RULES AND REGULATIONS
Title 58--RECREATION
PENNSYLVANIA GAMING CONTROL BOARD
[58 PA. CODE CHS. 461a, 465, 465a, 465b, 466, 466a, 466b, 467 AND 467a]
Slot Machine Testing and Control; Accounting and Internal Controls; Slot Computer Systems; Commencement of Slot Operations
[37 Pa.B. 4068]
[Saturday, July 28, 2007]The Pennsylvania Gaming Control Board (Board), under its general authority in 4 Pa.C.S. § 1202(b)(30) (relating to general and specific powers) and the specific authority in 4 Pa.C.S. §§ 1207, 1322 and 1520 (relating to regulatory authority of board; slot machine accounting controls and audits; and automated teller machines), adopts Chapters 465a, 466a and 467a (relating to accounting and internal controls; slot computer systems; and commencement of slot operations), amends Chapter 461a (relating to slot machine testing and control) and rescinds Chapter 465, 466 and 467 to read as set forth in Annex A.
Purpose of the Final-Form Rulemaking
Under the authority granted to the Board under 4 Pa.C.S. § 1203 (relating to temporary regulations), the Board initially adopted temporary regulations in Chapter 465 at 36 Pa.B. 910 (February 18, 2006), in Chapter 466 at 36 Pa.B. 3416 (July 1, 2006) and in Chapter 467 at 36 Pa.B. 3954 (July 22, 2006). Under 4 Pa.C.S. § 1203(b), the temporary regulations expired on July 5, 2007.
The Board is adopting Chapters 465a, 466a and 467a, amending Chapter 461a and rescinding Chapter 465, 466 and 467 to replace the Board's temporary regulations with the permanent regulations.
Explanation of Chapters 465a, 466a and 467a
Section 465a.1 (relating to accounting records) requires slot machine licensees to keep records pertaining to revenues and expenses. Accounting records must be maintained using a double entry system of accounting that is consistent with generally accepted accounting principals. It also lists supporting records that must be kept.
Section 465a.2 (relating to internal control systems and audit protocols) requires the submission of a slot machine licensee's system of internal controls at least 90 days prior to the commencement of gaming. This section lists the items that must be included in the internal controls, requires certain attestations by the chief executive officer and requires Board approval of the internal controls. It also sets forth the process for submission and review of amendments to the internal controls.
Section 465a.3 (relating to forms, records and documents) contains general formatting requirements which apply to any forms the slot machine licensee may use.
Section 465a.4 (relating to standard financial and statistical reports) requires the filing of periodic financial and statistical reports and allows the Board to request additional reports in certain circumstances.
Section 465a.5 (relating to annual audit; other reports; suspicious activity and currency transaction reporting) requires each slot machine licensee to obtain an annual audit and submit copies of the audit to the Board. It also requires the filing of: additional reports from the auditors; replies to the audit findings and recommendations; and copies of fillings with the SEC or other regulatory agencies. This section also requires submission of certain reports when the slot machine licensee changes auditors and that copies of a Suspicious Activity Report-Casino or Currency Transaction Report by Casino filed with the Federal government also be filed with the Board.
Section 465a.6 (relating to retention, storage and destruction of books, records and documents) contains detailed provisions specifying what records must be kept, how long various records must be kept and how records must be made available to the Board.
Section 465a.7 (relating to complimentary services or items) requires slot machine licensees to develop internal controls to govern the issuance of complementary services or items. It also requires monthly reporting of each patron who received $10,000 or more in complementary cash and noncash gifts within a 5-day period.
Section 465a.8 (relating to licensed facility) requires licensed facilities to have surveillance systems, alarm systems for emergency exits and to provide onsite facilities for use by the Board, the Department of Revenue and the Pennsylvania State Police.
Section 465a.9 (relating to surveillance system; surveillance department control; surveillance department restrictions) sets forth the requirements for surveillance systems, including who has access to the monitoring room, what areas must be covered and the capabilities of the system. It also requires the maintenance of a log of surveillance activities, notice to the Board of system malfunctions and requires Board approval of staffing. It also places restrictions on employment of surveillance department employees and requires that a monitoring room entry log be maintained.
Section 465a.10 (relating to surveillance system recording formats) specifies the recording formats that are acceptable for surveillance systems.
Section 465a.11 (relating to slot machine licensee's organization) contains requirements for organization charts that are to be submitted as part of a slot machine licensee's internal controls. It lists the departments that must be included, the functions they are responsible to perform and various reporting responsibilities. It also contains certain reporting requirements that must be met if the chief executive officer or one of the mandatory department head positions becomes vacant.
Section 465a.12 (relating to access badges and temporary access credentials) sets forth requirements for each slot machine licensee to establish an access badge form of identification for employees which indicates what areas of the licensed facility the wearer may enter. It also requires temporary access badges for nonemployees who may need access to restricted areas.
Section 465a.13 (relating to possession of deadly weapons within a licensed facility) sets forth prohibitions on and the requirements governing the possession of deadly weapons within a licensed facility.
Section 465a.14 (relating to security department minimum staffing) requires slot machine licensees to submit minimum staffing plans for the security department as part of its internal controls submission.
Section 465a.15 (relating to cashiers' cage) specifies requirement for the cashiers' cage including personnel and physical security requirements.
Section 465a.16 (relating to accounting controls for the cashiers' cage) establishes the accounting controls that must be used in the cashiers' cage.
Section 465a.17 (relating to bill validators and slot cash storage boxes) contains the technical standards for bill validators and security procedures related thereto.
Section 465a.18 (relating to transportation of slot cash storage boxes to and from bill validators; storage) requires the filing of the schedule for removing slot cash storage boxes with the Board and advanced notice of changes in the schedule. It also sets forth the security protocols that must be followed during the removal, transport and counting process.
Section 465a.19 (relating to acceptance of tips or gratuities from patrons) contains restrictions on the acceptance of tips or gratuities.
