purposes of accountability and 
reconciliation, all such payouts should be recorded, regardless of 
dollar value. Therefore, no changes were made to Sec. 542.7(c).
    One commenter suggested adding the requirement that a ``blind 
count'' be performed under Sec. 542.7(d)(2). Another suggested that two 
signatures be required by Sec. 542.7(c)(1)(iv) to authorize promotional 
payouts with a high dollar value. While the Commission decided not to 
require these higher standards of all gaming operations, the Commission 
continues to encourage implementation of higher standards of control 
where desired.
    One commenter suggested that a department independent of the bingo 
department should be responsible for the securing and inventorying of 
bingo paper, as required by Sec. 542.7(e)(4). The Commission agrees 
with another commenter that this would place an undue burden on small 
gaming operations. It is sufficient that personnel independent of bingo 
sales be assigned this function.

Section 542.8  Pull Tabs

    As in bingo, several commenters suggested adding the requirement 
that an independent department be required to verify the accuracy of 
the ending pull tab balance, as required by Sec. 542.8(b)(5). This 
increased level of control is encouraged but not required by these 
standards, as it would place an undue burden on small gaming 
operations. In response to another commenter, this section was 
clarified by stating that ``a person or persons independent of the pull 
tab sales and inventory control'' shall be assigned this 
responsibility.
    The Commission agrees with a commenter that weighing pull tabs is 
an acceptable alternative to the counting of pull tabs specified in 
Sec. 542.8(b)(5). Accordingly, the word ``counting'' was changed to the 
broader term ``reconciling.''

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Section 542.9  Card Games

    Several commenters suggested allowing the use of fill and credit 
slips in lieu of lammers for the transfer of cash equivalents between 
card tables and the bank as discussed in Sec. 542.9(c)(2). The 
Commission did not adopt this change given that the fill and credit 
process for execution of transfers between tables and the card room 
bank represents a process exceedingly more cumbersome than that 
stipulated in the MICS. The use of the fill and credit process in this 
instance does however represent an acceptable alternative procedure.
    One commenter asked whether Sec. 542.9(d)(2) requires the Tribal 
gaming regulatory authority to physically mark or destroy playing 
cards. It does not. Instead, the Tribal gaming regulatory authority 
must approve the process of marking or destroying the cards. In fact, 
industry practice indicates that security personnel typically perform 
this function.
    In reference to Secs. 542.9(d) and (e), one commenter suggested 
that requiring the washing of plastic cards every seventy-two (72) 
hours of use makes no sense if non-plastic cards can be used for up to 
seven (7) days with no action. Typically, most operations use non-
plastic playing cards for no more than twenty-four (24) hours, and this 
was presumed in developing these standards. Another commenter suggested 
adding language requiring cancellation of plastic cards showing wear. 
After consideration, the Commission agrees that it would provide better 
protection for the MICS to require routine inspection of plastic 
playing cards and allow the Tribal gaming regulatory authority to 
determine how often they should be washed.
    Several commenters suggested that the standards for promotional 
progressive pots and pools at Sec. 542.9(h) be changed to allow for the 
collection of a commission or administrative fee. The Commission 
disagrees and believes that funds contributed by the playing public to 
these pools should be returned to the public. It is worth noting, 
however, that there is nothing in the standard limiting the amount 
collected as a house rake, as long as players are made aware of the 
amount collected from each pot.
    One commenter suggested adding key controls for duplicate keys to 
Secs. 542.9(i) and (j). Such an addition is unnecessary as key control 
standards apply to all keys whether duplicate or original.

Section 542.10  Keno

    One commenter requested clarification to the language at 
Sec. 542.10(c)(1)(vi) regarding the inspection of keno balls in use. 
The commenter indicated that some have interpreted the standard to 
require inspection of keno balls while inside the drawing equipment. 
The standard, as currently written, does not require such inspection. 
Customarily, keno balls are removed from the keno equipment at the end 
of each session and transported to a secure location. Standard practice 
is for keno balls to be inspected once during each session of keno, 
generally as the balls are being reinserted into the keno equipment 
prior to the commencement of play.
    One commenter suggested that the personnel access listing at 
Sec. 542.10(j)(3)(vi) should require either an employee name or an 
identifying number. The Commission agrees and made this change.
    One commenter suggested removing Sec. 542.10(p) regarding manual 
keno. The Commission maintained this standard because it believes some 
gaming operations continue to offer manual keno.

Section 542.11  Pari-Mutuel Wagering

    Commenters indicated that this section is largely improved from the 
existing MICS. Several commenters requested an additional exemption 
from the MICS for those operations that utilize an independent 
simulcast provider that is not a state-regulated racetrack. The 
Commission believes that the information required by the MICS, which 
must be obtained from the provider, is essential to the ability of the 
gaming operation to be able to determine whether it is receiving its 
guaranteed share of the handle. Thus, no additional exemption was 
added.
    Several commenters also suggested fully exempting pari-mutuel 
wagering conducted pursuant to a Tribal-State compact, where the Tribe 
is responsible for security and other ancillary services, but not for 
the receipt, payment, and custody of all funds of the operation. The 
Commission believes that the exemption contained in Sec. 542.11(a) 
would include those Tribes operating under such an agreement pursuant 
to their compact.
    One commenter suggested removing the requirement at 
Sec. 542.11(h)(9) that the gaming operation verify purged ticket 
information. The Commission believes that this information is necessary 
to verify that the purging of unpaid tickets is appropriate and is not 
being performed in an arbitrary manner that could impact winning 
patrons of the gaming operation. Likewise, reviewing purged ticket data 
is important to the participating locations since they affect the 
calculation of funds to and/or from the service provider.
    One commenter suggested removing the ``on a weekly basis'' 
designation for the audit testing required at Sec. 524.11(h)(3). The 
Commission disagrees. Weekly review of the information provided by the 
operator is necessary to ensure that the Tribe is receiving its 
contractually agreed upon percentage of the handle.

Section 542.12  Table Games

    One commenter suggested that standards be included for debit card 
transactions at gaming tables. The Commission believes that, should a 
gaming operation choose to utilize this technology, the Tribal gaming 
regulatory authority would be responsible for developing controlling 
standards.
    Several commenters suggested removing references to credit in this 
section. As discussed earlier, the Commission realizes that there are 
certain standards contained within the MICS that do not apply to all 
gaming operations. Gaming operations that do not utilize credit are not 
required to adopt standards specifically relating to credit.
    Several commenters stated that reference to the standards for drop 
and count of table games found at Sec. 542.12(b) should be worded the 
same as the reference to drop and count for gaming machines. The 
Commission agrees and has made this change.
    One commenter stated that the requirement at Sec. 542.12(c)(4) that 
the pit supervisor authorize a credit or fill was too stringent. The 
Commission agrees that intermediary gaming supervisors could authorize 
credits or fills and has changed the language to ``pit supervisory 
personnel'' to clarify this point.
    Several commenters stated that the process of obtaining signatures 
on the copies of credit and fill slips was unclear. Section 
542.12(c)(13) was reworded to clarify the signature progression 
required for these transactions. In addition, the standard was changed 
to allow a boxperson to sign for chip transactions at craps tables.
    While some commented favorably about no longer requiring the 
counting of table banks of table games that were not opened during a 
shift, others suggested that Sec. 542.12(d) should continue to require 
that table banks be counted, whether opened or not. The Commission 
believes the new standard allows for flexibility, particularly for 
small gaming operations. If a Tribal gaming regulatory authority 
believes that all tables should be counted regardless of whether they 
were opened,

[[Page 43395]]

they can include this higher standard in their tribal internal control 
standards.
    Commenters stated that the requirement to ``mark and remove cards 
and dice from play'' places an unnecessary burden on the Tribal gaming 
regulatory authority. The language in Sec. 542.12(f) was clarified to 
indicate that, as long as used cards and dice are secured, it is not 
necessary to mark them immediately after removal from play. It is also 
worth noting that this standard does not specify which entity is 
responsible for the task, only that the Tribal gaming regulatory 
authority, or the gaming operation as approved by the Tribal gaming 
regulatory authority, establish a time frame (not to exceed seven (7) 
days) for the marking, canceling, or destruction of cards and dice.
    One commenter felt that the daily recap requirement of 
Sec. 542.12(i)(6) as it relates to pit credit was originally modeled 
after the Nevada MICS, and only important for the purpose of 
determining monthly taxes paid to the state. The Commission agrees that 
these requirements serve little if any value in Indian country and they 
therefore have been deleted.
    One commenter suggested allowing non-supervisory personnel to sign 
customer markers in Sec. 542.12(j)(1). The Commission disagrees, but 
has changed the term to ``pit supervisory personnel'' rather than ``pit 
supervisor'' to clarify that supervisors other than the pit supervisor 
may also perform this function.
    Two commenters suggested prohibiting rim credit, indicating either 
that it is not used in tribal gaming operations, or that it may lead to 
collusion between a player and a dealer. While the Commission tends to 
agree, it believes that the Tribal gaming regulatory authority should 
determine the suitability of rim credit. Tribal gaming regulatory 
authorities not wishing to permit rim credit can make this 
determination in their tribal internal control standards.

Section 542.13  Gaming Machines

    Several commenters discussed on-line accounting systems. Several 
were concerned that the MICS require such a system. Others felt that an 
on-line accounting system should be required. While the Commission 
encourages the use of an on-line accounting system, such system is not 
required for coin drop devices.
    A number of comments were received on Sec. 542.13(d), resulting in 
changes to both the content and structure of the section. Several asked 
that the documentation requirements of Sec. 542.13(d)(1) be reduced. 
The Commission finds the documentation requirements for single jackpot 
payouts to be appropriate due to IRS requirements that single jackpots 
in excess of $1,199.99 be documented.
    Section 542.13(d)(1)(vi)(B) permits jackpot payouts of less than 
$1,200 with the signature of only one employee if an on-line accounting 
system is utilized. Several commenters stated that hopper fills should 
be treated similarly. The Commission agrees that the risks associated 
with hopper fills is greatly reduced when an on-line accounting system 
is in use that confirms the fill transaction, and has therefore 
modified this section to include hopper fills.
    Many commenters mentioned the positive attributes of on-line 
accounting systems. Recognizing their ability to provide adequate 
protection for many transactions, several changes were made, including 
for example, the reduction in signature requirements in 
Sec. 542.13(d)(2) for short-pays and accumulated credit payouts of less 
than $3,000.
    Several commenters stated that they believe multi-denominational 
machines are not covered by the MICS. While it is true that the MICS 
are silent with regard to specific mention of multi-denominational 
machines, it is not necessary that each type of machine be specifically 
addressed in order to be included within the MICS. Multi-denominational 
machines are subject to the MICS as they are applicable to gaming 
machines.
    One commenter suggested eliminating the requirement at 
Sec. 542.13(h)(10) that in-meter reading data be retained for 5 years 
because it is excessive. The Commission agrees and has made this 
change.
    One commenter suggested that the investigation of large variances 
between theoretical and actual hold required by Sec. 542.13(h)(19), 
should be performed by a department independent of the gaming machine 
department and that the results of the investigation should be provided 
to the Tribal gaming regulatory authority. The Commission agrees with 
this recommendation and the language has been changed accordingly. 
Furthermore, because the Tribal gaming regulatory authority bears the 
primary regulatory responsibility, language regarding the sharing of 
investigative findings with the Tribal gaming regulatory authority has 
been added throughout the MICS.
    At Sec. 542.13(i), the Commission proposed consolidating hopper 
contents standards when gaming machines are either temporarily or 
permanently removed from the gaming floor. One commenter felt that 
requiring the counting of the gaming machine drop and hopper contents 
when machines were temporarily removed from the floor was of little 
value, and suggested reverting to the existing language. The Commission 
agrees and the language was modified accordingly.
    Commenters disagreed about whether booth employees should handle 
lost player club cards. Some felt that they should be able to return 
lost cards to players, while others felt that booth employees should 
under no circumstances have access to lost player cards. The Commission 
believes that the language at Sec. 542.13(j)(iii), which allows booth 
employees to receive lost player club cards, provided that they are 
immediately deposited into a secured container to which they do not 
have access, is an acceptable minimum level of control. At least one 
commenter saw this language as an appropriate compromise.
    Several commenters suggested that the thresholds contained in 
Secs. 542.13(m)(5) and (7), whereby investigation of coin and currency 
drop variances is necessary, were inappropriate. The Commission feels 
these amounts are a reasonable reflection of industry standards. Again, 
for those commenters that believe these amounts should be lower, it is 
suggested that this be done in the development of tribal internal 
control standards.
    Section 542.13(n)(3) discusses the redemption of cash-out tickets. 
Remote validation systems are a technological advance providing a 
reasonable level of control. The proposed rule recognized this new 
technology, but limited its use to tickets not exceeding $1,199. Based 
on comments and relevant research, the $1,199 limitation was increased 
to $2,999 per cash-out transaction.
    The language throughout Sec. 542.13(n) referring to a ``cashier'' 
has been clarified to include a ``redeemer'' to reflect use of a remote 
validation system. It is worth mentioning that in the event the system 
goes down, cash-out tickets must be redeemed at a change booth or 
cashier's cage in accordance with Sec. 542.13(n)(8) to ensure adequate 
surveillance to protect the integrity of the transaction.
    Two commenters opposed the prohibition by Sec. 542.13(p) of smart 
cards. With smart cards, there is no duplicate record of the 
information stored on the card, placing both the customer and the 
operation at risk. If, in the future, technology is developed that 
would alleviate these concerns, a gaming operation wishing to utilize 
the system may request a variance from the Commission.

[[Page 43396]]

Section 542.14  Cage

    One commenter asked whether the check cashing standards of 
Sec. 542.14 apply to independent check cashing companies. They do not. 
However, the Commission strongly recommends that the Tribal gaming 
regulatory authority adopt regulations that will ensure persons 
employed by such companies are suitable to work in the gaming industry. 
Likewise, the Commission recommends that the Tribal gaming regulatory 
authority install surveillance cameras over appropriate counter areas 
to ensure that the interests of its customers are adequately protected. 
It is also important for the tribal regulators to require that the 
service provider has adopted necessary internal controls to ensure 
compliance with Title 31.
    One commenter stated that the Tribal gaming regulatory authority, 
rather than the Commission, should determine the adequate minimum 
bankroll. The Commission agrees. The bankroll is the amount of cash or 
cash equivalents kept on hand to ensure that the gaming operation can 
satisfy its obligations to customers. Industry practice is for the 
gaming operation to determine the required bankroll. Section 
542.14(d)(4) requires only that the Tribal gaming regulatory authority 
approve the formula utilized for this determination. The bankroll 
formula available from the Commission is merely recommended guidance 
issued in response to repeated requests from gaming operations.
    One commenter asked whether chips, because they are a component of 
cage accountability, should be included in the bankroll formula. Chips, 
while they must be accounted for in the cage, are not cash equivalents 
for the purpose of paying customers.

Section 542.15  Credit

    A number of commenters suggest removing this section from the MICS 
because they do not extend credit, or because they are prohibited from 
doing so by their Tribal-State compact. The Commission recognizes that 
not all gaming operations play all games or utilize all procedures 
contained herein. Again, this is where the process of developing tribal 
internal control standards becomes important. It is not intended for 
Tribes to simply adopt these MICS verbatim as tribal standards. 
Instead, Tribes should utilize the MICS to develop their own internal 
control standards that provide a level of control that equals or 
exceeds those set forth in this part and that address the particulars 
of their gaming operation(s). Doing so allows the opportunity of 
tailoring the MICS to meet the individual needs of a diverse industry. 
Tribes that do not extend credit are not required to include credit 
standards in their tribal internal control standards.

Section 542.16  Information Technology

    Section 542.16(a)(1)(i) requires that all new vendor hardware and 
software agreements contain language requiring a vendor to adhere to 
tribal internal control standards. Two commenters opposed this 
requirement stating that such a requirement may create too few 
companies willing to do business with the Tribe. The Commission 
believes that, in order to protect the integrity of the systems 
provided by third-party vendors, this standard is necessary.
    One commenter suggested adding the language ``applicable to the 
goods or services the vendor is providing'' to the end of 
Sec. 542.16(a)(1)(i) to clarify what information is required. The 
language was added.
    One commenter asked whether Sec. 542.16(f)(1)(iii) requires a 
gaming operation to send computer hardware to the Commission for the 
purpose of performing auditing procedures. It does not. This standard 
instead requires that the Commission have access to hardware while on 
site.

Section 542.17  Complimentary Services or Items

    The use of complimentary services or items, commonly known as 
``comps,'' is customary throughout the gaming industry. This is true 
not only of commercial gaming, but also of Indian gaming. The 
Commission does not prohibit the use of comps in Indian gaming. To the 
contrary, the Commission believes that tribal gaming operations should 
possess the same business tools as commercial gaming so they can 
compete on an equal footing.
    Complimentaries are typically used for marketing or promotional 
purposes. They can be used to entice new customers, reward continuing 
customers, or promote community goodwill. Because the issuance of a 
comp amounts to the provision of goods or services, comps result in a 
cost to the gaming operation. As such, a complimentary generally should 
not be issued unless it provides an economic benefit, real or 
potential, to the operation.
    Determining how much of a gaming operation's resources should be 
expended on comps, as well as to whom they should be awarded, is a 
decision dictated by market conditions and unique to each operation. A 
gaming operation in a tightly competitive market may rely on comps to a 
much greater degree to attract or retain patrons than a gaming 
operation in a market with little local competition. When implemented 
properly, a gaming operation's use of comps will improve revenues and 
profitability, and ensure that the operation is competing effectively 
for the gaming customers within its market.
    A number of commenters and members of the Advisory Committee 
objected to Sec. 542.17 being included in the MICS. Most view 
complimentaries as a business decision and outside the scope of the 
Commission's authority. While the Commission agrees that the use of 
comps involves important business decisions, it also recognizes that 
abuse can amount to misappropriation of gaming revenues.
    Given that the issuance of a complimentary results in an expense to 
the operation, misuse negatively impacts gaming revenues. This lowering 
of gaming revenues leads directly to a reduction in the amount of 
revenues available for transfer to the Tribal government, and in turn, 
a reduction in the overall services a Tribe can provide to its members. 
Misuse of complimentaries thereby thwarts the principle that gaming 
revenues should benefit the Tribal community as a whole, and not 
individuals. Without clearly defined procedures for the authorization, 
issuance, and tracking of complimentaries, the potential for abuse can 
escalate.
    Several comments prompt a discussion about the difference between 
complimentaries and expenditures by a Tribal government. Most Tribes 
have a number of businesses or enterprises operated for economic 
development. It is customary that at some point during the year, each 
of these businesses or enterprises transfer a portion of their net 
revenues to the Tribal government in order to fund governmental 
operations. Some commenters expressed concern that the Commission has 
placed restrictions upon the manner in which a Tribal government can 
spend these revenues. The Commission has not. Instead, the Congress 
stipulated such limitations when they enacted the Indian Gaming 
Regulatory Act (IGRA). Revenues transferred to a Tribal government from 
a gaming operation must be spent as specified by the Congress within 
the IGRA.
    It is also important to note that expenditures of net gaming 
revenues by Tribal governments are not ``complimentaries.'' 
``Complimentaries'' is a term used to define certain types of 
expenditures of a gaming operation, not expenditures of a Tribal 
government. Because expenditures of net gaming

[[Page 43397]]

revenues by a Tribal government are not comps, they are therefore 
outside the scope of these MICS.
    In response to numerous comments, the requirement that certain data 
be obtained for all complimentary services or items that exceed $50.00 
has been modified to state that the collection of such data is not 
required for complimentary services or items below a ``reasonable 
amount'' to be established by the Tribal gaming regulatory authority. 
It is the Commission's view that for some large operations in a 
competitive market, $100 may be a reasonable amount. For others, $20 
may be more appropriate. In any case, the Commission recognizes that 
the Tribal gaming regulatory authority can most appropriately establish 
this amount.

Section 542.18  Variances

    This section was restructured to provide clarity and to recognize 
that the Tribal gaming regulatory authority, in the first instance, 
should determine whether the gaming operation should be granted a 
variance. Clearly, tribal regulators who are most familiar with a 
gaming operation are best equipped to make these initial 
determinations. The Commission would then be requested to concur with 
the variance. If the Commission does not agree, it must justify its 
objection. The new process also allows for an appeal to the full 
Commission. A number of commenters agreed that the changes to this 
section are an improvement.
    Many commenters believe that the ninety (90) day time frame for 
Commission action in Sec. 542.18(b) is too long. Previous experience 
has shown that review of a variance approval can be lengthy, 
particularly where the variance is somewhat complicated or involves new 
technology. The Commission has a shortage of staff able to review 
variance approvals, and such activity requires reassignment from 
current workload. In many cases, review may also entail travel to the 
gaming operation, as well as review of equivalent standards in 
comparable gaming jurisdictions. In response to the numerous comments, 
however, the Commission has shortened its response time to sixty (60) 
days. Further shortening of this time frame was not entertained out of 
fear that it may lead to lack of concurrence simply because of 
insufficient time for review, as opposed to concern with the variance 
itself.
    One commenter suggested a standard whereby the Commission would 
notify a Tribe if its Tribal gaming regulatory authority requests a 
variance. The Commission believes that communication between the Tribal 
gaming regulatory authority and the Tribe is important, but also 
believes that it is an internal matter better addressed by the Tribe 
than through the MICS.
    One commenter suggested that a gaming operation be able to appeal a 
Tribal gaming regulatory authority's denial of a variance request 
directly to the Commission. Again, the Commission believes that this is 
an internal issue, best addressed by the Tribe.
    Several commenters stated that the Commission should not be 
involved in the variance process and that such decisions should be left 
entirely to the Tribal gaming regulatory authority. While acknowledging 
the vital role Tribal gaming regulatory authorities play in the primary 
regulation of gaming, the Commission would find it problematical to 
review compliance of gaming operations if each were being operated 
under different variances. In addition to being time-consuming and an 
unnecessary waste of Commission resources, such a process could also 
lead to a situation where the Commission disagrees with the level of 
control provided by a variance after implementation, resulting in 
unnecessary expense to the gaming operation. Furthermore, the MICS are 
the Commission's regulation and it therefore follows that the 
Commission should ultimately be responsible for review of variances.
    Several commenters requested that the effective date of a variance, 
discussed in Sec. 542.17(e), be changed to the date approved by the 
Tribal gaming regulatory authority. The Commission believes that the 
gaming operation should comply with standards that achieve a level of 
control sufficient to accomplish the purpose of the standard it is to 
replace until such time as the Commission objects.
    A commenter requested that the Commission publish approved 
variances. This issue was considered in developing the proposed rule 
and rejected because of concerns that a variance (often based on 
intimate knowledge of the requesting gaming operation) that works for 
one operation, may not be sufficient to meet the needs of another. Even 
so, the Commission agrees that having the ability to review approved 
variances may be of benefit to other Tribal gaming operations. The 
Commission agrees to make public on its web page a list of Tribes who 
have received a variance concurrence, including the particular standard 
of the MICS it addressed. Tribal gaming regulatory authorities may then 
contact each other for specific details of the variance. A variance 
continues to be applicable only to the operation receiving concurrence.
    The Committee expressed concern that nowhere is it clearly 
indicated to whom requests for variances should be sent. The Commission 
agrees with this concern and has in the past recommended that requests 
for variances be clearly marked both on the request itself and on the 
outside of the envelope. The Committee asked that the Commission issue 
clear guidance about the procedures that should be followed in 
requesting a variance concurrence.

Section 542.20  Tier A Gaming Operations

    Several commenters requested that the upper limit for Tier A be 
raised. Based upon earlier comments and input from the Advisory 
Committee, the upper limit for Tier A gaming operations has been 
increased from the current level of $3 million to $5 million. The 
Commission believes that further adjustment of the upper limit may 
result in an unacceptable risk to tribal assets.

Sections 542.21, 542.31, and 542.41  Drop and Count for Tier A, B, and 
C Gaming Operations

    One commenter asked that the clause regarding computer 
applications, included elsewhere in the MICS, be added to drop and 
count. The Commission agrees and has added such language at 
Secs. 542.21(a), 542.31(a), and 542.41(a).
    While some commented favorably about no longer requiring the drop 
of tables that were not opened during a shift, others suggested that 
Secs. 542.21(b)(2)(ii), 542.31(b)(2)(ii), and 542.41(b)(2)(ii) should 
continue to require that tables be dropped, whether opened or not. The 
Commission believes the new standard allows for flexibility, 
particularly for small gaming operations. If a Tribal gaming regulatory 
authority believes that all tables should be dropped, regardless of 
whether they were opened, they can include this higher standard in 
their tribal internal control standards.
    Several commenters indicated that they use computerized bar codes 
to mark table game drop boxes. The Commission agrees that use of such 
technology satisfies the requirements of Secs. 542.21(b)(5), 
542.31(b)(5), and 542.41(b)(5).
    One commenter suggested that no one other than count room personnel 
should be permitted to enter or exit the count room during the count. 
The Commission was concerned that this could be interpreted to include 
gaming regulators, which is not the intent of Secs. 542.21(c)(2), 
542.31(c)(2), and

[[Page 43398]]

542.41(c)(2). Therefore, no change was made.
    Several commenters were concerned about lack of independence if a 
dealer or cage cashier is used as a member of the count team, as 
permitted by Secs. 542.21(c)(4), 542.31(c)(4), and 542.41(c)(4). The 
Commission tends to agree, but is concerned about how removing this 
provision would impact small gaming operations. Therefore, the ability 
to utilize a dealer or cage cashier was removed only from 
Sec. 542.41(c)(4).
    One commenter stated that the second count required by 
Secs. 542.21(d)(4)(ii), 542.31(d)(4)(ii), and 542.41(d)(4)(ii) should 
be conducted of each box. The standard requires only that a second 
count of the entire drop be conducted, which is believed to be an 
appropriate minimum standard. A second commenter asked if an automated 
currency counting machine meets the requirements of this standard. The 
Commission agrees that utilization of this type of technology is 
appropriate, so long as the system is capable of conducting two 
independent counts. Yet another commenter suggested requiring a blind 
second count. The Commission would agree that this provides an 
additional layer of security, but would not require blind counts of all 
operations. Similar comments and changes were also made to 
Secs. 542.21(f)(4)(ii), 542.31(f)(4)(ii), and 542.41(f)(4)(ii).
    The standard at Secs. 542.31(e)(3)(i) and 542.41(e)(3)(i) regarding 
a surveillance log has been moved to the surveillance section upon a 
recommendation that surveillance would be the department responsible 
for keeping the log.
    Several commenters indicated that they use computerized bar codes 
to mark bill acceptor canisters. The Commission agrees that use of such 
technology satisfies the requirements of Secs. 542.21(e)(4), 
542.31(e)(5), and 542.41(e)(5).
    One commenter recommended modification to Secs. 542.21(f)(11), 
542.31(f)(11), and 542.41(f)(11) to allow authorized personnel access 
to stored bill acceptor canisters in an emergency for the resolution of 
a problem. The Commission agrees and appropriate language was added.
    One commenter suggested modification to the on-the-floor drop 
system standards at Secs. 542.21(i)(2)(i), 542.31(i)(2)(i), and 
542.41(i)(2)(i). These changes were accepted.

Sections 542.22, 542.32, and 542.42  Internal Audit for Tier A, B, and 
C Gaming Operations

    One commenter recommended that a tiered approach should be 
considered for internal audit testing. The commenter suggested that 
while annual testing was appropriate for Tier A operations, in some 
instances, Tiers B and C should complete testing on a more frequent 
basis. While the Commission supports testing on a more frequent basis, 
it is believed that the approach specified in these standards is an 
appropriate minimum standard.
    Language was also added at Secs. 542.22(b)(1)(xi), 
542.32(b)(1)(xi), and 542.42(b)(1)(xi), that expands the entities 
entitled to ask for additional internal audits to include the Tribe, 
Tribal gaming regulatory authority, audit committee, or any other 
entity designated by the Tribe.

Sections 542.23, 542.33, and 542.43  Surveillance for Tier A, B, and C 
Gaming Operations

    Several commenters requested clarification that Tier A gaming 
operations require only the ``recording'' of areas under surveillance, 
not ``monitoring.'' The Commission agrees. Unlike Tier B and C gaming 
operations, Tier A gaming operations are not required to maintain a 
staffed surveillance room. Therefore, ``monitoring'' is not required of 
Tier A gaming operations.
    Several commenters also requested clarification of the meaning of 
the word ``monitor.'' The Commission agrees that it should be read as 
the ``ability to monitor.'' Surveillance personnel must continuously 
prioritize their activities as events unfold within the operation. To 
require ``continuous monitoring'' of one area or of one event may in 
fact divert attention from more pressing matters. The Commission does 
not expect continuous monitoring, only that surveillance personnel be 
able to monitor the particular area or event in the manner specified.
    One commenter indicated concern with the camera coverage required 
by Secs. 542.23(m), 542.33(p), and 542.43(q). The commenter believes 
that if camera coverage is set so that card values and suits can be 
clearly identified (as required by Secs. 542.23(m)(1)(i), 
542.33(p)(1)(i), and 542.43(q)(1)(i)), it may not be possible to also 
maintain an overall view of the entire table (as required by 
Secs. 542.23(m)(1)(ii)), 542.33(p)(1)(ii)), and 542.43(q)(1)(ii)). 
These sections are not meant to specify the number or types of cameras 
that should be utilized. While several commenters suggested that the 
Commission should set a specific number and type of camera required for 
each standard, the Commission believes that the Tribal gaming 
regulatory authority and gaming operation are better suited to make 
this determination. As such, these sections are meant only to specify 
the required areas of coverage. To help alleviate any confusion, the 
beginning of the section was changed by deleting the word ``each.'' 
Similar changes were also made to other comparable sections of the 
MICS.
    Some commenters requested clarification of the meaning of ``base 
payout amount'' as used in Secs. 542.23(n)(2) and (3), 542.33(q)(2) and 
(3), and 542.43(r)(2) and (3). The base payout amount is the jackpot 
reset amount. Clarifying language has been added to Secs. 542.23(n)(2), 
542.33(q)(2), and 542.43(r)(2). By way of example, an in-house 
progressive machine offering a base payout (jackpot reset) amount of 
$90,000 that increases to $200,000, is not required to be monitored and 
recorded by a dedicated camera under this section because the base 
payout amount of $90,000 is less than the $100,000 threshold.
    One commenter questioned why the surveillance standards are less 
stringent for wide-area progressive machines, in that the base payout 
amount requiring dedicated camera coverage is set at $1.5 million. 
(Secs. 542.23(n)(3), 542.33(q)(3), 542.43(r)(3)) The Commission 
believes that because these games are monitored by independent vendors, 
primary payouts are made by independent vendors, and they utilize an 
on-line monitoring system, the threat to tribal gaming operations' 
assets are reduced and therefore, the surveillance requirements should 
be less stringent.
    Several commenters objected to the standard contained within 
Secs. 542.23(p)(3), 542.33(v)(3), and 542.43(w)(3) requiring that an 
original surveillance tape or digital recording be provided to the 
Commission. The standard was changed to allow Commission access to a 
duly authenticated copy instead of an original.

Section 542.30  Tier B Gaming Operations

    Several commenters requested that the upper limit for Tier B be 
raised. Based upon earlier comments and input from the Advisory 
Committee, the upper limit for Tier B gaming operations has been 
increased from the current level of $10 million to $15 million. The 
Commission believes that further adjustment of the upper limit may 
result in an unacceptable risk to tribal assets.

Section 542.40  Tier C Gaming Operations

    Several commenters requested that the threshold at which gaming 
operations become Tier C be raised.

[[Page 43399]]

Based upon earlier comments and input from the Advisory Committee, the 
level at which gaming operations become Tier C has been increased from 
$10 million to $15 million. The Commission believes that further 
adjustment may result in an unacceptable risk to tribal assets.
    One commenter suggested requiring that all Tier C gaming operations 
install on-line accounting systems. While the Commission believes that 
on-line systems provide a higher level of protection of assets, we do 
not agree that, as a minimum standard, this system should be required.

Regulatory Flexibility Act

    On April 23, 2002, the Commission published for public comment its 
certification that the proposed regulation would not have a significant 
impact on small entities. In response the Commission received nineteen 
comments. A majority of the comments received were similar, stating 
that the Commission had violated the Regulatory Flexibility Act by 
failing to prepare an analysis. The Commission disagrees. The 
Regulatory Flexibility Act allows an agency to certify that a proposed 
rule will not have a significant economic impact on small entities 
subject to the rule as long as the agency provides an explanation of 
the factual basis for the certification. 5 U.S.C. Sec. 605(b). The 
Commission provided this basis in its notice dated April 23, 2002, and 
again certifies in this final rule.
    A majority of the commenters also disagree with the Commission's 
determination that it possesses the statutory authority to promulgate 
this regulation. That issue is considered and addressed elsewhere in 
this preamble.
    One commenter objected to the Commission's definition of ``small 
entity'' under the Regulatory Flexibility Act. The Commission, in 
determining that gaming operations with gross revenues under $5 million 
may qualify as ``small businesses'' and, therefore as ``small 
entities,'' relied, as does the Regulatory Flexibility Act, on the 
definitions contained with the Small Business Act, and associated 
regulations. 15 U.S.C. 632; 13 CFR 121.201. Therefore, the Commission 
disagrees with this comment.
    The same commenter disagreed with the Commission's certification 
that this regulation does not impose significant economic costs to 
affected Indian gaming operations. The Commission disagrees. As stated 
in its certification, internal controls are requirements that are 
mandated by the nature of gaming operations. In the absence of federal 
regulations, Tribes would continue to incur many, if not all, of the 
same regulatory expenses. The same commenter suggested that the 
Commission should consider the effect of all of the Commission's 
regulatory activities in determining economic impact. The Commission is 
aware of its obligations under the Regulatory Flexibility Act and will 
continue to comply with the Act in fitting regulatory and informational 
requirements to the scale of entities subject to its regulations. For 
example, as stated in the request for public comment dated April 23, 
2002, the Commission has tiered this regulation to take into account 
the needs of large and small gaming operations. The Commission's 
advisory committee consisted of representatives from both large and 
small gaming operations. The Commission also requested and responded to 
public comments in the form of written comments and held a public 
hearing.
    One commenter stated that the Commission's proposal to exempt 
gaming operations grossing under $1 million from compliance with these 
regulations was commendable, but asked that the Commission consider 
exempting all gaming operations grossing less than $5 million from 
regulatory compliance. The Commission believes that such an exemption 
would jeopardize the integrity of Indian gaming as a whole; and 
exempting such a large group of gaming operations from federal 
oversight would be a shirking of the responsibilities of the 
Commission. The Commission does, however, realize that the costs of 
compliance with minimum internal control standards should reflect the 
risk of loss to Indian gaming operations. Because of this, the 
Commission has reduced the requirements of Tier A gaming facilities. In 
addition, tribal gaming regulatory authorities may request a variance 
from these requirements if adequate alternative controls are put in 
place. The Commission believes that the flexibility of the new 
regulation adequately addresses the concerns of smaller gaming 
operations, while fulfilling its statutory obligation of the federal 
oversight of Indian gaming.

Future Revisions to the MICS

    Indian gaming, like commercial gaming, is an ever-changing 
industry. As new technology emerges and the industry itself continues 
to mature, this regulation will likewise require evolution. The MICS 
are a technical regulation greatly impacting all Tribal gaming 
operations. As such, input from those most affected is critical to 
developing a mutually beneficial regulatory framework. The Commission 
firmly believes that any future changes to this regulation be made in a 
fully consultative process, similar to the one utilized in developing 
this final rule.

Regulatory Matters

Regulatory Flexibility Act

    The Commission certifies that the Minimum Internal Control 
Standards contained within this regulation will not have a significant 
economic impact on small entities, 5 U.S.C. 605(b). The factual basis 
for this certification is as follows:
    Of the 315 Indian gaming operations across the country, 
approximately 100 of the operations have gross revenues of less than $5 
million. Of these, approximately 50 operations have gross revenues of 
under $1 million. Since the proposed revisions will not apply to gaming 
operations with gross revenues under $1 million, only 50 small 
operations may be affected. While this is a substantial number, the 
Commission believes that the regulations will not have a significant 
economic impact on these operations for several reasons. First, 
internal controls are essential to gaming operations in order to 
protect assets. The costs involved in implementing these controls are 
part of the regular business costs incurred by such an operation. The 
Commission also believes that many Indian gaming operations have 
already implemented internal control standards that are more stringent 
than those contained in these regulations.
    Under the proposed revisions, small gaming operations grossing 
under $1 million are exempted from MICS compliance. Tier A facilities 
(those with gross revenues between $1 and $5 million) are subject to 
the yearly requirement that independent certified public accountant 
testing occur. The purpose of this testing is to measure the gaming 
operation's compliance with the tribe's internal control standards. The 
cost of compliance with this requirement for a small gaming operation 
is estimated at between $3,000 and $5,000. The cost of this report is 
minimal and does not create a significant economic effect on gaming 
operations. What little impact exists is further offset because other 
regulations require a yearly independent financial audit that can be 
conducted at the same time. For these reasons, the Commission has 
concluded that the proposed rule will not have a significant economic 
impact on those small entities subject to the rule.

