Minimum Internal Control Standards, 69293-69302 [05-22506]

Agencies

• DEPARTMENT OF THE INTERIOR
• National Indian Gaming Commission

[Federal Register Volume 70, Number 219 (Tuesday, November 15, 2005)]
[Proposed Rules]
[Pages 69293-69302]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-22506]


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DEPARTMENT OF THE INTERIOR

National Indian Gaming Commission

25 CFR Part 542

RIN 3141-AA27


Minimum Internal Control Standards

AGENCY: National Indian Gaming Commission.

ACTION: Proposed rule revisions.

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SUMMARY: In response to the inherent risks of gaming enterprises and 
the resulting need for effective internal controls in Tribal gaming 
operations, the National Indian Gaming Commission (Commission or NIGC) 
first developed Minimum Internal Control Standards (MICS) for Indian 
gaming in 1999, which have subsequently been revised. The Commission 
recognized from the outset that periodic technical adjustments and 
revisions would be necessary in order to keep the MICS effective in 
protecting Tribal gaming assets and the interests of Tribal 
stakeholders and the gaming public. To that end, the following proposed 
rule revisions contain certain proposed corrections and revisions to 
the Commission's existing MICS, which are necessary to clarify, 
improve, and update other existing MICS provisions. The purpose of 
these proposed MICS revisions is to address apparent shortcomings in 
the MICS and various changes in Tribal gaming technology and methods.

DATES: Submit comments on or before December 30, 2005. After 
consideration of all received comments, the Commission will make 
whatever changes to the proposed revisions that it deems appropriate 
and then promulgate and publish the final revisions to the Commission's 
MICS Rule, 25 CFR part 542.

ADDRESSES: Mail comments to ``Comments Proposed MICS Rule Revisions, 
National Indian Gaming Commission, 1441 L Street NW., Washington, DC 
20005, Attn: Acting General Counsel, Penny J. Coleman.'' Comments may 
be transmitted by facsimile to (202) 632-7066.

FOR FURTHER INFORMATION CONTACT: Vice-Chairman Nelson Westrin, (202) 
632-7003 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On January 5, 1999, the Commission first published its Minimum 
Internal Control Standards (MICS) as a Final Rule. As gaming Tribes and 
the Commission gained practical experience applying the MICS, it became 
apparent that some of the standards required clarification or 
modification to be effective, operate as the Commission had intended, 
and accommodate changes and advances in gaming technology and methods.
    Consequently, the Commission, working with an Advisory Committee 
composed of Commission and nominated Tribal representatives, published 
the new final revised MICS rule on June 27, 2002. Based on the 
practical experiences of the Commission and Tribes working with the 
newly revised MICS, it has once again become apparent that additional 
corrections, clarifications, and modifications are needed to ensure 
that the MICS continue to be effective and operate as the Commission 
intended. To identify which of the current MICS need correction, 
clarification or modification, the Commission initially solicited input 
and guidance from NIGC employees, who have extensive gaming regulatory 
expertise and experience and work closely with Tribal gaming regulators 
in monitoring the implementation, operation, and effect of the MICS in 
Tribal gaming operations. The resulting input from NIGC staff convinced 
the Commission that the MICS require continuing review and prompt 
revision on an ongoing basis to keep them effective and up-to-date. To 
address this need, the Commission decided to establish a Standing MICS 
Advisory Committee to assist it in both identifying and developing 
necessary MICS revisions on an ongoing basis.
    In recognition of its government-to-government relationship with 
Tribes, and related commitment to meaningful Tribal consultation, the 
Commission asked gaming Tribes in January of 2004 for nominations of 
Tribal representatives to serve on its Standing MICS Advisory 
Committee. From the twenty-seven (27) Tribal nominations that it 
received, the Commission selected nine (9) Tribal representatives in 
March 2004 to serve on the Committee. The Commission's Tribal Committee 
member selections were based on several factors, including the 
regulatory experience and background of the individuals nominated; the 
size(s) of their affiliated Tribal gaming operation(s); the types of 
games played at their affiliated Tribal gaming operation(s); and the 
areas of the country in which their affiliated Tribal gaming 
operation(s) are located. The selection process was very difficult 
because numerous highly qualified Tribal representatives were nominated 
to serve on this important Committee. As expected, the benefit of 
including