Section 465a.20 (relating to personal check cashing) establishes the conditions that must be met and the limitations on cashing personal checks and the procedures for verifying the signature and identity of a patron.
Section 465a.21 (relating to wire transfers) contains provisions governing the acceptance of wire transfers. Prior to the acceptance of wire transfers, the slot machine licensee must have approved internal controls in place governing the acceptance, verification and accounting for the wire transfers.
Section 465a.22 (relating to cash equivalents) requires that prior to the acceptance of cash equivalents, the slot machine licensee must have approved internal controls in place governing the acceptance, verification and accounting for cash equivalents.
Section 465a.23 (relating to customer deposits) mandates that before a slot machine licensee may hold a patron's funds, the slot machine licensee must have approved internal controls in place governing the acceptance and withdrawal of the deposits.
Section 465a.24 (relating to count room characteristics) requires licensed facilities to have a count room, contains the design specifications a count room must meet and specifies the security procedures that must be employed.
Section 465a.25 (relating to counting and recording of slot cash storage boxes) requires the submission of the schedule to the Board of when the contents of slot cash storage boxes will be counted. It also contains equipment requirements, restrictions on count room personnel, requires the development of internal controls and requires reporting of discrepancies in the count.
Section 465a.26 (relating to jackpot payouts) requires the slot machine licensee to have approved internal controls in place for jackpot payouts and what must be included in the jackpot payout internal controls.
Section 465a.27 (relating to annuity jackpots) sets forth the conditions under which a slot machine licensee may offer a single cash payout instead of an annuity, the conditions regarding annuity jackpots and requires that approved internal controls for annuity jackpots be in place.
Section 465a.28 (relating to merchandise jackpots) establishes the conditions under which merchandise jackpots may be offered. These include Board approval of specific offers and that approved internal controls be in place.
Section 465a.29 (relating to automated teller machines) allows automated teller machines to be located anywhere in the licensed facility.
Section 465a.30 (relating to waiver of requirements) sets forth the procedures and conditions under which the Board will grant a waiver of one or more of the requirements of this chapter.
Section 465a.31 (relating to gaming day) specifies that the Board will determine the beginning and end of the gaming day for the purpose of determining gross terminal revenues. It also requires Board approval of a slot machine licensee's hours of operation prior to its opening and Board approval of changes in its hours of operation.
Section 465a.32 (relating to signature) establishes requirements for written or electronic signatures.
Section 466a.1 (relating to slot computer systems generally) requires all aspects of a slot machine licensee's slot computer system to be located within the licensed facility and specifies what is included in a slot computer system.
Section 466a.2 (relating to waiver of requirements) sets forth the conditions under which the Board may waive one or more of the requirements of this chapter.
Section 466b.1 (relating to slot computer systems) specifies authorized locations.
Section 467a.1 (relating to gaming floor plan) specifies what must be included in a floor plan of the gaming floor and requires that the Board approve the floor plan prior to the commencement of slot operations at the licensed facility. Changes in the gaming floor square footage or number, configuration or location of slot machines also require prior approval from the Board.
Section 467a.2 (relating to commencement of slot operations generally) requires a slot machine licensee to demonstrate that the licensed facility complies with all requirements and that its slot machines have been tested and approved by the Board before it commences operations. It also specifies that once the slot machine licensee has demonstrated compliance, the Board will authorize the date and time that the licensed facility may open, the maximum size of the gaming floor and the maximum number of slot machines that may be operated.
Comment and Response Summary
The proposed rulemaking was published at 36 Pa.B. 7267 (December 2, 2006).
The Board received comments on the proposed rulemaking from the Independent Regulatory Review Commission (IRRC). Those comments were reviewed by the Board and are discussed as follows.
IRRC requested that the Board provide additional information pertaining to the need for the regulation and the fiscal impact in the preamble and Regulatory Analysis Form. Additional information has been included. However, the Board notes that because gaming is new to this Commonwealth and licenses have just been issued, the fiscal information available is somewhat limited.
IRRC also urged the Board to review a number of phrases which it thought were vague. These phrases were contained in the appendix attached to IRRC's comments.
The Board reviewed the attached appendix and, as suggested by IRRC, deleted phrases such as ''when applicable,'' ''in a manner approved by the Board'' and ''in a manner prescribed by the Board.''
The Board has not deleted the phrases ''other items the Board may request in writing'' and ''additional documentation requested by the Board'' which appear in two sections. While the Board attempted to provide comprehensive guidance as to what information the Board needs, there will be times when the Board will need additional information from a slot machine licensee. However, the Board has added language to make it clear that the additional information requested must relate to the area that is being reviewed.
Most of the phrases referring to ''approved by the Board'' have also been deleted; they were intended to refer back to the approval process for the internal controls in § 465a.2 and are not needed. For other approvals, the Board added cross-references to the specific sections where the approval process is specified or added an approval process in the section.
IRRC also questioned the incorporation of technical standards, which are not in these regulations, as binding requirements. Use of '' . . . this approach would allow an agency or department to bypass the formal regulatory review process...''
Use of binding technical standards to supplement the Board's regulations is not an attempt by the Board to bypass the regulatory review process. It is merely intended as a means by which the Board can keep pace with changes in gaming technology.
Due to the dynamic nature of the industry, new games and new equipment are constantly being brought to market. Because it takes a minimum of 6 months to promulgate a regulation, use of the technical standards is the only way the Board can develop new standards rapidly.
The technical standards are not intended to be permanent rules. As a technology matures, it is the Board's intention to initiate proposed rulemakings which will bring the applicable technical standards into the body of its regulations. The Board is also examining the possibility incorporating National standards such as those developed by the Gaming Standards Association as an alternative to Pennsylvania-specific technical standards.