[[Page 43400]]

Small Business Regulatory Enforcement Fairness Act

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule does not have 
an annual effect on the economy of $100 million or more. This rule will 
not cause a major increase in costs or prices for consumers, individual 
industries, Federal, state or local government agencies or geographic 
regions, and does not have a significant adverse effect on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S. based enterprises to compete with foreign-based enterprises.

Unfunded Mandates Reform Act

    The Commission is an independent regulatory agency and, as such, is 
not subject to the Unfunded Mandates Reform Act. Even so, the 
Commission has determined that this final rule does not impose an 
unfunded mandate on State, local, or tribal governments, or on the 
private sector, of more than $100 million per year. Thus, it is not a 
``significant regulatory action'' under the Unfunded Mandates Reform 
Act, 2 U.S.C. 1501 et seq.
    The Commission has, however, determined that this final rule may 
have a unique effect on tribal governments (this rule applies 
exclusively to tribal governments) whenever they undertake the 
ownership, operation, regulation, or licensing of gaming operations on 
Indian lands as defined by the Indian Gaming Regulatory Act. The 
Commission has therefore undertaken the following actions: on two 
occasions, made a request for public comment on changes to the 
regulation; formed a Tribal Advisory Committee to assist in writing the 
new regulation; held discussions with Tribal leaders and Tribal 
associations about desired changes to the regulation; prepared guidance 
material and model documents; held a public hearing; and continues to 
provide technical assistance.
    Between May and November 2001, the Commission and the Tribal 
Advisory Committee met six times to develop a regulatory proposal. In 
selecting Committee members, consideration was placed on the 
applicant's experience in this area, as well as the size of the Tribe 
the nominee represented, geographic location of the Tribe's gaming 
operation, and the size and type of gaming conducted. The Commission 
believes it assembled a diverse Committee representative of Indian 
gaming interests.
    Since beginning formulation of this final rule, the Commission 
spoke at several tribal association meetings. The Commission will 
develop guidance materials that will include guidelines for CPA firms 
who must audit gaming operations to determine compliance with tribal 
internal control standards. The Commission also held a public hearing 
on the proposed regulation prior to development and publication of a 
final rule. The Commission and the Tribal Advisory Committee met one 
last time to discuss the public comments received as a result of 
publication of the proposed rule and to develop a recommendation 
regarding the final rule. The Commission also plans on continuing its 
policy of providing technical assistance, through its field offices, to 
Tribes to assist in complying with the MICS.

Takings

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

Civil Justice Reform

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

Paperwork Reduction Act

    This final rule requires an information collection under the 
Paperwork Reduction Act 44 U.S.C. 3501 et seq., as did the regulation 
it replaces. There is no change to the paperwork requirements created 
by this amendment. The Commission's OMB Control number for this 
regulation is 3141-0009.

National Environmental Policy Act

    The Commission has determined that this final 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).

List of Subjects in 25 CFR Part 542

    Accounting, Auditing, Gambling, Indian-lands, Indian-tribal 
government, Reporting and record keeping requirements.

    For reasons stated in the preamble, the National Indian Gaming 
Commission revises 25 CFR part 542 to read as follows:

PART 542--MINIMUM INTERNAL CONTROL STANDARDS

Sec.
542.1  What does this part cover?
542.2  What are the definitions for this part?
542.3  How do I comply with this part?
542.4  How do these regulations affect minimum internal control 
standards establish in a Tribal-State compact?
542.5  How do these regulations affect state jurisdiction?
542.6  Does this part apply to small and charitable gaming 
operations?
542.7  What are the minimum internal control standards for bingo?
542.8  What are the minimum internal control standards for pull 
tabs?
542.9  What are the minimum internal control standards for card 
games?
542.10  What are the minimum internal control standards for keno?
542.11  What are the minimum internal control standards for pari-
mutuel wagering?
542.12  What are the minimum internal control standards for table 
games?
542.13  What are the minimum internal control standards for gaming 
machines?
542.14  What are the minimum internal control standards for the 
cage?
542.15  What are the minimum internal control standards for credit?
542.16  What are the minimum internal control standards for 
information technology?
542.17  What are the minimum internal control standards for 
complimentary services or items?
542.18  How does a gaming operation apply for a variance from the 
standards of this part?
542.20  What is a Tier A gaming operation?
542.21  What are the minimum internal control standards for drop and 
count for Tier A gaming operations?
542.22  What are the minimum internal control standards for internal 
audit for Tier A gaming operations?
542.23  What are the minimum internal control standards for 
surveillance for Tier A gaming operations?
542.30  What is a Tier B gaming operation?
542.31  What are the minimum internal control standards for drop and 
count for Tier B gaming operations?
542.32  What are the minimum internal control standards for internal 
audit for Tier B gaming operations?
542.33  What are the minimum internal control standards for 
surveillance for Tier B gaming operations?
542.40  What is a Tier C gaming operation?
542.41  What are the minimum internal control standards for drop and 
count for Tier C gaming operations?
542.42  What are the minimum internal control standards for internal 
audit for Tier C gaming operations?
542.43  What are the minimum internal control standards for 
surveillance for a Tier C gaming operation?

    Authority: 25 U.S.C. 2702(c), 2706(b)(10).

[[Page 43401]]

Sec. 542.1  What does this part cover?

    This part establishes the minimum internal control standards for 
gaming operations on Indian land.


Sec. 542.2  What are the definitions for this part?

    The definitions in this section shall apply to all sections of this 
part unless otherwise noted.
    Account access card means an instrument used to access customer 
accounts for wagering at a gaming machine. Account access cards are 
used in connection with a computerized account database.
    Accountability means all items of cash, chips, coins, tokens, 
plaques, receivables, and customer deposits constituting the total 
amount for which the bankroll custodian is responsible at a given time.
    Accumulated credit payout means credit earned in a gaming machine 
that is paid to a customer manually in lieu of a machine payout.
    Actual hold percentage means the percentage calculated by dividing 
the win by the drop or coin-in (number of credits wagered). Can be 
calculated for individual tables or gaming machines, type of table 
games, or gaming machines on a per day or cumulative basis.
    Ante means a player's initial wager or predetermined contribution 
to the pot before the dealing of the first hand.
    Betting station means the area designated in a pari-mutuel area 
that accepts wagers and pays winning bets.
    Betting ticket means a printed, serially numbered form used to 
record the event upon which a wager is made, the amount and date of the 
wager, and sometimes the line or spread (odds).
    Bill acceptor means the device that accepts and reads cash by 
denomination in order to accurately register customer credits.
    Bill acceptor canister means the box attached to the bill acceptor 
used to contain cash received by bill acceptors.
    Bill acceptor canister release key means the key used to release 
the bill acceptor canister from the bill acceptor device.
    Bill acceptor canister storage rack key means the key used to 
access the storage rack where bill acceptor canisters are secured.
    Bill acceptor drop means cash contained in bill acceptor canisters.
    Bill-in meter means a meter included on a gaming machine accepting 
cash that tracks the number of bills put in the machine.
    Boxperson means the first-level supervisor who is responsible for 
directly participating in and supervising the operation and conduct of 
a craps game.
    Breakage means the difference between actual bet amounts paid out 
by a racetrack to bettors and amounts won due to bet payments being 
rounded up or down. For example, a winning bet that should pay $4.25 
may be actually paid at $4.20 due to rounding.
    Cage means a secure work area within the gaming operation for 
cashiers and a storage area for the gaming operation bankroll.
    Cage accountability form means an itemized list of the components 
that make up the cage accountability.
    Cage credit means advances in the form of cash or gaming chips made 
to customers at the cage. Documented by the players signing an IOU or a 
marker similar to a counter check.
    Cage marker form means a document, signed by the customer, 
evidencing an extension of credit at the cage to the customer by the 
gaming operation.
    Calibration module means the section of a weigh scale used to set 
the scale to a specific amount or number of coins to be counted.
    Call bets means a wager made without cash or chips, reserved for a 
known customer and includes marked bets (which are supplemental bets 
made during a hand of play). For the purpose of settling a call bet, a 
hand of play in craps is defined as a natural winner (e.g., seven or 
eleven on the come-out roll), a natural loser (e.g., a two, three or 
twelve on the come-out roll), a seven-out, or the player making his 
point, whichever comes first.
    Card game means a game in which the gaming operation is not party 
to wagers and from which the gaming operation receives compensation in 
the form of a rake, a time buy-in, or other fee or payment from a 
player for the privilege of playing.
    Card room bank means the operating fund assigned to the card room 
or main card room bank.
    Cash-out ticket means an instrument of value generated by a gaming 
machine representing a cash amount owed to a customer at a specific 
gaming machine. This instrument may be wagered at other machines by 
depositing the cash-out ticket in the machine bill acceptor.
    Chips means cash substitutes, in various denominations, issued by a 
gaming operation and used for wagering.
    Coin-in meter means the meter that displays the total amount 
wagered in a gaming machine that includes coins-in and credits played.
    Coin meter count machine means a device used in a coin room to 
count coin.
    Coin room means an area where coins and tokens are stored.
    Coin room inventory means coins and tokens stored in the coin room 
that are generally used for gaming machine department operation.
    Commission means the National Indian Gaming Commission.
    Complimentary means a service or item provided at no cost, or at a 
reduced cost, to a customer.
    Count means the total funds counted for a particular game, gaming 
machine, shift, or other period.
    Count room means a room where the coin and cash drop from gaming 
machines, table games, or other games are transported to and counted.
    Count team means personnel that perform either the count of the 
gaming machine drop and/or the table game drop.
    Counter check means a form provided by the gaming operation for the 
customer to use in lieu of a personal check.
    Credit means the right granted by a gaming operation to a customer 
to defer payment of debt or to incur debt and defer its payment.
    Credit limit means the maximum dollar amount of credit assigned to 
a customer by the gaming operation.
    Credit slip means a form used to record either:
    (1) The return of chips from a gaming table to the cage; or
    (2) The transfer of IOUs, markers, or negotiable checks from a 
gaming table to a cage or bankroll.
    Customer deposits means the amounts placed with a cage cashier by 
customers for the customers' use at a future time.
    Deal means a specific pull tab game that has a specific serial 
number associated with each game.
    Dealer means an employee who operates a game, individually or as a 
part of a crew, administering house rules and making payoffs.
    Dedicated camera means a video camera required to continuously 
record a specific activity.
    Deskman means a person who authorizes payment of winning tickets 
and verifies payouts for keno games.
    Draw ticket means a blank keno ticket whose numbers are punched out 
when balls are drawn for the game. Used to verify winning tickets.
    Drop (for gaming machines) means the total amount of cash, cash-out 
tickets, coupons, coins, and tokens removed from drop buckets and/or 
bill acceptor canisters.
    Drop (for table games) means the total amount of cash, chips, and 
tokens removed from drop boxes, plus the amount of credit issued at the 
tables.
    Drop box means a locked container affixed to the gaming table into 
which

[[Page 43402]]

the drop is placed. The game type, table number, and shift are 
indicated on the box.
    Drop box contents keys means the key used to open drop boxes.
    Drop box release keys means the key used to release drop boxes from 
tables.
    Drop box storage rack keys means the key used to access the storage 
rack where drop boxes are secured.
    Drop bucket means a container located in the drop cabinet (or in a 
secured portion of the gaming machine in coinless/cashless 
configurations) for the purpose of collecting coins, tokens, cash-out 
tickets, and coupons from the gaming machine.
    Drop cabinet means the wooden or metal base of the gaming machine 
that contains the gaming machine drop bucket.
    Earned and unearned take means race bets taken on present and 
future race events. Earned take means bets received on current or 
present events. Unearned take means bets taken on future race events.
    EPROM means erasable programmable read-only memory or other 
equivalent game software media.
    Fill means a transaction whereby a supply of chips, coins, or 
tokens is transferred from a bankroll to a table game or gaming 
machine.
    Fill slip means a document evidencing a fill.
    Flare means the information sheet provided by the manufacturer that 
sets forth the rules of a particular pull tab game and that is 
associated with a specific deal of pull tabs. The flare shall contain 
the following information:
    (1) Name of the game;
    (2) Manufacturer name or manufacturer's logo;
    (3) Ticket count; and
    (4) Prize structure, which shall include the number of winning pull 
tabs by denomination, with their respective winning symbols, numbers, 
or both.
    Future wagers means bets on races to be run in the future (e.g., 
Kentucky Derby).
    Game server means an electronic selection device, utilizing a 
random number generator.
    Gaming machine means an electronic or electromechanical machine 
which contains a microprocessor with random number generator capability 
which allows a player to play games of chance, some of which may be 
affected by skill, which machine is activated by the insertion of a 
coin, token or cash, or by the use of a credit, and which awards game 
credits, cash, tokens, or replays, or a written statement of the 
player's accumulated credits, which written statements be redeemable 
for cash.
    Gaming machine analysis report means a report prepared that 
compares theoretical to actual hold by a gaming machine on a monthly or 
other periodic basis.
    Gaming machine booths and change banks means a booth or small cage 
in the gaming machine area used to provide change to players, store 
change aprons and extra coin, and account for jackpot and other 
payouts.
    Gaming machine count means the total amount of coins, tokens, and 
cash removed from a gaming machine. The amount counted is entered on 
the Gaming Machine Count Sheet and is considered the drop. Also, the 
procedure of counting the coins, tokens, and cash or the process of 
verifying gaming machine coin and token inventory.
    Gaming machine pay table means the reel strip combinations 
illustrated on the face of the gaming machine that can identify payouts 
of designated coin amounts.
    Gaming operation accounts receivable (for gaming operation credit) 
means credit extended to gaming operation customers in the form of 
markers, returned checks, or other credit instruments that have not 
been repaid.
    Gross gaming revenue means annual total amount of cash wagered on 
class II and class III games and admission fees (including table or 
card fees), less any amounts paid out as prizes or paid for prizes 
awarded.
    Hold means the relationship of win to coin-in for gaming machines 
and win to drop for table games.
    Hub means the person or entity that is licensed to provide the 
operator of a pari-mutuel wagering operation information related to 
horse racing that is used to determine winners of races or payoffs on 
wagers accepted by the pari-mutuel wagering operation.
    Internal audit means persons who perform an audit function of a 
gaming operation that are independent of the department subject to 
audit. Independence is obtained through the organizational reporting 
relationship, as the internal audit department shall not report to 
management of the gaming operation. Internal audit activities should be 
conducted in a manner that permits objective evaluation of areas 
examined. Internal audit personnel may provide audit coverage to more 
than one operation within a Tribe's gaming operation holdings.
    Issue slip means a copy of a credit instrument that is retained for 
numerical sequence control purposes.
    Jackpot payout means the portion of a jackpot paid by gaming 
machine personnel. The amount is usually determined as the difference 
between the total posted jackpot amount and the coins paid out by the 
machine. May also be the total amount of the jackpot.
    Lammer button means a type of chip that is placed on a gaming table 
to indicate that the amount of chips designated thereon has been given 
to the customer for wagering on credit before completion of the credit 
instrument. Lammer button may also mean a type of chip used to evidence 
transfers between table banks and card room banks.
    Linked electronic game means any game linked to two (2) or more 
gaming operations that are physically separate and not regulated by the 
same Tribal gaming regulatory authority.
    Main card room bank means a fund of cash, coin, and chips used 
primarily for poker and pan card game areas. Used to make even cash 
transfers between various games as needed. May be used similarly in 
other areas of the gaming operation.
    Marker means a document, signed by the customer, evidencing an 
extension of credit to him by the gaming operation.
    Marker credit play means that players are allowed to purchase chips 
using credit in the form of a marker.
    Marker inventory form means a form maintained at table games or in 
the gaming operation pit that are used to track marker inventories at 
the individual table or pit.
    Marker transfer form means a form used to document transfers of 
markers from the pit to the cage.
    Master credit record means a form to record the date, time, shift, 
game, table, amount of credit given, and the signatures or initials of 
the persons extending the credit.
    Master game program number means the game program number listed on 
a gaming machine EPROM.
    Master game sheet means a form used to record, by shift and day, 
each table game's winnings and losses. This form reflects the opening 
and closing table inventories, the fills and credits, and the drop and 
win.
    Mechanical coin counter means a device used to count coins that may 
be used in addition to or in lieu of a coin weigh scale.
    Meter means an electronic (soft) or mechanical (hard) apparatus in 
a gaming machine. May record the number of coins wagered, the number of 
coins dropped, the number of times the handle was pulled, or the number 
of coins paid out to winning players.
    MICS means minimum internal control standards in this part 542.
    Motion activated dedicated camera means a video camera that, upon 
its

[[Page 43403]]

detection of activity or motion in a specific area, begins to record 
the activity or area.
    Multi-game machine means a gaming machine that includes more than 
one type of game option.
    Multi-race ticket means a keno ticket that is played in multiple 
games.
    On-line gaming machine monitoring system means a system used by a 
gaming operation to monitor gaming machine meter readings and/or other 
activities on an on-line basis.
    Order for credit means a form that is used to request the transfer 
of chips or markers from a table to the cage. The order precedes the 
actual transfer transaction that is documented on a credit slip.
    Outstation means areas other than the main keno area where bets may 
be placed and tickets paid.
    Par percentage means the percentage of each dollar wagered that the 
house wins (i.e., gaming operation advantage).
    Par sheet means a specification sheet for a gaming machine that 
provides machine hold percentage, model number, hit frequency, reel 
combination, number of reels, number of coins that can be accepted, and 
reel strip listing.
    Pari-mutuel wagering means a system of wagering on horse races, 
jai-alai, greyhound, and harness racing, where the winners divide the 
total amount wagered, net of commissions and operating expenses, 
proportionate to the individual amount wagered.
    Payment slip means that part of a marker form on which customer 
payments are recorded.
    Payout means a transaction associated with a winning event.
    PIN means the personal identification number used to access a 
player's account.
    Pit podium means a stand located in the middle of the tables used 
by gaming operation supervisory personnel as a workspace and a record 
storage area.
    Pit supervisor means the employee who supervises all games in a 
pit.
    Player tracking system means a system typically used in gaming 
machine departments that can record the gaming machine play of 
individual customers.
    Post time means the time when a pari-mutuel track stops accepting 
bets in accordance with rules and regulations of the applicable 
jurisdiction.
    Primary and secondary jackpots means promotional pools offered at 
certain card games that can be won in addition to the primary pot.
    Progressive gaming machine means a gaming machine, with a payoff 
indicator, in which the payoff increases as it is played (i.e., 
deferred payout). The payoff amount is accumulated, displayed on a 
machine, and will remain until a player lines up the jackpot symbols 
that result in the progressive amount being paid.
    Progressive jackpot means deferred payout from a progressive gaming 
machine.
    Progressive table game means table games that offer progressive 
jackpots.
    Promotional payout means merchandise or awards given to players by 
the gaming operation based on a wagering activity.
    Promotional progressive pots and/or pools means funds contributed 
to a table game by and for the benefit of players. Funds are 
distributed to players based on a predetermined event.
    Rabbit ears means a device, generally V-shaped, that holds the 
numbered balls selected during a keno or bingo game so that the numbers 
are visible to players and employees.
    Rake means a commission charged by the house for maintaining or 
dealing a game such as poker.
    Rake circle means the area of a table where rake is placed.
    Random number generator means a device that generates numbers in 
the absence of a pattern. May be used to determine numbers selected in 
various games such as keno and bingo. Also commonly used in gaming 
machines to generate game outcome.
    Reel symbols means symbols listed on reel strips of gaming 
machines.
    Rim credit means extensions of credit that are not evidenced by the 
immediate preparation of a marker and does not include call bets.
    Runner means a gaming employee who transports chips/cash to or from 
a gaming table and a cashier.
    SAM means a screen-automated machine used to accept pari-mutuel 
wagers. SAM's also pay winning tickets in the form of a voucher, which 
is redeemable for cash.
    Shift means an eight-hour period, unless otherwise approved by the 
Tribal gaming regulatory authority, not to exceed twenty-four (24) 
hours.
    Shill means an employee financed by the house and acting as a 
player for the purpose of starting or maintaining a sufficient number 
of players in a game.
    Short pay means a payoff from a gaming machine that is less than 
the listed amount.
    Soft count means the count of the contents in a drop box or a bill 
acceptor canister.
    Sufficient clarity means use of monitoring and recording at a 
minimum of twenty (20) frames per second. Multiplexer tape recordings 
are insufficient to satisfy the requirement of sufficient clarity.
    Surveillance room means a secure location(s) in a gaming operation 
used primarily for casino surveillance.
    Surveillance system means a system of video cameras, monitors, 
recorders, video printers, switches, selectors, and other ancillary 
equipment used for casino surveillance.
    Table games means games that are banked by the house or a pool 
whereby the house or the pool pays all winning bets and collects from 
all losing bets.
    Table inventory means the total coins, chips, and markers at a 
table.
    Table inventory form means the form used by gaming operation 
supervisory personnel to document the inventory of chips, coins, and 
tokens on a table at the beginning and ending of a shift.
    Table tray means the container located on gaming tables where 
chips, coins, or cash are stored that are used in the game.
    Take means the same as earned and unearned take.
    Theoretical hold means the intended hold percentage or win of an 
individual gaming machine as computed by reference to its payout 
schedule and reel strip settings or EPROM.
    Theoretical hold worksheet means a worksheet provided by the 
manufacturer for all gaming machines that indicate the theoretical 
percentages that the gaming machine should hold based on adequate 
levels of coin-in. The worksheet also indicates the reel strip 
settings, number of credits that may be played, the payout schedule, 
the number of reels and other information descriptive of the particular 
type of gaming machine.
    Tier A means gaming operations with annual gross gaming revenues of 
more than $1 million but not more than $5 million.
    Tier B means gaming operations with annual gross gaming revenues of 
more than $5 million but not more than $15 million.
    Tier C means gaming operations with annual gross gaming revenues of 
more than $15 million.
    Tokens means a coin-like cash substitute, in various denominations, 
used for gambling transactions.
    Tribal gaming regulatory authority means the tribally designated 
entity responsible for gaming regulation.
    Vault means a secure area within the gaming operation where tokens, 
checks, cash, coins, and chips are stored.
    Weigh/count means the value of coins and tokens counted by a weigh 
machine.
    Weigh scale calibration module means the device used to adjust a 
coin weigh scale.

[[Page 43404]]

    Weigh scale interface means a communication device between the 
weigh scale used to calculate the amount of funds included in drop 
buckets and the computer system used to record the weigh data.
    Weigh tape means the tape where weighed coin is recorded.
    Wide area progressive gaming machine means a progressive gaming 
machine that is linked to machines in other operations and play on the 
machines affect the progressive amount. As wagers are placed, the 
progressive meters on all of the linked machines increase.
    Win means the net win resulting from all gaming activities. Net win 
results from deducting all gaming losses from all wins prior to 
considering associated operating expenses.
    Win-to-write hold percentage means win divided by write to 
determine hold percentage.
    Wrap means the method of storing coins after the count process has 
been completed, including, but not limited to, wrapping, racking, or 
bagging. May also refer to the total amount or value of the counted and 
stored coins.
    Write means the total amount wagered in keno, bingo, pull tabs, and 
pari-mutuel operations.
    Writer means an employee who writes keno, bingo, pull tabs, or 
pari-mutuel tickets. A keno writer usually also makes payouts.


Sec. 542.3  How do I comply with this part?

    (a) Compliance based upon tier. (1) Tier A gaming operations must 
comply with Secs. 542.1 through 542.18, and Secs. 542.20 through 
542.23.
    (2) Tier B gaming operations must comply with Secs. 542.1 through 
542.18, and Secs. 542.30 through 542.33.
    (3) Tier C gaming operations must comply with Secs. 542.1 through 
542.18, and Secs. 542.40 through 542.43.
    (b) Determination of tier. (1) The determination of tier level 
shall be made based upon the annual gross gaming revenues indicated 
within the gaming operation's audited financial statements. Gaming 
operations moving from one tier to another shall have nine (9) months 
from the date of the independent certified public accountant's audit 
report to achieve compliance with the requirements of the new tier.
    (2) The Tribal gaming regulatory authority may extend the deadline 
by an additional six (6) months if written notice is provided to the 
Commission no later than two weeks before the expiration of the nine 
(9) month period.
    (c) Tribal internal control standards. Within six (6) months of 
June 27, 2002, each Tribal gaming regulatory authority shall, in 
accordance with the Tribal gaming ordinance, establish and implement 
tribal internal control standards that shall:
    (1) Provide a level of control that equals or exceeds those set 
forth in this part;
    (2) Contain standards for currency transaction reporting that 
comply with 31 CFR part 103;
    (3) Establish standards for games that are not addressed in this 
part; and
    (4) Establish a deadline, which shall not exceed nine (9) months 
from June 27, 2002, by which a gaming operation must come into 
compliance with the tribal internal control standards. However, the 
Tribal gaming regulatory authority may extend the deadline by an 
additional six (6) months if written notice is provided to the 
Commission no later than two weeks before the expiration of the nine 
(9) month period.
    (d) Gaming operations. Each gaming operation shall develop and 
implement an internal control system that, at a minimum, complies with 
the tribal internal control standards.
    (1) Existing gaming operations. All gaming operations that are 
operating on or before June 27, 2002, shall comply with this part 
within the time requirements established in paragraph (c) of this 
section. In the interim, such operations shall continue to comply with 
existing tribal internal control standards.
    (2) New gaming operations. All gaming operations that commence 
operations after August 26, 2002, shall comply with this part before 
commencement of operations.
    (e) Submission to Commission. Tribal regulations promulgated 
pursuant to this part shall not be required to be submitted to the 
Commission pursuant to 25 CFR 522.3(b).
    (f) CPA testing. (1) An independent certified public accountant 
(CPA) shall be engaged to perform procedures to verify, on a test 
basis, that the gaming operation is in material compliance with the 
tribal internal control standards or a tribally approved variance that 
has received Commission concurrence. The procedures may be performed in 
conjunction with the annual audit. The CPA shall report its findings to 
the Tribe, Tribal gaming regulatory authority, and management. The 
Tribe shall submit a copy of the report to the Commission within 120 
days of the gaming operation's fiscal year end.
    (2) CPA Guidelines. In connection with the CPA testing pursuant to 
paragraph (f)(1) of this section, the Commission shall develop 
recommended CPA Guidelines available upon request.
    (g) Enforcement of Commission Minimum Internal Control Standards. 
(1) Each Tribal gaming regulatory authority is required to establish 
and implement internal control standards pursuant to paragraph (c) of 
this section. Each gaming operation is then required, pursuant to 
paragraph (d) of this section, to develop and implement an internal 
control system that complies with the Tribal internal control 
standards. Failure to do so may subject the Tribal operator of the 
gaming operation, and/or the management contractor, to penalties under 
25 U.S.C. 2713.
    (2) Recognizing that Tribes are the primary regulator of their 
gaming operation(s), enforcement action by the Commission will not be 
initiated under this part without first informing the Tribe and Tribal 
gaming regulatory authority of deficiencies in the internal controls of 
its gaming operation and allowing a reasonable period of time to 
address such deficiencies. Such prior notice and opportunity for 
corrective action is not required where the threat to the integrity of 
the gaming operation is immediate and severe.


Sec. 542.4  How do these regulations affect minimum internal control 
standards established in a Tribal-State compact?

    (a) If there is a direct conflict between an internal control 
standard established in a Tribal-State compact and a standard or 
requirement set forth in this part, then the internal control standard 
established in a Tribal-State compact shall prevail.
    (b) If an internal control standard in a Tribal-State compact 
provides a level of control that equals or exceeds the level of control 
under an internal control standard or requirement set forth in this 
part, then the Tribal-State compact standard shall prevail.
    (c) If an internal control standard or a requirement set forth in 
this part provides a level of control that exceeds the level of control 
under an internal control standard established in a Tribal-State 
compact, then the internal control standard or requirement set forth in 
this part shall prevail.


Sec. 542.5  How do these regulations affect state jurisdiction?

    Nothing in this part shall be construed to grant to a state 
jurisdiction in class II gaming or extend a state's jurisdiction in 
class III gaming.

[[Page 43405]]

Sec. 542.6  Does this part apply to small and charitable gaming 
operations?

    (a) Small gaming operations. This part shall not apply to small 
gaming operations provided that:
    (1) The Tribal gaming regulatory authority permits the operation to 
be exempt from this part;
    (2) The annual gross gaming revenue of the operation does not 
exceed $1 million; and
    (3) The Tribal gaming regulatory authority develops and the 
operation complies with alternate procedures that:
    (i) Protect the integrity of games offered; and
    (ii) Safeguard the assets used in connection with the operation.
    (b) Charitable gaming operations. This part shall not apply to 
charitable gaming operations provided that:
    (1) All proceeds are for the benefit of a charitable organization;
    (2) The Tribal gaming regulatory authority permits the charitable 
organization to be exempt from this part;
    (3) The charitable gaming operation is operated wholly by the 
charitable organization's employees or volunteers;
    (4) The annual gross gaming revenue of the charitable gaming 
operation does not exceed $100,000;
    (i) Where the annual gross gaming revenues of the charitable gaming 
operation exceed $100,000, but are less than $1 million, paragraph (a) 
of this section shall also apply; and
    (ii) [Reserved]
    (5) The Tribal gaming regulatory authority develops and the 
charitable gaming operation complies with alternate procedures that:
    (i) Protect the integrity of the games offered; and
    (ii) Safeguard the assets used in connection with the gaming 
operation.
    (c) Independent operators. Nothing in this section shall exempt 
gaming operations conducted by independent operators for the benefit of 
a charitable organization.


Sec. 542.7  What are the minimum internal control standards for bingo?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Game play standards. (1) The functions of seller and payout 
verifier shall be segregated. Employees who sell cards on the floor 
shall not verify payouts with cards in their possession. Floor clerks 
who sell cards on the floor are permitted to announce the serial 
numbers of winning cards.
    (2) All sales of bingo cards shall be documented by recording at 
least the following:
    (i) Date;
    (ii) Shift (if applicable);
    (iii) Session (if applicable);
    (iv) Dollar amount;
    (v) Signature, initials, or identification number of at least one 
seller (if manually documented); and
    (vi) Signature, initials, or identification number of a person 
independent of the seller who has randomly verified the card sales 
(this requirement is not applicable to locations with $1 million or 
less in annual write).
    (3) The total win and write shall be computed and recorded by shift 
(or session, if applicable).
    (4) The Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with procedures that ensure the 
correct calling of numbers selected in the bingo game.
    (5) Each ball shall be shown to a camera immediately before it is 
called so that it is individually displayed to all customers. For speed 
bingo games not verified by camera equipment, each ball drawn shall be 
verified by a person independent of the bingo caller responsible for 
calling the speed bingo game.
    (6) For all coverall games and other games offering a payout of 
$1,200 or more, as the balls are called the numbers shall be 
immediately recorded by the caller and maintained for a minimum of 
twenty-four (24) hours.
    (7) Controls shall be present to assure that the numbered balls are 
placed back into the selection device prior to calling the next game.
    (8) The authenticity of each payout shall be verified by at least 
two persons. A computerized card verifying system may function as the 
second person verifying the payout if the card with the winning numbers 
is displayed on a reader board.
    (9) Payouts in excess of $1,200 shall require written approval, by 
personnel independent of the transaction, that the bingo card has been 
examined and verified with the bingo card record to ensure that the 
ticket has not been altered.
    (10) Total payout shall be computed and recorded by shift or 
session, if applicable.
    (c) Promotional payouts or awards. (1) If the gaming operation 
offers promotional payouts or awards, the payout form/documentation 
shall include the following information:
    (i) Date and time;
    (ii) Dollar amount of payout or description of personal property 
(e.g., jacket, toaster, car, etc.), including fair market value;
    (iii) Type of promotion; and
    (iv) Signature of at least one employee authorizing and completing 
the transaction.
    (2) [Reserved]
    (d) Accountability form. (1) All funds used to operate the bingo 
department shall be recorded on an accountability form.
    (2) All funds used to operate the bingo department shall be counted 
independently by at least two persons and reconciled to the recorded 
amounts at the end of each shift or session.
    (e) Bingo equipment. (1) Access to controlled bingo equipment 
(e.g., blower, balls in play, and back-up balls) shall be restricted to 
authorized persons.
    (2) The procedures established by the Tribal gaming regulatory 
authority, or the gaming operation as approved by the Tribal gaming 
regulatory authority, shall include standards relating to the 
inspection of new bingo balls put into play as well as for those in 
use.
    (3) Bingo equipment shall be maintained and checked for accuracy on 
a periodic basis.
    (4) The bingo card inventory shall be controlled so as to assure 
the integrity of the cards being used as follows:
    (i) Purchased paper shall be inventoried and secured by a person or 
persons independent of the bingo sales;
    (ii) The issue of paper to the cashiers shall be documented and 
signed for by the person responsible for inventory control and a 
cashier. The document log shall include the series number of the bingo 
paper;
    (iii) A copy of the bingo paper control log shall be given to the 
bingo ball caller for purposes of determining if the winner purchased 
the paper that was issued for sale that day (electronic verification 
satisfies this standard);
    (iv) At the end of each month, a person or persons independent of 
bingo sales and inventory control shall verify the accuracy of the 
ending balance in the bingo paper control by reconciling the paper on-
hand;
    (v) A monthly comparison for reasonableness shall be made of the 
amount of paper sold from the bingo paper control log to the amount of 
revenue recognized.
    (f) Standards for statistical reports. (1) Records shall be 
maintained, which include win, write (card sales), and a win-to-write 
hold percentage, for:
    (i) Each shift or each session;

[[Page 43406]]

    (ii) Each day;
    (iii) Month-to-date; and
    (iv) Year-to-date or fiscal year-to-date.
    (2) A manager independent of the bingo department shall review 
bingo statistical information on at least a monthly basis and 
investigate any large or unusual statistical fluctuations.
    (3) Investigations shall be documented, maintained for inspection, 
and provided to the Tribal gaming regulatory authority upon request.
    (g) Electronic equipment. (1) If the gaming operation utilizes 
electronic equipment in connection with the play of bingo, then the 
following standards shall also apply.
    (i) If the electronic equipment contains a bill acceptor, then 
Sec. 542.21(d) and (e), Sec. 542.31(d) and (e), or Sec. 542.41(d) and 
(e) (as applicable) shall apply.
    (ii) If the electronic equipment uses a bar code or microchip 
reader, the reader shall be tested periodically by a person or persons 
independent of the bingo department to determine that it is correctly 
reading the bar code or the microchip.
    (iii) If the electronic equipment returns a voucher or a payment 
slip to the player, then Sec. 542.13(n) (as applicable) shall apply.
    (2) [Reserved]
    (h) Standards for linked electronic games. Management shall ensure 
that all agreements/contracts entered into after June 27, 2002 to 
provide linked electronic games shall contain language requiring the 
vendor to comply with the standards in this section applicable to the 
goods or services the vendor is providing.
    (i) Host requirements/game information (for linked electronic 
games). (1) Providers of any linked electronic game(s) shall maintain 
complete records of game data for a period of one (1) year from the 
date the games are played (or a time frame established by the Tribal 
gaming regulatory authority). This data may be kept in an archived 
manner, provided the information can be produced within twenty-four 
(24) hours upon request. In any event, game data for the preceding 
seventy-two (72) hours shall be immediately accessible.
    (2) Data required to be maintained for each game played includes:
    (i) Date and time game start and game end;
    (ii) Sales information by location;
    (iii) Cash distribution by location;
    (iv) Refund totals by location;
    (v) Cards-in-play count by location;
    (vi) Identification number of winning card(s);
    (vii) Ordered list of bingo balls drawn; and
    (viii) Prize amounts at start and end of game.
    (j) Host requirements/sales information (for linked electronic 
games). (1) Providers of any linked electronic game(s) shall maintain 
complete records of sales data for a period of one (1) year from the 
date the games are played (or a time frame established by the Tribal 
gaming regulatory authority). This data may be kept in an archived 
manner, provided the information can be produced within twenty-four 
(24) hours upon request. In any event, sales data for the preceding ten 
(10) days shall be immediately accessible. Summary information must be 
accessible for at least 120 days.
    (2) Sales information required shall include:
    (i) Daily sales totals by location;
    (ii) Commissions distribution summary by location;
    (iii) Game-by-game sales, prizes, refunds, by location; and
    (iv) Daily network summary, by game by location.
    (k) Remote host requirements (for linked electronic games). (1) 
Linked electronic game providers shall maintain on-line records at the 
remote host site for any game played. These records shall remain on-
line until the conclusion of the session of which the game is a part. 
Following the conclusion of the session, records may be archived, but 
in any event, must be retrievable in a timely manner for at least 
seventy-two (72) hours following the close of the session. Records 
shall be accessible through some archived media for at least ninety 
(90) days from the date of the game.
    (2) Game information required includes date and time of game start 
and game end, sales totals, cash distribution (prizes) totals, and 
refund totals.
    (3) Sales information required includes cash register 
reconciliations, detail and summary records for purchases, prizes, 
refunds, credits, and game/sales balance for each session.
    (l) Standards for player accounts (for proxy play and linked 
electronic games). (1) Prior to participating in any game, players 
shall be issued a unique player account number. The player account 
number can be issued through the following means:
    (i) Through the use of a point-of-sale (cash register device);
    (ii) By assignment through an individual play station; or
    (iii) Through the incorporation of a ``player tracking'' media.
    (2) Printed receipts issued in conjunction with any player account 
should include a time/date stamp.
    (3) All player transactions shall be maintained, chronologically by 
account number, through electronic means on a data storage device. 
These transaction records shall be maintained on-line throughout the 
active game and for at least twenty-four (24) hours before they can be 
stored on an ``off-line'' data storage media.
    (4) The game software shall provide the ability to, upon request, 
produce a printed account history, including all transactions, and a 
printed game summary (total purchases, deposits, wins, debits, for any 
account that has been active in the game during the preceding twenty-
four (24) hours).
    (5) The game software shall provide a ``player account summary'' at 
the end of every game. This summary shall list all accounts for which 
there were any transactions during that game day and include total 
purchases, total deposits, total credits (wins), total debits (cash-
outs) and an ending balance.


