MICS Overview for Sports Betting Operations — <em>As Featured by Indian Gaming</em>

MICS Overview for Sports Betting Operations — As Featured by Indian Gaming

April 19, 2021

By Tony Gerlach, CPA, REDW Principal

As the old adage goes, time flies. It’s hard to believe the gaming industry is approaching three years past the repeal of the Professional and Amateur Sports Protection Act (PASPA). Seemingly every month, additional states are passing legislation to legalize sports betting, and in turn, tribes look to compact with those states in order to offer that gaming outlet in their casinos.

As more tribes move past planning sports betting operations to actual implementation, let’s look at some of the important Minimum Internal Control Standards (MICS) tribes should consider. Since the NIGC’s non-authoritative Class III MICS (Section 542) address only pari-mutuel race books and are silent regarding sports wagering, we turn to the Nevada Gaming Control Board MICS for insight, as several state jurisdictions have already done.

The first major point of emphasis of the MICS is on the integrity of the race and sports book computer system and related equipment. System integrity is paramount in ensuring the authenticity of wagers and payouts, and correctly recognizing and recording the results of events wagered upon. This begins with verifying the date and time recognized by the computer system during ticket writing, a critical piece in ensuring wagers are legitimate and not accepted after the event has begun. The Nevada MICS even go so far as requiring a daily verification of the date and time with the Naval Observatory Master Clock.

Focus next shifts to wagering standards, including maintaining appropriate documentation to support all wagers made. At the time a wager is made, an original ticket is printed and given to the customer. Concurrently, a computer system record of the wager is made. The record identifies all of the specific information about the wager:

  • ticket number;
  • date/time of the wager;
  • and the terms of the event wager, which include the event meet, event number, event date, wager selection (e.g., team name and number), and type of wager (e.g., point spread, money line bet, over/under amount, etc.).

Finally, a restricted computer system record of the wager is created. This restricted record must not be accessible to race and sports book employees, except for inquiry only purposes.

Due to the inherent risks associated with voided tickets, extended controls and enhanced auditing procedures are warranted. When a void occurs, an official designation of the void is branded on the ticket in the computer system. For voids not processed in the computer system, the date and time of the void is stamped on the original ticket. Also, all voids must be signed by the writer/cashier and by a supervisor who did not write the ticket.

The MICS then move sequentially into payout standards. As typical sports books only hold on average 5-6%, there is a large expected volume of payouts to process. But before payouts can begin being processed, event results first need to be entered into the computer system. At this point, the system processes a computerized grading for all wagers. To process the payout, the writer/cashier enters or scans the ticket number to authorize payment. At the point of payout, the system brands the ticket with a paid designation, the amount of payment, and date and time.

Skipping ahead then to shift end, a number of checkout standards are in place. This begins with generation of a summary report for each writer/cashier station. The computer system indicates the amount of net cash that should be turned in by each writer/cashier station. It includes a computation of cash turned in for the shift, and any variances between the expected and actual cash turned in. The summary report requires signatures of two employees who have verified the cash proceeds turned in.

Accounting and audit standards are numerous and comprise the largest single section of the MICS. These focus on various verifications and reconciliations, which are to be performed at varying intervals. Tests required annually, quarterly, or monthly are mostly designed to evaluate the accuracy of the computer system and identify discrepancies. Daily tests, however, mostly focus on substantiating all wager and payout transactions with appropriate original supporting documentation, both physical and electronic. Various tests are required for: write; winning tickets; vouchers redeemed; voided tickets; writer/cashier activity, including investigation of any large variances; customer account activity; and event results, date, and time.

MICS play an important role in all gaming areas, but particularly in games new to an operation. Be sure your facility is devoting an adequate amount of time to developing and implementing proper MICS for sports betting to help ensure the tribe’s assets are appropriately safeguarded.

This article was published on April 14, 2021 by Indian Gaming. Shared with permission.

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