Technical standards are used extensively in other gaming jurisdictions for the same reason the Board is proposing to use them here, which is to promote rapid approval of new games and equipment. Without technical standards, slot machine licensees would not be able to offer the newest games or take advantage of new systems or equipment as quickly as their competitors in other states. In an industry as competitive as gaming, not using technical standards would result in significant loss of revenue to slot machine licensees and the Commonwealth.
For these reasons, the Board retained the references to technical standards in these regulations. However, the Board added references to specific existing technical standards to add clarity. When technical standards have not yet been developed, the Board added the phrase ''and published in the Pennsylvania Bulletin and posted on the Board's website.'' This will insure that the regulated public has access to the standards that the Board is using.
In § 465a.2, IRRC raised three concerns. First, IRRC requested that the phrase ''applicable laws and regulations'' be replaced with specific cross references. Next, IRRC asked that more detail be added regarding the process for reviewing a licensee's internal controls. Finally, IRRC asked that additional details on how tolling would work be added to the regulation.
The phrase ''applicable laws and regulations'' is customarily used in financial attestations. Therefore, this phrase has not been amended or replaced.
Subsection (a) requires that a slot machine licensee's internal controls be submitted for Board review at least 90 days before gaming operations are to commence. The Board's approval of the internal controls is contingent upon the slot machine licensee's demonstration that their internal controls are sufficient to safeguard the integrity of the slot machine licensee's operations. To respond to IRRC's concern and to clarify this point, this language has been added to subsection (e). Also added is a provision stating that the Board will provide written notice of a deficiency to the slot machine licensee and allow the slot machine applicant or licensee to submit a revision to its submission. This is the Board's current practice. The Board has not established a deadline for completion of the Board's review because the Board will continue to work with a slot machine licensee until the slot machine licensee's internal controls are approved.
To address IRRC's final concern with this section, the Board added subsection (i) which explains how the slot machine licensee may respond to a tolling.
In § 465a.3(c), IRRC suggested that the term ''Bureau'' be clarified. Because the term ''Bureau'' is used throughout the Board's regulations, the term is defined in § 401.4 (relating to definitions) as the Bureau of Investigations and Enforcement. Therefore, no amendment was made in this section.
In § 465a.6(b)(1), IRRC suggested that ''should'' be replaced with ''must'' if this is a requirement. The Board agrees with this suggestion and has made this change.
In § 465a.7, IRRC had three questions regarding the $10,000 limit in subsection (d): Does the $10,000 limit apply to the person and the person's guest collectively or to each person individually; what makes an individual a ''guest'' of a person; and is the ''5-day period'' 5 consecutive days?
The $10,000 limit applies to the patron and the patron's guests, not to each person and the 5-day period was intended to be 5 consecutive days. Subsections (d) and (e) have been amended to clarify both of these points.
The last sentence in subsection (d) specifies who is considered to be a guest. Therefore, no additional amendments were made.
In § 465a.9(a), IRRC asked that the procedures and criteria for the approval of surveillance systems be added.
The review of surveillance systems is conducted as part of the initial submission of the internal controls required under § 465a.2. However, this is not stated in the regulation. To clarify this point, a cross reference to § 465a.2 has been added. The criteria for review of surveillance systems are contained in the requirements for surveillance systems in subsections (c)--(g).
In § 465a.13, IRRC had a number of questions and concerns. In subsection (a), IRRC asked that the term ''firearms and handguns'' be defined and asked why the prohibition didn't extend to other weapons. In subsection (a)(2), IRRC questioned the Board's authority to require local, State and Federal law enforcement agents possessing firearms to notify the Board and the Pennsylvania State Police before entering the gaming floor or a restricted area.
IRRC also suggested moving subsection (b) to § 465a.14 or its own section.
Finally, in subsection (c), IRRC wanted to know: What the process would be for reviewing requests to possess a firearm or handgun in a licensed facility; what would constitute an ''adequate course of training;'' and under what circumstances would the Board grant a request?
In response to IRRC's comments, § 465a.13 has been amended significantly.
The scope of the ban has been broadened to cover a deadly weapon as defined in 18 Pa.C.S. § 2301 (relating to definitions). This will still allow patrons to carry personal defense items such as mace or pepper spray, but provides the overall level of patron safety desired by the Board. The Board also eliminated the advanced notice requirement for law enforcement agents who enter a facility when acting in an official capacity
As suggested by IRRC, proposed subsection (b) has been moved to § 465a.14.
Subsection (c) has been amended to set forth the process for requesting Board permission to possess a deadly weapon on the premises of a licensed facility. The individual requesting permission must demonstrate the compelling need for the possession of the deadly weapon within the licensed facility and, if the request is for possession of a firearm, prove that the individual holds a valid license to possess the firearm. The proposed requirement regarding training has been deleted because the Board believes the requirement for licensure is sufficient.
In § 456a.20(b)(4) and (5), IRRC requested clarification of what would constitute ''adequate documentation evidencing signature verification or check verification.'' In subsection (b)(6), IRRC asked how the $2,500 limit would adequately protect the welfare of patrons.
The intent in subsection (b)(4) was for the slot cashier to indicate whether the signature was verified under subsection (c) or by a government-issued identification. The language in this subsection has been amended to clarify this point.
The intent in subsection (b)(5) was for the slot cashier to indicate whether the check was verified directly or by the use of a check verification service. The language in this subsection has also been amended to clarify this point.
The $2,500 daily limitation on cashing personal checks was established by the Board as a consumer protection. For a small percentage of individuals, gaming can become a problem. Limiting the ability of a patron to cash checks is intended to provide a mechanism to limit the losses a patron may incur.
In § 465a.21, IRRC asked why the $2,500 limit imposed on check cashing doesn't also apply to wire transfers.
Wire transfers are typically used by more experienced and sophisticated patrons. Placing a $2,500 limit on wire transfers would significantly hamper their ability to game in this Commonwealth and put this Commonwealth at a significant competitive disadvantage in attracting these patrons.