[[Page 69294]]

Tribal representatives on the Committee, who work daily with the MICS, 
has been invaluable.
    Tribal representatives selected to serve on the Commission's 
Standing MICS Advisory Committee are: Tracy Burris, Gaming 
Commissioner, Chickasaw Nation Gaming Commission, Chickasaw Nation of 
Oklahoma; Jack Crawford, Chairman, Umatilla Gaming Commission, 
Confederated Tribes of the Umatilla Indian Reservation; Patrick Darden, 
Executive Director, Chitimacha Gaming Commission, Chitimacha Indian 
Tribe of Louisiana; Mark N. Fox, former Compliance Director, Four Bears 
Casino, Three Affiliated Tribes of the Fort Berthold Reservation; 
Sherrilyn Kie, Senior Internal Auditor, Pueblo of Laguna Gaming 
Authority, Pueblo of Laguna; Patrick Lambert, Executive Director, 
Eastern Band of Cherokee Gaming Commission, Eastern Band of Cherokee 
Indians; John Meskill, Director, Mohegan Tribal Gaming Commission, 
Mohegan Indian Tribe; Jerome Schultze, Executive Director, Morongo 
Gaming Agency, Morongo Band of Mission Indians; and Lorna Skenandore, 
Assistant Gaming Manager, Support Services, Oneida Bingo and Casino, 
formerly Gaming Compliance Manager, Oneida Gaming Commission, Oneida 
Tribe of Indians of Wisconsin. The Advisory Committee also includes the 
following Commission representatives: Philip N. Hogen, Chairman; Nelson 
Westrin, Vice-Chairman; Cloyce V. Choney, Associate Commissioner; Joe 
H. Smith, Acting Director of Audits; Ken Billingsley, Region III 
Director; Nicole Peveler, Field Auditor; Ron Ray, Field Investigator; 
and Katherine Zebell, Staff Attorney, Office of General Counsel.
    In the past, the MICS were comprehensively revised on a broad, 
wholesale basis. Such large-scale revisions proved to be difficult for 
Tribes to implement in a timely manner and unnecessarily disruptive to 
Tribal gaming operations. The purpose of the Commission's Standing 
Committee is to conduct a continuing review of the operation and 
effectiveness of the existing MICS. The primary purpose of the review 
is to promptly identify and develop needed revisions of the MICS on a 
manageable, incremental basis, in order to keep the MICS practical and 
effective. By making more manageable incremental changes to the MICS on 
an ongoing basis, the Commission hopes to be more prompt in developing 
needed revisions, while, at the same time, avoiding larger-scale MICS 
revisions which take longer to implement and can be unnecessarily 
disruptive to Tribal gaming operations.
    In accordance with this approach, the Commission has developed the 
following set of proposed MICS rule revisions with the assistance of 
its Standing MICS Advisory Committee. In doing so, the Commission is 
carrying out its statutory mandate under the Indian Gaming Regulatory 
Act (Act or IGRA), 25 U.S.C. 2706(b)(10), to promulgate necessary and 
appropriate regulations to implement the provisions of the Act. In 
particular, the following proposed MICS rule revisions are intended to 
address Congress' purpose and concerns, stated in Section 2702(2) of 
the Act, that it ``provide a statutory basis for the regulation of 
gaming by an Indian tribe adequate to shield it from organized crime 
and other corrupting influences, to ensure the Indian tribe is the 
primary beneficiary of the gaming operation, and to ensure the gaming 
is conducted fairly and honestly by both the operator and the 
players.''
    The Commission, with the Committee's assistance, identified three 
specific objectives for the following proposed MICS rule revisions: (1) 
To ensure that the MICS are reasonably comparable to the internal 
control standards of established gaming jurisdictions; (2) to ensure 
that the interests of the Tribal stakeholders are adequately 
safeguarded; and (3) to ensure that the interests of the gaming public 
are adequately protected.
    It should be noted that the NIGC's authority to issue and enforce 
MICS for Class III gaming was recently challenged in Federal district 
court in Colorado River Indian Tribes v. NIGC (CRIT), Case No. 1:04-cv-
00010-JDB. The case arose after the Colorado River Indian Tribes 
objected to an NIGC audit of its Class III gaming operation, which led 
to the audit's discontinuation. The NIGC subsequently cited the Tribe 
for an access violation and imposed a fine. The Court ruled that the 
NIGC's notice of violation and imposition of a civil fine were 
improper, finding that, under IGRA, the NIGC lacked the authority to 
issue or enforce MICS for Class III gaming. While the Court held that 
the NIGC could not penalize the Colorado River Indian Tribes for 
resisting the NIGC's attempt to conduct an audit of its Class III 
gaming, it did not enjoin the NIGC from applying its MICS to other 
Class III operations, nor did the Court prohibit the NIGC from 
conducting audits to monitor compliance with those MICS. The CRIT 
decision applies only to the Colorado River Indian Tribes. A notice of 
appeal was recently filed in the case.
    In order to uphold the integrity of Indian gaming, it is important 
to maintain the continuity of the system of regulation that has been in 
place since 1999. This system has helped ensure adequate regulation and 
facilitated growth and prosperity in the industry. Thus, with the 
exception of the gaming operations of the Colorado River Indian Tribes, 
the NIGC will continue to monitor Tribal compliance with the MICS with 
respect to Class II and III gaming, pending the results of our appeal 
in the CRIT case or further judicial or legislative direction.
    The Advisory Committee met on January 25, 2005, May 10, 2005, and 
September 26, 2005, to discuss the revisions set forth in the following 
proposed MICS rule revisions. The input received from the Committee 
Members has been invaluable to the Commission in its development of the 
following proposed MICS rule revisions. In accordance with the 
Commission's established Government-to-Government Tribal Consultation 
Policy, the Commission provided a preliminary working draft of all of 
the proposed MICS rule revisions contained herein to gaming Tribes on 
August 26, 2005, for a thirty (30)-day informal review and comment 
period, before formulation of this proposed rule. In response to its 
requests for comments, the Commission received twenty two (22) comments 
from Commission and Tribal Advisory Committee members, individual 
Tribes, and other interested parties regarding the proposed revisions. 
A summary of these comments is presented below in the discussion of 
each proposed revision to which they relate.