Sec. 542.8  What are the minimum internal control standards for pull 
tabs?

    (a) Computer applications. For any computer application utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Pull tab inventory. (1) Pull tab inventory (including unused 
tickets) shall be controlled to assure the integrity of the pull tabs.
    (2) Purchased pull tabs shall be inventoried and secured by a 
person or persons independent of the pull tab sales.
    (3) The issue of pull tabs to the cashier or sales location shall 
be documented and signed for by the person responsible for inventory 
control and the cashier. The document log shall include the serial 
number of the pull tabs issued.
    (4) Appropriate documentation shall be given to the redemption 
booth for purposes of determining if the winner purchased the pull tab 
from the pull tabs issued by the gaming operation. Electronic 
verification satisfies this requirement.
    (5) At the end of each month, a person or persons independent of 
pull tab sales and inventory control shall verify the accuracy of the 
ending balance in the pull tab control by reconciling the pull tabs on 
hand.
    (6) A monthly comparison for reasonableness shall be made of the 
amount of pull tabs sold from the pull tab control log to the amount of 
revenue recognized.

[[Page 43407]]

    (c) Access. Access to pull tabs shall be restricted to authorized 
persons.
    (d) Transfers. Transfers of pull tabs from storage to the sale 
location shall be secured and independently controlled.
    (e) Winning pull tabs. (1) Winning pull tabs shall be verified and 
paid as follows:
    (i) Payouts in excess of a dollar amount determined by the gaming 
operation, as approved by the Tribal gaming regulatory authority, shall 
be verified by at least two employees.
    (ii) Total payout shall be computed and recorded by shift.
    (iii) The winning pull tabs shall be voided so that they cannot be 
presented for payment again.
    (2) Personnel independent of pull tab operations shall verify the 
amount of winning pull tabs redeemed each day.
    (f) Accountability form. (1) All funds used to operate the pull tab 
game shall be recorded on an accountability form.
    (2) All funds used to operate the pull tab game shall be counted 
independently by at least two persons and reconciled to the recorded 
amounts at the end of each shift or session.
    (g) Standards for statistical reports. (1) Records shall be 
maintained, which include win, write (sales), and a win-to-write hold 
percentage as compared to the theoretical hold percentage derived from 
the flare, for each deal or type of game, for:
    (i) Each shift;
    (ii) Each day;
    (iii) Month-to-date; and
    (iv) Year-to-date or fiscal year-to-date as applicable.
    (2) A manager independent of the pull tab operations shall review 
statistical information at least on a monthly basis and shall 
investigate any large or unusual statistical fluctuations. These 
investigations shall be documented, maintained for inspection, and 
provided to the Tribal gaming regulatory authority upon request.
    (3) Each month, the actual hold percentage shall be compared to the 
theoretical hold percentage. Any significant variations (3%) shall be 
investigated.
    (h) Electronic equipment. (1) If the gaming operation utilizes 
electronic equipment in connection with the play of pull tabs, then the 
following standards shall also apply.
    (i) If the electronic equipment contains a bill acceptor, then 
Sec. 542.21(d) and (e), Sec. 542.31(d) and (e), or Sec. 542.41(d) and 
(e)(as applicable) shall apply.
    (ii) If the electronic equipment uses a bar code or microchip 
reader, the reader shall be tested periodically to determine that it is 
correctly reading the bar code or microchip.
    (iii) If the electronic equipment returns a voucher or a payment 
slip to the player, then Sec. 542.13(n)(as applicable) shall apply.
    (2) [Reserved]


Sec. 542.9  What are the minimum internal control standards for card 
games?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Standards for drop and count. The procedures for the collection 
of the card game drop and the count thereof shall comply with 
Sec. 542.21, Sec. 542.31, or Sec. 542.41 (as applicable).
    (c) Standards for supervision. (1) Supervision shall be provided at 
all times the card room is in operation by personnel with authority 
equal to or greater than those being supervised.
    (2) Exchanges between table banks and the main card room bank (or 
cage, if a main card room bank is not used) in excess of $100.00 shall 
be authorized by a supervisor. All exchanges shall be evidenced by the 
use of a lammer unless the exchange of chips, tokens, and/or cash takes 
place at the table.
    (3) Exchanges from the main card room bank (or cage, if a main card 
room bank is not used) to the table banks shall be verified by the card 
room dealer and the runner.
    (4) If applicable, transfers between the main card room bank and 
the cage shall be properly authorized and documented.
    (5) A rake collected or ante placed shall be done in accordance 
with the posted rules.
    (d) Standards for playing cards. (1) Playing cards shall be 
maintained in a secure location to prevent unauthorized access and to 
reduce the possibility of tampering.
    (2) Used cards shall be maintained in a secure location until 
marked, scored, or destroyed, in a manner approved by the Tribal gaming 
regulatory authority, to prevent unauthorized access and reduce the 
possibility of tampering.
    (3) The Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with a reasonable time period, 
which shall not exceed seven (7) days, within which to mark, cancel, or 
destroy cards from play.
    (i) This standard shall not apply where playing cards are retained 
for an investigation.
    (ii) [Reserved]
    (4) A card control log shall be maintained that documents when 
cards and dice are received on site, distributed to and returned from 
tables and removed from play by the gaming operation.
    (e) Plastic cards. Notwithstanding paragraph (d) of this section, 
if a gaming operation uses plastic cards (not plastic-coated cards), 
the cards may be used for up to three (3) months if the plastic cards 
are routinely inspected, and washed or cleaned in a manner and time 
frame approved by the Tribal gaming regulatory authority.
    (f) Standards for shills. (1) Issuance of shill funds shall have 
the written approval of the supervisor.
    (2) Shill returns shall be recorded and verified on the shill sign-
out form.
    (3) The replenishment of shill funds shall be documented.
    (g) Standards for reconciliation of card room bank. (1) The amount 
of the main card room bank shall be counted, recorded, and reconciled 
on at least a per shift basis.
    (2) At least once per shift, the table banks that were opened 
during that shift shall be counted, recorded, and reconciled by a 
dealer or other person, and a supervisor, and shall be attested to by 
their signatures on the check-out form.
    (h) Standards for promotional progressive pots and pools. (1) All 
funds contributed by players into the pools shall be returned when won 
in accordance with the posted rules with no commission or 
administrative fee withheld.
    (2) Rules governing promotional pools shall be conspicuously posted 
and designate:
    (i) The amount of funds to be contributed from each pot;
    (ii) What type of hand it takes to win the pool (e.g., what 
constitutes a ``bad beat'');
    (iii) How the promotional funds will be paid out;
    (iv) How/when the contributed funds are added to the jackpots; and
    (v) Amount/percentage of funds allocated to primary and secondary 
jackpots, if applicable.
    (3) Promotional pool contributions shall not be placed in or near 
the rake circle, in the drop box, or commingled with gaming revenue 
from card games or any other gambling game.
    (4) The amount of the jackpot shall be conspicuously displayed in 
the card room.
    (5) At least once a day, the posted pool amount shall be updated to 
reflect the current pool amount.
    (6) At least once a day, increases to the posted pool amount shall 
be

[[Page 43408]]

reconciled to the cash previously counted or received by the cage by 
personnel independent of the card room.
    (7) All decreases to the pool must be properly documented, 
including a reason for the decrease.
    (i) Promotional progressive pots and pools where funds are 
displayed in the card room. (1) Promotional funds displayed in the card 
room shall be placed in a locked container in plain view of the public.
    (2) Persons authorized to transport the locked container shall be 
precluded from having access to the contents keys.
    (3) The contents key shall be maintained by personnel independent 
of the card room.
    (4) At least once a day, the locked container shall be removed by 
two persons, one of whom is independent of the card games department, 
and transported directly to the cage or other secure room to be 
counted, recorded, and verified.
    (5) The locked container shall then be returned to the card room 
where the posted pool amount shall be updated to reflect the current 
pool amount.
    (j) Promotional progressive pots and pools where funds are 
maintained in the cage. (1) Promotional funds removed from the card 
game shall be placed in a locked container.
    (2) Persons authorized to transport the locked container shall be 
precluded from having access to the contents keys.
    (3) The contents key shall be maintained by personnel independent 
of the card room.
    (4) At least once a day, the locked container shall be removed by 
two persons, one of whom is independent of the card games department, 
and transported directly to the cage or other secure room to be 
counted, recorded, and verified, prior to accepting the funds into cage 
accountability.
    (5) The posted pool amount shall then be updated to reflect the 
current pool amount.


Sec. 542.10  What are the minimum internal control standards for keno?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Game play standards. (1) The computerized customer ticket shall 
include the date, game number, ticket sequence number, station number, 
and conditioning (including multi-race if applicable).
    (2) The information on the ticket shall be recorded on a restricted 
transaction log or computer storage media concurrently with the 
generation of the ticket.
    (3) Keno personnel shall be precluded from having access to the 
restricted transaction log or computer storage media.
    (4) When it is necessary to void a ticket, the void information 
shall be inputted in the computer and the computer shall document the 
appropriate information pertaining to the voided wager (e.g., void slip 
is issued or equivalent documentation is generated).
    (5) Controls shall exist to prevent the writing and voiding of 
tickets after a game has been closed and after the number selection 
process for that game has begun.
    (6) The controls in effect for tickets prepared in outstations (if 
applicable) shall be identical to those in effect for the primary keno 
game.
    (c) Rabbit ear or wheel system. (1) The following standards shall 
apply if a rabbit ear or wheel system is utilized:
    (i) A dedicated camera shall be utilized to monitor the following 
both prior to, and subsequent to, the calling of a game:
    (A) Empty rabbit ears or wheel;
    (B) Date and time;
    (C) Game number; and
    (D) Full rabbit ears or wheel.
    (ii) The film of the rabbit ears or wheel shall provide a legible 
identification of the numbers on the balls drawn.
    (iii) Keno personnel shall immediately input the selected numbers 
in the computer and the computer shall document the date, the game 
number, the time the game was closed, and the numbers drawn.
    (iv) The Tribal gaming regulatory authority, or the gaming 
operation as approved by the Tribal gaming regulatory authority, shall 
establish and the gaming operation shall comply with procedures that 
prevent unauthorized access to keno balls in play.
    (v) Back-up keno ball inventories shall be secured in a manner to 
prevent unauthorized access.
    (vi) The Tribal gaming regulatory authority, or the gaming 
operation as approved by the Tribal gaming regulatory authority, shall 
establish and the gaming operation shall comply with procedures for 
inspecting new keno balls put into play as well as for those in use.
    (2) [Reserved]
    (d) Random number generator. (1) The following standards shall 
apply if a random number generator is utilized:
    (i) The random number generator shall be linked to the computer 
system and shall directly relay the numbers selected into the computer 
without manual input.
    (ii) Keno personnel shall be precluded from access to the random 
number generator.
    (2) [Reserved]
    (e) Winning tickets. Winning tickets shall be verified and paid as 
follows:
    (1) The sequence number of tickets presented for payment shall be 
inputted into the computer, and the payment amount generated by the 
computer shall be given to the customer.
    (2) The Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with procedures that preclude 
payment on tickets previously presented for payment, unclaimed winning 
tickets (sleepers) after a specified period of time, voided tickets, 
and tickets that have not been issued yet.
    (3) All payouts shall be supported by the customer (computer-
generated) copy of the winning ticket (payout amount is indicated on 
the customer ticket or a payment slip is issued).
    (4) A manual report or other documentation shall be produced and 
maintained documenting any payments made on tickets that are not 
authorized by the computer.
    (5) Winning tickets over a specified dollar amount (not to exceed 
$10,000 for locations with more than $5 million annual keno write and 
$3,000 for all other locations) shall also require the following:
    (i) Approval of management personnel independent of the keno 
department, evidenced by their signature;
    (ii) Review of the video recording and/or digital record of the 
rabbit ears or wheel to verify the legitimacy of the draw and the 
accuracy of the draw ticket (for rabbit ear or wheel systems only);
    (iii) Comparison of the winning customer copy to the computer 
reports;
    (iv) Regrading of the customer copy using the payout schedule and 
draw information; and
    (v) Documentation and maintenance of the procedures in this 
paragraph.
    (6) When the keno game is operated by one person, all winning 
tickets in excess of an amount to be determined by management (not to 
exceed $1,500) shall be reviewed and authorized by a person independent 
of the keno department.
    (f) Check out standards at the end of each keno shift. (1) For each 
writer

[[Page 43409]]

station, a cash summary report (count sheet) shall be prepared that 
includes:
    (i) Computation of net cash proceeds for the shift and the cash 
turned in; and
    (ii) Signatures of two employees who have verified the net cash 
proceeds for the shift and the cash turned in.
    (2) [Reserved]
    (g) Promotional payouts or awards. (1) If a gaming operation offers 
promotional payouts or awards, the payout form/documentation shall 
include the following information:
    (i) Date and time;
    (ii) Dollar amount of payout or description of personal property 
(e.g., jacket, toaster, car, etc.), including fair market value;
    (iii) Type of promotion; and
    (iv) Signature of at least one employee authorizing and completing 
the transaction.
    (2) [Reserved]
    (h) Standards for statistical reports. (1) Records shall be 
maintained that include win and write by individual writer for each 
day.
    (2) Records shall be maintained that include win, write, and win-
to-write hold percentage for:
    (i) Each shift;
    (ii) Each day;
    (iii) Month-to-date; and
    (iv) Year-to-date or fiscal year-to-date as applicable.
    (3) A manager independent of the keno department shall review keno 
statistical data at least on a monthly basis and investigate any large 
or unusual statistical variances.
    (4) At a minimum, investigations shall be performed for statistical 
percentage fluctuations from the base level for a month in excess of 
3%. The base level shall be defined as the gaming 
operation's win percentage for the previous business year or the 
previous twelve (12) months.
    (5) Such investigations shall be documented, maintained for 
inspection, and provided to the Tribal gaming regulatory authority upon 
request.
    (i) System security standards. (1) All keys (including duplicates) 
to sensitive computer hardware in the keno area shall be maintained by 
a department independent of the keno function.
    (2) Personnel independent of the keno department shall be required 
to accompany such keys to the keno area and shall observe changes or 
repairs each time the sensitive areas are accessed.
    (j) Documentation standards. (1) Adequate documentation of all 
pertinent keno information shall be generated by the computer system.
    (2) This documentation shall be restricted to authorized personnel.
    (3) The documentation shall include, at a minimum:
    (i) Ticket information (as described in paragraph (b)(1) of this 
section);
    (ii) Payout information (date, time, ticket number, amount, etc.);
    (iii) Game information (number, ball draw, time, etc.);
    (iv) Daily recap information, including:
    (A) Write;
    (B) Payouts; and
    (C) Gross revenue (win);
    (v) System exception information, including:
    (A) Voids;
    (B) Late pays; and
    (C) Appropriate system parameter information (e.g., changes in pay 
tables, ball draws, payouts over a predetermined amount, etc.); and
    (vi) Personnel access listing, including:
    (A) Employee name or employee identification number; and
    (B) Listing of functions employee can perform or equivalent means 
of identifying same.
    (k) Keno audit standards. (1) The keno audit function shall be 
independent of the keno department.
    (2) At least annually, keno audit shall foot the write on the 
restricted copy of the keno transaction report for a minimum of one 
shift and compare the total to the total as documented by the computer.
    (3) For at least one shift every other month, keno audit shall 
perform the following:
    (i) Foot the customer copy of the payouts and trace the total to 
the payout report; and
    (ii) Regrade at least 1% of the winning tickets using the payout 
schedule and draw ticket.
    (4) Keno audit shall perform the following:
    (i) For a minimum of five games per week, compare the video 
recording and/or digital record of the rabbit ears or wheel to the 
computer transaction summary;
    (ii) Compare net cash proceeds to the audited win/loss by shift and 
investigate any large cash overages or shortages (i.e., in excess of 
$25.00);
    (iii) Review and regrade all winning tickets greater than or equal 
to $1,500, including all forms that document that proper authorizations 
and verifications were obtained and performed;
    (iv) Review the documentation for payout adjustments made outside 
the computer and investigate large and frequent payments;
    (v) Review personnel access listing for inappropriate functions an 
employee can perform;
    (vi) Review system exception information on a daily basis for 
propriety of transactions and unusual occurrences including changes to 
the personnel access listing;
    (vii) If a random number generator is used, then at least weekly 
review the numerical frequency distribution for potential patterns; and
    (viii) Investigate and document results of all noted improper 
transactions or unusual occurrences.
    (5) When the keno game is operated by one person:
    (i) The customer copies of all winning tickets in excess of $100 
and at least 5% of all other winning tickets shall be regraded and 
traced to the computer payout report;
    (ii) The video recording and/or digital record of rabbit ears or 
wheel shall be randomly compared to the computer game information 
report for at least 10% of the games during the shift; and
    (iii) Keno audit personnel shall review winning tickets for proper 
authorization pursuant to paragraph (e)(6) of this section.
    (6) In the event any person performs the writer and deskman 
functions on the same shift, the procedures described in paragraphs 
(k)(5)(i) and (ii) of this section (using the sample sizes indicated) 
shall be performed on tickets written by that person.
    (7) Documentation (e.g., a log, checklist, etc.) that evidences the 
performance of all keno audit procedures shall be maintained.
    (8) A manager independent of the keno department shall review keno 
audit exceptions, and perform and document investigations into 
unresolved exceptions. These investigations shall be documented, 
maintained for inspection, and provided to the Tribal gaming regulatory 
authority upon request.
    (9) When a multi-game ticket is part of the sample in paragraphs 
(k)(3)(ii), (k)(5)(i) and (k)(6) of this section, the procedures may be 
performed for ten (10) games or ten percent (10%) of the games won, 
whichever is greater.
    (l) Access. Access to the computer system shall be adequately 
restricted (i.e., passwords are changed at least quarterly, access to 
computer hardware is physically restricted, etc.).
    (m) Equipment standards. (1) There shall be effective maintenance 
planned to service keno equipment, including computer program updates, 
hardware servicing, and keno ball selection equipment (e.g., service 
contract with lessor).
    (2) Keno equipment maintenance (excluding keno balls) shall be

[[Page 43410]]

independent of the operation of the keno game.
    (3) Keno maintenance personnel shall report irregularities to 
management personnel independent of the keno department.
    (4) If the gaming operation utilizes a barcode or microchip reader 
in connection with the play of keno, the reader shall be tested at 
least annually by personnel independent of the keno department to 
determine that it is correctly reading the barcode or microchip.
    (n) Document retention. (1) All documents (including computer 
storage media) discussed in this section shall be retained for five (5) 
years, except for the following, which shall be retained for at least 
seven (7) days:
    (i) Video recordings and/or digital records of rabbit ears or 
wheel;
    (ii) All copies of winning keno tickets of less than $1,500.00.
    (2) [Reserved]
    (o) Multi-race tickets. (1) Procedures shall be established to 
notify keno personnel immediately of large multi-race winners to ensure 
compliance with standards in paragraph (e)(5) of this section.
    (2) Procedures shall be established to ensure that keno personnel 
are aware of multi-race tickets still in process at the end of a shift.
    (p) Manual keno. For gaming operations that conduct manual keno 
games, alternate procedures that provide at least the level of control 
described by the standards in this section shall be developed and 
implemented.


Sec. 542.11  What are the minimum internal control standards for pari-
mutuel wagering?

    (a) Exemptions. (1) The requirements of this section shall not 
apply to gaming operations who house pari-mutuel wagering operations 
conducted entirely by a state licensed simulcast service provider 
pursuant to an approved tribal-state compact if:
    (i) The simulcast service provider utilizes its own employees for 
all aspects of the pari-mutuel wagering operation;
    (ii) The gaming operation posts, in a location visible to the 
public, that the simulcast service provider and its employees are 
wholly responsible for the conduct of pari-mutuel wagering offered at 
that location;
    (iii) The gaming operation receives a predetermined fee from the 
simulcast service provider; and
    (iv) In addition, the Tribal gaming regulatory authority, or the 
gaming operation as approved by the Tribal gaming regulatory authority, 
shall establish and the gaming operation shall comply with standards 
that ensure that the gaming operation receives, from the racetrack, its 
contractually guaranteed percentage of the handle.
    (2) Gaming operations that contract directly with a state regulated 
racetrack as a simulcast service provider, but whose on-site pari-
mutuel operations are conducted wholly or in part by tribal gaming 
operation employees, shall not be required to comply with paragraphs 
(h)(5) thru (h)(9) of this section.
    (i) If any standard contained within this section conflicts with 
state law, a tribal-state compact, or a contract, then the gaming 
operation shall document the basis for noncompliance and shall maintain 
such documentation for inspection by the Tribal gaming regulatory 
authority and the Commission.
    (ii) In addition, the Tribal gaming regulatory authority, or the 
gaming operation as approved by the Tribal gaming regulatory authority, 
shall establish and the gaming operation shall comply with standards 
that ensure that the gaming operation receives, from the racetrack, its 
contractually guaranteed percentage of the handle.
    (b) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (c) Betting ticket and equipment standards. (1) All pari-mutuel 
wagers shall be transacted through the pari-mutuel satellite system. In 
case of computer failure between the pari-mutuel book and the hub, no 
tickets shall be manually written.
    (2) Whenever a betting station is opened for wagering or turned 
over to a new writer/cashier, the writer/cashier shall sign on and the 
computer shall document gaming operation name (or identification 
number), station number, the writer/cashier identifier, and the date 
and time.
    (3) A betting ticket shall consist of at least two parts:
    (i) An original, which shall be transacted and issued through a 
printer and given to the customer; and
    (ii) A copy that shall be recorded concurrently with the generation 
of the original ticket either on paper or other storage media (e.g., 
tape or diskette).
    (4) Upon accepting a wager, the betting ticket that is created 
shall contain the following:
    (i) A unique transaction identifier;
    (ii) Gaming operation name (or identification number) and station 
number;
    (iii) Race track, race number, horse identification or event 
identification, as applicable;
    (iv) Type of bet(s), each bet amount, total number of bets, and 
total take; and
    (v) Date and time.
    (5) All tickets shall be considered final at post time.
    (6) If a gaming operation voids a betting ticket written prior to 
post time, it shall be immediately entered into the system.
    (7) Future wagers shall be accepted and processed in the same 
manner as regular wagers.
    (d) Payout standards. (1) Prior to making payment on a ticket, the 
writer/cashier shall input the ticket for verification and payment 
authorization.
    (2) The computer shall be incapable of authorizing payment on a 
ticket that has been previously paid, a voided ticket, a losing ticket, 
or an unissued ticket.
    (e) Checkout standards. (1) Whenever the betting station is closed 
or the writer/cashier is replaced, the writer/cashier shall sign off 
and the computer shall document the gaming operation name (or 
identification number), station number, the writer/cashier identifier, 
the date and time, and cash balance.
    (2) For each writer/cashier station a summary report shall be 
completed at the conclusion of each shift including:
    (i) Computation of cash turned in for the shift; and
    (ii) Signatures of two employees who have verified the cash turned 
in for the shift.
    (f) Employee wagering. Pari-mutuel employees shall be prohibited 
from wagering on race events while on duty, including during break 
periods.
    (g) Computer reports standards. (1) Adequate documentation of all 
pertinent pari-mutuel information shall be generated by the computer 
system.
    (2) This documentation shall be restricted to authorized personnel.
    (3) The documentation shall be created for each day's operation and 
shall include, but is not limited to:
    (i) Unique transaction identifier;
    (ii) Date/time of transaction;
    (iii) Type of wager;
    (iv) Animal identification or event identification;
    (v) Amount of wagers (by ticket, writer/SAM, track/event, and 
total);
    (vi) Amount of payouts (by ticket, writer/SAM, track/event, and 
total);
    (vii) Tickets refunded (by ticket, writer, track/event, and total);
    (viii) Unpaid winners/vouchers (``outs'') (by ticket/voucher, 
track/event, and total);

[[Page 43411]]

    (ix) Voucher sales/payments (by ticket, writer/SAM, and track/
event);
    (x) Voids (by ticket, writer, and total);
    (xi) Future wagers (by ticket, date of event, total by day, and 
total at the time of revenue recognition);
    (xii) Results (winners and payout data);
    (xiii) Breakage data (by race and track/event);
    (xiv) Commission data (by race and track/event); and
    (xv) Purged data (by ticket and total).
    (4) The system shall generate the following reports:
    (i) A reconciliation report that summarizes totals by track/event, 
including write, the day's winning ticket total, total commission and 
breakage due the gaming operation, and net funds transferred to or from 
the gaming operation's bank account;
    (ii) An exception report that contains a listing of all system 
functions and overrides not involved in the actual writing or cashing 
of tickets, including sign-on/off, voids, and manually input paid 
tickets; and
    (iii) A purged ticket report that contains a listing of the unique 
transaction identifier(s), description, ticket cost and value, and date 
purged.
    (h) Accounting and auditing functions. A gaming operation shall 
perform the following accounting and auditing functions:
    (1) The parimutuel audit shall be conducted by personnel 
independent of the parimutuel operation.
    (2) Documentation shall be maintained evidencing the performance of 
all parimutuel accounting and auditing procedures.
    (3) An accounting employee shall review handle, commission, and 
breakage for each day's play and recalculate the net amount due to or 
from the systems operator on a weekly basis.
    (4) The accounting employee shall verify actual cash/cash 
equivalents turned in to the system's summary report for each cashier's 
drawer (Beginning balance, (+) fills (draws), (+) net write (sold less 
voids), (-) payouts (net of IRS withholding), (-) cashbacks (paids), 
(=) cash turn-in).
    (5) An accounting employee shall produce a gross revenue recap 
report to calculate gross revenue for each day's play and for a month-
to-date basis, including the following totals:
    (i) Commission;
    (ii) Positive breakage;
    (iii) Negative breakage;
    (iv) Track/event fees;
    (v) Track/event fee rebates; and
    (vi) Purged tickets.
    (6) All winning tickets and vouchers shall be physically removed 
from the SAM's for each day's play.
    (7) In the event a SAM does not balance for a day's play, the 
auditor shall perform the following procedures:
    (i) Foot the winning tickets and vouchers deposited and trace to 
the totals of SAM activity produced by the system;
    (ii) Foot the listing of cashed vouchers and trace to the totals 
produced by the system;
    (iii) Review all exceptions for propriety of transactions and 
unusual occurrences;
    (iv) Review all voids for propriety;
    (v) Verify the results as produced by the system to the results 
provided by an independent source;
    (vi) Regrade 1% of paid (cashed) tickets to ensure accuracy and 
propriety; and
    (vii) When applicable, reconcile the totals of future tickets 
written to the totals produced by the system for both earned and 
unearned take, and review the reports to ascertain that future wagers 
are properly included on the day of the event.
    (8) At least annually, the auditor shall foot the wagers for one 
day and trace to the total produced by the system.
    (9) At least one day per quarter, the auditor shall recalculate and 
verify the change in the unpaid winners to the total purged tickets.


Sec. 542.12  What are the minimum internal control standards for table 
games?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Standards for drop and count. The procedures for the collection 
of the table game drop and the count thereof shall comply with 
Sec. 542.21, Sec. 542.31, or Sec. 542.41 (as applicable).
    (c) Fill and credit standards. (1) Fill slips and credit slips 
shall be in at least triplicate form, and in a continuous, prenumbered 
series. Such slips shall be concurrently numbered in a form utilizing 
the alphabet and only in one series at a time. The alphabet need not be 
used if the numerical series is not repeated during the business year.
    (2) Unissued and issued fill/credit slips shall be safeguarded and 
adequate procedures shall be employed in their distribution, use, and 
control. Personnel from the cashier or pit departments shall have no 
access to the secured (control) copies of the fill/credit slips.
    (3) When a fill/credit slip is voided, the cashier shall clearly 
mark ``void'' across the face of the original and first copy, the 
cashier and one other person independent of the transactions shall sign 
both the original and first copy, and shall submit them to the 
accounting department for retention and accountability.
    (4) Fill transactions shall be authorized by pit supervisory 
personnel before the issuance of fill slips and transfer of chips, 
tokens, or cash equivalents. The fill request shall be communicated to 
the cage where the fill slip is prepared.
    (5) At least three parts of each fill slip shall be utilized as 
follows:
    (i) One part shall be transported to the pit with the fill and, 
after the appropriate signatures are obtained, deposited in the table 
game drop box;
    (ii) One part shall be retained in the cage for reconciliation of 
the cashier bank; and
    (iii) For computer systems, one part shall be retained in a secure 
manner to insure that only authorized persons may gain access to it. 
For manual systems, one part shall be retained in a secure manner in a 
continuous unbroken form.
    (6) For Tier C gaming operations, the part of the fill slip that is 
placed in the table game drop box shall be of a different color for 
fills than for credits, unless the type of transaction is clearly 
distinguishable in another manner (the checking of a box on the form 
shall not be a clearly distinguishable indicator).
    (7) The table number, shift, and amount of fill by denomination and 
in total shall be noted on all copies of the fill slip. The correct 
date and time shall be indicated on at least two copies.
    (8) All fills shall be carried from the cashier's cage by a person 
who is independent of the cage or pit.
    (9) The fill slip shall be signed by at least the following persons 
(as an indication that each has counted the amount of the fill and the 
amount agrees with the fill slip):
    (i) Cashier who prepared the fill slip and issued the chips, 
tokens, or cash equivalent;
    (ii) Runner who carried the chips, tokens, or cash equivalents from 
the cage to the pit;
    (iii) Dealer or boxperson who received the chips, tokens, or cash 
equivalents at the gaming table; and
    (iv) Pit supervisory personnel who supervised the fill transaction.
    (10) Fills shall be broken down and verified by the dealer or 
boxperson in public view before the dealer or boxperson places the fill 
in the table tray.