In § 465a.30, IRRC questioned the Board's authority to grant waivers of the requirements in this chapter. Additionally, IRRC stated that the regulation should specify who can request waivers and what the process for requesting a waiver would be.
The Board's authority for this section can be found in the general rulemaking authority under 4 Pa.C.S. §§ 1202(b)(30) and 1322. Similar waiver provisions have been included in other chapters to provide some flexibility for licensees. While the Board's regulations reflect current practice, because of the rapidly changing nature of gaming, there may be better ways to insure compliance and to protect the integrity of slot machine operations. Additionally, a waiver does not exempt a slot machine licensee from compliance; it simply allows the slot machine licensee to demonstrate compliance by some other means than what is specified in the regulation.
The Board agrees that the waiver process, as proposed, lacked clarity. Therefore, this section has been amended extensively to track other waiver sections in the Board's regulations and to add the detail requested by IRRC.
In § 466a.1, IRRC raised the same concerns that it did for § 465a.30.
The Board's authority for this section can be found in the general rulemaking authority under 2 Pa.C.S. § 1202(b)(30). For the reasons previously stated, the Board believes the waiver provisions are necessary to provide flexibility and to react to changes in gaming technology. However, the Board amended the waiver language, as it did with § 456a.30, and moved it to new § 466a.2. This new section tracks the other waiver sections in the Board's regulations and adds the detail requested by IRRC.
IRRC suggested that the references to temporary regulations be deleted since these regulations expired on July 5, 2007.
The Board discussed this issue with the Legislative Reference Bureau (LRB) prior to the publication of the proposed rulemaking and this is how the LRB has instructed the Board to reference other chapters. The Board will update these citations as permanent regulations are promulgated.
IRRC also suggested that the clarity of the regulation could be improved by adding definitions of seven terms that are used in the regulations.
The Board concurs with this suggestion and definitions were added to § 461a.1 (relating to definitions) for ''bill validator,'' ''cash equivalents,'' ''drop team,'' ''merchandise jackpot,'' ''player rating,'' ''player rating system'' and ''trolley.''
Finally, IRRC suggested that the Board delete several terms used in the regulation which it believes are vague.
The Board reviewed the use of each of these terms in these chapters. In many instances, the Board agrees with IRRC's observation and deleted the terms and in some cases added additional clarifying language. However, in a few instances, the Board believes the use of these terms is appropriate within the context of the particular provision. In these limited instances, the terms have not been deleted or replaced.
Additional Revisions
In addition to the amendments made in response to IRRC's comments, the Board made further revisions.
Throughout the regulations, the term ''slot accounting department'' has been replaced with ''finance department.'' This is the term more commonly used in the gaming industry.
In § 465a.2(g)(2), the authority to approve amendments to a slot machine licensee's internal controls has been shifted from the Board to the Executive Director. This will permit more rapid implementation of necessary changes.
Section 465a.2(i), (j) and (k) has been deleted. Rather than having two different processes for reviewing different types of amendments, changes to organization charts and the jobs compendium will be submitted and reviewed under subsections (f) and (g), like all other changes.
Section 465a.4(a) has been amended to list the monthly reports that must be filed by slot machine licensees. This will clarify what slot machine licensees are required to file. Additionally, subsection (e) has been added, which allows the Board to request additional financial reports.
Section 465a.11(a)(5) has been amended to clarify that each of the six major department heads listed in § 465a.11(b) must report directly to the facility's chief executive officer.
In § 465a.17(d), a technical requirement has been added to cover slot machines that don't have a full door covering the bill validator.
Section 465a.20(b)(5) has been amended to give facilities the option of verifying the validity of checks for $500 or more directly with the bank themselves or by using a check verification and warranty service.
In § 465a.28, language has been added to specify that offers of merchandise jackpots, which must be approved by the Board, are to be submitted for approval using an Amendment Waiver and Request Form.
In § 467a.1(c), ''configuration or location'' of slot machines has been added to the list of changes to an approved floor plan that require prior written approval of the Board.
Finally, the numbering of the statements of policy in Chapters 465a and 466a (relating to technical standards--statement of policy) will be changed to Chapter 465b (§ 465b.1) and Chapter 466b (§ 466b.1).
Affected Parties
This final-form rulemaking imposes requirements on applicants for or holders of slot machine licenses. To date, the Board approved 11 applications for slot machine licenses.
Fiscal Impact
Commonwealth. This final-form rulemaking will impose costs on the Board to monitor the compliance of slot machine licensees with the requirements in the regulations.
Political subdivisions. This final-form rulemaking will have no significant fiscal impact on political subdivisions of the Commonwealth.
Private sector. Applicants for and holders of slot machine licenses will experience some costs to comply with the accounting, auditing, personnel and reporting requirements.
General public. This final-form rulemaking will have no fiscal impact on the general public.
Paperwork Requirements
Applicants for and holders of slot machine licenses will experience some costs to comply with the accounting, auditing, personnel and reporting requirements.
Effective Date
The final-form rulemaking will become effective upon publication in the Pennsylvania Bulletin.
Contact Person
The contact person for questions about this final-form rulemaking is Richard Sandusky, Director of Regulatory Review, (717) 214-8111.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on October 25, 2006, the Board submitted a copy of the notice of proposed rulemaking, published at 36 Pa.B. 7267, to IRRC and the Chairpersons of the House Tourism and Recreational Development Committee and the Senate Committee on Rules and Executive Nominations for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Board has considered all comments from IRRC, the House and Senate Committees and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on June 20, 2007, the final-form rulemaking was deemed approved by the House and Senate Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on June 21, 2007, and approved the final-form rulemaking.
Findings
The Board finds that:
(1) Public notice of intention to adopt these chapters was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The final-form rulemaking is necessary and appropriate for the administration and enforcement of 4 Pa.C.S. Part II (relating to gaming).
