Casino Accounting Short Discussion AND REPLY

In module 5 we cover taxation and reporting including minimum internal control (MICS).

Governing bodies who enforce MICS need to be proactive instead of reactive to keep up with industry changes and to not slow down industry progression yet at the same time making sure the casino, customers, and jurisdictions are protected. What changes do you foresee coming that will need to be addressed in MICS and what are some things the MICS must address concerning this change?

Increasing Title 31 enforcement means casinos need to know their customers

Alex Alvarado

Several emerging technologies will need to be addressed within traditional minimum internal control standards MICS, as well as increased focus on environmental social governance ESG and social responsibility and movements. Among them, I believe the digital transformation of the gaming industry will drive the greatest need for change.

With many states already offering online sports betting and a rising number now offering iGaming, new competition and thereby new operators are entering established land-based markets historically dominated by traditional land-based operators. Traditional MICS may not comprehensively address data privacy controls and the handling of financial compliance for transactions that intersect and flow between or back and forth between a digital/mobile platform and a land-based facility (How Digital Transformation Reshapes Casinos, 2024).

Furthermore, though in their infancy, Artificial Intelligence AI and Virtual / Augmented Reality are being applied in a range of ways including VR / AR at home and on-site applications through mobile apps, and early-stage AI decision engines in a range of tools. These may create security vulnerabilities, and cross some lines related to responsible gaming standards which are critical to the reputation of our industry (Recent Changes in Casino Regulations: What’s New in 2024?, 2024).

In the best example I have found to date, operators are getting ahead of these concerns by engineering their digital product development in a way that protects all stakeholders, including customers, regulators, and their organizations, even developing KPIs that ensure they stay on track and tying these results to the compensation results of team members (Furr, 2023).

References

Furr, N. (2023, October 30). Balancing Profit and Purpose with Your Digital Transformation. Harvard Business Review.

https://hbr.org/2023/10/balancing-profit-and-purpo…

How digital transformation reshapes casinos. (2024, February 5). Medium. Retrieved April 15, 2024, from

https://medium.com/@icreontech/how-digital-transfo…

Recent changes in casino regulations: What’s new in 2024? (2024, January 6). Technology.org. Retrieved April 15, 2024, from https://www.technology.org/2024/01/06/recent-changes-in-casino-regulations-whats-new-in-2024/#:~:text=In%202024%2C%20there%20will%20be,data%20to%20prevent%20illegal%20activities.

Reply

MICS Reports
Scenario
At the end of the month your company financial statements show that your blackjack
hold percentage was 12% when you typically hold 18%. What would you do to determine
if the variance was correct?
Also, if you held 22% instead of the standard 18% what would you do?
Variance Reports
• Used to explain why games held above or below expectation
• Table games are based on actual hold
• Slots based on theoretical
• Current month versus last 12 months average
• Year end report game type to industry average
• Different MICS state different variances that must be explained
• +/- 3% – 5% typical
• NV +/- 5% on TG, slots no minimum stated
• Sometimes referred to as Winner/Loser Report
• Done independent of the games department being audited
• By table/machine and type of game
• Effects can include:
• Players
• Rule changes
• Promotions
• Thefts
• Errors
Variance Report Example:
• Add players until you get within acceptable variance
Player Variance Reports
• In Nevada, when playing in a gaming salon must be done by player
• All negative material impact
• 5 percentage points of 20% of total drop
• Requires surveillance verification
• Can be done by surveillance or audit/accounting
• Done within 30 days of month end
Tax Returns
•
•
Reconciliation from financial statements to tax returns for gross gaming revenue
o Include all allowable deductions
o Carefully review deductions and what is allowed and not
o Want to take full advantage of allowable deductions without being in
violation
Done at least monthly
Scenario
Your company policy on unredeemed slot tickets is that they expire in 180 days. After
180 days, $5,000 in unredeemed slot tickets was expired. What audit procedures would
you conduct to determine this was correct?
Expired Tickets
• Some jurisdiction address expired tickets in the MICS (NV does)
• Book into revenue and decrease the liability
o Generally booked into an account labeled unredeemed slot tickets
▪ Easier to track and match to physical tickets
▪ Will not mess up statistics
• Verify they are expired in the slot system
o Separate code
o Test cashing some after expiration date
• Submit expired ticket $ to the jurisdiction if required by law
o Quarterly in NV: 75% goes to state and 25% kept in casino and taxed
o Allowed up to 180 days for an expiration date
• Have policy in place for cashing after expiration
o As long as not submitted to the state most places have some exception
policy
Expired Tickets Audit Concerns
• Are there tickets that are close to expiration that are being redeemed?
o Run a report of cashed ticket by issue date
o Randomly test
• Are there certain employees who cash more older tickets than others?
• Are there certain times of day that more tickets close to expiration are cashed?
• How often are expired tickets cashed?
Minimum Bankroll Verification
• Required minimum amount of cash
o Needed to pay all customers and cover expenses
• Could lose gaming license if in violation
• When completed
o NV: Daily, but can ask for waiver if substantially exceed
o Typically just held on hand until requested
• Instructions
http://gaming.nv.gov/modules/showdocument.aspx?documentid=12361