[[Page 43412]]

    (11) A copy of the fill slip shall then be deposited into the drop 
box on the table by the dealer, where it shall appear in the soft count 
room with the cash receipts for the shift.
    (12) Table credit transactions shall be authorized by a pit 
supervisor before the issuance of credit slips and transfer of chips, 
tokens, or other cash equivalent. The credit request shall be 
communicated to the cage where the credit slip is prepared.
    (13) At least three parts of each credit slip shall be utilized as 
follows:
    (i) Two parts of the credit slip shall be transported by the runner 
to the pit. After signatures of the runner, dealer, and pit supervisor 
are obtained, one copy shall be deposited in the table game drop box 
and the original shall accompany transport of the chips, tokens, 
markers, or cash equivalents from the pit to the cage for verification 
and signature of the cashier.
    (ii) For computer systems, one part shall be retained in a secure 
manner to insure that only authorized persons may gain access to it. 
For manual systems, one part shall be retained in a secure manner in a 
continuous unbroken form.
    (14) The table number, shift, and the amount of credit by 
denomination and in total shall be noted on all copies of the credit 
slip. The correct date and time shall be indicated on at least two 
copies.
    (15) Chips, tokens, and/or cash equivalents shall be removed from 
the table tray by the dealer or boxperson and shall be broken down and 
verified by the dealer or boxperson in public view prior to placing 
them in racks for transfer to the cage.
    (16) All chips, tokens, and cash equivalents removed from the 
tables and markers removed from the pit shall be carried to the 
cashier's cage by a person who is independent of the cage or pit.
    (17) The credit slip shall be signed by at least the following 
persons (as an indication that each has counted or, in the case of 
markers, reviewed the items transferred):
    (i) Cashier who received the items transferred from the pit and 
prepared the credit slip;
    (ii) Runner who carried the items transferred from the pit to the 
cage;
    (iii) Dealer who had custody of the items prior to transfer to the 
cage; and
    (iv) Pit supervisory personnel who supervised the credit 
transaction.
    (18) The credit slip shall be inserted in the drop box by the 
dealer.
    (19) Chips, tokens, or other cash equivalents shall be deposited on 
or removed from gaming tables only when accompanied by the appropriate 
fill/credit or marker transfer forms.
    (20) Cross fills (the transfer of chips between table games) and 
even cash exchanges are prohibited in the pit.
    (d) Table inventory forms. (1) At the close of each shift, for 
those table banks that were opened during that shift:
    (i) The table's chip, token, coin, and marker inventory shall be 
counted and recorded on a table inventory form; or
    (ii) If the table banks are maintained on an imprest basis, a final 
fill or credit shall be made to bring the bank back to par.
    (2) If final fills are not made, beginning and ending inventories 
shall be recorded on the master game sheet for shift win calculation 
purposes.
    (3) The accuracy of inventory forms prepared at shift end shall be 
verified by the outgoing pit supervisor and the dealer. Alternatively, 
if the dealer is not available, such verification may be provided by 
another pit supervisor or another supervisor from another gaming 
department. Verifications shall be evidenced by signature on the 
inventory form.
    (4) If inventory forms are placed in the drop box, such action 
shall be performed by a person other than a pit supervisor.
    (e) Table games computer generated documentation standards. (1) The 
computer system shall be capable of generating adequate documentation 
of all information recorded on the source documents and transaction 
detail (e.g., fill/credit slips, markers, etc.).
    (2) This documentation shall be restricted to authorized personnel.
    (3) The documentation shall include, at a minimum:
    (i) System exception information (e.g., appropriate system 
parameter information, corrections, voids, etc.); and
    (ii) Personnel access listing, which includes, at a minimum:
    (A) Employee name or employee identification number (if 
applicable); and
    (B) Listing of functions employees can perform or equivalent means 
of identifying the same.
    (f) Standards for playing cards and dice. (1) Playing cards and 
dice shall be maintained in a secure location to prevent unauthorized 
access and to reduce the possibility of tampering.
    (2) Used cards and dice shall be maintained in a secure location 
until marked, scored, or destroyed, in a manner as approved by the 
Tribal gaming regulatory authority, to prevent unauthorized access and 
reduce the possibility of tampering.
    (3) The Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with a reasonable time period, 
which shall not exceed seven (7) days, within which to mark, cancel, or 
destroy cards and dice from play.
    (i) This standard shall not apply where playing cards or dice are 
retained for an investigation.
    (ii) [Reserved]
    (4) A card control log shall be maintained that documents when 
cards and dice are received on site, distributed to and returned from 
tables and removed from play by the gaming operation.
    (g) Plastic cards. Notwithstanding paragraph (f) of this section, 
if a gaming operation uses plastic cards (not plastic-coated cards), 
the cards may be used for up to three (3) months if the plastic cards 
are routinely inspected, and washed or cleaned in a manner and time 
frame approved by the Tribal gaming regulatory authority.
    (h) Standards for supervision. Pit supervisory personnel (with 
authority equal to or greater than those being supervised) shall 
provide supervision of all table games.
    (i) Analysis of table game performance standards. (1) Records shall 
be maintained by day and shift indicating any single-deck blackjack 
games that were dealt for an entire shift.
    (2) Records reflecting hold percentage by table and type of game 
shall be maintained by shift, by day, cumulative month-to-date, and 
cumulative year-to-date.
    (3) This information shall be presented to and reviewed by 
management independent of the pit department on at least a monthly 
basis.
    (4) The management in paragraph (h)(3) of this section shall 
investigate any unusual fluctuations in hold percentage with pit 
supervisory personnel.
    (5) The results of such investigations shall be documented, 
maintained for inspection, and provided to the Tribal gaming regulatory 
authority upon request.
    (j) Accounting/auditing standards. (1) The accounting and auditing 
procedures shall be performed by personnel who are independent of the 
transactions being audited/accounted for.
    (2) If a table game has the capability to determine drop (e.g., 
bill-in/coin-drop meters, bill acceptor, computerized record, etc.) the 
dollar amount of the drop shall be reconciled to the actual drop by 
shift.
    (3) Accounting/auditing employees shall review exception reports 
for all computerized table games systems at

[[Page 43413]]

least monthly for propriety of transactions and unusual occurrences.
    (4) All noted improper transactions or unusual occurrences shall be 
investigated with the results documented.
    (5) Evidence of table games auditing procedures and any follow-up 
performed shall be documented, maintained for inspection, and provided 
to the Tribal gaming regulatory authority upon request.
    (6) A daily recap shall be prepared for the day and month-to-date, 
which shall include the following information:
    (i) Drop;
    (ii) Win; and
    (iii) Gross revenue.
    (k) Marker credit play. (1) If a gaming operation allows marker 
credit play (exclusive of rim credit and call bets), the following 
standards shall apply:
    (i) A marker system shall allow for credit to be both issued and 
repaid in the pit.
    (ii) Prior to the issuance of gaming credit to a player, the 
employee extending the credit shall contact the cashier or other 
independent source to determine if the player's credit limit has been 
properly established and there is sufficient remaining credit available 
for the advance.
    (iii) Proper authorization of credit extension in excess of the 
previously established limit shall be documented.
    (iv) The amount of credit extended shall be communicated to the 
cage or another independent source and the amount documented within a 
reasonable time subsequent to each issuance.
    (v) The marker form shall be prepared in at least triplicate form 
(triplicate form being defined as three parts performing the functions 
delineated in the standard in paragraph (j)(1)(vi) of this section), 
with a preprinted or concurrently-printed marker number, and utilized 
in numerical sequence. (This requirement shall not preclude the 
distribution of batches of markers to various pits.)
    (vi) At least three parts of each separately numbered marker form 
shall be utilized as follows:
    (A) Original shall be maintained in the pit until settled or 
transferred to the cage;
    (B) Payment slip shall be maintained in the pit until the marker is 
settled or transferred to the cage. If paid in the pit, the slip shall 
be inserted in the table game drop box. If not paid in the pit, the 
slip shall be transferred to the cage with the original;
    (C) Issue slip shall be inserted into the appropriate table game 
drop box when credit is extended or when the player has signed the 
original.
    (vii) When marker documentation (e.g., issue slip and payment slip) 
is inserted in the drop box, such action shall be performed by the 
dealer or boxperson at the table.
    (viii) A record shall be maintained that details the following 
(e.g., master credit record retained at the pit podium):
    (A) The signature or initials of the person(s) approving the 
extension of credit (unless such information is contained elsewhere for 
each issuance);
    (B) The legible name of the person receiving the credit;
    (C) The date and shift of granting the credit;
    (D) The table on which the credit was extended;
    (E) The amount of credit issued;
    (F) The marker number;
    (G) The amount of credit remaining after each issuance or the total 
credit available for all issuances;
    (H) The amount of payment received and nature of settlement (e.g., 
credit slip number, cash, chips, etc.); and
    (I) The signature or initials of the person receiving payment/
settlement.
    (ix) The forms required in paragraphs (j)(1)(v), (vi), and (viii) 
of this section shall be safeguarded, and adequate procedures shall be 
employed to control the distribution, use, and access to these forms.
    (x) All credit extensions shall be initially evidenced by lammer 
buttons, which shall be displayed on the table in public view and 
placed there by supervisory personnel.
    (xi) Marker preparation shall be initiated and other records 
updated within approximately one hand of play following the initial 
issuance of credit to the player.
    (xii) Lammer buttons shall be removed only by the dealer or 
boxperson employed at the table upon completion of a marker 
transaction. (xiii) The original marker shall contain at least the 
following information:
    (A) Marker number;
    (B) Player's name and signature;
    (C) Date; and
    (D) Amount of credit issued.
    (xiv) The issue slip or stub shall include the same marker number 
as the original, the table number, date and time of issuance, and 
amount of credit issued. The issue slip or stub shall also include the 
signature of the person extending the credit, and the signature or 
initials of the dealer or boxperson at the applicable table, unless 
this information is included on another document verifying the issued 
marker.
    (xv) The payment slip shall include the same marker number as the 
original. When the marker is paid in full in the pit, it shall also 
include the table number where paid, date and time of payment, nature 
of settlement (cash, chips, etc.), and amount of payment. The payment 
slip shall also include the signature of pit supervisory personnel 
acknowledging payment, and the signature or initials of the dealer or 
boxperson receiving payment, unless this information is included on 
another document verifying the payment of the marker.
    (xvi) When partial payments are made in the pit, a new marker shall 
be completed reflecting the remaining balance and the marker number of 
the marker originally issued.
    (xvii) When partial payments are made in the pit, the payment slip 
of the marker that was originally issued shall be properly cross-
referenced to the new marker number, completed with all information 
required by paragraph (j)(1)(xv) of this section, and inserted into the 
drop box.
    (xviii) The cashier's cage or another independent source shall be 
notified when payments (full or partial) are made in the pit so that 
cage records can be updated for such transactions. Notification shall 
be made no later than when the customer's play is completed or at shift 
end, whichever is earlier.
    (xix) All portions of markers, both issued and unissued, shall be 
safeguarded and procedures shall be employed to control the 
distribution, use and access to the forms.
    (xx) An investigation shall be performed to determine the cause and 
responsibility for loss whenever marker forms, or any part thereof, are 
missing. These investigations shall be documented, maintained for 
inspection, and provided to the Tribal gaming regulatory authority upon 
request.
    (xxi) When markers are transferred to the cage, marker transfer 
forms or marker credit slips (or similar documentation) shall be 
utilized and such documents shall include, at a minimum, the date, 
time, shift, marker number(s), table number(s), amount of each marker, 
the total amount transferred, signature of pit supervisory personnel 
releasing instruments from the pit, and the signature of cashier 
verifying receipt of instruments at the cage.
    (xxii) All markers shall be transferred to the cage within twenty-
four (24) hours of issuance.
    (xxiii) Markers shall be transported to the cashier's cage by a 
person who is independent of the marker issuance and payment functions 
(pit clerks may perform this function).
    (2) [Reserved]

[[Page 43414]]

    (l) Name credit instruments accepted in the pit. (1) For the 
purposes of this paragraph, name credit instruments means personal 
checks, payroll checks, counter checks, hold checks, traveler's checks, 
or other similar instruments that are accepted in the pit as a form of 
credit issuance to a player with an approved credit limit.
    (2) The following standards shall apply if name credit instruments 
are accepted in the pit:
    (i) A name credit system shall allow for the issuance of credit 
without using markers;
    (ii) Prior to accepting a name credit instrument, the employee 
extending the credit shall contact the cashier or another independent 
source to determine if the player's credit limit has been properly 
established and the remaining credit available is sufficient for the 
advance;
    (iii) All name credit instruments shall be transferred to the 
cashier's cage (utilizing a two-part order for credit) immediately 
following the acceptance of the instrument and issuance of chips (if 
name credit instruments are transported accompanied by a credit slip, 
an order for credit is not required);
    (iv) The order for credit (if applicable) and the credit slip shall 
include the customer's name, amount of the credit instrument, the date, 
time, shift, table number, signature of pit supervisory personnel 
releasing instrument from pit, and the signature of the cashier 
verifying receipt of instrument at the cage;
    (v) The procedures for transacting table credits at standards in 
paragraphs (c)(12) through (19) of this section shall be strictly 
adhered to; and
    (vi) The acceptance of payments in the pit for name credit 
instruments shall be prohibited.
    (m) Call bets. (1) The following standards shall apply if call bets 
are accepted in the pit:
    (i) A call bet shall be evidenced by the placement of a lammer 
button, chips, or other identifiable designation in an amount equal to 
that of the wager in a specific location on the table;
    (ii) The placement of the lammer button, chips, or other 
identifiable designation shall be performed by supervisory/boxperson 
personnel. The placement may be performed by a dealer only if the 
supervisor physically observes and gives specific authorization;
    (iii) The call bet shall be settled at the end of each hand of play 
by the preparation of a marker, repayment of the credit extended, or 
the payoff of the winning wager. Call bets extending beyond one hand of 
play shall be prohibited; and
    (iv) The removal of the lammer button, chips, or other identifiable 
designation shall be performed by the dealer/ boxperson upon completion 
of the call bet transaction.
    (2) [Reserved]
    (n) Rim credit. (1) The following standards shall apply if rim 
credit is extended in the pit:
    (i) Rim credit shall be evidenced by the issuance of chips to be 
placed in a neutral zone on the table and then extended to the customer 
for the customer to wager, or to the dealer to wager for the customer, 
and by the placement of a lammer button or other identifiable 
designation in an amount equal to that of the chips extended; and
    (ii) Rim credit shall be recorded on player cards, or similarly 
used documents, which shall be:
    (A) Prenumbered or concurrently numbered and accounted for by a 
department independent of the pit;
    (B) For all extensions and subsequent repayments, evidenced by the 
initials or signatures of a supervisor and the dealer attesting to the 
validity of each credit extension and repayment;
    (C) An indication of the settlement method (e.g., serial number of 
marker issued, chips, cash);
    (D) Settled no later than when the customer leaves the table at 
which the card is prepared;
    (E) Transferred to the accounting department on a daily basis; and
    (F) Reconciled with other forms utilized to control the issuance of 
pit credit (e.g., master credit records, table cards).
    (2) [Reserved]
    (o) Foreign currency. (l) The following standards shall apply if 
foreign currency is accepted in the pit:
    (i) Foreign currency transactions shall be authorized by a pit 
supervisor/ boxperson who completes a foreign currency exchange form 
before the exchange for chips or tokens;
    (ii) Foreign currency exchange forms include the country of origin, 
total face value, amount of chips/token extended (i.e., conversion 
amount), signature of supervisor/boxperson, and the dealer completing 
the transaction;
    (iii) Foreign currency exchange forms and the foreign currency 
shall be inserted in the drop box by the dealer; and
    (iv) Alternate procedures specific to the use of foreign valued 
gaming chips shall be developed by the Tribal gaming regulatory 
authority, or the gaming operation as approved by the Tribal gaming 
regulatory authority.
    (2) [Reserved]


Sec. 542.13  What are the minimum internal control standards for gaming 
machines?

    (a) Standards for gaming machines.
    (1) For this section only, credit or customer credit means a unit 
of value equivalent to cash or cash equivalents deposited, wagered, 
won, lost, or redeemed by a customer.
    (2) Coins shall include tokens.
    (3) For all computerized gaming machine systems, a personnel access 
listing shall be maintained, which includes at a minimum:
    (i) Employee name or employee identification number (or 
equivalent); and
    (ii) Listing of functions employee can perform or equivalent means 
of identifying same.
    (b) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (c) Standards for drop and count. The procedures for the collection 
of the gaming machine drop and the count thereof shall comply with 
Sec. 542.21, Sec. 542.31, or Sec. 542.41 (as applicable).
    (d) Jackpot payouts, gaming machines fills, short pays and 
accumulated credit payouts standards. (1) For jackpot payouts and 
gaming machine fills, documentation shall include the following 
information:
    (i) Date and time;
    (ii) Machine number;
    (iii) Dollar amount of cash payout or gaming machine fill (both 
alpha and numeric) or description of personal property awarded, 
including fair market value. Alpha is optional if another unalterable 
method is used for evidencing the amount of the payout;
    (iv) Game outcome (including reel symbols, card values, suits, 
etc.) for jackpot payouts. Game outcome is not required if a 
computerized jackpot/fill system is used;
    (v) Preprinted or concurrently printed sequential number; and
    (vi) Signatures of at least two employees verifying and witnessing 
the payout or gaming machine fill (except as otherwise provided in 
paragraphs (d)(1)(vi)(A), (B), and (C) of this section).
    (A) Jackpot payouts over a predetermined amount shall require the 
signature and verification of a supervisory or management employee 
independent of the gaming machine department (in addition to the two 
signatures required in paragraph (d)(1)(vi) of this section). 
Alternatively, if an on-line accounting system is utilized, only two 
signatures are

[[Page 43415]]

required: one employee and one supervisory or management employee 
independent of the gaming machine department. This predetermined amount 
shall be authorized by management (as approved by the Tribal gaming 
regulatory authority), documented, and maintained.
    (B) With regard to jackpot payouts and hopper fills, the signature 
of one employee is sufficient if an on-line accounting system is 
utilized and the jackpot or fill is less than $1,200.
    (C) On graveyard shifts (eight-hour maximum) payouts/fills less 
than $100 can be made without the payout/fill being witnessed by a 
second person.
    (2) For short pays of $10.00 or more, and payouts required for 
accumulated credits, the payout form shall include the following 
information:
    (i) Date and time;
    (ii) Machine number;
    (iii) Dollar amount of payout (both alpha and numeric); and
    (iv) The signature of at least one (1) employee verifying and 
witnessing the payout.
    (A) Where the payout amount is $50 or more, signatures of at least 
two (2) employees verifying and witnessing the payout. Alternatively, 
the signature of one (1) employee is sufficient if an on-line 
accounting system is utilized and the payout amount is less than 
$3,000.
    (B) [Reserved]
    (3) Computerized jackpot/fill systems shall be restricted so as to 
prevent unauthorized access and fraudulent payouts by one person as 
required by Sec. 542.16(a).
    (4) Payout forms shall be controlled and routed in a manner that 
precludes any one person from producing a fraudulent payout by forging 
signatures or by altering the amount paid out subsequent to the payout 
and misappropriating the funds.
    (e) Promotional payouts or awards. (1) If a gaming operation offers 
promotional payouts or awards that are not reflected on the gaming 
machine pay table, then the payout form/documentation shall include:
    (i) Date and time;
    (ii) Machine number and denomination;
    (iii) Dollar amount of payout or description of personal property 
(e.g., jacket, toaster, car, etc.), including fair market value;
    (iv) Type of promotion (e.g., double jackpots, four-of-a-kind 
bonus, etc.); and
    (v) Signature of at least one employee authorizing and completing 
the transaction.
    (2) [Reserved]
    (f) Gaming machine department funds standards. (1) The gaming 
machine booths and change banks that are active during the shift, shall 
be counted down and reconciled each shift utilizing appropriate 
accountability documentation.
    (2) The wrapping of loose gaming machine booth and cage cashier 
coin shall be performed at a time or location that does not interfere 
with the hard count/wrap process or the accountability of that process.
    (3) A record shall be maintained evidencing the transfers of 
wrapped and unwrapped coins and retained for seven (7) days.
    (g) EPROM control standards. (1) At least annually, procedures 
shall be performed to insure the integrity of a sample of gaming 
machine game program EPROMs, or other equivalent game software media, 
by personnel independent of the gaming machine department or the 
machines being tested.
    (2) The Tribal gaming regulatory authority, or the gaming operation 
subject to the approval of the Tribal gaming regulatory authority, 
shall develop and implement procedures for the following:
    (i) Removal of EPROMs, or other equivalent game software media, 
from devices, the verification of the existence of errors as 
applicable, and the correction via duplication from the master game 
program EPROM, or other equivalent game software media;
    (ii) Copying one gaming device program to another approved program;
    (iii) Verification of duplicated EPROMs before being offered for 
play;
    (iv) Receipt and destruction of EPROMs, or other equivalent game 
software media; and
    (v) Securing the EPROM, or other equivalent game software media, 
duplicator, and master game EPROMs, or other equivalent game software 
media, from unrestricted access.
    (3) The master game program number, par percentage, and the pay 
table shall be verified to the par sheet when initially received from 
the manufacturer.
    (4) Gaming machines with potential jackpots in excess of $100,000 
shall have the game software circuit boards locked or physically 
sealed. The lock or seal shall necessitate the presence of a person 
independent of the gaming machine department to access the device game 
program EPROM, or other equivalent game software media. If a seal is 
used to secure the board to the frame of the gaming device, it shall be 
pre-numbered.
    (5) Records that document the procedures in paragraph (g)(2)(i) of 
this section shall include the following information:
    (i) Date;
    (ii) Machine number (source and destination);
    (iii) Manufacturer;
    (iv) Program number;
    (v) Personnel involved;
    (vi) Reason for duplication;
    (vii) Disposition of any permanently removed EPROM, or other 
equivalent game software media;
    (viii) Seal numbers, if applicable; and
    (ix) Approved testing lab approval numbers, if available.
    (6) EPROMS, or other equivalent game software media, returned to 
gaming devices shall be labeled with the program number. Supporting 
documentation shall include the date, program number, information 
identical to that shown on the manufacturer's label, and initials of 
the person replacing the EPROM, or other equivalent game software 
media.
    (h) Standards for evaluating theoretical and actual hold 
percentages. (1) Accurate and current theoretical hold worksheets shall 
be maintained for each gaming machine.
    (2) For those gaming machines or groups of identical machines 
(excluding multi-game machines) with differences in theoretical payback 
percentage exceeding a 4% spread between the minimum and maximum 
theoretical payback, an employee or department independent from the 
gaming machine department shall perform a weighted average calculation 
to periodically adjust theoretical as follows:
    (i) On a quarterly basis, record the meters that contain the number 
of plays by wager (i.e., one coin, two coins, etc.);
    (ii) On an annual basis, calculate the theoretical hold percentage 
based on the distribution of plays by wager type;
    (iii) On an annual basis, adjust the machine(s) theoretical hold 
percentage in the gaming machine statistical report to reflect this 
revised percentage; and
    (iv) The adjusted theoretical hold percentage shall be within the 
spread between the minimum and maximum theoretical payback percentages.
    (3) For those gaming operations that are unable to perform the 
weighted average calculation as required by paragraph (h)(2) of this 
section, the following procedures shall apply:
    (i) On at least an annual basis, calculate the actual hold 
percentage for each aming machine;
    (ii) On at least an annual basis, adjust the theoretical hold 
percentage in the gaming machine statistical report for each gaming 
machine to the previously calculated actual hold percentage; and
    (iii) The adjusted theoretical hold percentage shall be within the 
spread

[[Page 43416]]

between the minimum and maximum theoretical payback percentages.
    (4) For multi-game machines with a four percent (4%) or greater 
spread between minimum and maximum theoretical payback percentages, an 
employee or department independent of the gaming machine department 
shall:
    (i) Weekly, record the total coin-in meter;
    (ii) Quarterly, record the coin-in meters for each game contained 
in the machine; and
    (iii) On an annual basis, adjust the theoretical hold percentage in 
the gaming machine statistical report to a weighted average based upon 
the ratio of coin-in for each game.
    (5) The adjusted theoretical hold percentage for multi-game 
machines may be combined for machines with exactly the same game mix 
throughout the year.
    (6) The theoretical hold percentages used in the gaming machine 
analysis reports should be within the performance standards set by the 
manufacturer.
    (7) Records shall be maintained for each machine indicating the 
dates and type of changes made and the recalculation of theoretical 
hold as a result of the changes.
    (8) Records shall be maintained for each machine that indicate the 
date the machine was placed into service, the date the machine was 
removed from operation, the date the machine was placed back into 
operation, and any changes in machine numbers and designations.
    (9) All of the gaming machines shall contain functioning meters 
that shall record coin-in or credit-in, or on-line gaming machine 
monitoring system that captures similar data.
    (10) All gaming machines with bill acceptors shall contain 
functioning bill-in meters that record the dollar amounts or number of 
bills accepted by denomination.
    (11) Gaming machine in-meter readings shall be recorded at least 
weekly (monthly for Tier A and Tier B gaming operations) immediately 
prior to or subsequent to a gaming machine drop. On-line gaming machine 
monitoring systems can satisfy this requirement. However, the time 
between readings may extend beyond one week in order for a reading to 
coincide with the end of an accounting period only if such extension is 
for no longer than six (6) days.
    (12) The employee who records the in-meter reading shall either be 
independent of the hard count team or shall be assigned on a rotating 
basis, unless the in-meter readings are randomly verified quarterly for 
all gaming machines and bill acceptors by a person other than the 
regular in-meter reader.
    (13) Upon receipt of the meter reading summary, the accounting 
department shall review all meter readings for reasonableness using 
pre-established parameters.
    (14) Prior to final preparation of statistical reports, meter 
readings that do not appear reasonable shall be reviewed with gaming 
machine department employees or other appropriate designees, and 
exceptions documented, so that meters can be repaired or clerical 
errors in the recording of meter readings can be corrected.
    (15) A report shall be produced at least monthly showing month-to-
date, year-to-date (previous twelve (12) months data preferred), and if 
practicable, life-to-date actual hold percentage computations for 
individual machines and a comparison to each machine's theoretical hold 
percentage previously discussed.
    (16) Each change to a gaming machine's theoretical hold percentage, 
including progressive percentage contributions, shall result in that 
machine being treated as a new machine in the statistical reports 
(i.e., not commingling various hold percentages), except for 
adjustments made in accordance with paragraph (h)(2) of this section.
    (17) If promotional payouts or awards are included on the gaming 
machine statistical reports, it shall be in a manner that prevents 
distorting the actual hold percentages of the affected machines.
    (18) The statistical reports shall be reviewed by both gaming 
machine department management and management employees independent of 
the gaming machine department on at least a monthly basis.
    (19) For those machines in play for more than six (6) months, large 
variances (three percent (3%) recommended) between theoretical hold and 
actual hold shall be investigated and resolved by a department 
independent of the gaming machine department with the findings 
documented and provided to the Tribal gaming regulatory authority upon 
request in a timely manner.
    (20) Maintenance of the on-line gaming machine monitoring system 
data files shall be performed by a department independent of the gaming 
machine department. Alternatively, maintenance may be performed by 
gaming machine supervisory employees if sufficient documentation is 
generated and it is randomly verified on a monthly basis by employees 
independent of the gaming machine department.
    (21) Updates to the on-line gaming machine monitoring system to 
reflect additions, deletions, or movements of gaming machines shall be 
made at least weekly prior to in-meter readings and the weigh process.
    (i) Gaming machine hopper contents standards. (1) When machines are 
temporarily removed from the floor, gaming machine drop and hopper 
contents shall be protected to preclude the misappropriation of stored 
funds.
    (2) When machines are permanently removed from the floor, the 
gaming machine drop and hopper contents shall be counted and recorded 
by at least two employees with appropriate documentation being routed 
to the accounting department for proper recording and accounting for 
initial hopper loads.
    (j) Player tracking system. (1) The following standards apply if a 
player tracking system is utilized:
    (i) The player tracking system shall be secured so as to prevent 
unauthorized access (e.g., changing passwords at least quarterly and 
physical access to computer hardware, etc.).
    (ii) The addition of points to members' accounts other than through 
actual gaming machine play shall be sufficiently documented (including 
substantiation of reasons for increases) and shall be authorized by a 
department independent of the player tracking and gaming machines. 
Alternatively, addition of points to members' accounts may be 
authorized by gaming machine supervisory employees if sufficient 
documentation is generated and it is randomly verified by employees 
independent of the gaming machine department on a quarterly basis.
    (iii) Booth employees who redeem points for members shall be 
allowed to receive lost players club cards, provided that they are 
immediately deposited into a secured container for retrieval by 
independent personnel.
    (iv) Changes to the player tracking system parameters, such as 
point structures and employee access, shall be performed by supervisory 
employees independent of the gaming machine department. Alternatively, 
changes to player tracking system parameters may be performed by gaming 
machine supervisory employees if sufficient documentation is generated 
and it is randomly verified by supervisory employees independent of the 
gaming machine department on a monthly basis.

[[Page 43417]]

    (v) All other changes to the player tracking system shall be 
appropriately documented.
    (2) [Reserved]
    (k) In-house progressive gaming machine standards. (1) A meter that 
shows the amount of the progressive jackpot shall be conspicuously 
displayed at or near the machines to which the jackpot applies.
    (2) At least once each day, each gaming operation shall record the 
amount shown on each progressive jackpot meter at the gaming operation 
except for those jackpots that can be paid directly from the machine's 
hopper;
    (3) Explanations for meter reading decreases shall be maintained 
with the progressive meter reading sheets, and where the payment of a 
jackpot is the explanation for a decrease, the gaming operation shall 
record the jackpot payout number on the sheet or have the number 
reasonably available; and
    (4) Each gaming operation shall record the base amount of each 
progressive jackpot the gaming operation offers.
    (5) The Tribal gaming regulatory authority shall approve procedures 
specific to the transfer of progressive amounts in excess of the base 
amount to other gaming machines. Such procedures may also include other 
methods of distribution that accrue to the benefit of the gaming public 
via an award or prize.
    (l) Wide area progressive gaming machine standards. (1) A meter 
that shows the amount of the progressive jackpot shall be conspicuously 
displayed at or near the machines to which the jackpot applies.
    (2) As applicable to participating gaming operations, the wide area 
progressive gaming machine system shall be adequately restricted to 
prevent unauthorized access (e.g., changing passwords at least 
quarterly, restrict access to EPROMs or other equivalent game software 
media, and restrict physical access to computer hardware, etc.).
    (3) The Tribal gaming regulatory authority shall approve procedures 
for the wide area progressive system that:
    (i) Reconcile meters and jackpot payouts;
    (ii) Collect/drop gaming machine funds;
    (iii) Verify jackpot, payment, and billing to gaming operations on 
pro-rata basis;
    (iv) System maintenance;
    (v) System accuracy; and
    (vi) System security.
    (4) Reports, where applicable, adequately documenting the 
procedures required in paragraph (1)(3) of this section shall be 
generated and retained.
    (m) Accounting/auditing standards. (1) Gaming machine accounting/
auditing procedures shall be performed by employees who are independent 
of the transactions being reviewed.
    (2) For on-line gaming machine monitoring systems, procedures shall 
be performed at least monthly to verify that the system is transmitting 
and receiving data from the gaming machines properly and to verify the 
continuing accuracy of the coin-in meter readings as recorded in the 
gaming machine statistical report.
    (3) For weigh scale and currency interface systems, for at least 
one drop period per month accounting/auditing employees shall make such 
comparisons as necessary to the system generated count as recorded in 
the gaming machine statistical report. Discrepancies shall be resolved 
prior to generation/distribution of gaming machine reports.
    (4) For each drop period, accounting/auditing personnel shall 
compare the coin-to-drop meter reading to the actual drop amount. 
Discrepancies should be resolved prior to generation/distribution of 
on-line gaming machine monitoring system statistical reports.
    (5) Follow-up shall be performed for any one machine having an 
unresolved variance between actual coin drop and coin-to-drop meter 
reading in excess of three percent (3%) and over $25.00. The follow-up 
performed and results of the investigation shall be documented, 
maintained for inspection, and provided to the Tribal gaming regulatory 
authority upon request.
    (6) At least weekly, accounting/auditing employees shall compare 
the bill-in meter reading to the total bill acceptor drop amount for 
the week. Discrepancies shall be resolved before the generation/
distribution of gaming machine statistical reports.
    (7) Follow-up shall be performed for any one machine having an 
unresolved variance between actual currency drop and bill-in meter 
reading in excess of $200.00. The follow-up performed and results of 
the investigation shall be documented, maintained for inspection, and 
provided to the Tribal gaming regulatory authority upon request.
    (8) At least annually, accounting/auditing personnel shall randomly 
verify that EPROM or other equivalent game software media changes are 
properly reflected in the gaming machine analysis reports.
    (9) Accounting/auditing employees shall review exception reports 
for all computerized gaming machine systems on a daily basis for 
propriety of transactions and unusual occurrences.
    (10) All gaming machine auditing procedures and any follow-up 
performed shall be documented, maintained for inspection, and provided 
to the Tribal gaming regulatory authority upon request.
    (n) Cash-out tickets. For gaming machines that utilize cash-out 
tickets, the following standards apply. This standard is not applicable 
to Tiers A and B. Tier A and B gaming operations shall develop adequate 
standards governing the security over the issuance of the cash-out 
paper to the gaming machines and the redemption of cash-out slips.
    (1) In addition to the applicable auditing and accounting standards 
in paragraph (m) of this section, on a quarterly basis, the gaming 
operation shall foot all jackpot cash-out tickets equal to or greater 
than $1,200 and trace totals to those produced by the host validation 
computer system.
    (2) The customer may request a cash-out ticket from the gaming 
machine that reflects all remaining credits. The cash-out ticket shall 
be printed at the gaming machine by an internal document printer. The 
cash-out ticket shall be valid for a time period specified by the 
Tribal gaming regulatory authority, or the gaming operation as approved 
by the Tribal gaming regulatory authority. Cash-out tickets may be 
redeemed for payment or inserted in another gaming machine and wagered, 
if applicable, during the specified time period.
    (3) The customer shall redeem the cash-out ticket at a change booth 
or cashiers' cage. Alternatively, if a gaming operation utilizes a 
remote computer validation system, the Tribal gaming regulatory 
authority, or the gaming operation as approved by the Tribal gaming 
regulatory authority, shall develop alternate standards for the maximum 
amount that can be redeemed, which shall not exceed $2,999.99 per cash-
out transaction.
    (4) Upon presentation of the cash-out ticket(s) for redemption, the 
following shall occur:
    (i) Scan the bar code via an optical reader or its equivalent; or
    (ii) Input the cash-out ticket validation number into the computer.
    (5) The information contained in paragraph (n)(4) of this section 
shall be communicated to the host computer. The host computer shall 
verify the authenticity of the cash-out ticket and communicate directly 
to the redeemer of the cash-out ticket.
    (6) If valid, the cashier (redeemer of the cash-out ticket) pays 
the customer the appropriate amount and the cash-out ticket is 
electronically noted ``paid'' in the system. The ``paid'' cash-out

[[Page 43418]]

ticket shall remain in the cashiers'' bank for reconciliation purposes. 
The host validation computer system shall electronically reconcile the 
cashier's banks for the paid cashed-out tickets.
    (7) If invalid, the host computer shall notify the cashier 
(redeemer of the cash-out ticket). The cashier (redeemer of the cash-
out ticket) shall refuse payment to the customer and notify a 
supervisor of the invalid condition. The supervisor shall resolve the 
dispute.
    (8) If the host validation computer system temporarily goes down, 
cashiers may redeem cash-out tickets at a change booth or cashier's 
cage after recording the following:
    (i) Serial number of the cash-out ticket;
    (ii) Date and time;
    (iii) Dollar amount;
    (iv) Issuing gaming machine number;
    (v) Marking ticket ``paid''; and
    (vi) Ticket shall remain in cashier's bank for reconciliation 
purposes.
    (9) Cash-out tickets shall be validated as expeditiously as 
possible when the host validation computer system is restored.
    (10) The Tribal gaming regulatory authority, or the gaming 
operation as approved by the Tribal gaming regulatory authority, shall 
establish and the gaming operation shall comply with procedures to 
control cash-out ticket paper, which shall include procedures that:
    (i) Mitigate the risk of counterfeiting of cash-out ticket paper;
    (ii) Adequately control the inventory of the cash-out ticket paper; 
and
    (iii) Provide for the destruction of all unused cash-out ticket 
paper.
    (iv) Alternatively, if the gaming operation utilizes a computer 
validation system, this standard shall not apply.
    (11) If the host validation computer system is down for more than 
four (4) hours, the gaming operation shall promptly notify the Tribal 
gaming regulatory authority or its designated representative.
    (12) These gaming machine systems shall comply with all other 
standards (as applicable) in this part including:
    (i) Standards for bill acceptor drop and count;
    (ii) Standards for coin drop and count; and
    (iii) Standards concerning EPROMS or other equivalent game software 
media.
    (o) Account access cards. For gaming machines that utilize account 
access cards to activate play of the machine, the following standards 
shall apply:
    (1) Equipment. (i) A central computer, with supporting hardware and 
software, to coordinate network activities, provide system interface, 
and store and manage a player/account database;
    (ii) A network of contiguous player terminals with touch-screen or 
button-controlled video monitors connected to an electronic selection 
device and the central computer via a communications network;
    (iii) One or more electronic selection devices, utilizing random 
number generators, each of which selects any combination or 
combinations of numbers, colors, and/or symbols for a network of player 
terminals.
    (2) Player terminals standards. (i) The player terminals are 
connected to a game server;
    (ii) The game server shall generate and transmit to the bank of 
player terminals a set of random numbers, colors, and/or symbols at 
regular intervals. The subsequent game results are determined at the 
player terminal and the resulting information is transmitted to the 
account server;
    (iii) The game server shall be housed in a game server room or a 
secure locked cabinet.
    (3) Customer account maintenance standards. (i) A central computer 
acting as an account server shall provide customer account maintenance 
and the deposit/withdrawal function of those account balances;
    (ii) Customers may access their accounts on the computer system by 
means of an account access card at the player terminal. Each player 
terminal may be equipped with a card reader and personal identification 
number (PIN) pad or touch screen array for this purpose;
    (iii) All communications between the player terminal, or bank of 
player terminals, and the account server shall be encrypted for 
security reasons.
    (4) Customer account generation standards. (i) A computer file for 
each customer shall be prepared by a clerk, with no incompatible 
functions, prior to the customer being issued an account access card to 
be utilized for machine play. The customer may select his/her PIN to be 
used in conjunction with the account access card.
    (ii) The clerk shall sign-on with a unique password to a terminal 
equipped with peripherals required to establish a customer account. 
Passwords are issued and can only be changed by information technology 
personnel at the discretion of the department director.
    (iii) After entering a specified number of incorrect PIN entries at 
the cage or player terminal, the customer shall be directed to proceed 
to the Gaming Machine Information Center to obtain a new PIN. If a 
customer forgets, misplaces or requests a change to their PIN, the 
customer shall proceed to the Gaming Machine Information Center.
    (5) Deposit of credits standards. (i) The cashier shall sign-on 
with a unique password to a cashier terminal equipped with peripherals 
required to complete the credit transactions. Passwords are issued and 
can only be changed by information technology personnel at the 
discretion of the department director.
    (ii) The customer shall present cash, chips, coin or coupons along 
with their account access card to a cashier to deposit credits.
    (iii) The cashier shall complete the transaction by utilizing a 
card scanner that the cashier shall slide the customer's account access 
card through.
    (iv) The cashier shall accept the funds from the customer and enter 
the appropriate amount on the cashier terminal.
    (v) A multi-part deposit slip shall be generated by the point of 
sale receipt printer. The cashier shall direct the customer to sign the 
deposit slip receipt. One copy of the deposit slip shall be given to 
the customer. The other copy of the deposit slip shall be secured in 
the cashier's cash drawer.
    (vi) The cashier shall verify the customer's balance before 
completing the transaction. The cashier shall secure the funds in their 
cash drawer and return the account access card to the customer.
    (vii) Alternatively, if a kiosk is utilized to accept a deposit of 
credits, the Tribal gaming regulatory authority, or the gaming 
operation as approved by the Tribal gaming regulatory authority, shall 
establish and the gaming operation shall comply with procedures that 
safeguard the integrity of the kiosk system.
    (6) Prize standards. (i) Winners at the gaming machines may receive 
cash, prizes redeemable for cash or merchandise.
    (ii) If merchandise prizes are to be awarded, the specific type of 
prize or prizes that may be won shall be disclosed to the player before 
the game begins.
    (iii) The redemption period of account access cards, as approved by 
the Tribal gaming regulatory authority, shall be conspicuously posted 
in the gaming operation.
    (7) Credit withdrawal. The customer shall present their account 
access card to a cashier to withdraw their credits. The cashier shall 
perform the following:
    (i) Scan the account access card;
    (ii) Request the customer to enter their PIN, if the PIN was 
selected by the customer;
    (iii) The cashier shall ascertain the amount the customer wishes to 
withdraw and enter the amount into the computer;

[[Page 43419]]

    (iv) A multi-part withdrawal slip shall be generated by the point 
of sale receipt printer. The cashier shall direct the customer to sign 
the withdrawal slip;
    (v) The cashier shall verify that the account access card and the 
customer match by:
    (A) Comparing the customer to image on the computer screen;
    (B) Comparing the customer to image on customer's picture ID; or
    (C) Comparing the customer signature on the withdrawal slip to 
signature on the computer screen.
    (vi) The cashier shall verify the customer's balance before 
completing the transaction. The cashier shall pay the customer the 
appropriate amount, issue the customer the original withdrawal slip and 
return the account access card to the customer;
    (vii) The copy of the withdrawal slip shall be placed in the cash 
drawer. All account transactions shall be accurately tracked by the 
account server computer system. The copy of the withdrawal slip shall 
be forwarded to the accounting department at the end of the gaming day; 
and
    (viii) In the event the imaging function is temporarily disabled, 
customers shall be required to provide positive ID for cash withdrawal 
transactions at the cashier stations.
    (p) Smart cards. All smart cards (i.e., cards that possess the 
means to electronically store and retrieve data) that maintain the only 
source of account data are prohibited.