Order
The Board, acting under 4 Pa.C.S. Part II, orders that:
(a) The regulations of the Board, 58 Pa. Code, are amended by deleting §§ 465.1--465.31, 466.1, 467.1 and 467.2, by adding final regulations in §§ 465a.1--465a.32, 466a.1, 466a.2, 467a.1 and 467a.2 and by amending the final regulation in § 461a.1 to read as set forth in Annex A, with ellipses referring to the existing text of the regulations.
(Editor's Note: The proposal to add § 465a.32 was not included in the proposed rulemaking published at 36 Pa.B. 7267.)
(b) The statements of policy in §§ 465a.1 and 466a.1 are renumbered as §§ 465b.1 and 466b.1.
(c) The Chairperson of the Board shall certify this order and Annex A and deposit them with the LRB as required by law.
(d) This order shall take effect upon publication in the Pennsylvania Bulletin.
THOMAS A. DECKER,
Chairperson(Editor's Note: For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 37 Pa.B. 3138 (July 7, 2007).)
Fiscal Note: 125-49. (1) State Gaming Fund; (2) Implementing Year 2006-07 is $2,146,000; (3) 1st Succeeding Year 2007-08 is $2,232,000; 2nd Succeeding Year 2008-09 is $2,322,000; 3rd Succeeding Year 2009-10 is $2,414,000; 4th Succeeding Year 2010-11 is $2,511,000; 5th Succeeding Year 2011-12 is $2,611,000; (4) 2005-06 Program--$26,400,000; 2004-05 Program--$13,200,000; 2003-04 Program--$2,900,000; (7) Board Budget; (8) recommends adoption.
Annex A
TITLE 58. RECREATION
PART VII. GAMING CONTROL BOARD
Subpart E. SLOT MACHINES AND ASSOCIATED EQUIPMENT
CHAPTER 461a. SLOT MACHINE TESTING AND CONTROL § 461a.1. Definitions.
The following words and terms, when used in this subpart, have the following meanings, unless the context clearly indicates otherwise:
* * * * * Bill validator--An electronic device designed to interface with a slot machine for the purpose of accepting and validating any combination of United States currency, gaming vouchers, coupons or other instruments authorized by the Board for incrementing credits on a slot machine.
* * * * * Cash equivalents--Instruments with a value equal to United States currency or coin including certified checks, cashiers checks, travelers' checks, money orders, gaming vouchers or coupons.
* * * * * Drop team--The group of employees of a slot machine licensee who participate in the transportation of slot cash storage boxes and drop boxes.
* * * * * Merchandise jackpot--A slot machine jackpot in the form of:
(i) Merchandise or a thing of value.
(ii) A cash payout and a payout of merchandise or a thing of value.
(iii) An option to choose between a cash payout and a payout of merchandise or a thing of value.
* * * * * Player rating--A score or ranking assigned to a player based on an evaluation of the amount and frequency of play by the person.
Player rating system--A computerized system by which a player is assigned a score or ranking based upon an evaluation of the amount and frequency of play by the person.
* * * * * Trolley--A wheeled apparatus used for the secured transport of slot cash storage boxes and drop boxes.
* * * * *
CHAPTER 465. (Reserved) §§ 465.1--465.31. (Reserved).
CHAPTER 465a. ACCOUNTING AND INTERNAL CONTROLS Sec.
465a.1. Accounting records. 465a.2. Internal control systems and audit protocols. 465a.3. Forms, records and documents. 465a.4. Standard financial and statistical reports. 465a.5. Annual audit; other reports; suspicious activity and currency transaction reporting. 465a.6. Retention, storage and destruction of books, records and documents. 465a.7. Complimentary services or items. 465a.8. Licensed facility. 465a.9. Surveillance system; surveillance department control; surveillance department restrictions. 465a.10. Surveillance system recording formats. 465a.11. Slot machine licensee's organization. 465a.12. Access badges and temporary access credentials. 465a.13. Possession of deadly weapons within a licensed facility. 465a.14. Security department minimum staffing. 465a.15. Cashiers' cage. 465a.16. Accounting controls for the cashiers' cage. 465a.17. Bill validators and slot cash storage boxes. 465a.18. Transportation of slot cash storage boxes to and from bill validators; storage. 465a.19. Acceptance of tips or gratuities from patrons. 465a.20. Personal check cashing. 465a.21. Wire transfers. 465a.22. Cash equivalents. 465a.23. Customer deposits. 465a.24. Count room characteristics. 465a.25. Counting and recording of slot cash storage boxes. 465a.26. Jackpot payouts. 465a.27. Annuity jackpots. 465a.28. Merchandise jackpots. 465a.29. Automated teller machines. 465a.30. Waiver of requirements. 465a.31. Gaming day. 465a.32. Signature. § 465a.1. Accounting records.
(a) A slot machine licensee shall maintain complete, accurate and legible records of all transactions pertaining to the revenues and expenses of each licensed facility.
(b) General accounting records shall be maintained on a double entry system of accounting with transactions recorded on a basis consistent with generally accepted accounting principles in the United States. Detailed, supporting and subsidiary records sufficient to meet the requirements of subsection (c) shall also be maintained in accordance with the requirements of this chapter.
(c) The detailed, supporting and subsidiary records include:
(1) Records pertaining to revenue that is taxable or subject to taxation under the act.
(2) Records pertaining to the financial statements and all transactions impacting the financial statements of the slot machine licensee including contracts or agreements with licensed manufacturers, suppliers, junket enterprises, certified and registered vendors, contractors, consultants, management companies, attorneys and law firms, accountants and accounting firms, insurance companies, and financial institutions, including statements and reconciliations related thereto.
(3) Records which identify the handle, payout, actual win amounts and percentages, theoretical win amounts and percentages, and differences between theoretical and actual win amounts and percentages, for each slot machine on a week-to-date, month-to-date and year-to-date basis.
(4) Records documenting the costs of complimentary services and items as defined in § 401a.3 (relating to definitions).
(5) Records of loans and other amounts payable by the slot machine licensee.
(6) Records of investments, advances, loan and receivable balances due to the slot machine licensee.
(7) Records created in connection with the system of internal controls submitted to the Board under § 465a.2 (relating to internal control systems and audit protocols).
(8) Records of returned checks.
§ 465a.2. Internal control systems and audit protocols.
(a) An applicant for, or holder of, a slot machine license shall submit to the Board and the Department a written description of its initial system of administrative and accounting procedures, including its internal control systems and audit protocols (collectively referred to as its ''internal controls'') at least 90 days before gaming operations are to commence. A written system of internal controls must include:
(1) Records of direct and indirect ownership in the proposed slot machine license, its affiliates, intermediaries, subsidiaries or holding companies.
(2) Organization charts depicting segregation of functions and responsibilities.
(3) A description of the duties and responsibilities of each licensed or permitted position shown on the organization charts and their respective lines of authority.
(4) A detailed narrative description of the administrative and accounting procedures designed to satisfy the requirements of this subpart.
(5) A record retention policy in accordance with § 465a.6 (relating to retention, storage and destruction of books, records and documents).
(6) Procedures to ensure that assets are safeguarded, and counted in conformance with effective count procedures.
(7) Other items the Board may request in writing to be included in the internal controls.
(b) A submission must be accompanied by the following:
(1) An attestation by the chief executive officer or other competent person with a direct reporting relationship to the chief executive officer attesting that the officer believes, in good faith, that the submitted internal controls conform to the requirements of the act and this subpart.
(2) An attestation by the chief financial officer or other competent person with a direct reporting relationship to the chief financial officer attesting that the officer believes, in good faith, that the submitted internal controls are designed to provide reasonable assurance that the financial reporting conforms to generally accepted accounting principles in the United States and complies with applicable laws and regulations, including the act and this subpart.
(c) The initial submission must also be accompanied by a report from an independent registered public accounting firm, licensed to practice in this Commonwealth. The report should express an opinion as to the effectiveness of the design of the submitted system of internal controls over financial reporting and should further express an opinion as to whether the submitted system of internal controls materially deviates from the requirements of applicable laws and regulations, including the act and this subpart.
(d) A submission by a slot machine licensee or applicant must include, at a minimum, the following:
(1) Administrative controls which include the procedures and records that relate to the decision making processes leading to management's authorization of transactions.
(2) Accounting controls which have as their primary objectives the safeguarding of assets and revenues and the reliability of financial records. The accounting controls must be designed to provide reasonable assurance that:
(i) Transactions or financial events which occur in the operation of a slot machine are executed in accordance with management's general and specific authorization.
(ii) Transactions or financial events which occur in the operation of a slot machine are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles in the United States, the act and this subpart.
(iii) Transactions or financial events which occur in the operation of a slot machine are recorded in a manner which provides reliable records, accounts and reports, including the recording of cash and evidences of indebtedness, for use in the preparation of reports to the Board related to slot machines.
(iv) Transactions or financial events which occur in the operation of a slot machine are recorded to permit proper and timely reporting and calculation of gross terminal revenue, fees and taxes and to maintain accountability for assets.
(v) Access to assets is permitted only in accordance with management's general and specific authorization.
(vi) The recorded accountability for assets is compared with existing physical assets at reasonable intervals and appropriate action is taken with respect to any discrepancies.
(3) Procedures and controls for ensuring, in accordance with section 1323 of the act (relating to the central control computer system), that each slot machine directly provides and communicates all required activities and financial details to the central control computer system as set by the Board.
(4) Procedures and controls for ensuring that all functions, duties and responsibilities are segregated and performed in accordance with sound financial practices by qualified personnel.
(5) Procedures and controls for ensuring, through the use of surveillance and security departments, that the licensed facility is secure during normal operations and during any emergencies due to malfunctioning equipment, loss of power, natural disaster or any other cause.
(e) The Board, in consultation with the Department, will review each initial submission made under subsection (a) and determine whether it conforms to the requirements of the act and this subpart and provides adequate and effective controls to insure the integrity of the operation of slot machines at a licensed facility. If the Board determines that the submission is deficient in any area, the Board will provide a written notice of the deficiency to the slot machine applicant or licensee and allow the slot machine applicant or licensee to submit a revision to its submission. A slot machine licensee is prohibited from commencing gaming operations until its system of internal controls is approved by the Board.
(f) If a slot machine licensee intends to make a change or amendment to its system of internal controls, it shall submit to the Board and the Department a written description of a change or amendment in its system of internal controls and the two original signed certifications described in subsection (b). The slot machine licensee may implement the change or amendment on the 30th calendar day following the filing of a complete submission unless the slot machine licensee receives a notice under subsection (g) tolling the change or amendment.
(g) If during the 30-day review period in subsection (f), the Bureau of Corporate Compliance and Internal Controls (BCCIC) preliminarily determines that a procedure in a submission contains a substantial and material insufficiency likely to have a direct and materially adverse impact on the integrity of slot operations or the control of gross terminal revenue, that Bureau, by written notice to the slot machine licensee, will:
(1) Specify the nature of the insufficiency and, when possible, an acceptable alternative procedure.
(2) Direct that the 30 calendar day review period in subsection (f) be tolled and that any internal controls at issue not be implemented until approved by the Executive Director.
(h) Examples of submissions that may be determined to contain a substantial and material insufficiency likely to have a direct and materially adverse impact on the integrity of slot operations or the control of gross terminal revenue may include the following:
(1) Submissions that fail to provide an audit trail sufficient to permit the review of gaming operations or the reconstruction of gross terminal revenue transactions.
(2) Submissions that fail to provide for the segregation of incompatible functions so that no employee is in a position both to commit an error or to perpetrate a fraud and to conceal the error or fraud in the normal course of the employee's duties.
(3) Submissions that do not include forms or other materials referenced in the submission or required by the act or this part that are essential elements of the internal controls.