Sec. 542.14  What are the minimum internal control standards for the 
cage?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Personal checks, cashier's checks, payroll checks, and counter 
checks. (1) If personal checks, cashier's checks, payroll checks, or 
counter checks are cashed at the cage, the Tribal gaming regulatory 
authority, or the gaming operation as approved by the Tribal gaming 
regulatory authority, shall establish and the gaming operation shall 
comply with appropriate controls for purposes of security and 
integrity.
    (2) The Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with procedures for the 
acceptance of personal checks, collecting and recording checks returned 
to the gaming operation after deposit, re-deposit, and write-off 
authorization.
    (3) When counter checks are issued, the following shall be included 
on the check:
    (i) The customer's name and signature;
    (ii) The dollar amount of the counter check (both alpha and 
numeric);
    (iii) Customer's bank name and bank account number;
    (iv) Date of issuance; and
    (v) Signature or initials of the person approving the counter check 
transaction.
    (4) When traveler's checks or other guaranteed drafts such as 
cashier's checks are presented, the cashier shall comply with the 
examination and documentation procedures as required by the issuer.
    (c) Customer deposited funds. If a gaming operation permits a 
customer to deposit funds with the gaming operation at the cage, the 
following standards shall apply.
    (1) The receipt or withdrawal of a customer deposit shall be 
evidenced by at least a two-part document with one copy going to the 
customer and one copy remaining in the cage file.
    (2) The multi-part receipt shall contain the following information:
    (i) Same receipt number on all copies;
    (ii) Customer's name and signature;
    (iii) Date of receipt and withdrawal;
    (iv) Dollar amount of deposit/withdrawal; and
    (v) Nature of deposit (cash, check, chips); however,
    (vi) Provided all of the information in paragraph (c)(2)(i) through 
(v) is available, the only required information for all copies of the 
receipt is the receipt number.
    (3) The Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with procedures that:
    (i) Maintain a detailed record by customer name and date of all 
funds on deposit;
    (ii) Maintain a current balance of all customer cash deposits that 
are in the cage/vault inventory or accountability; and
    (iii) Reconcile this current balance with the deposits and 
withdrawals at least daily.
    (4) The gaming operation, as approved by the Tribal gaming 
regulatory authority, shall describe the sequence of the required 
signatures attesting to the accuracy of the information contained on 
the customer deposit or withdrawal form ensuring that the form is 
signed by the cashier.
    (5) All customer deposits and withdrawal transactions at the cage 
shall be recorded on a cage accountability form on a per-shift basis.
    (6) Only cash, cash equivalents, chips, and tokens shall be 
accepted from customers for the purpose of a customer deposit.
    (7) The Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with procedures that verify the 
customer's identity, including photo identification.
    (8) A file for customers shall be prepared prior to acceptance of a 
deposit.
    (d) Cage and vault accountability standards. (1) All transactions 
that flow through the cage shall be summarized on a cage accountability 
form on a per shift basis and shall be supported by documentation.
    (2) The cage and vault (including coin room) inventories shall be 
counted by the oncoming and outgoing cashiers. These employees shall 
make individual counts for comparison of accuracy and maintenance of 
individual accountability. Such counts shall be recorded at the end of 
each shift during which activity took place. All discrepancies shall be 
noted and investigated.
    (3) The gaming operation cash-on-hand shall include, but is not 
limited to, the following components:
    (i) Currency and coins;
    (ii) House chips, including reserve chips;
    (iii) Personal checks, cashier's checks, counter checks, and 
traveler's checks for deposit;
    (iv) Customer deposits;
    (v) Chips on tables;
    (vi) Hopper loads (coins put into machines when they are placed in 
service); and
    (vii) Fills and credits (these documents shall be treated as assets 
and liabilities, respectively, of the cage during a business day. When 
win or loss is recorded at the end of the business day, they are 
removed from the accountability).
    (4) The Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with a minimum bankroll formula 
to ensure the gaming operation maintains cash or cash equivalents (on 
hand and in the bank, if readily accessible) in an amount sufficient to 
satisfy obligations to the gaming operation's customers as they are 
incurred. A suggested bankroll

[[Page 43420]]

formula will be provided by the Commission upon request.
    (e) Chip and token standards. The Tribal gaming regulatory 
authority, or the gaming operation as approved by the Tribal gaming 
regulatory authority, shall establish and the gaming operation shall 
comply with procedures for the receipt, inventory, storage, and 
destruction of gaming chips and tokens.
    (f) Coupon standards. Any program for the exchange of coupons for 
chips, tokens, and/or another coupon program shall be approved by the 
Tribal gaming regulatory authority prior to implementation. If 
approved, the gaming operation shall establish and comply with 
procedures that account for and control such programs.
    (g) Accounting/auditing standards. (1) The cage accountability 
shall be reconciled to the general ledger at least monthly.
    (2) A trial balance of gaming operation accounts receivable, 
including the name of the customer and current balance, shall be 
prepared at least monthly for active, inactive, settled or written-off 
accounts.
    (3) The trial balance of gaming operation accounts receivable shall 
be reconciled to the general ledger each month. The reconciliation and 
any follow-up performed shall be documented, maintained for inspection, 
and provided to the Tribal gaming regulatory authority upon request.
    (4) On a monthly basis an evaluation of the collection percentage 
of credit issued to identify unusual trends shall be performed.
    (5) All cage and credit accounting procedures and any follow-up 
performed shall be documented, maintained for inspection, and provided 
to the Tribal gaming regulatory authority upon request.
    (h) Extraneous items. The Tribal gaming regulatory authority, or 
the gaming operation as approved by the Tribal gaming regulatory 
authority, shall establish and the gaming operation shall comply with 
procedures to address the transporting of extraneous items, such as 
coats, purses, and/or boxes, into and out of the cage, coin room, count 
room, and/or vault.


Sec. 542.15  What are the minimum internal control standards for 
credit?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Credit standards. The following standards shall apply if the 
gaming operation authorizes and extends credit to customers:
    (1) At least the following information shall be recorded for 
customers that have credit limits or are issued credit (excluding 
personal checks, payroll checks, cashier's checks, and traveler's 
checks):
    (i) Customer's name, current address, and signature;
    (ii) Identification verifications;
    (iii) Authorized credit limit;
    (iv) Documentation of authorization by a person designated by 
management to approve credit limits; and
    (v) Credit issuances and payments.
    (2) Prior to extending credit, the customer's gaming operation 
credit record and/or other documentation shall be examined to determine 
the following:
    (i) Properly authorized credit limit;
    (ii) Whether remaining credit is sufficient to cover the credit 
issuance; and
    (iii) Identity of the customer (except for known customers).
    (3) Credit extensions over a specified dollar amount shall be 
approved by personnel designated by management.
    (4) Proper approval of credit extensions over ten percent (10%) of 
the previously established limit shall be documented.
    (5) The job functions of credit approval (i.e., establishing the 
customer's credit worthiness) and credit extension (i.e., advancing 
customer's credit) shall be segregated for credit extensions to a 
single customer of $10,000 or more per day (applies whether the credit 
is extended in the pit or the cage).
    (6) If cage credit is extended to a single customer in an amount 
exceeding $2,500, appropriate gaming personnel shall be notified on a 
timely basis of the customers playing on cage credit, the applicable 
amount of credit issued, and the available balance.
    (7) Cage marker forms shall be at least two parts (the original 
marker and a payment slip), prenumbered by the printer or concurrently 
numbered by the computerized system, and utilized in numerical 
sequence.
    (8) The completed original cage marker shall contain at least the 
following information:
    (i) Marker number;
    (ii) Player's name and signature; and
    (iii) Amount of credit issued (both alpha and numeric).
    (9) The completed payment slip shall include the same marker number 
as the original, date and time of payment, amount of payment, nature of 
settlement (cash, chips, etc.), and signature of cashier receiving the 
payment.
    (c) Payment standards. (1) All payments received on outstanding 
credit instruments shall be recorded in ink or other permanent form of 
recordation in the gaming operation's records.
    (2) When partial payments are made on credit instruments, they 
shall be evidenced by a multi-part receipt (or another equivalent 
document) that contains:
    (i) The same preprinted number on all copies;
    (ii) Customer's name;
    (iii) Date of payment;
    (iv) Dollar amount of payment (or remaining balance if a new marker 
is issued), and nature of settlement (cash, chips, etc.);
    (v) Signature of employee receiving payment; and
    (vi) Number of credit instrument on which partial payment is being 
made.
    (3) Unless account balances are routinely confirmed on a random 
basis by the accounting or internal audit departments, or statements 
are mailed by a person independent of the credit transactions and 
collections thereon, and the department receiving payments cannot 
access cash, then the following standards shall apply:
    (i) The routing procedures for payments by mail require that they 
be received by a department independent of credit instrument custody 
and collection;
    (ii) Such receipts by mail shall be documented on a listing 
indicating the customer's name, amount of payment, nature of payment 
(if other than a check), and date payment received; and
    (iii) The total amount of the listing of mail receipts shall be 
reconciled with the total mail receipts recorded on the appropriate 
accountability form by the accounting department on a random basis (for 
at least three (3) days per month).
    (d) Access to credit documentation. (1) Access to credit 
documentation shall be restricted as follows:
    (i) The credit information shall be restricted to those positions 
that require access and are so authorized by management;
    (ii) Outstanding credit instruments shall be restricted to persons 
authorized by management; and
    (iii) Written-off credit instruments shall be further restricted to 
persons specified by management.
    (2) [Reserved]
    (e) Maintenance of credit documentation. (1) All extensions of cage 
credit, pit credit transferred to the cage, and subsequent payments 
shall be documented on a credit instrument control form.

[[Page 43421]]

    (2) Records of all correspondence, transfers to and from outside 
agencies, and other documents related to issued credit instruments 
shall be maintained.
    (f) Write-off and settlement standards. (1) Written-off or settled 
credit instruments shall be authorized in writing.
    (2) Such authorizations shall be made by at least two management 
officials who are from departments independent of the credit 
transaction.
    (g) Collection agency standards. (1) If credit instruments are 
transferred to collection agencies or other collection representatives, 
a copy of the credit instrument and a receipt from the collection 
representative shall be obtained and maintained until the original 
credit instrument is returned or payment is received.
    (2) A person independent of credit transactions and collections 
shall periodically review the documents in paragraph (g)(1) of this 
section.
    (h) Accounting/auditing standards. (1) A person independent of the 
cage, credit, and collection functions shall perform all of the 
following at least three (3) times per year:
    (i) Ascertain compliance with credit limits and other established 
credit issuance procedures;
    (ii) Randomly reconcile outstanding balances of both active and 
inactive accounts on the accounts receivable listing to individual 
credit records and physical instruments;
    (iii) Examine credit records to determine that appropriate 
collection efforts are being made and payments are being properly 
recorded; and
    (iv) For a minimum of five (5) days per month, partial payment 
receipts shall be subsequently reconciled to the total payments 
recorded by the cage for the day and shall be numerically accounted 
for.
    (2) [Reserved]


Sec. 542.16  What are the minimum internal control standards for 
information technology?

    (a) General controls for gaming hardware and software. (1) 
Management shall take an active role in making sure that physical and 
logical security measures are implemented, maintained, and adhered to 
by personnel to prevent unauthorized access that could cause errors or 
compromise data or processing integrity.
    (i) Management shall ensure that all new gaming vendor hardware and 
software agreements/contracts contain language requiring the vendor to 
adhere to tribal internal control standards applicable to the goods and 
services the vendor is providing.
    (ii) Physical security measures shall exist over computer, computer 
terminals, and storage media to prevent unauthorized access and loss of 
integrity of data and processing.
    (iii) Access to systems software and application programs shall be 
limited to authorized personnel.
    (iv) Access to computer data shall be limited to authorized 
personnel.
    (v) Access to computer communications facilities, or the computer 
system, and information transmissions shall be limited to authorized 
personnel.
    (vi) Standards in paragraph (a)(1) of this section shall apply to 
each applicable department within the gaming operation.
    (2) The main computers (i.e., hardware, software, and data files) 
for each gaming application (e.g., keno, race and sports, gaming 
machines, etc.) shall be in a secured area with access restricted to 
authorized persons, including vendors.
    (3) Access to computer operations shall be restricted to authorized 
personnel to reduce the risk of loss of integrity of data or 
processing.
    (4) Incompatible duties shall be adequately segregated and 
monitored to prevent error in general information technology procedures 
to go undetected or fraud to be concealed.
    (5) Non-information technology personnel shall be precluded from 
having unrestricted access to the secured computer areas.
    (6) The computer systems, including application software, shall be 
secured through the use of passwords or other approved means where 
applicable. Management personnel or persons independent of the 
department being controlled shall assign and control access to system 
functions.
    (7) Passwords shall be controlled as follows unless otherwise 
addressed in the standards in this section.
    (i) Each user shall have their own individual password;
    (ii) Passwords shall be changed at least quarterly with changes 
documented; and
    (iii) For computer systems that automatically force a password 
change on a quarterly basis, documentation shall be maintained listing 
the systems and the date the user was given access.
    (8) Adequate backup and recovery procedures shall be in place that 
include:
    (i) Frequent backup of data files;
    (ii) Backup of all programs;
    (iii) Secured off-site storage of all backup data files and 
programs, or other adequate protection; and
    (iv) Recovery procedures, which are tested on a sample basis at 
least annually with documentation of results.
    (9) Adequate information technology system documentation shall be 
maintained, including descriptions of hardware and software, operator 
manuals, etc.
    (b) Independence of information technology personnel. (1) The 
information technology personnel shall be independent of the gaming 
areas (e.g., cage, pit, count rooms, etc.). Information technology 
personnel procedures and controls should be documented and 
responsibilities communicated.
    (2) Information technology personnel shall be precluded from 
unauthorized access to:
    (i) Computers and terminals located in gaming areas;
    (ii) Source documents; and
    (iii) Live data files (not test data).
    (3) Information technology personnel shall be restricted from:
    (i) Having unauthorized access to cash or other liquid assets; and
    (ii) Initiating general or subsidiary ledger entries.
    (c) Gaming program changes. (1) Program changes for in-house 
developed systems should be documented as follows:
    (i) Requests for new programs or program changes shall be reviewed 
by the information technology supervisor. Approvals to begin work on 
the program shall be documented;
    (ii) A written plan of implementation for new and modified programs 
shall be maintained, and shall include, at a minimum, the date the 
program is to be placed into service, the nature of the change, a 
description of procedures required in order to bring the new or 
modified program into service (conversion or input of data, 
installation procedures, etc.), and an indication of who is to perform 
all such procedures;
    (iii) Testing of new and modified programs shall be performed and 
documented prior to implementation; and
    (iv) A record of the final program or program changes, including 
evidence of user acceptance, date in service, programmer, and reason 
for changes, shall be documented and maintained.
    (2) [Reserved]
    (d) Security logs. (1) If computer security logs are generated by 
the system, they shall be reviewed by information technology 
supervisory personnel for evidence of:
    (i) Multiple attempts to log-on, or alternatively, the system shall 
deny user access after three attempts to log-on;
    (ii) Unauthorized changes to live data files; and

[[Page 43422]]

    (iii) Any other unusual transactions.
    (2) This paragraph shall not apply to personal computers.
    (e) Remote dial-up. (1) If remote dial-up to any associated 
equipment is allowed for software support, the gaming operation shall 
maintain an access log that includes:
    (i) Name of employee authorizing modem access;
    (ii) Name of authorized programmer or manufacturer representative;
    (iii) Reason for modem access;
    (iv) Description of work performed; and
    (v) Date, time, and duration of access.
    (2) [Reserved]
    (f) Document storage. (1) Documents may be scanned or directly 
stored to an unalterable storage medium under the following conditions.
    (i) The storage medium shall contain the exact duplicate of the 
original document.
    (ii) All documents stored on the storage medium shall be maintained 
with a detailed index containing the gaming operation department and 
date. This index shall be available upon request by the Commission.
    (iii) Upon request and adequate notice by the Commission, hardware 
(terminal, printer, etc.) shall be made available in order to perform 
auditing procedures.
    (iv) Controls shall exist to ensure the accurate reproduction of 
records up to and including the printing of stored documents used for 
auditing purposes.
    (v) The storage medium shall be retained for a minimum of five 
years.
    (vi) Original documents must be retained until the books and 
records have been audited by an independent certified public 
accountant.
    (2) [Reserved]


Sec. 542.17  What are the minimum internal control standards for 
complimentary services or items?

    (a) Each Tribal gaming regulatory authority or gaming operation 
shall establish and the gaming operation shall comply with procedures 
for the authorization, issuance, and tracking of complimentary services 
and items, including cash and non-cash gifts. Such procedures must be 
approved by the Tribal gaming regulatory authority and shall include, 
but shall not be limited to, the procedures by which the gaming 
operation delegates to its employees the authority to approve the 
issuance of complimentary services and items, and the procedures by 
which conditions or limits, if any, which may apply to such authority 
are established and modified (including limits based on relationships 
between the authorizer and recipient), and shall further include 
effective provisions for audit purposes.
    (b) At least monthly, accounting, information technology, or audit 
personnel that cannot grant or receive complimentary privileges shall 
prepare reports that include the following information:
    (1) Name of customer who received the complimentary service or 
item;
    (2) Name(s) of authorized issuer of the complimentary service or 
item;
    (3) The actual cash value of the complimentary service or item;
    (4) The type of complimentary service or item (i.e., food, 
beverage, etc.); and
    (5) Date the complimentary service or item was issued.
    (c) The report required by paragraph (b) of this section shall not 
be required to include complimentary services or items below a 
reasonable amount to be established by the Tribal gaming regulatory 
authority, or the gaming operation as approved by the Tribal gaming 
regulatory authority.
    (d) The internal audit or accounting departments shall review the 
reports required in paragraph (b) of this section at least monthly. 
These reports shall be made available to the Tribe, Tribal gaming 
regulatory authority, audit committee, other entity designated by the 
Tribe, and the Commission upon request.


Sec. 542.18  How does a gaming operation apply for a variance from the 
standards of this part?

    (a) Tribal gaming regulatory authority approval. (1) A Tribal 
gaming regulatory authority may approve a variance for a gaming 
operation if it has determined that the variance will achieve a level 
of control sufficient to accomplish the purpose of the standard it is 
to replace.
    (2) For each enumerated standard for which the Tribal gaming 
regulatory authority approves a variance, it shall submit to the 
Commission, within thirty (30) days, a detailed report, which shall 
include the following:
    (i) A detailed description of the variance;
    (ii) An explanation of how the variance achieves a level of control 
sufficient to accomplish the purpose of the standard it is to replace; 
and
    (iii) Evidence that the Tribal gaming regulatory authority has 
approved the variance.
    (3) In the event that the Tribal gaming regulatory authority or the 
Tribe chooses to submit a variance request directly to the Commission, 
it may do so without the approval requirement set forth in paragraph 
(a)(2)(iii) of this section.
    (b) Commission concurrence. (1) Following receipt of the variance 
approval, the Commission shall have sixty (60) days to concur with or 
object to the approval of the variance.
    (2) Any objection raised by the Commission shall be in the form of 
a written explanation based upon the following criteria:
    (i) There is no valid explanation of why the gaming operation 
should have received a variance approval from the Tribal gaming 
regulatory authority on the enumerated standard; or
    (ii) The variance as approved by the Tribal gaming regulatory 
authority does not provide a level of control sufficient to accomplish 
the purpose of the standard it is to replace.
    (3) If the Commission fails to object in writing within sixty (60) 
days after the date of receipt of a complete submission, the variance 
shall be considered concurred with by the Commission.
    (4) The 60-day deadline may be extended, provided such extension is 
mutually agreed upon by the Tribal gaming regulatory authority and the 
Commission.
    (c) Curing Commission objections. (1) Following an objection by the 
Commission to the issuance of a variance, the Tribal gaming regulatory 
authority shall have the opportunity to cure any objections noted by 
the Commission.
    (2) A Tribal gaming regulatory authority may cure the objections 
raised by the Commission by:
    (i) Rescinding its initial approval of the variance; or
    (ii) Amending its initial approval and re-submitting it to the 
Commission.
    (3) Upon any re-submission of a variance approval, the Commission 
shall have thirty (30) days to concur with or object to the re-
submitted variance.
    (4) If the Commission fails to object in writing within thirty (30) 
days after the date of receipt of the re-submitted variance, the re-
submitted variance shall be considered concurred with by the 
Commission.
    (d) Appeals. (1) Upon receipt of objections to a re-submission of a 
variance, the Tribal gaming regulatory authority shall be entitled to 
an appeal to the full Commission in accordance with the following 
process:
    (i) Within thirty (30) days of receiving an objection to a re-
submission, the Tribal gaming regulatory authority shall file its 
notice of appeal.
    (ii) Failure to file an appeal within the time provided by this 
section shall result in a waiver of the opportunity for an appeal.
    (iii) An appeal under this section shall specify the reasons why 
the Tribal gaming regulatory authority believes the

[[Page 43423]]

Commission's objections should be reviewed, and shall include 
supporting documentation, if any.
    (iv) Within thirty (30) days after receipt of the appeal, the 
Commission shall render a decision based upon the criteria contained 
within paragraph (b)(2) of this section unless the appellant elects to 
provide the Commission additional time, not to exceed an additional 
thirty (30) days, to render a decision.
    (v) In the absence of a decision within the time provided, the 
Tribal gaming regulatory authority's re-submission shall be considered 
concurred with by the Commission and become effective.
    (2) [Reserved]
    (e) Effective date of variance. The gaming operation shall comply 
with standards that achieve a level of control sufficient to accomplish 
the purpose of the standard it is to replace until such time as the 
Commission objects to the Tribal gaming regulatory authority's approval 
of a variance as provided in paragraph (b) of this section.


Sec. 542.20  What is a Tier A gaming operation?

    A Tier A gaming operation is one with annual gross gaming revenues 
of more than $1 million but not more than $5 million.


Sec. 542.21  What are the minimum internal control standards for drop 
and count for Tier A gaming operations?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Table game drop standards. (1) The setting out of empty table 
game drop boxes and the drop shall be a continuous process.
    (2) At the end of each shift:
    (i) All locked table game drop boxes shall be removed from the 
tables by a person independent of the pit shift being dropped;
    (ii) A separate drop box shall be placed on each table opened at 
any time during each shift or a gaming operation may utilize a single 
drop box with separate openings and compartments for each shift; and
    (iii) Upon removal from the tables, table game drop boxes shall be 
transported directly to the count room or other equivalently secure 
area with comparable controls and locked in a secure manner until the 
count takes place.
    (3) If drop boxes are not placed on all tables, then the pit 
department shall document which tables were open during the shift.
    (4) The transporting of table game drop boxes shall be performed by 
a minimum of two persons, at least one of whom is independent of the 
pit shift being dropped.
    (5) All table game drop boxes shall be posted with a number 
corresponding to a permanent number on the gaming table and marked to 
indicate game, table number, and shift.
    (c) Soft count room personnel. (1) The table game soft count and 
the gaming machine bill acceptor count shall be performed by a minimum 
of two employees.
    (2) Count room personnel shall not be allowed to exit or enter the 
count room during the count except for emergencies or scheduled breaks. 
At no time during the count, shall there be fewer than two employees in 
the count room until the drop proceeds have been accepted into cage/
vault accountability.
    (3) Count team members shall be rotated on a routine basis such 
that the count team is not consistently the same two persons more than 
four (4) days per week. This standard shall not apply to gaming 
operations that utilize a count team of more than two persons.
    (4) The count team shall be independent of transactions being 
reviewed and counted. The count team shall be independent of the cage/
vault departments, however, a dealer or a cage cashier may be used if 
this person is not allowed to perform the recording function. An 
accounting representative may be used if there is an independent audit 
of all soft count documentation.
    (d) Table game soft count standards. (1) The table game soft count 
shall be performed in a soft count room or other equivalently secure 
area with comparable controls.
    (2) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers, supervisors for resolution of problems, and 
authorized maintenance personnel.
    (3) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (4) The table game drop boxes shall be individually emptied and 
counted in such a manner to prevent the commingling of funds between 
boxes until the count of the box has been recorded.
    (i) The count of each box shall be recorded in ink or other 
permanent form of recordation.
    (ii) A second count shall be performed by an employee on the count 
team who did not perform the initial count.
    (iii) Corrections to information originally recorded by the count 
team on soft count documentation shall be made by drawing a single line 
through the error, writing the correct figure above the original 
figure, and then obtaining the initials of at least two count team 
members who verified the change, unless the count team only has two (2) 
members in which case the initials of only one (1) verifying member is 
required.
    (5) If cash counters are utilized and the count room table is used 
only to empty boxes and sort/stack contents, a count team member shall 
be able to observe the loading and unloading of all cash at the cash 
counter, including rejected cash.
    (6) Table game drop boxes, when empty, shall be shown to another 
member of the count team, or to another person who is observing the 
count, or to surveillance.
    (7) Orders for fill/credit (if applicable) shall be matched to the 
fill/credit slips. Fills and credits shall be traced to or recorded on 
the count sheet.
    (8) Pit marker issue and payment slips (if applicable) removed from 
the table game drop boxes shall either be:
    (i) Traced to or recorded on the count sheet by the count team; or
    (ii) Totaled by shift and traced to the totals documented by the 
computerized system. Accounting personnel shall verify the issue/
payment slip for each table is accurate.
    (9) Foreign currency exchange forms (if applicable) removed from 
the table game drop boxes shall be reviewed for the proper daily 
exchange rate and the conversion amount shall be recomputed by the 
count team. Alternatively, this may be performed by accounting/auditing 
employees.
    (10) The opening/closing table and marker inventory forms (if 
applicable) shall either be:
    (i) Examined and traced to or recorded on the count sheet; or
    (ii) If a computerized system is used, accounting personnel can 
trace the opening/closing table and marker inventory forms to the count 
sheet. Discrepancies shall be investigated with the findings documented 
and maintained for inspection.
    (11) The count sheet shall be reconciled to the total drop by a 
count team member who shall not function as the sole recorder.
    (12) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.

[[Page 43424]]

    (13) All drop proceeds and cash equivalents that were counted shall 
be turned over to the cage or vault cashier (who shall be independent 
of the count team) or to an authorized person/employee independent of 
the revenue generation and the count process for verification. Such 
person shall certify by signature as to the accuracy of the drop 
proceeds delivered and received.
    (14) The count sheet, with all supporting documents, shall be 
delivered to the accounting department by a count team member or a 
person independent of the cashiers department. Alternatively, it may be 
adequately secured (e.g., locked container to which only accounting 
personnel can gain access) until retrieved by the accounting 
department.
    (15) Access to stored, full table game drop boxes shall be 
restricted to authorized members of the drop and count teams.
    (e) Gaming machine bill acceptor drop standards. (1) A minimum of 
two employees shall be involved in the removal of the gaming machine 
drop, at least one of whom is independent of the gaming machine 
department.
    (2) All bill acceptor canisters shall be removed only at the time 
previously designated by the gaming operation and reported to the 
Tribal gaming regulatory authority, except for emergency drops.
    (3) The bill acceptor canisters shall be removed by a person 
independent of the gaming machine department then transported directly 
to the count room or other equivalently secure area with comparable 
controls and locked in a secure manner until the count takes place.
    (i) Security shall be provided over the bill acceptor canisters 
removed from the gaming machines and awaiting transport to the count 
room.
    (ii) The transporting of bill acceptor canisters shall be performed 
by a minimum of two persons, at least one of whom is independent of the 
gaming machine department.
    (4) All bill acceptor canisters shall be posted with a number 
corresponding to a permanent number on the gaming machine.
    (f) Gaming machine bill acceptor count standards. (1) The gaming 
machine bill acceptor count shall be performed in a soft count room or 
other equivalently secure area with comparable controls.
    (2) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers, supervisors for resolution of problems, and 
authorized maintenance personnel.
    (3) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (4) The bill acceptor canisters shall be individually emptied and 
counted in such a manner to prevent the commingling of funds between 
canisters until the count of the canister has been recorded.
    (i) The count of each canister shall be recorded in ink or other 
permanent form of recordation.
    (ii) A second count shall be performed by an employee on the count 
team who did not perform the initial count.
    (iii) Corrections to information originally recorded by the count 
team on soft count documentation shall be made by drawing a single line 
through the error, writing the correct figure above the original 
figure, and then obtaining the initials of at least two count team 
members who verified the change.
    (5) If cash counters are utilized and the count room table is used 
only to empty canisters and sort/stack contents, a count team member 
shall be able to observe the loading and unloading of all cash at the 
cash counter, including rejected cash.
    (6) Canisters, when empty, shall be shown to another member of the 
count team, or to another person who is observing the count, or to 
surveillance.
    (7) The count sheet shall be reconciled to the total drop by a 
count team member who shall not function as the sole recorder.
    (8) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.
    (9) All drop proceeds and cash equivalents that were counted shall 
be turned over to the cage or vault cashier (who shall be independent 
of the count team) or to an authorized person/employee independent of 
the revenue generation and the count process for verification. Such 
person shall certify by signature as to the accuracy of the drop 
proceeds delivered and received.
    (10) The count sheet, with all supporting documents, shall be 
delivered to the accounting department by a count team member or a 
person independent of the cashiers department. Alternatively, it may be 
adequately secured (e.g., locked container to which only accounting 
personnel can gain access) until retrieved by the accounting 
department.
    (11) Access to stored bill acceptor canisters, full or empty, shall 
be restricted to:
    (i) Authorized members of the drop and count teams; and
    (ii) Authorized personnel in an emergency for resolution of a 
problem.
    (12) All bill acceptor canisters shall be posted with a number 
corresponding to a permanent number on the gaming machine.
    (g) Gaming machine coin drop standards. (1) A minimum of two 
employees shall be involved in the removal of the gaming machine drop, 
at least one of whom is independent of the gaming machine department.
    (2) All drop buckets shall be removed only at the time previously 
designated by the gaming operation and reported to the Tribal gaming 
regulatory authority, except for emergency drops.
    (3) Security shall be provided over the buckets removed from the 
gaming machine drop cabinets and awaiting transport to the count room.
    (4) As each machine is opened, the contents shall be tagged with 
its respective machine number if the bucket is not permanently marked 
with the machine number. The contents shall be transported directly to 
the area designated for the counting of such drop proceeds. If more 
than one trip is required to remove the contents of the machines, the 
filled carts of coins shall be securely locked in the room designed for 
counting or in another equivalently secure area with comparable 
controls. There shall be a locked covering on any carts in which the 
drop route includes passage out of doors.
    (i) Alternatively, a smart bucket system that electronically 
identifies and tracks the gaming machine number, and facilitates the 
proper recognition of gaming revenue, shall satisfy the requirements of 
this paragraph.
    (ii) [Reserved]
    (5) Each drop bucket in use shall be:
    (i) Housed in a locked compartment separate from any other 
compartment of the gaming machine and keyed differently than other 
gaming machine compartments; and
    (ii) Identifiable to the gaming machine from which it is removed. 
If the gaming machine is identified with a removable tag that is placed 
in the bucket, the tag shall be placed on top of the bucket when it is 
collected.
    (6) Each gaming machine shall have drop buckets into which coins or 
tokens that are retained by the gaming machine are collected. Drop 
bucket contents shall not be used to make change or pay hand-paid 
payouts.
    (7) The collection procedures may include procedures for dropping 
gaming machines that have trays instead of drop buckets.