(4) Submissions that would implement operations or accounting procedures not authorized by the act or this part.
(5) Submissions that are dependent upon the use of equipment or related devices or software not approved by the Board, unless the submissions are required as part of an authorized test of the equipment or related device or software.
(i) When a change or amendment has been tolled under subsection (g), the slot machine licensee may submit a revised change or amendment within 30 days of receipt of the written notice from BCCIC. The slot machine licensee may implement the revised change or amendment on the 30th calendar day following the filing of the revision unless it receives written notice under subsection (g) tolling the change or amendment.
(j) A current version of the internal controls of a slot machine licensee shall be maintained in or made available in electronic form through secure computer access to the accounting and surveillance departments of the slot machine licensee and the Board's onsite facilities required under § 465a.8 (relating to licensed facility). The slot machine licensee shall also maintain a copy, either in paper or electronic form, of any superseded internal control procedures, along with the two certifications required to be submitted with respect thereto, for a minimum of 5 years. Each page of the internal controls must indicate the date on which it was approved by the Board.
§ 465a.3. Forms, records and documents.
(a) Information required by this part to be placed on any form, record or document and in stored data shall be recorded on the form, record or document and in stored data in ink or other permanent form.
(b) Whenever duplicate or triplicate copies are required of a form, record or document, the original, duplicate and triplicate copies must have the name of the recipient receiving the copy preprinted on the bottom of that copy so as to differentiate between the copies.
(c) Whenever under this part, forms or serial numbers are required to be accounted for and an exception is noted, the exceptions shall be reported in writing to the slot machine licensee's internal audit department and the Bureau within 2 days of identification of the exception or upon its confirmation, whichever occurs earlier.
(d) Unless otherwise specified in this part, all forms, records, documents and stored data required to be prepared, maintained and controlled by this chapter must have the name of the licensed facility and the title of the form, record, document and, for stored data, the date imprinted or preprinted thereon.
(e) Nothing in this chapter shall be construed as prohibiting a slot machine licensee from preparing more copies of any form, record or document than those prescribed by this chapter.
§ 465a.4. Standard financial and statistical reports.
(a) A slot machine licensee shall file the following monthly reports of financial and statistical data:
(1) A balance sheet.
(2) A statement of revenues and expenses.
(3) A cash flow statement.
(4) A net income statement.
(5) Daily gross terminal revenues and taxes.
(6) A comparison of gross terminal revenues to projected gross terminal revenues.
(b) The Board may prescribe standard reporting forms and corresponding filing instructions to be used by a slot machine licensee in filing the monthly reports referenced in subsection (a).
(c) In the event of a license termination, change in business entity, or material change in ownership, the Board may require the filing of financial and statistical reports as of the date of occurrence of the event. The slot machine licensee will be notified in writing by the Board.
(d) Adjustments resulting from the annual audit required in § 465a.5 (relating to annual audit; other reports; suspicious activity and currency transaction reporting) shall be recorded in the accounting records of the year to which the adjustment relates. If the adjustments were not reflected in any annual report and the Board concludes that the adjustments are significant, the Board may require the slot machine licensee to file a revised annual report. The revised filing shall be due within 30 calendar days after written notification to the slot machine licensee, unless the slot machine licensee submits a written request for an extension prior to the required filing date and the extension is granted by the Board.
(e) The Board may request, in writing, additional financial reports to determine compliance by the slot machine licensee with the act and the Board's regulations.
§ 465a.5. Annual audit; other reports; suspicious activity and currency transaction reporting.
(a) A slot machine licensee shall, at its own expense, cause its annual financial statements to be audited in accordance with generally accepted auditing standards (when applicable, the Standards of the Public Company Accounting Oversight Board (United States)) by an independent certified public accountant or, when appropriate, an independent registered public accounting firm, licensed to practice in this Commonwealth.
(b) The annual financial statements shall be prepared on a comparative basis for the current and prior fiscal year and present financial position and results of operations in conformity with generally accepted accounting principles in the United States.
(c) The financial statements required by this section must include a footnote reconciling and explaining any differences between the financial statements included in any annual report filed in conformity with § 465a.4 (relating to standard financial and statistical reports) and the audited financial statements. The footnote must, at a minimum, disclose the effect of adjustments on:
(1) Revenue from the operation of slot machines.
(2) Slot machine revenue net of expenses for complimentary services or items.
(3) Total costs and expenses.
(4) Income before extraordinary items.
(5) Net income.
(d) Two copies of the audited financial statements, together with any management letter or report prepared thereon by the slot machine licensee's independent registered public accounting firm, shall be filed with the Board not later than 60 days after the end of the licensee's fiscal year.
(e) The slot machine licensee shall require the independent registered public accounting firm auditing its financial statements to render the following additional reports:
(1) A report on material weaknesses or significant deficiencies in the system of internal controls noted in the course of the examination of the financial statements.
(2) A report expressing the opinion of the independent certified public accountant or independent registered public accounting firm as to the adequacy of the slot machine licensee's system of internal controls over financial reporting based upon the description of the system of internal controls approved for the slot machine licensee under § 465a.2 (relating to internal control systems and audit protocols). When appropriate, the report should make specific recommendations regarding improvements in the system of internal controls.
(f) The slot machine licensee shall prepare a written response to the independent certified public accountant's or independent registered public accounting firm's reports required by subsection (e)(1) and (2). The response must indicate, in detail, corrective actions taken. The slot machine licensee shall submit a copy of the response to the Bureau of Corporate Compliance and Internal Controls (BCCIC) within 90 days of receipt of the reports.
(g) The slot machine licensee shall file with the BCCIC two copies of the reports required by subsection (e), and two copies of any other reports on internal controls, administrative controls, or other matters relative to the slot machine licensee's accounting or operating procedures rendered by the licensee's independent certified public accountant or independent registered public accounting firm within 120 days following the end of the licensee's fiscal year or upon receipt, whichever is earlier.