[[Page 43425]]

    (h) Hard count room personnel. (1) The weigh/count shall be 
performed by a minimum of two employees.
    (2) At no time during the weigh/count shall there be fewer than two 
employees in the count room until the drop proceeds have been accepted 
into cage/vault accountability.
    (i) If the gaming machine count is conducted with a continuous 
mechanical count meter that is not reset during the count and is 
verified in writing by at least two employees at the start and end of 
each denomination count, then one employee may perform the wrap.
    (ii) [Reserved]
    (3) Count team members shall be rotated on a routine basis such 
that the count team is not consistently the same two persons more than 
four (4) days per week. This standard shall not apply to gaming 
operations that utilize a count team of more than two persons.
    (4) The count team shall be independent of transactions being 
reviewed and counted. The count team shall be independent of the cage/
vault departments, unless they are non-supervisory gaming machine 
employees and perform the laborer function only (A non-supervisory 
gaming machine employee is defined as a person below the level of 
gaming machine shift supervisor). A cage cashier may be used if this 
person is not allowed to perform the recording function. An accounting 
representative may be used if there is an independent audit of all 
count documentation.
    (i) Gaming machine coin count and wrap standards. (1) Coins shall 
include tokens.
    (2) The gaming machine coin count and wrap shall be performed in a 
count room or other equivalently secure area with comparable controls.
    (i) Alternatively, an on-the-floor drop system utilizing a mobile 
scale shall satisfy the requirements of this paragraph, subject to the 
following conditions:
    (A) The gaming operation shall utilize and maintain an effective 
on-line gaming machine monitoring system, as described in 
Sec. 542.13(m)(3);
    (B) Components of the on-the-floor drop system shall include, but 
not be limited to, a weigh scale, a laptop computer through which 
weigh/count applications are operated, a security camera available for 
the mobile scale system, and a VCR to be housed within the video 
compartment of the mobile scale. The system may include a mule cart 
used for mobile weigh scale system locomotion.
    (C) The gaming operation must obtain the security camera available 
with the system, and this camera must be added in such a way as to 
eliminate tampering.
    (D) Prior to the drop, the drop/count team shall ensure the scale 
batteries are charged;
    (E) Prior to the drop, a videotape shall be inserted into the VCR 
used to record the drop in conjunction with the security camera system 
and the VCR shall be activated;
    (F) The weigh scale test shall be performed prior to removing the 
unit from the hard count room for the start of the weigh/drop/count;
    (G) Surveillance shall be notified when the weigh/drop/count begins 
and shall be capable of monitoring the entire process;
    (H) An observer independent of the weigh/drop/count teams 
(independent observer) shall remain by the weigh scale at all times and 
shall observe the entire weigh/drop/count process;
    (I) Physical custody of the key(s) needed to access the laptop and 
video compartment shall require the involvement of two persons, one of 
whom is independent of the drop and count team;
    (J) The mule key (if applicable), the laptop and video compartment 
keys, and the remote control for the VCR shall be maintained by a 
department independent of the gaming machine department. The 
appropriate personnel shall sign out these keys;
    (K) A person independent of the weigh/drop/count teams shall be 
required to accompany these keys while they are checked out, and 
observe each time the laptop compartment is opened;
    (L) The laptop access panel shall not be opened outside the hard 
count room, except in instances when the laptop must be rebooted as a 
result of a crash, lock up, or other situation requiring immediate 
corrective action;
    (M) User access to the system shall be limited to those employees 
required to have full or limited access to complete the weigh/drop/
count; and
    (N) When the weigh/drop/count is completed, the independent 
observer shall access the laptop compartment, end the recording 
session, eject the videotape, and deliver the videotape to 
surveillance.
    (ii) [Reserved]
    (3) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers, supervisors for resolution of problems, and 
authorized maintenance personnel.
    (4) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (5) The following functions shall be performed in the counting of 
the gaming machine drop:
    (i) Recorder function, which involves the recording of the gaming 
machine count; and
    (ii) Count team supervisor function, which involves the control of 
the gaming machine weigh and wrap process. The supervisor shall not 
perform the initial recording of the weigh/count unless a weigh scale 
with a printer is used.
    (6) The gaming machine drop shall be counted, wrapped, and 
reconciled in such a manner to prevent the commingling of gaming 
machine drop coin with coin (for each denomination) from the next 
gaming machine drop until the count of the gaming machine drop has been 
recorded. If the coins are not wrapped immediately after being weighed 
or counted, they shall be secured and not commingled with other coins.
    (i) The amount of the gaming machine drop from each machine shall 
be recorded in ink or other permanent form of recordation on a gaming 
machine count document by the recorder or mechanically printed by the 
weigh scale.
    (ii) Corrections to information originally recorded by the count 
team on gaming machine count documentation shall be made by drawing a 
single line through the error, writing the correct figure above the 
original figure, and then obtaining the initials of at least two count 
team members who verified the change.
    (A) If a weigh scale interface is used, corrections to gaming 
machine count data shall be made using either of the following:
    (1) Drawing a single line through the error on the gaming machine 
document, writing the correct figure above the original figure, and 
then obtaining the initials of at least two count team employees. If 
this procedure is used, an employee independent of the gaming machine 
department and count team shall enter the correct figure into the 
computer system prior to the generation of related gaming machine 
reports; or
    (2) During the count process, correct the error in the computer 
system and enter the passwords of at least two count team employees. If 
this procedure is used, an exception report shall be generated by the 
computer system identifying the gaming machine number, the error, the 
correction, and the count team employees attesting to the correction.
    (B) [Reserved]

[[Page 43426]]

    (7) If applicable, the weight shall be converted to dollar amounts 
prior to the reconciliation of the weigh to the wrap.
    (8) If a coin meter is used, a count team member shall convert the 
coin count for each denomination into dollars and shall enter the 
results on a summary sheet.
    (9) The recorder and at least one other count team member shall 
sign the weigh tape and the gaming machine count document attesting to 
the accuracy of the weigh/count.
    (10) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.
    (11) All drop proceeds and cash equivalents that were counted shall 
be turned over to the cage or vault cashier (who shall be independent 
of the count team) or to an authorized person/employee independent of 
the revenue generation and the count process for verification. Such 
person shall certify by signature as to the accuracy of the drop 
proceeds delivered and received.
    (12) All gaming machine count and wrap documentation, including any 
applicable computer storage media, shall be delivered to the accounting 
department by a count team member or a person independent of the 
cashier's department. Alternatively, it may be adequately secured 
(e.g., locked container to which only accounting personnel can gain 
access) until retrieved by the accounting department.
    (13) If the coins are transported off the property, a second 
(alternative) count procedure shall be performed before the coins leave 
the property. Any variances shall be documented.
    (14) Variances. Large (by denomination, either $1,000 or 2% of the 
drop, whichever is less) or unusual (e.g., zero for weigh/count or 
patterned for all counts) variances between the weigh/count and wrap 
shall be investigated by management personnel independent of the gaming 
machine department, count team, and the cage/vault functions on a 
timely basis. The results of such investigation shall be documented, 
maintained for inspection, and provided to the Tribal gaming regulatory 
authority upon request.
    (j) Security of the coin room inventory during the gaming machine 
coin count and wrap. (1) If the count room serves as a coin room and 
coin room inventory is not secured so as to preclude access by the 
count team, then the following standards shall apply:
    (i) At the commencement of the gaming machine count the following 
requirements shall be met:
    (A) The coin room inventory shall be counted by at least two 
employees, one of whom is a member of the count team and the other is 
independent of the weigh/count and wrap procedures;
    (B) The count in paragraph (j)(1)(i)(A) of this section shall be 
recorded on an appropriate inventory form;
    (ii) Upon completion of the wrap of the gaming machine drop:
    (A) At least two members of the count team (wrap team), 
independently from each other, shall count the ending coin room 
inventory;
    (B) The counts in paragraph (j)(1)(ii)(A) of this section shall be 
recorded on a summary report(s) that evidences the calculation of the 
final wrap by subtracting the beginning inventory from the sum of the 
ending inventory and transfers in and out of the coin room;
    (C) The same count team members shall compare the calculated wrap 
to the weigh/count, recording the comparison and noting any variances 
on the summary report;
    (D) A member of the cage/vault department shall count the ending 
coin room inventory by denomination and shall reconcile it to the 
beginning inventory, wrap, transfers, and weigh/count; and
    (E) At the conclusion of the reconciliation, at least two count/
wrap team members and the verifying employee shall sign the summary 
report(s) attesting to its accuracy.
    (iii) The functions described in paragraph (j)(1)(ii)(A) and (C) of 
this section may be performed by only one count team member. That count 
team member must then sign the summary report, along with the verifying 
employee, as required under paragraph (j)(1)(ii)(E).
    (2) If the count room is segregated from the coin room, or if the 
coin room is used as a count room and the coin room inventory is 
secured to preclude access by the count team, all of the following 
requirements shall be completed, at the conclusion of the count:
    (i) At least two members of the count/wrap team shall count the 
final wrapped gaming machine drop independently from each other;
    (ii) The counts shall be recorded on a summary report;
    (iii) The same count team members (or the accounting department) 
shall compare the final wrap to the weigh/count, recording the 
comparison, and noting any variances on the summary report;
    (iv) A member of the cage/vault department shall count the wrapped 
gaming machine drop by denomination and reconcile it to the weigh/
count;
    (v) At the conclusion of the reconciliation, at least two count 
team members and the cage/vault employee shall sign the summary report 
attesting to its accuracy; and
    (vi) The wrapped coins (exclusive of proper transfers) shall be 
transported to the cage, vault or coin vault after the reconciliation 
of the weigh/count to the wrap.
    (k) Transfers during the gaming machine coin count and wrap. (1) 
Transfers may be permitted during the count and wrap only if permitted 
under the internal control standards approved by the Tribal gaming 
regulatory authority.
    (2) Each transfer shall be recorded on a separate multi-part form 
with a preprinted or concurrently-printed form number (used solely for 
gaming machine count transfers) that shall be subsequently reconciled 
by the accounting department to ensure the accuracy of the reconciled 
gaming machine drop.
    (3) Each transfer must be counted and signed for by at least two 
members of the count team and by a person independent of the count team 
who is responsible for authorizing the transfer.
    (l) Gaming machine drop key control standards. (1) Gaming machine 
coin drop cabinet keys, including duplicates, shall be maintained by a 
department independent of the gaming machine department.
    (2) The physical custody of the keys needed to access gaming 
machine coin drop cabinets, including duplicates, shall require the 
involvement of two persons, one of whom is independent of the gaming 
machine department.
    (3) Two employees (separate from key custodian) shall be required 
to accompany such keys while checked out and observe each time gaming 
machine drop cabinets are accessed.
    (m) Table game drop box key control standards. (1) Tier A gaming 
operations shall be exempt from compliance with this paragraph if the 
Tribal gaming regulatory authority, or the gaming operation as approved 
by the Tribal gaming regulatory authority, establishes and the gaming 
operation complies with procedures that maintain adequate key control 
and restricts access to the keys.
    (2) Procedures shall be developed and implemented to insure that 
unauthorized access to empty table game drop boxes shall not occur from 
the time the boxes leave the storage racks until they are placed on the 
tables.
    (3) The involvement of at least two persons independent of the cage 
department shall be required to access stored empty table game drop 
boxes.

[[Page 43427]]

    (4) The release keys shall be separately keyed from the contents 
keys.
    (5) At least two count team members are required to be present at 
the time count room and other count keys are issued for the count.
    (6) All duplicate keys shall be maintained in a manner that 
provides the same degree of control as is required for the original 
keys. Records shall be maintained for each key duplicated that indicate 
the number of keys made and destroyed.
    (7) Logs shall be maintained by the custodian of sensitive keys to 
document authorization of personnel accessing keys.
    (n) Table game drop box release keys. (1) Tier A gaming operations 
shall be exempt from compliance with this paragraph if the Tribal 
gaming regulatory authority, or the gaming operation as approved by the 
Tribal gaming regulatory authority, establishes and the gaming 
operation complies with procedures that maintain adequate key control 
and restricts access to the keys.
    (2) The table game drop box release keys shall be maintained by a 
department independent of the pit department.
    (3) Only the person(s) authorized to remove table game drop boxes 
from the tables shall be allowed access to the table game drop box 
release keys; however, the count team members may have access to the 
release keys during the soft count in order to reset the table game 
drop boxes.
    (4) Persons authorized to remove the table game drop boxes shall be 
precluded from having simultaneous access to the table game drop box 
contents keys and release keys.
    (5) For situations requiring access to a table game drop box at a 
time other than the scheduled drop, the date, time, and signature of 
employee signing out/in the release key must be documented.
    (o) Bill acceptor canister release keys. (1) Tier A gaming 
operations shall be exempt from compliance with this paragraph if the 
Tribal gaming regulatory authority, or the gaming operation as approved 
by the Tribal gaming regulatory authority, establishes and the gaming 
operation complies with procedures that maintain adequate key control 
and restricts access to the keys.
    (2) The bill acceptor canister release keys shall be maintained by 
a department independent of the gaming machine department.
    (3) Only the person(s) authorized to remove bill acceptor canisters 
from the gaming machines shall be allowed access to the release keys.
    (4) Persons authorized to remove the bill acceptor canisters shall 
be precluded from having simultaneous access to the bill acceptor 
canister contents keys and release keys.
    (5) For situations requiring access to a bill acceptor canister at 
a time other than the scheduled drop, the date, time, and signature of 
employee signing out/in the release key must be documented.
    (p) Table game drop box storage rack keys. (1) Tier A gaming 
operations shall be exempt from compliance with this paragraph if the 
Tribal gaming regulatory authority, or the gaming operation as approved 
by the Tribal gaming regulatory authority, establishes and the gaming 
operation complies with procedures that maintain adequate key control 
and restricts access to the keys.
    (2) Persons authorized to obtain table game drop box storage rack 
keys shall be precluded from having simultaneous access to table game 
drop box contents keys, with the exception of the count team.
    (q) Bill acceptor canister storage rack keys. (1) Tier A gaming 
operations shall be exempt from compliance with this paragraph if the 
Tribal gaming regulatory authority, or the gaming operation as approved 
by the Tribal gaming regulatory authority, establishes and the gaming 
operation complies with procedures that maintain adequate key control 
and restricts access to the keys.
    (2) Persons authorized to obtain bill acceptor canister storage 
rack keys shall be precluded from having simultaneous access to bill 
acceptor canister contents keys, with the exception of the count team.
    (r) Table game drop box contents keys. (1) Tier A gaming operations 
shall be exempt from compliance with this paragraph if the Tribal 
gaming regulatory authority, or the gaming operation as approved by the 
Tribal gaming regulatory authority, establishes and the gaming 
operation complies with procedures that maintain adequate key control 
and restricts access to the keys.
    (2) The physical custody of the keys needed for accessing stored, 
full table game drop box contents shall require the involvement of 
persons from at least two separate departments, with the exception of 
the count team.
    (3) Access to the table game drop box contents key at other than 
scheduled count times shall require the involvement of at least two 
persons from separate departments, including management. The reason for 
access shall be documented with the signatures of all participants and 
observers.
    (4) Only count team members shall be allowed access to table game 
drop box contents keys during the count process.
    (s) Bill acceptor canister contents keys. (1) Tier A gaming 
operations shall be exempt from compliance with this paragraph if the 
Tribal gaming regulatory authority, or the gaming operation as approved 
by the Tribal gaming regulatory authority, establishes and the gaming 
operation complies with procedures that maintain adequate key control 
and restricts access to the keys.
    (2) The physical custody of the keys needed for accessing stored, 
full bill acceptor canister contents shall require involvement of 
persons from two separate departments, with the exception of the count 
team.
    (3) Access to the bill acceptor canister contents key at other than 
scheduled count times shall require the involvement of at least two 
persons from separate departments, one of whom must be a supervisor. 
The reason for access shall be documented with the signatures of all 
participants and observers.
    (4) Only the count team members shall be allowed access to bill 
acceptor canister contents keys during the count process.
    (t) Emergency drop procedures. Emergency drop procedures shall be 
developed by the Tribal gaming regulatory authority, or the gaming 
operation as approved by the Tribal gaming regulatory authority.
    (u) Equipment standards for gaming machine count.
    (1) A weigh scale calibration module shall be secured so as to 
prevent unauthorized access (e.g., prenumbered seal, lock and key, 
etc.).
    (2) A person independent of the cage, vault, gaming machine, and 
count team functions shall be required to be present whenever the 
calibration module is accessed. Such access shall be documented and 
maintained.
    (3) If a weigh scale interface is used, it shall be adequately 
restricted so as to prevent unauthorized access (passwords, keys, 
etc.).
    (4) If the weigh scale has a zero adjustment mechanism, it shall be 
physically limited to minor adjustments (e.g., weight of a bucket) or 
physically situated such that any unnecessary adjustments to it during 
the weigh process would be observed by other count team members.
    (5) The weigh scale and weigh scale interface (if applicable) shall 
be tested by a person or persons independent of the cage, vault, and 
gaming machine departments and count team at least quarterly. At least 
annually, this test shall be performed by internal audit in accordance 
with the internal audit standards. The result of these tests shall be 
documented and signed by the person or persons performing the test.

[[Page 43428]]

    (6) Prior to the gaming machine count, at least two employees shall 
verify the accuracy of the weigh scale with varying weights or with 
varying amounts of previously counted coin for each denomination to 
ensure the scale is properly calibrated (varying weights/coin from drop 
to drop is acceptable).
    (7) If a mechanical coin counter is used (instead of a weigh 
scale), the Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply, with procedures that are 
equivalent to those described in paragraphs (u)(4), (u)(5), and (u)(6) 
of this section.
    (8) If a coin meter count machine is used, the count team member 
shall record the machine number denomination and number of coins in ink 
on a source document, unless the meter machine automatically records 
such information.
    (i) A count team member shall test the coin meter count machine 
prior to the actual count to ascertain if the metering device is 
functioning properly with a predetermined number of coins for each 
denomination.
    (ii) [Reserved]


Sec. 542.22  What are the minimum internal control standards for 
internal audit for Tier A gaming operations?

    (a) Internal audit personnel. (1) For Tier A gaming operations, a 
separate internal audit department must be maintained. Alternatively, 
designating personnel (who are independent with respect to the 
departments/procedures being examined) to perform internal audit work 
satisfies the requirements of this paragraph.
    (2) The internal audit personnel shall report directly to the 
Tribe, Tribal gaming regulatory authority, audit committee, or other 
entity designated by the Tribe in accordance with the definition of 
internal audit in Sec. 542.2.
    (b) Audits. (1) Internal audit personnel shall perform audits of 
all major gaming areas of the gaming operation. The following shall be 
reviewed at least annually:
    (i) Bingo, including but not limited to, bingo card control, payout 
procedures, and cash reconciliation process;
    (ii) Pull tabs, including but not limited to, statistical records, 
winner verification, perpetual inventory, and accountability of sales 
versus inventory;
    (iii) Card games, including but not limited to, card games 
operation, cash exchange procedures, shill transactions, and count 
procedures;
    (iv) Keno, including but not limited to, game write and payout 
procedures, sensitive key location and control, and a review of keno 
auditing procedures;
    (v) Pari-mutual wagering, including write and payout procedures, 
and pari-mutual auditing procedures;
    (vi) Table games, including but not limited to, fill and credit 
procedures, pit credit play procedures, rim credit procedures, soft 
drop/count procedures and the subsequent transfer of funds, unannounced 
testing of count room currency counters and/or currency interface, 
location and control over sensitive keys, the tracing of source 
documents to summarized documentation and accounting records, and 
reconciliation to restricted copies;
    (vii) Gaming machines, including but not limited to, jackpot payout 
and gaming machine fill procedures, gaming machine drop/count and bill 
acceptor drop/count and subsequent transfer of funds, unannounced 
testing of weigh scale and weigh scale interface, unannounced testing 
of count room currency counters and/or currency interface, gaming 
machine drop cabinet access, tracing of source documents to summarized 
documentation and accounting records, reconciliation to restricted 
copies, location and control over sensitive keys, compliance with EPROM 
duplication procedures, and compliance with MICS procedures for gaming 
machines that accept currency or coin(s) and issue cash-out tickets or 
gaming machines that do not accept currency or coin(s) and do not 
return currency or coin(s);
    (viii) Cage and credit procedures including all cage, credit, and 
collection procedures, and the reconciliation of trial balances to 
physical instruments on a sample basis. Cage accountability shall be 
reconciled to the general ledger;
    (ix) Information technology functions, including review for 
compliance with information technology standards;
    (x) Complimentary service or item, including but not limited to, 
procedures whereby complimentary service items are issued, authorized, 
and redeemed; and
    (xi) Any other internal audits as required by the Tribe, Tribal 
gaming regulatory authority, audit committee, or other entity 
designated by the Tribe.
    (2) In addition to the observation and examinations performed under 
paragraph (b)(1) of this section, follow-up observations and 
examinations shall be performed to verify that corrective action has 
been taken regarding all instances of noncompliance cited by internal 
audit, the independent accountant, and/or the Commission. The 
verification shall be performed within six (6) months following the 
date of notification.
    (3) Whenever possible, internal audit observations shall be 
performed on an unannounced basis (i.e., without the employees being 
forewarned that their activities will be observed). Additionally, if 
the independent accountant also performs the internal audit function, 
the accountant shall perform separate observations of the table games/
gaming machine drops and counts to satisfy the internal audit 
observation requirements and independent accountant tests of controls 
as required by the American Institute of Certified Public Accountants 
guide.
    (c) Documentation. (1) Documentation (e.g., checklists, programs, 
reports, etc.) shall be prepared to evidence all internal audit work 
performed as it relates to the requirements in this section, including 
all instances of noncompliance.
    (2) The internal audit department shall operate with audit 
programs, which, at a minimum, address the MICS. Additionally, the 
department shall properly document the work performed, the conclusions 
reached, and the resolution of all exceptions. Institute of Internal 
Auditors standards are recommended but not required.
    (d) Reports. (1) Reports documenting audits performed shall be 
maintained and made available to the Commission upon request.
    (2) Such audit reports shall include the following information:
    (i) Audit objectives;
    (ii) Audit procedures and scope;
    (iii) Findings and conclusions;
    (iv) Recommendations, if applicable; and
    (v) Management's response.
    (e) Material exceptions. All material exceptions resulting from 
internal audit work shall be investigated and resolved with the results 
of such being documented and retained for five years.
    (f) Role of management. (1) Internal audit findings shall be 
reported to management.
    (2) Management shall be required to respond to internal audit 
findings stating corrective measures to be taken to avoid recurrence of 
the audit exception.
    (3) Such management responses shall be included in the internal 
audit report that will be delivered to management, the Tribe, Tribal 
gaming regulatory authority, audit committee, or other entity 
designated by the Tribe.


Sec. 542.23  What are the minimum internal control standards for 
surveillance for Tier A gaming operations?

    (a) Tier A gaming operations must, at a minimum, maintain and 
operate an unstaffed surveillance system in a

[[Page 43429]]

secured location whereby the areas under surveillance are continually 
recorded.
    (b) The entrance to the secured location shall be located so that 
it is not readily accessible by either gaming operation employees who 
work primarily on the casino floor, or the general public.
    (c) Access to the secured location shall be limited to surveillance 
personnel, designated employees, and other persons authorized in 
accordance with the surveillance department policy. Such policy shall 
be approved by the Tribal gaming regulatory authority.
    (d) The surveillance system shall include date and time generators 
that possess the capability to display the date and time of recorded 
events on video and/or digital recordings. The displayed date and time 
shall not significantly obstruct the recorded view.
    (e) The surveillance department shall strive to ensure staff is 
trained in the use of the equipment, knowledge of the games, and house 
rules.
    (f) Each camera required by the standards in this section shall be 
installed in a manner that will prevent it from being readily 
obstructed, tampered with, or disabled by customers or employees.
    (g) Each camera required by the standards in this section shall 
possess the capability of having its picture recorded. The surveillance 
system shall include sufficient numbers of recorders to simultaneously 
record multiple gaming and count room activities, and record the views 
of all dedicated cameras and motion activated dedicated cameras.
    (h) Reasonable effort shall be made to repair each malfunction of 
surveillance system equipment required by the standards in this section 
within seventy-two (72) hours after the malfunction is discovered. The 
Tribal gaming regulatory authority shall be notified of any camera(s) 
that has malfunctioned for more than twenty-four (24) hours.
    (1) In the event of a dedicated camera malfunction, the gaming 
operation and/or the surveillance department shall, upon identification 
of the malfunction, provide alternative camera coverage or other 
security measures, such as additional supervisory or security 
personnel, to protect the subject activity.
    (2) [Reserved]
    (i) Bingo. The surveillance system shall record the bingo ball 
drawing device, the game board, and the activities of the employees 
responsible for drawing, calling, and entering the balls drawn or 
numbers selected.
    (j) Card games. The surveillance system shall record the general 
activities in each card room and be capable of identifying the 
employees performing the different functions.
    (k) Keno. The surveillance system shall record the keno ball-
drawing device, the general activities in each keno game area, and be 
capable of identifying the employees performing the different 
functions.
    (l) Table games. (1) Operations with four (4) or more table games. 
Except as otherwise provided in paragraphs (l)(3), (l)(4), and (l)(5) 
of this section, the surveillance system of gaming operations operating 
four (4) or more table games shall provide at a minimum one (1) pan-
tilt-zoom camera per two (2) tables and surveillance must be capable of 
taping:
    (i) With sufficient clarity to identify customers and dealers; and
    (ii) With sufficient coverage and clarity to simultaneously view 
the table bank and determine the configuration of wagers, card values, 
and game outcome.
    (iii) One (1) dedicated camera per table and one (1) pan-tilt-zoom 
camera per four (4) tables may be an acceptable alternative procedure 
to satisfy the requirements of this paragraph.
    (2) Operations with three (3) or fewer table games. The 
surveillance system of gaming operations operating three (3) or fewer 
table games shall:
    (i) Comply with the requirements of paragraph (l)(1) of this 
section; or
    (ii) Have one (1) overhead camera at each table.
    (3) Craps. All craps tables shall have two (2) dedicated cross view 
cameras covering both ends of the table.
    (4) Roulette. All roulette areas shall have one (1) overhead 
dedicated camera covering the roulette wheel and shall also have one 
(1) dedicated camera covering the play of the table.
    (5) Big wheel. All big wheel games shall have one (1) dedicated 
camera viewing the wheel.
    (m) Progressive table games. (1) Progressive table games with a 
progressive jackpot of $25,000 or more shall be recorded by dedicated 
cameras that provide coverage of:
    (i) The table surface, sufficient that the card values and card 
suits can be clearly identified;
    (ii) An overall view of the entire table with sufficient clarity to 
identify customers and dealer; and
    (iii) A view of the progressive meter jackpot amount. If several 
tables are linked to the same progressive jackpot meter, only one meter 
need be recorded.
    (2) [Reserved]
    (n) Gaming machines. (1) Except as otherwise provided in paragraphs 
(n)(2) and (n)(3) of this section, gaming machines offering a payout of 
more than $250,000 shall be recorded by a dedicated camera(s) to 
provide coverage of:
    (i) All customers and employees at the gaming machine; and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (2) In-house progressive machine. In-house progressive gaming 
machines offering a base payout amount (jackpot reset amount) of more 
than $100,000 shall be recorded by a dedicated camera(s) to provide 
coverage of:
    (i) All customers and employees at the gaming machine; and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (3) Wide-area progressive machine. Wide-area progressive gaming 
machines offering a base payout amount of more than $1.5 million and 
monitored by an independent vendor utilizing an on-line progressive 
computer system shall be recorded by a dedicated camera(s) to provide 
coverage of:
    (i) All customers and employees at the gaming machine; and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (4) Notwithstanding paragraph (n)(1) of this section, if the gaming 
machine is a multi-game machine, the Tribal gaming regulatory 
authority, or the gaming operation subject to the approval of the 
Tribal gaming regulatory authority, may develop and implement 
alternative procedures to verify payouts.
    (o) Currency and coin. The surveillance system shall record a 
general overview of all areas where currency or coin may be stored or 
counted.
    (p) Video recording and/or digital record retention. (1) All video 
recordings and/or digital records of coverage provided by the dedicated 
cameras or motion-activated dedicated cameras required by the standards 
in this section shall be retained for a minimum of seven (7) days.
    (2) Recordings involving suspected or confirmed gaming crimes, 
unlawful activity, or detentions by security personnel, must be 
retained for a minimum of thirty (30) days.
    (3) Duly authenticated copies of video recordings and/or digital 
records shall be provided to the Commission upon request.
    (q) Video library log. A video library log, or comparable 
alternative procedure approved by the Tribal gaming regulatory 
authority, shall be maintained to demonstrate compliance

[[Page 43430]]

with the storage, identification, and retention standards required in 
this section.
    (r) Malfunction and repair log. (1) Surveillance personnel shall 
maintain a log or alternative procedure approved by the Tribal gaming 
regulatory authority that documents each malfunction and repair of the 
surveillance system as defined in this section.
    (2) The log shall state the time, date, and nature of each 
malfunction, the efforts expended to repair the malfunction, and the 
date of each effort, the reasons for any delays in repairing the 
malfunction, the date the malfunction is repaired, and where 
applicable, any alternative security measures that were taken.


Sec. 542.30  What is a Tier B gaming operation?

    A Tier B gaming operation is one with gross gaming revenues of more 
than $5 million but not more than $15 million.


Sec. 542.31  What are the minimum internal control standards for drop 
and count for Tier B gaming operations?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Table game drop standards. (1) The setting out of empty table 
game drop boxes and the drop shall be a continuous process.
    (2) At the end of each shift:
    (i) All locked table game drop boxes shall be removed from the 
tables by a person independent of the pit shift being dropped;
    (ii) A separate drop box shall be placed on each table opened at 
any time during each shift or a gaming operation may utilize a single 
drop box with separate openings and compartments for each shift; and
    (iii) Upon removal from the tables, table game drop boxes shall be 
transported directly to the count room or other equivalently secure 
area with comparable controls and locked in a secure manner until the 
count takes place.
    (3) If drop boxes are not placed on all tables, then the pit 
department shall document which tables were open during the shift.
    (4) The transporting of table game drop boxes shall be performed by 
a minimum of two persons, at least one of whom is independent of the 
pit shift being dropped.
    (5) All table game drop boxes shall be posted with a number 
corresponding to a permanent number on the gaming table and marked to 
indicate game, table number, and shift.
    (6) Surveillance shall be notified when the drop is to begin so 
that surveillance may monitor the activities.
    (c) Soft count room personnel. (1) The table game soft count and 
the gaming machine bill acceptor count shall be performed by a minimum 
of two employees.
    (i) The count shall be viewed live, or on video recording and/or 
digital record, within seven (7) days by an employee independent of the 
count.
    (ii) [Reserved]
    (2) Count room personnel shall not be allowed to exit or enter the 
count room during the count except for emergencies or scheduled breaks. 
At no time during the count, shall there be fewer than two employees in 
the count room until the drop proceeds have been accepted into cage/
vault accountability. Surveillance shall be notified whenever count 
room personnel exit or enter the count room during the count.
    (3) Count team members shall be rotated on a routine basis such 
that the count team is not consistently the same two persons more than 
four (4) days per week. This standard shall not apply to gaming 
operations that utilize a count team of more than two persons.
    (4) The count team shall be independent of transactions being 
reviewed and counted. The count team shall be independent of the cage/
vault departments, however, a dealer or a cage cashier may be used if 
this person is not allowed to perform the recording function. An 
accounting representative may be used if there is an independent audit 
of all soft count documentation.
    (d) Table game soft count standards. (1) The table game soft count 
shall be performed in a soft count room or other equivalently secure 
area with comparable controls.
    (2) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers, supervisors for resolution of problems, and 
authorized maintenance personnel.
    (3) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (4) The table game drop boxes shall be individually emptied and 
counted in such a manner to prevent the commingling of funds between 
boxes until the count of the box has been recorded.
    (i) The count of each box shall be recorded in ink or other 
permanent form of recordation.
    (ii) A second count shall be performed by an employee on the count 
team who did not perform the initial count.
    (iii) Corrections to information originally recorded by the count 
team on soft count documentation shall be made by drawing a single line 
through the error, writing the correct figure above the original 
figure, and then obtaining the initials of at least two count team 
members who verified the change, unless the count team only has two (2) 
members in which case the initials of only one (1) verifying count team 
member is required.
    (5) If currency counters are utilized and the count room table is 
used only to empty boxes and sort/stack contents, a count team member 
shall be able to observe the loading and unloading of all currency at 
the currency counter, including rejected currency.
    (6) Table game drop boxes, when empty, shall be shown to another 
member of the count team, or to another person who is observing the 
count, or to surveillance, provided the count is monitored in its 
entirety by a person independent of the count.
    (7) Orders for fill/credit (if applicable) shall be matched to the 
fill/credit slips. Fills and credits shall be traced to or recorded on 
the count sheet.
    (8) Pit marker issue and payment slips (if applicable) removed from 
the table game drop boxes shall either be:
    (i) Traced to or recorded on the count sheet by the count team; or
    (ii) Totaled by shift and traced to the totals documented by the 
computerized system. Accounting personnel shall verify the issue/
payment slip for each table is accurate.
    (9) Foreign currency exchange forms (if applicable) removed from 
the table game drop boxes shall be reviewed for the proper daily 
exchange rate and the conversion amount shall be recomputed by the 
count team. Alternatively, this may be performed by accounting/auditing 
employees.
    (10) The opening/closing table and marker inventory forms (if 
applicable) shall either be:
    (i) Examined and traced to or recorded on the count sheet; or
    (ii) If a computerized system is used, accounting personnel can 
trace the opening/closing table and marker inventory forms to the count 
sheet. Discrepancies shall be investigated with the findings documented 
and maintained for inspection.
    (11) The count sheet shall be reconciled to the total drop by a 
count

[[Page 43431]]

team member who shall not function as the sole recorder.
    (12) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.
    (13) All drop proceeds and cash equivalents that were counted shall 
be turned over to the cage or vault cashier (who shall be independent 
of the count team) or to an authorized person/employee independent of 
the revenue generation and the count process for verification. Such 
person shall certify by signature as to the accuracy of the drop 
proceeds delivered and received.
    (14) The count sheet, with all supporting documents, shall be 
delivered to the accounting department by a count team member or a 
person independent of the cashiers department. Alternatively, it may be 
adequately secured (e.g., locked container to which only accounting 
personnel can gain access) until retrieved by the accounting 
department.
    (15) Access to stored, full table game drop boxes shall be 
restricted to authorized members of the drop and count teams.
    (e) Gaming machine bill acceptor drop standards. (1) A minimum of 
two employees shall be involved in the removal of the gaming machine 
drop, at least one of who is independent of the gaming machine 
department.
    (2) All bill acceptor canisters shall be removed only at the time 
previously designated by the gaming operation and reported to the 
Tribal gaming regulatory authority, except for emergency drops.
    (3) Surveillance shall be notified when the drop is to begin so 
that surveillance may monitor the activities.
    (4) The bill acceptor canisters shall be removed by a person 
independent of the gaming machine department then transported directly 
to the count room or other equivalently secure area with comparable 
controls and locked in a secure manner until the count takes place.
    (i) Security shall be provided over the bill acceptor canisters 
removed from the gaming machines and awaiting transport to the count 
room.
    (ii) The transporting of bill acceptor canisters shall be performed 
by a minimum of two persons, at least one of who is independent of the 
gaming machine department.
    (5) All bill acceptor canisters shall be posted with a number 
corresponding to a permanent number on the gaming machine.
    (f) Gaming machine bill acceptor count standards. (1) The gaming 
machine bill acceptor count shall be performed in a soft count room or 
other equivalently secure area with comparable controls.
    (2) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers, supervisors for resolution of problems, and 
authorized maintenance personnel.
    (3) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (4) The bill acceptor canisters shall be individually emptied and 
counted in such a manner to prevent the commingling of funds between 
canisters until the count of the canister has been recorded.
    (i) The count of each canister shall be recorded in ink or other 
permanent form of recordation.
    (ii) A second count shall be performed by an employee on the count 
team who did not perform the initial count.
    (iii) Corrections to information originally recorded by the count 
team on soft count documentation shall be made by drawing a single line 
through the error, writing the correct figure above the original 
figure, and then obtaining the initials of at least two count team 
members who verified the change.
    (5) If currency counters are utilized and the count room table is 
used only to empty canisters and sort/stack contents, a count team 
member shall be able to observe the loading and unloading of all 
currency at the currency counter, including rejected currency.
    (6) Canisters, when empty, shall be shown to another member of the 
count team, to another person who is observing the count, or to 
surveillance, provided that the count is monitored in its entirety by a 
person independent of the count.
    (7) The count sheet shall be reconciled to the total drop by a 
count team member who shall not function as the sole recorder.
    (8) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.
    (9) All drop proceeds and cash equivalents that were counted shall 
be turned over to the cage or vault cashier (who shall be independent 
of the count team) or to an authorized person/employee independent of 
the revenue generation and the count process for verification. Such 
person shall certify by signature as to the accuracy of the drop 
proceeds delivered and received.
    (10) The count sheet, with all supporting documents, shall be 
delivered to the accounting department by a count team member or a 
person independent of the cashiers department. Alternatively, it may be 
adequately secured (e.g., locked container to which only accounting 
personnel can gain access) until retrieved by the accounting 
department.
    (11) Access to stored bill acceptor canisters, full or empty, shall 
be restricted to:
    (i) Authorized members of the drop and count teams; and
    (ii) Authorized personnel in an emergency for the resolution of a 
problem.
    (12) All bill acceptor canisters shall be posted with a number 
corresponding to a permanent number on the gaming machine.
    (g) Gaming machine coin drop standards. (1) A minimum of two 
employees shall be involved in the removal of the gaming machine drop, 
at least one of who is independent of the gaming machine department.
    (2) All drop buckets shall be removed only at the time previously 
designated by the gaming operation and reported to the Tribal gaming 
regulatory authority, except for emergency drops.
    (3) Surveillance shall be notified when the drop is to begin in 
order that surveillance may monitor the activities.
    (4) Security shall be provided over the buckets removed from the 
gaming machine drop cabinets and awaiting transport to the count room.
    (5) As each machine is opened, the contents shall be tagged with 
its respective machine number if the bucket is not permanently marked 
with the machine number. The contents shall be transported directly to 
the area designated for the counting of such drop proceeds. If more 
than one trip is required to remove the contents of the machines, the 
filled carts of coins shall be securely locked in the room designed for 
counting or in another equivalently secure area with comparable 
controls. There shall be a locked covering on any carts in which the 
drop route includes passage out of doors.
    (i) Alternatively, a smart bucket system that electronically 
identifies and tracks the gaming machine number, and facilitates the 
proper recognition of gaming revenue, shall satisfy the requirements of 
this paragraph.
    (ii) [Reserved]
    (6) Each drop bucket in use shall be:
    (i) Housed in a locked compartment separate from any other 
compartment of the gaming machine and keyed differently than other 
gaming machine compartments; and
    (ii) Identifiable to the gaming machine from which it is removed. 
If the gaming

[[Page 43432]]

machine is identified with a removable tag that is placed in the 
bucket, the tag shall be placed on top of the bucket when it is 
collected.
    (7) Each gaming machine shall have drop buckets into which coins or 
tokens that are retained by the gaming machine are collected. Drop 
bucket contents shall not be used to make change or pay hand-paid 
payouts.
    (8) The collection procedures may include procedures for dropping 
gaming machines that have trays instead of drop buckets.
    (h) Hard count room personnel. (1) The weigh/count shall be 
performed by a minimum of two employees.
    (i) The count shall be viewed either live, or on video recording 
and/or digital record within seven (7) days by an employee independent 
of the count.
    (ii) [Reserved]
    (2) At no time during the weigh/count shall there be fewer than two 
employees in the count room until the drop proceeds have been accepted 
into cage/vault accountability. Surveillance shall be notified whenever 
count room personnel exit or enter the count room during the count.
    (i) If the gaming machine count is conducted with a continuous 
mechanical count meter that is not reset during the count and is 
verified in writing by at least two employees at the start and end of 
each denomination count, then one employee may perform the wrap.
    (ii) [Reserved]
    (3) Count team members shall be rotated on a routine basis such 
that the count team is not consistently the same two persons more than 
four (4) days per week. This standard shall not apply to gaming 
operations that utilize a count team of more than two persons.
    (4) The count team shall be independent of transactions being 
reviewed and counted. The count team shall be independent of the cage/
vault departments, unless they are non-supervisory gaming machine 
employees and perform the laborer function only (A non-supervisory 
gaming machine employee is defined as a person below the level of 
gaming machine shift supervisor). A cage cashier may be used if this 
person is not allowed to perform the recording function. An accounting 
representative may be used if there is an independent audit of all 
count documentation.
    (i) Gaming machine coin count and wrap standards. (1) Coins shall 
include tokens.
    (2) The gaming machine coin count and wrap shall be performed in a 
count room or other equivalently secure area with comparable controls.
    (i) Alternatively, an on-the-floor drop system utilizing a mobile 
scale shall satisfy the requirements of this paragraph, subject to the 
following conditions:
    (A) The gaming operation shall utilize and maintain an effective 
on-line gaming machine monitoring system, as described in 
Sec. 542.13(m)(3);
    (B) Components of the on-the-floor drop system shall include, but 
not be limited to, a weigh scale, a laptop computer through which 
weigh/count applications are operated, a security camera available for 
the mobile scale system, and a VCR to be housed within the video 
compartment of the mobile scale. The system may include a mule cart 
used for mobile weigh scale system locomotion.
    (C) The gaming operation must obtain the security camera available 
with the system, and this camera must be added in such a way as to 
eliminate tampering.
    (D) Prior to the drop, the drop/count team shall ensure the scale 
batteries are charged;
    (E) Prior to the drop, a videotape shall be inserted into the VCR 
used to record the drop in conjunction with the security camera system 
and the VCR shall be activated;
    (F) The weigh scale test shall be performed prior to removing the 
unit from the hard count room for the start of the weigh/drop/count;
    (G) Surveillance shall be notified when the weigh/drop/count begins 
and shall be capable of monitoring the entire process;
    (H) An observer independent of the weigh/drop/count teams 
(independent observer) shall remain by the weigh scale at all times and 
shall observe the entire weigh/drop/count process;
    (I) Physical custody of the key(s) needed to access the laptop and 
video compartment shall require the involvement of two persons, one of 
whom is independent of the drop and count team;
    (J) The mule key (if applicable), the laptop and video compartment 
keys, and the remote control for the VCR shall be maintained by a 
department independent of the gaming machine department. The 
appropriate personnel shall sign out these keys;
    (K) A person independent of the weigh/drop/count teams shall be 
required to accompany these keys while they are checked out, and 
observe each time the laptop compartment is opened;
    (L) The laptop access panel shall not be opened outside the hard 
count room, except in instances when the laptop must be rebooted as a 
result of a crash, lock up, or other situation requiring immediate 
corrective action;
    (M) User access to the system shall be limited to those employees 
required to have full or limited access to complete the weigh/drop/
count; and
    (N) When the weigh/drop/count is completed, the independent 
observer shall access the laptop compartment, end the recording 
session, eject the videotape, and deliver the videotape to 
surveillance.
    (ii) [Reserved]
    (3) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers, supervisors for resolution of problems, and 
authorized maintenance personnel.
    (4) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (5) The following functions shall be performed in the counting of 
the gaming machine drop:
    (i) Recorder function, which involves the recording of the gaming 
machine count; and
    (ii) Count team supervisor function, which involves the control of 
the gaming machine weigh and wrap process. The supervisor shall not 
perform the initial recording of the weigh/count unless a weigh scale 
with a printer is used.
    (6) The gaming machine drop shall be counted, wrapped, and 
reconciled in such a manner to prevent the commingling of gaming 
machine drop coin with coin (for each denomination) from the next 
gaming machine drop until the count of the gaming machine drop has been 
recorded. If the coins are not wrapped immediately after being weighed 
or counted, they shall be secured and not commingled with other coin.
    (i) The amount of the gaming machine drop from each machine shall 
be recorded in ink or other permanent form of recordation on a gaming 
machine count document by the recorder or mechanically printed by the 
weigh scale.
    (ii) Corrections to information originally recorded by the count 
team on gaming machine count documentation shall be made by drawing a 
single line through the error, writing the correct figure above the 
original figure, and then obtaining the initials of at least two count 
team members who verified the change.
    (A) If a weigh scale interface is used, corrections to gaming 
machine count data shall be made using either of the following:
    (1) Drawing a single line through the error on the gaming machine 
document,

[[Page 43433]]

writing the correct figure above the original figure, and then 
obtaining the initials of at least two count team employees. If this 
procedure is used, an employee independent of the gaming machine 
department and count team shall enter the correct figure into the 
computer system prior to the generation of related gaming machine 
reports; or
    (2) During the count process, correct the error in the computer 
system and enter the passwords of at least two count team employees. If 
this procedure is used, an exception report shall be generated by the 
computer system identifying the gaming machine number, the error, the 
correction, and the count team employees attesting to the correction.
    (B) [Reserved]
    (7) If applicable, the weight shall be converted to dollar amounts 
before the reconciliation of the weigh to the wrap.
    (8) If a coin meter is used, a count team member shall convert the 
coin count for each denomination into dollars and shall enter the 
results on a summary sheet.
    (9) The recorder and at least one other count team member shall 
sign the weigh tape and the gaming machine count document attesting to 
the accuracy of the weigh/count.
    (10) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.
    (11) All drop proceeds and cash equivalents that were counted shall 
be turned over to the cage or vault cashier (who shall be independent 
of the count team) or to an authorized person/employee independent of 
the revenue generation and the count process for verification. Such 
person shall certify by signature as to the accuracy of the drop 
proceeds delivered and received.
    (12) All gaming machine count and wrap documentation, including any 
applicable computer storage media, shall be delivered to the accounting 
department by a count team member or a person independent of the 
cashier's department. Alternatively, it may be adequately secured 
(e.g., locked container to which only accounting personnel can gain 
access) until retrieved by the accounting department.
    (13) If the coins are transported off the property, a second 
(alternative) count procedure shall be performed before the coins leave 
the property. Any variances shall be documented.
    (14) Variances. Large (by denomination, either $1,000 or 2% of the 
drop, whichever is less) or unusual (e.g., zero for weigh/count or 
patterned for all counts) variances between the weigh/count and wrap 
shall be investigated by management personnel independent of the gaming 
machine department, count team, and the cage/vault functions on a 
timely basis. The results of such investigation shall be documented, 
maintained for inspection, and provided to the Tribal gaming regulatory 
authority upon request.
    (j) Security of the coin room inventory during the gaming machine 
coin count and wrap. (1) If the count room serves as a coin room and 
coin room inventory is not secured so as to preclude access by the 
count team, then the following standards shall apply:
    (i) At the commencement of the gaming machine count the following 
requirements shall be met:
    (A) The coin room inventory shall be counted by at least two 
employees, one of whom is a member of the count team and the other is 
independent of the weigh/count and wrap procedures;
    (B) The count in paragraph (j)(1)(i)(A) of this section shall be 
recorded on an appropriate inventory form;
    (ii) Upon completion of the wrap of the gaming machine drop:
    (A) At least two members of the count team (wrap team), 
independently from each other, shall count the ending coin room 
inventory;
    (B) The counts in paragraph (j)(1)(ii)(A) of this section shall be 
recorded on a summary report(s) that evidences the calculation of the 
final wrap by subtracting the beginning inventory from the sum of the 
ending inventory and transfers in and out of the coin room;
    (C) The same count team members shall compare the calculated wrap 
to the weigh/count, recording the comparison and noting any variances 
on the summary report;
    (D) A member of the cage/vault department shall count the ending 
coin room inventory by denomination and shall reconcile it to the 
beginning inventory, wrap, transfers and weigh/count; and
    (E) At the conclusion of the reconciliation, at least two count/
wrap team members and the verifying employee shall sign the summary 
report(s) attesting to its accuracy.
    (iii) The functions described in paragraph (j)(1)(ii)(A) and (C) of 
this section may be performed by only one count team member. That count 
team member must then sign the summary report, along with the verifying 
employee, as required under paragraph (j)(1)(ii)(E).
    (2) If the count room is segregated from the coin room, or if the 
coin room is used as a count room and the coin room inventory is 
secured to preclude access by the count team, all of the following 
requirements shall be completed, at the conclusion of the count:
    (i) At least two members of the count/wrap team shall count the 
final wrapped gaming machine drop independently from each other;
    (ii) The counts shall be recorded on a summary report;
    (iii) The same count team members (or the accounting department) 
shall compare the final wrap to the weigh/count, recording the 
comparison, and noting any variances on the summary report;
    (iv) A member of the cage/vault department shall count the wrapped 
gaming machine drop by denomination and reconcile it to the weigh/
count;
    (v) At the conclusion of the reconciliation, at least two count 
team members and the cage/vault employee shall sign the summary report 
attesting to its accuracy; and
    (vi) The wrapped coins (exclusive of proper transfers) shall be 
transported to the cage, vault or coin vault after the reconciliation 
of the weigh/count to the wrap.
    (k) Transfers during the gaming machine coin count and wrap. (1) 
Transfers may be permitted during the count and wrap only if permitted 
under the internal control standards approved by the Tribal gaming 
regulatory authority.
    (2) Each transfer shall be recorded on a separate multi-part form 
with a preprinted or concurrently-printed form number (used solely for 
gaming machine count transfers) that shall be subsequently reconciled 
by the accounting department to ensure the accuracy of the reconciled 
gaming machine drop.
    (3) Each transfer must be counted and signed for by at least two 
members of the count team and by a person independent of the count team 
who is responsible for authorizing the transfer.
    (l) Gaming machine drop key control standards. (1) Gaming machine 
coin drop cabinet keys, including duplicates, shall be maintained by a 
department independent of the gaming machine department.
    (2) The physical custody of the keys needed to access gaming 
machine coin drop cabinets, including duplicates, shall require the 
involvement of two persons, one of whom is independent of the gaming 
machine department.
    (3) Two employees (separate from key custodian) shall be required 
to accompany such keys while checked out and observe each time gaming 
machine drop cabinets are accessed, unless surveillance is notified 
each time keys are checked out and surveillance

[[Page 43434]]

observes the person throughout the period the keys are checked out.
    (m) Table game drop box key control standards. (1) Procedures shall 
be developed and implemented to insure that unauthorized access to 
empty table game drop boxes shall not occur from the time the boxes 
leave the storage racks until they are placed on the tables.
    (2) The involvement of at least two persons independent of the cage 
department shall be required to access stored empty table game drop 
boxes.
    (3) The release keys shall be separately keyed from the contents 
keys.
    (4) At least two count team members are required to be present at 
the time count room and other count keys are issued for the count.
    (5) All duplicate keys shall be maintained in a manner that 
provides the same degree of control as is required for the original 
keys. Records shall be maintained for each key duplicated that indicate 
the number of keys made and destroyed.
    (6) Logs shall be maintained by the custodian of sensitive keys to 
document authorization of personnel accessing keys.
    (n) Table game drop box release keys. (1) The table game drop box 
release keys shall be maintained by a department independent of the pit 
department.
    (2) Only the person(s) authorized to remove table game drop boxes 
from the tables shall be allowed access to the table game drop box 
release keys; however, the count team members may have access to the 
release keys during the soft count in order to reset the table game 
drop boxes.
    (3) Persons authorized to remove the table game drop boxes shall be 
precluded from having simultaneous access to the table game drop box 
contents keys and release keys.
    (4) For situations requiring access to a table game drop box at a 
time other than the scheduled drop, the date, time, and signature of 
employee signing out/in the release key must be documented.
    (o) Bill acceptor canister release keys. (1) The bill acceptor 
canister release keys shall be maintained by a department independent 
of the gaming machine department.
    (2) Only the person(s) authorized to remove bill acceptor canisters 
from the gaming machines shall be allowed access to the release keys.
    (3) Persons authorized to remove the bill acceptor canisters shall 
be precluded from having simultaneous access to the bill acceptor 
canister contents keys and release keys.
    (4) For situations requiring access to a bill acceptor canister at 
a time other than the scheduled drop, the date, time, and signature of 
employee signing out/in the release key must be documented.
    (p) Table game drop box storage rack keys. Persons authorized to 
obtain table game drop box storage rack keys shall be precluded from 
having simultaneous access to table game drop box contents keys with 
the exception of the count team.
    (q) Bill acceptor canister storage rack keys. Persons authorized to 
obtain bill acceptor canister storage rack keys shall be precluded from 
having simultaneous access to bill acceptor canister contents keys with 
the exception of the count team.
    (r) Table game drop box contents keys. (1) The physical custody of 
the keys needed for accessing stored, full table game drop box contents 
shall require the involvement of persons from at least two separate 
departments, with the exception of the count team.
    (2) Access to the table game drop box contents key at other than 
scheduled count times shall require the involvement of at least two 
persons from separate departments, including management. The reason for 
access shall be documented with the signatures of all participants and 
observers.
    (3) Only count team members shall be allowed access to table game 
drop box contents keys during the count process.
    (s) Bill acceptor canister contents keys. (1) The physical custody 
of the keys needed for accessing stored, full bill acceptor canister 
contents shall require involvement of persons from two separate 
departments, with the exception of the count team.
    (2) Access to the bill acceptor canister contents key at other than 
scheduled count times shall require the involvement of at least two 
persons from separate departments, one of whom must be a supervisor. 
The reason for access shall be documented with the signatures of all 
participants and observers.
    (3) Only the count team members shall be allowed access to bill 
acceptor canister contents keys during the count process.
    (t) Emergency drop procedures. Emergency drop procedures shall be 
developed by the Tribal gaming regulatory authority, or the gaming 
operation as approved by the Tribal gaming regulatory authority.
    (u) Equipment standards for gaming machine count. (1) A weigh scale 
calibration module shall be secured so as to prevent unauthorized 
access (e.g., prenumbered seal, lock and key, etc.).
    (2) A person independent of the cage, vault, gaming machine, and 
count team functions shall be required to be present whenever the 
calibration module is accessed. Such access shall be documented and 
maintained.
    (3) If a weigh scale interface is used, it shall be adequately 
restricted so as to prevent unauthorized access (passwords, keys, 
etc.).
    (4) If the weigh scale has a zero adjustment mechanism, it shall be 
physically limited to minor adjustments (e.g., weight of a bucket) or 
physically situated such that any unnecessary adjustments to it during 
the weigh process would be observed by other count team members.
    (5) The weigh scale and weigh scale interface (if applicable) shall 
be tested by a person or persons independent of the cage, vault, and 
gaming machine departments and count team at least quarterly. At least 
annually, this test shall be performed by internal audit in accordance 
with the internal audit standards. The result of these tests shall be 
documented and signed by the person or persons performing the test.
    (6) Prior to the gaming machine count, at least two employees shall 
verify the accuracy of the weigh scale with varying weights or with 
varying amounts of previously counted coin for each denomination to 
ensure the scale is properly calibrated (varying weights/coin from drop 
to drop is acceptable).
    (7) If a mechanical coin counter is used (instead of a weigh 
scale), the Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with procedures that are 
equivalent to those described in paragraphs (u)(4), (u)(5), and (u)(6) 
of this section.
    (8) If a coin meter count machine is used, the count team member 
shall record the machine number denomination and number of coins in ink 
on a source document, unless the meter machine automatically records 
such information.
    (i) A count team member shall test the coin meter count machine 
before the actual count to ascertain if the metering device is 
functioning properly with a predetermined number of coins for each 
denomination.
    (ii) [Reserved]


Sec. 542.32  What are the minimum internal control standards for 
internal audit for Tier B gaming operations?

    (a) Internal audit personnel. (1) For Tier B gaming operations, a 
separate internal audit department must be maintained. Alternatively, 
designating personnel (who are independent with respect to the 
departments/procedures being examined) to perform internal

[[Page 43435]]

audit work satisfies the requirements of this paragraph.
    (2) The internal audit personnel shall report directly to the 
Tribe, Tribal gaming regulatory authority, audit committee, or other 
entity designated by the Tribe in accordance with the definition of 
internal audit in Sec. 542.2.
    (b) Audits. (1) Internal audit personnel shall perform audits of 
all major gaming areas of the gaming operation. The following shall be 
reviewed at least annually:
    (i) Bingo, including but not limited to, bingo card control, payout 
procedures, and cash reconciliation process;
    (ii) Pull tabs, including but not limited to, statistical records, 
winner verification, perpetual inventory, and accountability of sales 
versus inventory;
    (iii) Card games, including but not limited to, card games 
operation, cash exchange procedures, shill transactions, and count 
procedures;
    (iv) Keno, including but not limited to, game write and payout 
procedures, sensitive key location and control, and a review of keno 
auditing procedures;
    (v) Pari-mutual wagering, including write and payout procedures, 
and pari-mutual auditing procedures;
    (vi) Table games, including but not limited to, fill and credit 
procedures, pit credit play procedures, rim credit procedures, soft 
drop/count procedures and the subsequent transfer of funds, unannounced 
testing of count room currency counters and/or currency interface, 
location and control over sensitive keys, the tracing of source 
documents to summarized documentation and accounting records, and 
reconciliation to restricted copies;
    (vii) Gaming machines, including but not limited to, jackpot payout 
and gaming machine fill procedures, gaming machine drop/count and bill 
acceptor drop/count and subsequent transfer of funds, unannounced 
testing of weigh scale and weigh scale interface, unannounced testing 
of count room currency counters and/or currency interface, gaming 
machine drop cabinet access, tracing of source documents to summarized 
documentation and accounting records, reconciliation to restricted 
copies, location and control over sensitive keys, compliance with EPROM 
duplication procedures, and compliance with MICS procedures for gaming 
machines that accept currency or coin(s) and issue cash-out tickets or 
gaming machines that do not accept currency or coin(s) and do not 
return currency or coin(s);
    (viii) Cage and credit procedures including all cage, credit, and 
collection procedures, and the reconciliation of trial balances to 
physical instruments on a sample basis. Cage accountability shall be 
reconciled to the general ledger;
    (ix) Information technology functions, including review for 
compliance with information technology standards;
    (x) Complimentary service or item, including but not limited to, 
procedures whereby complimentary service items are issued, authorized, 
and redeemed; and
    (xi) Any other internal audits as required by the Tribe, Tribal 
gaming regulatory authority, audit committee, or other entity 
designated by the Tribe.
    (2) In addition to the observation and examinations performed under 
paragraph (b)(1) of this section, follow-up observations and 
examinations shall be performed to verify that corrective action has 
been taken regarding all instances of noncompliance cited by internal 
audit, the independent accountant, and/or the Commission. The 
verification shall be performed within six (6) months following the 
date of notification.
    (3) Whenever possible, internal audit observations shall be 
performed on an unannounced basis (i.e., without the employees being 
forewarned that their activities will be observed). Additionally, if 
the independent accountant also performs the internal audit function, 
the accountant shall perform separate observations of the table games/
gaming machine drops and counts to satisfy the internal audit 
observation requirements and independent accountant tests of controls 
as required by the American Institute of Certified Public Accountants 
guide.
    (c) Documentation. (1) Documentation (e.g., checklists, programs, 
reports, etc.) shall be prepared to evidence all internal audit work 
performed as it relates to the requirements in this section, including 
all instances of noncompliance.
    (2) The internal audit department shall operate with audit 
programs, which, at a minimum, address the MICS. Additionally, the 
department shall properly document the work performed, the conclusions 
reached, and the resolution of all exceptions. Institute of Internal 
Auditors standards are recommended but not required.
    (d) Reports. (1) Reports documenting audits performed shall be 
maintained and made available to the Commission upon request.
    (2) Such audit reports shall include the following information:
    (i) Audit objectives;
    (ii) Audit procedures and scope;
    (iii) Findings and conclusions;
    (iv) Recommendations, if applicable; and
    (v) Management's response.
    (e) Material exceptions. All material exceptions resulting from 
internal audit work shall be investigated and resolved with the results 
of such being documented and retained for five years.
    (f) Role of management. (1) Internal audit findings shall be 
reported to management.
    (2) Management shall be required to respond to internal audit 
findings stating corrective measures to be taken to avoid recurrence of 
the audit exception.
    (3) Such management responses shall be included in the internal 
audit report that will be delivered to management, the Tribe, Tribal 
gaming regulatory authority, audit committee, or other entity 
designated by the Tribe.


Sec. 542.33  What are the minimum internal control standards for 
surveillance for Tier B gaming operations?

    (a) The surveillance system shall be maintained and operated from a 
staffed surveillance room and shall provide surveillance over gaming 
areas.
    (b) The entrance to the surveillance room shall be located so that 
it is not readily accessible by either gaming operation employees who 
work primarily on the casino floor, or the general public.
    (c) Access to the surveillance room shall be limited to 
surveillance personnel, designated employees, and other persons 
authorized in accordance with the surveillance department policy. Such 
policy shall be approved by the Tribal gaming regulatory authority. The 
surveillance department shall maintain a sign-in log of other 
authorized persons entering the surveillance room.
    (d) Surveillance room equipment shall have total override 
capability over all other satellite surveillance equipment located 
outside the surveillance room.
    (e) The surveillance system shall include date and time generators 
that possess the capability to display the date and time of recorded 
events on video and/or digital recordings. The displayed date and time 
shall not significantly obstruct the recorded view.
    (f) The surveillance department shall strive to ensure staff is 
trained in the use of the equipment, knowledge of the games, and house 
rules.
    (g) Each camera required by the standards in this section shall be 
installed in a manner that will prevent it from being readily 
obstructed, tampered with, or disabled by customers or employees.
    (h) Each camera required by the standards in this section shall 
possess the capability of having its picture

[[Page 43436]]

displayed on a monitor and recorded. The surveillance system shall 
include sufficient numbers of monitors and recorders to simultaneously 
display and record multiple gaming and count room activities, and 
record the views of all dedicated cameras and motion activated 
dedicated cameras.
    (i) Reasonable effort shall be made to repair each malfunction of 
surveillance system equipment required by the standards in this section 
within seventy-two (72) hours after the malfunction is discovered. The 
Tribal gaming regulatory authority shall be notified of any camera(s) 
that has malfunctioned for more than twenty-four (24) hours.
    (1) In the event of a dedicated camera malfunction, the gaming 
operation and/or surveillance department shall immediately provide 
alternative camera coverage or other security measures, such as 
additional supervisory or security personnel, to protect the subject 
activity.
    (2) [Reserved]
    (j) Bingo. (1) The surveillance system shall possess the capability 
to monitor the bingo ball drawing device or random number generator, 
which shall be recorded during the course of the draw by a dedicated 
camera with sufficient clarity to identify the balls drawn or numbers 
selected.
    (2) The surveillance system shall monitor and record the game board 
and the activities of the employees responsible for drawing, calling, 
and entering the balls drawn or numbers selected.
    (k) Card games. The surveillance system shall monitor and record 
general activities in each card room with sufficient clarity to 
identify the employees performing the different functions.
    (l) Progressive card games. (1) Progressive card games with a 
progressive jackpot of $25,000 or more shall be monitored and recorded 
by dedicated cameras that provide coverage of:
    (i) The table surface, sufficient that the card values and card 
suits can be clearly identified;
    (ii) An overall view of the entire table with sufficient clarity to 
identify customers and dealer; and
    (iii) A view of the posted jackpot amount.
    (2) [Reserved]
    (m) Keno. (1) The surveillance system shall possess the capability 
to monitor the keno ball-drawing device or random number generator, 
which shall be recorded during the course of the draw by a dedicated 
camera with sufficient clarity to identify the balls drawn or numbers 
selected.
    (2) The surveillance system shall monitor and record general 
activities in each keno game area with sufficient clarity to identify 
the employees performing the different functions.
    (n) Pari-mutuel. The surveillance system shall monitor and record 
general activities in the pari-mutuel area, to include the ticket 
writer and cashier areas, with sufficient clarity to identify the 
employees performing the different functions.
    (o) Table games. (1) Operations with four (4) or more table games. 
Except as otherwise provided in paragraphs (o)(3), (o)(4), and (o)(5) 
of this section, the surveillance system of gaming operations operating 
four (4) or more table games shall provide at a minimum one (1) pan-
tilt-zoom camera per two (2) tables and surveillance must be capable of 
taping:
    (i) With sufficient clarity to identify customers and dealers; and
    (ii) With sufficient coverage and clarity to simultaneously view 
the table bank and determine the configuration of wagers, card values, 
and game outcome.
    (iii) One (1) dedicated camera per table and one (1) pan-tilt-zoom 
camera per four (4) tables may be an acceptable alternative procedure 
to satisfy the requirements of this paragraph.
    (2) Operations with three (3) or fewer table games. The 
surveillance system of gaming operations operating three (3) or fewer 
table games shall:
    (i) Comply with the requirements of paragraph (o)(1) of this 
section; or
    (ii) Have one (1) overhead camera at each table.
    (3) Craps. All craps tables shall have two (2) dedicated cross view 
cameras covering both ends of the table.
    (4) Roulette. All roulette areas shall have one (1) overhead 
dedicated camera covering the roulette wheel and shall also have one 
(1) dedicated camera covering the play of the table.
    (5) Big wheel. All big wheel games shall have one (1) dedicated 
camera viewing the wheel.
    (p) Progressive table games. (1) Progressive table games with a 
progressive jackpot of $25,000 or more shall be monitored and recorded 
by dedicated cameras that provide coverage of:
    (i) The table surface, sufficient that the card values and card 
suits can be clearly identified;
    (ii) An overall view of the entire table with sufficient clarity to 
identify customers and dealer; and
    (iii) A view of the progressive meter jackpot amount. If several 
tables are linked to the same progressive jackpot meter, only one meter 
need be recorded.
    (2) [Reserved]
    (q) Gaming machines. (1) Except as otherwise provided in paragraphs 
(q)(2) and (q)(3) of this section, gaming machines offering a payout of 
more than $250,000 shall be monitored and recorded by a dedicated 
camera(s) to provide coverage of:
    (i) All customers and employees at the gaming machine, and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (2) In-house progressive machine. In-house progressive gaming 
machines offering a base payout amount (jackpot reset amount) of more 
than $100,000 shall be monitored and recorded by a dedicated camera(s) 
to provide coverage of:
    (i) All customers and employees at the gaming machine; and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (3) Wide-area progressive machine. Wide-area progressive gaming 
machines offering a base payout amount of more than $1.5 million and 
monitored by an independent vendor utilizing an on-line progressive 
computer system shall be monitored and recorded by a dedicated 
camera(s) to provide coverage of:
    (i) All customers and employees at the gaming machine; and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (4) Notwithstanding paragraph (q)(1) of this section, if the gaming 
machine is a multi-game machine, the Tribal gaming regulatory 
authority, or the gaming operation subject to the approval of the 
Tribal gaming regulatory authority, may develop and implement 
alternative procedures to verify payouts.
    (r) Cage and vault. (1) The surveillance system shall monitor and 
record a general overview of activities occurring in each cage and 
vault area with sufficient clarity to identify employees within the 
cage and customers and employees at the counter areas.
    (2) Each cashier station shall be equipped with one (1) dedicated 
overhead camera covering the transaction area.
    (3) The surveillance system shall provide an overview of cash 
transactions. This overview should include the customer, the employee, 
and the surrounding area.
    (s) Fills and credits. (1) The cage or vault area in which fills 
and credits are transacted shall be monitored and recorded by a 
dedicated camera or motion activated dedicated camera that provides 
coverage with sufficient clarity

[[Page 43437]]

to identify the chip values and the amounts on the fill and credit 
slips.
    (2) Controls provided by a computerized fill and credit system may 
be deemed an adequate alternative to viewing the fill and credit slips.
    (t) Currency and coin. (1) The surveillance system shall monitor 
and record with sufficient clarity all areas where currency or coin may 
be stored or counted.
    (2) The surveillance system shall provide for:
    (i) Coverage of scales shall be sufficiently clear to view any 
attempted manipulation of the recorded data.
    (ii) Monitoring and recording of the table game drop box storage 
rack or area by either a dedicated camera or a motion-detector 
activated camera.
    (iii) Monitoring and recording of all areas where coin may be 
stored or counted, including the hard count room, all doors to the hard 
count room, all scales and wrapping machines, and all areas where 
uncounted coin may be stored during the drop and count process.
    (iv) Monitoring and recording of soft count room, including all 
doors to the room, all table game drop boxes, safes, and counting 
surfaces, and all count team personnel. The counting surface area must 
be continuously monitored and recorded by a dedicated camera during the 
soft count.
    (v) Monitoring and recording of all areas where currency is sorted, 
stacked, counted, verified, or stored during the soft count process.
    (u) Change booths. The surveillance system shall monitor and record 
a general overview of the activities occurring in each gaming machine 
change booth.
    (v) Video recording and/or digital record retention. (1) All video 
recordings and/or digital records of coverage provided by the dedicated 
cameras or motion-activated dedicated cameras required by the standards 
in this section shall be retained for a minimum of seven (7) days.
    (2) Recordings involving suspected or confirmed gaming crimes, 
unlawful activity, or detentions by security personnel, must be 
retained for a minimum of thirty (30) days.
    (3) Duly authenticated copies of video recordings and/or digital 
records shall be provided to the Commission upon request.
    (w) Video library log. A video library log, or comparable 
alternative procedure approved by the Tribal gaming regulatory 
authority, shall be maintained to demonstrate compliance with the 
storage, identification, and retention standards required in this 
section.
    (x) Malfunction and repair log. (1) Surveillance personnel shall 
maintain a log or alternative procedure approved by the Tribal gaming 
regulatory authority that documents each malfunction and repair of the 
surveillance system as defined in this section.
    (2) The log shall state the time, date, and nature of each 
malfunction, the efforts expended to repair the malfunction, and the 
date of each effort, the reasons for any delays in repairing the 
malfunction, the date the malfunction is repaired, and where 
applicable, any alternative security measures that were taken.
    (y) Surveillance log. (1) Surveillance personnel shall maintain a 
log of all surveillance activities.
    (2) Such log shall be maintained by surveillance room personnel and 
shall be stored securely within the surveillance department.
    (3) At a minimum, the following information shall be recorded in a 
surveillance log:
    (i) Date;
    (ii) Time commenced and terminated;
    (iii) Activity observed or performed; and
    (iv) The name or license credential number of each person who 
initiates, performs, or supervises the surveillance.
    (4) Surveillance personnel shall also record a summary of the 
results of the surveillance of any suspicious activity. This summary 
may be maintained in a separate log.


Sec. 542.40  What is a Tier C gaming operation?

    A Tier C gaming operation is one with annual gross gaming revenues 
of more than $15 million.


Sec. 542.41  What are the minimum internal control standards for drop 
and count for Tier C gaming operations?

    (a) Computer applications. For any computer applications utilized, 
alternate documentation and/or procedures that provide at least the 
level of control described by the standards in this section, as 
approved by the Tribal gaming regulatory authority, will be acceptable.
    (b) Table game drop standards.
    (1) The setting out of empty table game drop boxes and the drop 
shall be a continuous process.
    (2) At the end of each shift:
    (i) All locked table game drop boxes shall be removed from the 
tables by a person independent of the pit shift being dropped;
    (ii) A separate drop box shall be placed on each table opened at 
any time during each shift or a gaming operation may utilize a single 
drop box with separate openings and compartments for each shift; and
    (iii) Upon removal from the tables, table game drop boxes shall be 
transported directly to the count room or other equivalently secure 
area with comparable controls and locked in a secure manner until the 
count takes place.
    (3) If drop boxes are not placed on all tables, then the pit 
department shall document which tables were open during the shift.
    (4) The transporting of table game drop boxes shall be performed by 
a minimum of two persons, at least one of whom is independent of the 
pit shift being dropped.
    (5) All table game drop boxes shall be posted with a number 
corresponding to a permanent number on the gaming table and marked to 
indicate game, table number, and shift.
    (6) Surveillance shall be notified when the drop is to begin so 
that surveillance may monitor the activities.
    (c) Soft count room personnel. (1) The table game soft count and 
the gaming machine bill acceptor count shall be performed by a minimum 
of three employees.
    (2) Count room personnel shall not be allowed to exit or enter the 
count room during the count except for emergencies or scheduled breaks. 
At no time during the count, shall there be fewer than three employees 
in the count room until the drop proceeds have been accepted into cage/
vault accountability. Surveillance shall be notified whenever count 
room personnel exit or enter the count room during the count.
    (3) Count team members shall be rotated on a routine basis such 
that the count team is not consistently the same three persons more 
than four (4) days per week. This standard shall not apply to gaming 
operations that utilize a count team of more than three persons.
    (4) The count team shall be independent of transactions being 
reviewed and counted. The count team shall be independent of the cage/
vault departments, however, an accounting representative may be used if 
there is an independent audit of all soft count documentation.
    (d) Table game soft count standards. (1) The table game soft count 
shall be performed in a soft count room or other equivalently secure 
area with comparable controls.
    (2) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers,

[[Page 43438]]

supervisors for resolution of problems, and authorized maintenance 
personnel.
    (3) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (4) The table game drop boxes shall be individually emptied and 
counted in such a manner to prevent the commingling of funds between 
boxes until the count of the box has been recorded.
    (i) The count of each box shall be recorded in ink or other 
permanent form of recordation.
    (ii) A second count shall be performed by an employee on the count 
team who did not perform the initial count.
    (iii) Corrections to information originally recorded by the count 
team on soft count documentation shall be made by drawing a single line 
through the error, writing the correct figure above the original 
figure, and then obtaining the initials of at least two count team 
members who verified the change.
    (5) If currency counters are utilized and the count room table is 
used only to empty boxes and sort/stack contents, a count team member 
shall be able to observe the loading and unloading of all currency at 
the currency counter, including rejected currency.
    (6) Table game drop boxes, when empty, shall be shown to another 
member of the count team, or to another person who is observing the 
count, or to surveillance, provided the count is monitored in its 
entirety by a person independent of the count.
    (7) Orders for fill/credit (if applicable) shall be matched to the 
fill/credit slips. Fills and credits shall be traced to or recorded on 
the count sheet.
    (8) Pit marker issue and payment slips (if applicable) removed from 
the table game drop boxes shall either be:
    (i) Traced to or recorded on the count sheet by the count team; or
    (ii) Totaled by shift and traced to the totals documented by the 
computerized system. Accounting personnel shall verify the issue/
payment slip for each table is accurate.
    (9) Foreign currency exchange forms (if applicable) removed from 
the table game drop boxes shall be reviewed for the proper daily 
exchange rate and the conversion amount shall be recomputed by the 
count team. Alternatively, this may be performed by accounting/auditing 
employees.
    (10) The opening/closing table and marker inventory forms (if 
applicable) shall either be:
    (i) Examined and traced to or recorded on the count sheet; or
    (ii) If a computerized system is used, accounting personnel can 
trace the opening/closing table and marker inventory forms to the count 
sheet. Discrepancies shall be investigated with the findings documented 
and maintained for inspection.
    (11) The count sheet shall be reconciled to the total drop by a 
count team member who shall not function as the sole recorder.
    (12) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.
    (13) All drop proceeds and cash equivalents that were counted shall 
be turned over to the cage or vault cashier (who shall be independent 
of the count team) or to an authorized person/employee independent of 
the revenue generation and the count process for verification. Such 
person shall certify by signature as to the accuracy of the drop 
proceeds delivered and received.
    (14) The count sheet, with all supporting documents, shall be 
delivered to the accounting department by a count team member or a 
person independent of the cashiers department. Alternatively, it may be 
adequately secured (e.g., locked container to which only accounting 
personnel can gain access) until retrieved by the accounting 
department.
    (15) Access to stored, full table game drop boxes shall be 
restricted to authorized members of the drop and count teams.
    (e) Gaming machine bill acceptor drop standards. (1) A minimum of 
three employees shall be involved in the removal of the gaming machine 
drop, at least one of who is independent of the gaming machine 
department.
    (2) All bill acceptor canisters shall be removed only at the time 
previously designated by the gaming operation and reported to the 
Tribal gaming regulatory authority, except for emergency drops.
    (3) Surveillance shall be notified when the drop is to begin so 
that surveillance may monitor the activities.
    (4) The bill acceptor canisters shall be removed by a person 
independent of the gaming machine department then transported directly 
to the count room or other equivalently secure area with comparable 
controls and locked in a secure manner until the count takes place.
    (i) Security shall be provided over the bill acceptor canisters 
removed from the gaming machines and awaiting transport to the count 
room.
    (ii) The transporting of bill acceptor canisters shall be performed 
by a minimum of two persons, at least one of who is independent of the 
gaming machine department.
    (5) All bill acceptor canisters shall be posted with a number 
corresponding to a permanent number on the gaming machine.
    (f) Gaming machine bill acceptor count standards. (1) The gaming 
machine bill acceptor count shall be performed in a soft count room or 
other equivalently secure area with comparable controls.
    (2) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers, supervisors for resolution of problems, and 
authorized maintenance personnel.
    (3) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (4) The bill acceptor canisters shall be individually emptied and 
counted in such a manner to prevent the commingling of funds between 
canisters until the count of the canister has been recorded.
    (i) The count of each canister shall be recorded in ink or other 
permanent form of recordation.
    (ii) A second count shall be performed by an employee on the count 
team who did not perform the initial count.
    (iii) Corrections to information originally recorded by the count 
team on soft count documentation shall be made by drawing a single line 
through the error, writing the correct figure above the original 
figure, and then obtaining the initials of at least two count team 
members who verified the change.
    (5) If currency counters are utilized and the count room table is 
used only to empty canisters and sort/stack contents, a count team 
member shall be able to observe the loading and unloading of all 
currency at the currency counter, including rejected currency.
    (6) Canisters, when empty, shall be shown to another member of the 
count team, or to another person who is observing the count, or to 
surveillance, provided that the count is monitored in its entirety by a 
person independent of the count.
    (7) The count sheet shall be reconciled to the total drop by a 
count team member who shall not function as the sole recorder.
    (8) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.
    (9) All drop proceeds and cash equivalents that were counted shall 
be