(h) If the slot machine license is publicly held, the slot machine licensee shall submit to the BCCIC three copies of any report, including forms S-1, 8-K, 10-Q, 10-K, proxy or information statements and registration statements, required to be filed by the slot machine licensee with the SEC or other domestic or foreign securities regulatory agency. The filing with the Board shall be made within 10 days of the time of filing with the applicable Commission or regulatory agency or the due date prescribed by the applicable Commission or regulatory agency, whichever occurs first.
(i) If an independent certified public accountant or independent registered public accounting firm who was previously engaged as the principal accountant to audit the slot machine licensee's financial statements resigns or is dismissed as the slot machine licensee's principal accountant, or another independent certified public accountant or independent registered public accounting firm is engaged as principal accountant, the slot machine licensee shall file a report with the BCCIC within 10 days following the end of the month in which the event occurs, setting forth the following:
(1) The date of the resignation, dismissal or engagement.
(2) Whether in connection with the audits of the 2 most recent years preceding a resignation, dismissal or engagement there were any disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, including a description of each disagreement. The disagreements to be reported include those resolved and those not resolved.
(3) Whether the principal accountant's report on the financial statements for either of the past 2 years contained an adverse opinion or disclaimer of opinion or was qualified. The nature of the adverse opinion, disclaimer of opinion or qualification shall be described.
(j) The slot machine licensee shall request the former accountant to furnish to the slot machine licensee a letter addressed to the Board stating whether he agrees with the statements made by the slot machine licensee in response to subsection (i)(2). The letter shall be filed with the Board as an exhibit to the report required by subsection (i)(2).
(k) The slot machine licensee shall file with the Board a copy of any Suspicious Activity Report-Casino (SARC) it is required to file under 31 CFR 103.21 (relating to reports by casinos of suspicious transactions). Each SARC shall be filed with the Board concurrently with the Federal filing.
(l) A slot machine licensee, director, officer, employee or agent who reports a suspicious activity under subsection (k) may not notify any person involved in the suspicious activity that the suspicious activity has been reported.
(m) The slot machine licensee shall file with the Board a copy of any Currency Transaction Report by Casino (CTRC) it is required to file under 31 CFR 103.22 (relating to reports of transactions in currency). Each CTRC shall be filed with the Board concurrently with the Federal filing.
(n) Prior to commencing gaming operations, a slot machine licensee shall file with the Board, in a manner to be prescribed by the Board, a copy of its compliance program required under 31 CFR 103.64 (relating to special rules for casinos). Thereafter, a slot machine licensee shall file with the Board any amendment or supplement to its compliance program on or before the effective date of the amendment or supplement.
§ 465a.6. Retention, storage and destruction of books, records and documents.
(a) For the purposes of this section, ''books, records and documents'' means any book, record or document pertaining to, prepared in or generated by the operation of the licensed facility including all forms, reports, accounting records, ledgers, subsidiary records, computer generated data, internal audit records, correspondence and personnel records required to be generated and maintained by this part. This definition applies without regard to the medium through which the record is generated or maintained, for example, paper, magnetic media or encoded disk.
(b) Original books, records and documents pertaining to the operation of a licensed facility shall be:
(1) Prepared and maintained in a complete, accurate and legible form. Electronic data must be stored in a format that ensures readability, regardless of whether the technology or software that created or maintained it has become obsolete.
(2) Retained on the site of the licensed facility or at another secure location approved under subsection (d).
(3) Kept immediately available for inspection by agents of the Board, the Department and the Pennsylvania State Police during all hours of operation.
(4) Organized and indexed in a manner to provide immediate accessibility to agents of the Board, the Department and the Pennsylvania State Police.
(5) Destroyed only after expiration of the minimum retention period specified in subsection (c), except that the Board may, upon the written request of a slot machine licensee and for good cause shown, permit the destruction at an earlier date.
(c) Original books, records and documents shall be retained by a slot machine licensee for a minimum of 5 years with the following exceptions:
(1) Documentation with regard to gaming vouchers reported to the Board as possibly counterfeit, altered or tampered with should be retained for a minimum of 2 years.
(2) Coupons entitling patrons to cash or slot machine credits, whether unused, voided or redeemed shall be retained for a minimum of 6 months.
(3) Voided gaming vouchers and gaming vouchers redeemed at a location other than a slot machine shall be retained for a minimum of 6 months.
(4) Gaming vouchers redeemed at a slot machine shall be retained for a minimum of 7 days.
(d) A slot machine licensee may request, in writing, that the Board approve a location outside the licensed facility to store original books, records and documents. The request must include the following:
(1) A detailed description of the proposed offsite facility, including security and fire safety systems.
(2) The procedures under which the Board, the Department and the Pennsylvania State Police will be able to gain access to the original books, records and documents retained at the offsite facility.
(e) A slot machine licensee may request, in writing, that the Board approve a microfilm, microfiche or other suitable media system for the copying and storage of original books, records and documents. The request must include representations regarding:
(1) The processing, preservation and maintenance methods which will be employed to insure that the books, records and documents are available in a format which makes them readily available for review and copying.
(2) The inspection and quality control methods which will be employed to insure that microfilm, microfiche or other media when displayed on a reader/viewer or reproduced on paper exhibits a high degree of legibility and readability.
(3) The availability of a reader/printer for use by the Board, the Department and the Pennsylvania State Police at the licensed facility or other location approved by the Board and the readiness with which the books, records or documents being stored on microfilm, microfiche or other media can be located, read and reproduced.
(4) The availability of a detailed index of all microfilmed, microfiched or other stored data maintained and arranged in a manner to permit the immediate location of any particular book, record or document.
(f) Nothing herein shall be construed as relieving a slot machine licensee from meeting any obligation to prepare or maintain any book, record or document required by any other Federal, State or local governmental body, authority or agency.
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