[[Page 43439]]

turned over to the cage or vault cashier (who shall be independent of 
the count team) or to an authorized person/employee independent of the 
revenue generation and the count process for verification. Such person 
shall certify by signature as to the accuracy of the drop proceeds 
delivered and received.
    (10) The count sheet, with all supporting documents, shall be 
delivered to the accounting department by a count team member or a 
person independent of the cashiers department. Alternatively, it may be 
adequately secured (e.g., locked container to which only accounting 
personnel can gain access) until retrieved by the accounting 
department.
    (11) Access to stored bill acceptor canisters, full or empty, shall 
be restricted to:
    (i) Authorized members of the drop and count teams; and
    (ii) Authorized personnel in an emergency for the resolution of a 
problem.
    (12) All bill acceptor canisters shall be posted with a number 
corresponding to a permanent number on the gaming machine.
    (g) Gaming machine coin drop standards. (1) A minimum of three 
employees shall be involved in the removal of the gaming machine drop, 
at least one of who is independent of the gaming machine department.
    (2) All drop buckets shall be removed only at the time previously 
designated by the gaming operation and reported to the Tribal gaming 
regulatory authority, except for emergency drops.
    (3) Surveillance shall be notified when the drop is to begin in 
order that surveillance may monitor the activities.
    (4) Security shall be provided over the buckets removed from the 
gaming machine drop cabinets and awaiting transport to the count room.
    (5) As each machine is opened, the contents shall be tagged with 
its respective machine number if the bucket is not permanently marked 
with the machine number. The contents shall be transported directly to 
the area designated for the counting of such drop proceeds. If more 
than one trip is required to remove the contents of the machines, the 
filled carts of coins shall be securely locked in the room designed for 
counting or in another equivalently secure area with comparable 
controls. There shall be a locked covering on any carts in which the 
drop route includes passage out of doors.
    (i) Alternatively, a smart bucket system that electronically 
identifies and tracks the gaming machine number, and facilitates the 
proper recognition of gaming revenue, shall satisfy the requirements of 
this paragraph.
    (ii) [Reserved]
    (6) Each drop bucket in use shall be:
    (i) Housed in a locked compartment separate from any other 
compartment of the gaming machine and keyed differently than other 
gaming machine compartments; and
    (ii) Identifiable to the gaming machine from which it is removed. 
If the gaming machine is identified with a removable tag that is placed 
in the bucket, the tag shall be placed on top of the bucket when it is 
collected.
    (7) Each gaming machine shall have drop buckets into which coins or 
tokens that are retained by the gaming machine are collected. Drop 
bucket contents shall not be used to make change or pay hand-paid 
payouts.
    (8) The collection procedures may include procedures for dropping 
gaming machines that have trays instead of drop buckets.
    (h) Hard count room personnel. (1) The weigh/count shall be 
performed by a minimum of three employees.
    (2) At no time during the weigh/count shall there be fewer than 
three employees in the count room until the drop proceeds have been 
accepted into cage/vault accountability. Surveillance shall be notified 
whenever count room personnel exit or enter the count room during the 
count.
    (i) If the gaming machine count is conducted with a continuous 
mechanical count meter that is not reset during the count and is 
verified in writing by at least three employees at the start and end of 
each denomination count, then one employee may perform the wrap.
    (ii) [Reserved]
    (3) Count team members shall be rotated on a routine basis such 
that the count team is not consistently the same three persons more 
than four (4) days per week. This standard shall not apply to gaming 
operations that utilize a count team of more than three persons.
    (4) The count team shall be independent of transactions being 
reviewed and counted. The count team shall be independent of the cage/
vault departments, unless they are non-supervisory gaming machine 
employees and perform the laborer function only (A non-supervisory 
gaming machine employee is defined as a person below the level of 
gaming machine shift supervisor). A cage cashier may be used if this 
person is not allowed to perform the recording function. An accounting 
representative may be used if there is an independent audit of all 
count documentation.
    (i) Gaming machine coin count and wrap standards. (1) Coins shall 
include tokens.
    (2) The gaming machine coin count and wrap shall be performed in a 
count room or other equivalently secure area with comparable controls.
    (i) Alternatively, an on-the-floor drop system utilizing a mobile 
scale shall satisfy the requirements of this paragraph, subject to the 
following conditions:
    (A) The gaming operation shall utilize and maintain an effective 
on-line gaming machine monitoring system, as described in 
Sec. 542.13(m)(3);
    (B) Components of the on-the-floor drop system shall include, but 
not be limited to, a weigh scale, a laptop computer through which 
weigh/count applications are operated, a security camera available for 
the mobile scale system, and a VCR to be housed within the video 
compartment of the mobile scale. The system may include a mule cart 
used for mobile weigh scale system locomotion.
    (C) The gaming operation must obtain the security camera available 
with the system, and this camera must be added in such a way as to 
eliminate tampering.
    (D) Prior to the drop, the drop/count team shall ensure the scale 
batteries are charged;
    (E) Prior to the drop, a videotape shall be inserted into the VCR 
used to record the drop in conjunction with the security camera system 
and the VCR shall be activated;
    (F) The weigh scale test shall be performed prior to removing the 
unit from the hard count room for the start of the weigh/drop/count;
    (G) Surveillance shall be notified when the weigh/drop/count begins 
and shall be capable of monitoring the entire process;
    (H) An observer independent of the weigh/drop/count teams 
(independent observer) shall remain by the weigh scale at all times and 
shall observe the entire weigh/drop/count process;
    (I) Physical custody of the key(s) needed to access the laptop and 
video compartment shall require the involvement of two persons, one of 
whom is independent of the drop and count team;
    (J) The mule key (if applicable), the laptop and video compartment 
keys, and the remote control for the VCR shall be maintained by a 
department independent of the gaming machine department. The 
appropriate personnel shall sign out these keys;
    (K) A person independent of the weigh/drop/count teams shall be 
required to accompany these keys while

[[Page 43440]]

they are checked out, and observe each time the laptop compartment is 
opened;
    (L) The laptop access panel shall not be opened outside the hard 
count room, except in instances when the laptop must be rebooted as a 
result of a crash, lock up, or other situation requiring immediate 
corrective action;
    (M) User access to the system shall be limited to those employees 
required to have full or limited access to complete the weigh/drop/
count; and
    (N) When the weigh/drop/count is completed, the independent 
observer shall access the laptop compartment, end the recording 
session, eject the videotape, and deliver the videotape to 
surveillance.
    (ii) [Reserved]
    (3) Access to the count room during the count shall be restricted 
to members of the drop and count teams, with the exception of 
authorized observers, supervisors for resolution of problems, and 
authorized maintenance personnel.
    (4) If counts from various revenue centers occur simultaneously in 
the count room, procedures shall be in effect that prevent the 
commingling of funds from different revenue centers.
    (5) The following functions shall be performed in the counting of 
the gaming machine drop:
    (i) Recorder function, which involves the recording of the gaming 
machine count; and
    (ii) Count team supervisor function, which involves the control of 
the gaming machine weigh and wrap process. The supervisor shall not 
perform the initial recording of the weigh/count unless a weigh scale 
with a printer is used.
    (6) The gaming machine drop shall be counted, wrapped, and 
reconciled in such a manner to prevent the commingling of gaming 
machine drop coin with coin (for each denomination) from the next 
gaming machine drop until the count of the gaming machine drop has been 
recorded. If the coins are not wrapped immediately after being weighed 
or counted, they shall be secured and not commingled with other coin.
    (i) The amount of the gaming machine drop from each machine shall 
be recorded in ink or other permanent form of recordation on a gaming 
machine count document by the recorder or mechanically printed by the 
weigh scale.
    (ii) Corrections to information originally recorded by the count 
team on gaming machine count documentation shall be made by drawing a 
single line through the error, writing the correct figure above the 
original figure, and then obtaining the initials of at least two count 
team members who verified the change.
    (A) If a weigh scale interface is used, corrections to gaming 
machine count data shall be made using either of the following:
    (1) Drawing a single line through the error on the gaming machine 
document, writing the correct figure above the original figure, and 
then obtaining the initials of at least two count team employees. If 
this procedure is used, an employee independent of the gaming machine 
department and count team shall enter the correct figure into the 
computer system prior to the generation of related gaming machine 
reports; or
    (2) During the count process, correct the error in the computer 
system and enter the passwords of at least two count team employees. If 
this procedure is used, an exception report shall be generated by the 
computer system identifying the gaming machine number, the error, the 
correction, and the count team employees attesting to the correction.
    (B) [Reserved]
    (7) If applicable, the weight shall be converted to dollar amounts 
before the reconciliation of the weigh to the wrap.
    (8) If a coin meter is used, a count team member shall convert the 
coin count for each denomination into dollars and shall enter the 
results on a summary sheet.
    (9) The recorder and at least one other count team member shall 
sign the weigh tape and the gaming machine count document attesting to 
the accuracy of the weigh/count.
    (10) All members of the count team shall sign the count document or 
a summary report to attest to their participation in the count.
    (11) All drop proceeds and cash equivalents that were counted shall 
be turned over to the cage or vault cashier (who shall be independent 
of the count team) or to an authorized person/employee independent of 
the revenue generation and the count process for verification. Such 
person shall certify by signature as to the accuracy of the drop 
proceeds delivered and received.
    (12) All gaming machine count and wrap documentation, including any 
applicable computer storage media, shall be delivered to the accounting 
department by a count team member or a person independent of the 
cashier's department. Alternatively, it may be adequately secured 
(e.g., locked container to which only accounting personnel can gain 
access) until retrieved by the accounting department.
    (13) If the coins are transported off the property, a second 
(alternative) count procedure shall be performed before the coins leave 
the property. Any variances shall be documented.
    (14) Variances. Large (by denomination, either $1,000 or 2% of the 
drop, whichever is less) or unusual (e.g., zero for weigh/count or 
patterned for all counts) variances between the weigh/count and wrap 
shall be investigated by management personnel independent of the gaming 
machine department, count team, and the cage/vault functions on a 
timely basis. The results of such investigation shall be documented, 
maintained for inspection, and provided to the Tribal gaming regulatory 
authority upon request.
    (j) Security of the count room inventory during the gaming machine 
coin count and wrap. (1) If the count room serves as a coin room and 
coin room inventory is not secured so as to preclude access by the 
count team, then the following standards shall apply:
    (i) At the commencement of the gaming machine count the following 
requirements shall be met:
    (A) The coin room inventory shall be counted by at least two 
employees, one of whom is a member of the count team and the other is 
independent of the weigh/count and wrap procedures;
    (B) The count in paragraph (j)(1)(i)(A) of this section shall be 
recorded on an appropriate inventory form;
    (ii) Upon completion of the wrap of the gaming machine drop:
    (A) At least two members of the count team (wrap team), 
independently from each other, shall count the ending coin room 
inventory;
    (B) The counts in paragraph (j)(1)(ii)(A) of this section shall be 
recorded on a summary report(s) that evidences the calculation of the 
final wrap by subtracting the beginning inventory from the sum of the 
ending inventory and transfers in and out of the coin room;
    (C) The same count team members shall compare the calculated wrap 
to the weigh/count, recording the comparison and noting any variances 
on the summary report;
    (D) A member of the cage/vault department shall count the ending 
coin room inventory by denomination and shall reconcile it to the 
beginning inventory, wrap, transfers, and weigh/count; and
    (E) At the conclusion of the reconciliation, at least two count/
wrap team members and the verifying employee shall sign the summary 
report(s) attesting to its accuracy.
    (2) If the count room is segregated from the coin room, or if the 
coin room is used as a count room and the coin room inventory is 
secured to preclude access by the count team, all of the

[[Page 43441]]

following requirements shall be completed, at the conclusion of the 
count:
    (i) At least two members of the count/wrap team shall count the 
final wrapped gaming machine drop independently from each other;
    (ii) The counts shall be recorded on a summary report;
    (iii) The same count team members (or the accounting department) 
shall compare the final wrap to the weigh/count, recording the 
comparison and noting any variances on the summary report;
    (iv) A member of the cage/vault department shall count the wrapped 
gaming machine drop by denomination and reconcile it to the weigh/
count;
    (v) At the conclusion of the reconciliation, at least two count 
team members and the cage/vault employee shall sign the summary report 
attesting to its accuracy; and
    (vi) The wrapped coins (exclusive of proper transfers) shall be 
transported to the cage, vault or coin vault after the reconciliation 
of the weigh/count to the wrap.
    (k) Transfers during the gaming machine coin count and wrap. (1) 
Transfers may be permitted during the count and wrap only if permitted 
under the internal control standards approved by the Tribal gaming 
regulatory authority.
    (2) Each transfer shall be recorded on a separate multi-part form 
with a preprinted or concurrently-printed form number (used solely for 
gaming machine count transfers) that shall be subsequently reconciled 
by the accounting department to ensure the accuracy of the reconciled 
gaming machine drop.
    (3) Each transfer must be counted and signed for by at least two 
members of the count team and by a person independent of the count team 
who is responsible for authorizing the transfer.
    (l) Gaming machine drop key control standards. (1) Gaming machine 
coin drop cabinet keys, including duplicates, shall be maintained by a 
department independent of the gaming machine department.
    (2) The physical custody of the keys needed to access gaming 
machine coin drop cabinets, including duplicates, shall require the 
involvement of two persons, one of whom is independent of the gaming 
machine department.
    (3) Two employees (separate from key custodian) shall be required 
to accompany such keys while checked out and observe each time gaming 
machine drop cabinets are accessed, unless surveillance is notified 
each time keys are checked out and surveillance observes the person 
throughout the period the keys are checked out.
    (m) Table game drop box key control standards. (1) Procedures shall 
be developed and implemented to insure that unauthorized access to 
empty table game drop boxes shall not occur from the time the boxes 
leave the storage racks until they are placed on the tables.
    (2) The involvement of at least two persons independent of the cage 
department shall be required to access stored empty table game drop 
boxes.
    (3) The release keys shall be separately keyed from the contents 
keys.
    (4) At least three (two for table game drop box keys in operations 
with three tables or fewer) count team members are required to be 
present at the time count room and other count keys are issued for the 
count.
    (5) All duplicate keys shall be maintained in a manner that 
provides the same degree of control as is required for the original 
keys. Records shall be maintained for each key duplicated that indicate 
the number of keys made and destroyed.
    (6) Logs shall be maintained by the custodian of sensitive keys to 
document authorization of personnel accessing keys.
    (n) Table game drop box release keys. (1) The table game drop box 
release keys shall be maintained by a department independent of the pit 
department.
    (2) Only the person(s) authorized to remove table game drop boxes 
from the tables shall be allowed access to the table game drop box 
release keys; however, the count team members may have access to the 
release keys during the soft count in order to reset the table game 
drop boxes.
    (3) Persons authorized to remove the table game drop boxes shall be 
precluded from having simultaneous access to the table game drop box 
contents keys and release keys.
    (4) For situations requiring access to a table game drop box at a 
time other than the scheduled drop, the date, time, and signature of 
employee signing out/in the release key must be documented.
    (o) Bill acceptor canister release keys. (1) The bill acceptor 
canister release keys shall be maintained by a department independent 
of the gaming machine department.
    (2) Only the person(s) authorized to remove bill acceptor canisters 
from the gaming machines shall be allowed access to the release keys.
    (3) Persons authorized to remove the bill acceptor canisters shall 
be precluded from having simultaneous access to the bill acceptor 
canister contents keys and release keys.
    (4) For situations requiring access to a bill acceptor canister at 
a time other than the scheduled drop, the date, time, and signature of 
employee signing out/in the release key must be documented.
    (p) Table game drop box storage rack keys. (1) A person independent 
of the pit department shall be required to accompany the table game 
drop box storage rack keys and observe each time table game drop boxes 
are removed from or placed in storage racks.
    (2) Persons authorized to obtain table game drop box storage rack 
keys shall be precluded from having simultaneous access to table game 
drop box contents keys with the exception of the count team.
    (q) Bill acceptor canister storage rack keys. (1) A person 
independent of the gaming machine department shall be required to 
accompany the bill acceptor canister storage rack keys and observe each 
time canisters are removed from or placed in storage racks.
    (2) Persons authorized to obtain bill acceptor canister storage 
rack keys shall be precluded from having simultaneous access to bill 
acceptor canister contents keys with the exception of the count team.
    (r) Table game drop box contents keys. (1) The physical custody of 
the keys needed for accessing stored, full table game drop box contents 
shall require the involvement of persons from at least two separate 
departments, with the exception of the count team.
    (2) Access to the table game drop box contents key at other than 
scheduled count times shall require the involvement of at least three 
persons from separate departments, including management. The reason for 
access shall be documented with the signatures of all participants and 
observers.
    (3) Only count team members shall be allowed access to table game 
drop box content keys during the count process.
    (s) Bill acceptor canister contents keys. (1) The physical custody 
of the keys needed for accessing stored, full bill acceptor canister 
contents shall require involvement of persons from two separate 
departments, with the exception of the count team.
    (2) Access to the bill acceptor canister contents key at other than 
scheduled count times shall require the involvement of at least three 
persons from separate departments, one of whom must be a supervisor. 
The reason for access shall be documented with the signatures of all 
participants and observers.
    (3) Only the count team members shall be allowed access to bill 
acceptor canister contents keys during the count process.

[[Page 43442]]

    (t) Emergency drop procedures. Emergency drop procedures shall be 
developed by the Tribal gaming regulatory authority, or the gaming 
operation as approved by the Tribal gaming regulatory authority.
    (u) Equipment standards for gaming machine count. (1) A weigh scale 
calibration module shall be secured so as to prevent unauthorized 
access (e.g., prenumbered seal, lock and key, etc.).
    (2) A person independent of the cage, vault, gaming machine, and 
count team functions shall be required to be present whenever the 
calibration module is accessed. Such access shall be documented and 
maintained.
    (3) If a weigh scale interface is used, it shall be adequately 
restricted so as to prevent unauthorized access (passwords, keys, 
etc.).
    (4) If the weigh scale has a zero adjustment mechanism, it shall be 
physically limited to minor adjustments (e.g., weight of a bucket) or 
physically situated such that any unnecessary adjustments to it during 
the weigh process would be observed by other count team members.
    (5) The weigh scale and weigh scale interface (if applicable) shall 
be tested by a person or persons independent of the cage, vault, and 
gaming machine departments and count team at least quarterly. At least 
annually, this test shall be performed by internal audit in accordance 
with the internal audit standards. The result of these tests shall be 
documented and signed by the person or persons performing the test.
    (6) Prior to the gaming machine count, at least two employees shall 
verify the accuracy of the weigh scale with varying weights or with 
varying amounts of previously counted coin for each denomination to 
ensure the scale is properly calibrated (varying weights/coin from drop 
to drop is acceptable).
    (7) If a mechanical coin counter is used (instead of a weigh 
scale), the Tribal gaming regulatory authority, or the gaming operation 
as approved by the Tribal gaming regulatory authority, shall establish 
and the gaming operation shall comply with procedures that are 
equivalent to those described in paragraphs (u)(4), (u)(5), and (u)(6) 
of this section.
    (8) If a coin meter count machine is used, the count team member 
shall record the machine number denomination and number of coins in ink 
on a source document, unless the meter machine automatically records 
such information.
    (i) A count team member shall test the coin meter count machine 
before the actual count to ascertain if the metering device is 
functioning properly with a predetermined number of coins for each 
denomination.
    (ii) [Reserved]


Sec. 542.42  What are the minimum internal control standards for 
internal audit for Tier C gaming operations?

    (a) Internal audit personnel. (1) For Tier C gaming operations, a 
separate internal audit department shall be maintained whose primary 
function is performing internal audit work and that is independent with 
respect to the departments subject to audit.
    (2) The internal audit personnel shall report directly to the 
Tribe, Tribal gaming regulatory authority, audit committee, or other 
entity designated by the Tribe in accordance with the definition of 
internal audit in Sec. 542.2.
    (b) Audits. (1) Internal audit personnel shall perform audits of 
all major gaming areas of the gaming operation. The following shall be 
reviewed at least annually:
    (i) Bingo, including but not limited to, bingo card control, payout 
procedures, and cash reconciliation process;
    (ii) Pull tabs, including but not limited to, statistical records, 
winner verification, perpetual inventory, and accountability of sales 
versus inventory;
    (iii) Card games, including but not limited to, card games 
operation, cash exchange procedures, shill transactions, and count 
procedures;
    (iv) Keno, including but not limited to, game write and payout 
procedures, sensitive key location and control, and a review of keno 
auditing procedures;
    (v) Pari-mutual wagering, including write and payout procedures, 
and pari-mutual auditing procedures;
    (vi) Table games, including but not limited to, fill and credit 
procedures, pit credit play procedures, rim credit procedures, soft 
drop/count procedures and the subsequent transfer of funds, unannounced 
testing of count room currency counters and/or currency interface, 
location and control over sensitive keys, the tracing of source 
documents to summarized documentation and accounting records, and 
reconciliation to restricted copies;
    (vii) Gaming machines, including but not limited to, jackpot payout 
and gaming machine fill procedures, gaming machine drop/count and bill 
acceptor drop/count and subsequent transfer of funds, unannounced 
testing of weigh scale and weigh scale interface, unannounced testing 
of count room currency counters and/or currency interface, gaming 
machine drop cabinet access, tracing of source documents to summarized 
documentation and accounting records, reconciliation to restricted 
copies, location and control over sensitive keys, compliance with EPROM 
duplication procedures, and compliance with MICS procedures for gaming 
machines that accept currency or coin(s) and issue cash-out tickets or 
gaming machines that do not accept currency or coin(s) and do not 
return currency or coin(s);
    (viii) Cage and credit procedures including all cage, credit, and 
collection procedures, and the reconciliation of trial balances to 
physical instruments on a sample basis. Cage accountability shall be 
reconciled to the general ledger;
    (ix) Information technology functions, including review for 
compliance with information technology standards;
    (x) Complimentary service or item, including but not limited to, 
procedures whereby complimentary service items are issued, authorized, 
and redeemed; and
    (xi) Any other internal audits as required by the Tribe, Tribal 
gaming regulatory authority, audit committee, or other entity 
designated by the Tribe.
    (2) In addition to the observation and examinations performed under 
paragraph (b)(1) of this section, follow-up observations and 
examinations shall be performed to verify that corrective action has 
been taken regarding all instances of noncompliance cited by internal 
audit, the independent accountant, and/or the Commission. The 
verification shall be performed within six (6) months following the 
date of notification.
    (3) Whenever possible, internal audit observations shall be 
performed on an unannounced basis (i.e., without the employees being 
forewarned that their activities will be observed). Additionally, if 
the independent accountant also performs the internal audit function, 
the accountant shall perform separate observations of the table games/
gaming machine drops and counts to satisfy the internal audit 
observation requirements and independent accountant tests of controls 
as required by the American Institute of Certified Public Accountants 
guide.
    (c) Documentation. (1) Documentation (e.g., checklists, programs, 
reports, etc.) shall be prepared to evidence all internal audit work 
performed as it relates to the requirements in this section, including 
all instances of noncompliance.
    (2) The internal audit department shall operate with audit 
programs, which, at a minimum, address the MICS. Additionally, the 
department shall properly document the work performed, the conclusions 
reached, and the resolution of all exceptions. Institute of Internal 
Auditors standards are recommended but not required.

[[Page 43443]]

    (d) Reports. (1) Reports documenting audits performed shall be 
maintained and made available to the Commission upon request.
    (2) Such audit reports shall include the following information:
    (i) Audit objectives;
    (ii) Audit procedures and scope;
    (iii) Findings and conclusions;
    (iv) Recommendations, if applicable; and
    (v) Management's response.
    (e) Material exceptions. All material exceptions resulting from 
internal audit work shall be investigated and resolved with the results 
of such being documented and retained for five years.
    (f) Role of management. (1) Internal audit findings shall be 
reported to management.
    (2) Management shall be required to respond to internal audit 
findings stating corrective measures to be taken to avoid recurrence of 
the audit exception.
    (3) Such management responses shall be included in the internal 
audit report that will be delivered to management, the Tribe, Tribal 
gaming regulatory authority, audit committee, or other entity 
designated by the Tribe.


Sec. 542.43  What are the minimum internal control standards for 
surveillance for a Tier C gaming operation?

    (a) The surveillance system shall be maintained and operated from a 
staffed surveillance room and shall provide surveillance over gaming 
areas.
    (b) The entrance to the surveillance room shall be located so that 
it is not readily accessible by either gaming operation employees who 
work primarily on the casino floor, or the general public.
    (c) Access to the surveillance room shall be limited to 
surveillance personnel, designated employees, and other persons 
authorized in accordance with the surveillance department policy. Such 
policy shall be approved by the Tribal gaming regulatory authority. The 
surveillance department shall maintain a sign-in log of other 
authorized persons entering the surveillance room.
    (d) Surveillance room equipment shall have total override 
capability over all other satellite surveillance equipment located 
outside the surveillance room.
    (e) In the event of power loss to the surveillance system, an 
auxiliary or backup power source shall be available and capable of 
providing immediate restoration of power to all elements of the 
surveillance system that enable surveillance personnel to observe the 
table games remaining open for play and all areas covered by dedicated 
cameras. Auxiliary or backup power sources such as a UPS System, backup 
generator, or an alternate utility supplier, satisfy this requirement.
    (f) The surveillance system shall include date and time generators 
that possess the capability to display the date and time of recorded 
events on video and/or digital recordings. The displayed date and time 
shall not significantly obstruct the recorded view.
    (g) The surveillance department shall strive to ensure staff is 
trained in the use of the equipment, knowledge of the games, and house 
rules.
    (h) Each camera required by the standards in this section shall be 
installed in a manner that will prevent it from being readily 
obstructed, tampered with, or disabled by customers or employees.
    (i) Each camera required by the standards in this section shall 
possess the capability of having its picture displayed on a monitor and 
recorded. The surveillance system shall include sufficient numbers of 
monitors and recorders to simultaneously display and record multiple 
gaming and count room activities, and record the views of all dedicated 
cameras and motion activated dedicated cameras.
    (j) Reasonable effort shall be made to repair each malfunction of 
surveillance system equipment required by the standards in this section 
within seventy-two (72) hours after the malfunction is discovered. The 
Tribal gaming regulatory authority shall be notified of any camera(s) 
that has malfunctioned for more than twenty-four (24) hours.
    (1) In the event of a dedicated camera malfunction, the gaming 
operation and/or the surveillance department shall immediately provide 
alternative camera coverage or other security measures, such as 
additional supervisory or security personnel, to protect the subject 
activity.
    (2) [Reserved]
    (k) Bingo. (1) The surveillance system shall possess the capability 
to monitor the bingo ball drawing device or random number generator, 
which shall be recorded during the course of the draw by a dedicated 
camera with sufficient clarity to identify the balls drawn or numbers 
selected.
    (2) The surveillance system shall monitor and record the game board 
and the activities of the employees responsible for drawing, calling, 
and entering the balls drawn or numbers selected.
    (l) Card games. The surveillance system shall monitor and record 
general activities in each card room with sufficient clarity to 
identify the employees performing the different functions.
    (m) Progressive card games. (1) Progressive card games with a 
progressive jackpot of $25,000 or more shall be monitored and recorded 
by dedicated cameras that provide coverage of:
    (i) The table surface, sufficient that the card values and card 
suits can be clearly identified;
    (ii) An overall view of the entire table with sufficient clarity to 
identify customers and dealer; and
    (iii) A view of the posted jackpot amount.
    (2) [Reserved]
    (n) Keno. (1) The surveillance system shall possess the capability 
to monitor the keno ball-drawing device or random number generator, 
which shall be recorded during the course of the draw by a dedicated 
camera with sufficient clarity to identify the balls drawn or numbers 
selected.
    (2) The surveillance system shall monitor and record general 
activities in each keno game area with sufficient clarity to identify 
the employees performing the different functions.
    (o) Pari-mutuel. The surveillance system shall monitor and record 
general activities in the pari-mutuel area, to include the ticket 
writer and cashier areas, with sufficient clarity to identify the 
employees performing the different functions.
    (p) Table games. (1) Operations with four (4) or more table games. 
Except as otherwise provided in paragraphs (p)(3), (p)(4), and (p)(5) 
of this section, the surveillance system of gaming operations operating 
four (4) or more table games shall provide at a minimum one (1) pan-
tilt-zoom camera per two (2) tables and surveillance must be capable of 
taping:
    (i) With sufficient clarity to identify customers and dealers; and
    (ii) With sufficient coverage and clarity to simultaneously view 
the table bank and determine the configuration of wagers, card values, 
and game outcome.
    (iii) One (1) dedicated camera per table and one (1) pan-tilt-zoom 
camera per four (4) tables may be an acceptable alternative procedure 
to satisfy the requirements of this paragraph.
    (2) Operations with three (3) or fewer table games. The 
surveillance system of gaming operations operating three (3) or fewer 
table games shall:
    (i) Comply with the requirements of paragraph (p)(1) of this 
section; or
    (ii) Have one (1) overhead camera at each table.
    (3) Craps. All craps tables shall have two (2) dedicated cross view 
cameras covering both ends of the table.

[[Page 43444]]

    (4) Roulette. All roulette areas shall have one (1) overhead 
dedicated camera covering the roulette wheel and shall also have one 
(1) dedicated camera covering the play of the table.
    (5) Big wheel. All big wheel games shall have one (1) dedicated 
camera viewing the wheel.
    (q) Progressive table games. (1) Progressive table games with a 
progressive jackpot of $25,000 or more shall be monitored and recorded 
by dedicated cameras that provide coverage of:
    (i) The table surface, sufficient that the card values and card 
suits can be clearly identified;
    (ii) An overall view of the entire table with sufficient clarity to 
identify customers and dealer; and
    (iii) A view of the progressive meter jackpot amount. If several 
tables are linked to the same progressive jackpot meter, only one meter 
need be recorded.
    (2) [Reserved]
    (r) Gaming machines. (1) Except as otherwise provided in paragraphs 
(r)(2) and (r)(3) of this section, gaming machines offering a payout of 
more than $250,000 shall be monitored and recorded by a dedicated 
camera(s) to provide coverage of:
    (i) All customers and employees at the gaming machine, and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (2) In-house progressive machine. In-house progressive gaming 
machines offering a base payout amount (jackpot reset amount) of more 
than $100,000 shall be monitored and recorded by a dedicated camera(s) 
to provide coverage of:
    (i) All customers and employees at the gaming machine; and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (3) Wide-area progressive machine. Wide-area progressive gaming 
machines offering a base payout amount of more than $1.5 million and 
monitored by an independent vendor utilizing an on-line progressive 
computer system shall be monitored and recorded by a dedicated 
camera(s) to provide coverage of:
    (i) All customers and employees at the gaming machine; and
    (ii) The face of the gaming machine, with sufficient clarity to 
identify the payout line(s) of the gaming machine.
    (4) Notwithstanding paragraph (r)(1) of this section, if the gaming 
machine is a multi-game machine, the Tribal gaming regulatory 
authority, or the gaming operation subject to the approval of the 
Tribal gaming regulatory authority, may develop and implement 
alternative procedures to verify payouts.
    (s) Cage and vault. (1) The surveillance system shall monitor and 
record a general overview of activities occurring in each cage and 
vault area with sufficient clarity to identify employees within the 
cage and customers and employees at the counter areas.
    (2) Each cashier station shall be equipped with one (1) dedicated 
overhead camera covering the transaction area.
    (3) The surveillance system shall provide an overview of cash 
transactions. This overview should include the customer, the employee, 
and the surrounding area.
    (t) Fills and credits. (1) The cage or vault area in which fills 
and credits are transacted shall be monitored and recorded by a 
dedicated camera or motion activated dedicated camera that provides 
coverage with sufficient clarity to identify the chip values and the 
amounts on the fill and credit slips.
    (2) Controls provided by a computerized fill and credit system 
maybe deemed an adequate alternative to viewing the fill and credit 
slips.
    (u) Currency and coin. (1) The surveillance system shall monitor 
and record with sufficient clarity all areas where currency or coin may 
be stored or counted.
    (2) Audio capability of the soft count room shall also be 
maintained.
    (3) The surveillance system shall provide for:
    (i) Coverage of scales shall be sufficiently clear to view any 
attempted manipulation of the recorded data.
    (ii) Monitoring and recording of the table game drop box storage 
rack or area by either a dedicated camera or a motion-detector 
activated camera.
    (iii) Monitoring and recording of all areas where coin may be 
stored or counted, including the hard count room, all doors to the hard 
count room, all scales and wrapping machines, and all areas where 
uncounted coin may be stored during the drop and count process.
    (iv) Monitoring and recording of soft count room, including all 
doors to the room, all table game drop boxes, safes, and counting 
surfaces, and all count team personnel. The counting surface area must 
be continuously monitored and recorded by a dedicated camera during the 
soft count.
    (v) Monitoring and recording of all areas where currency is sorted, 
stacked, counted, verified, or stored during the soft count process.
    (v) Change booths. The surveillance system shall monitor and record 
a general overview of the activities occurring in each gaming machine 
change booth.
    (w) Video recording and/or digital record retention.
    (1) All video recordings and/or digital records of coverage 
provided by the dedicated cameras or motion-activated dedicated cameras 
required by the standards in this section shall be retained for a 
minimum of seven (7) days.
    (2) Recordings involving suspected or confirmed gaming crimes, 
unlawful activity, or detentions by security personnel, must be 
retained for a minimum of thirty (30) days.
    (3) Duly authenticated copies of video recordings and/or digital 
records shall be provided to the Commission upon request.
    (x) Video library log. A video library log, or comparable 
alternative procedure approved by the Tribal gaming regulatory 
authority, shall be maintained to demonstrate compliance with the 
storage, identification, and retention standards required in this 
section.
    (y) Malfunction and repair log. (1) Surveillance personnel shall 
maintain a log or alternative procedure approved by the Tribal gaming 
regulatory authority that documents each malfunction and repair of the 
surveillance system as defined in this section.
    (2) The log shall state the time, date, and nature of each 
malfunction, the efforts expended to repair the malfunction, and the 
date of each effort, the reasons for any delays in repairing the 
malfunction, the date the malfunction is repaired, and where 
applicable, any alternative security measures that were taken.
    (z) Surveillance log. (1) Surveillance personnel shall maintain a 
log of all surveillance activities.
    (2) Such log shall be maintained by surveillance room personnel and 
shall be stored securely within the surveillance department.
    (3) At a minimum, the following information shall be recorded in a 
surveillance log:
    (i) Date;
    (ii) Time commenced and terminated;
    (iii) Activity observed or performed; and
    (iv) The name or license credential number of each person who 
initiates, performs, or supervises the surveillance.
    (4) Surveillance personnel shall also record a summary of the 
results of the surveillance of any suspicious activity. This summary 
may be maintained in a separate log.


[[Page 43445]]


    Signed at Washington, DC, this 17th day of June, 2002.
Montie R. Deer,
Chairman.
 Elizabeth L. Homer,
Vice-Chair.
Teresa E. Poust,
Commissioner.
[FR Doc. 02-15644 Filed 6-26-02; 8:45 am]
BILLING CODE 7565-01-P