General Comments to Proposed MICS Revisions

    For reasons stated above in this preamble, the NIGC proposes to 
revise the following specific sections of its MICS rule, 25 CFR part 
542. The following discussion includes the Commission's responses to 
general comments concerning the MICS and is followed by a discussion 
regarding each of the specifically proposed revisions, along with 
previously submitted informal comments to the proposed revisions and 
the Commission's responses to those comments. As noted above, prior 
commenters include Commission and Tribal Advisory Committee members, 
gaming Tribes, and others.

Comments Questioning NIGC Authority To Promulgate MICS for Class III 
Gaming

    Many of the previous informal comments to the preliminary working 
draft of the MICS revisions pertained to the Commission's authority to 
promulgate rules governing proposed

[[Page 69295]]

the conduct of Class III gaming. Positions were expressed asserting 
that Congress intended the NIGC's Class III gaming regulatory authority 
to be limited exclusively to the approval of Tribal gaming ordinances 
and management contracts. Similar comments were received concerning the 
first proposed MICS back in 1999. The Commission, at that time, 
determined in its publication of the original MICS in 1999 that it 
possessed the statutory authority to promulgate Class III MICS.
    As stated in the preamble to those MICS: ``The Commission believes 
that it does have the authority to promulgate this final rule. * * * 
[T]he Commission's promulgation of the MICS is consistent with its 
responsibilities as the Federal regulator of Indian gaming.'' 64 FR 
509.
    The current Commission reaffirms that determination. The IGRA, 
which established the regulatory structure for all classes of Indian 
gaming, expressly provides that the Commission shall promulgate such 
regulations as it deems appropriate to implement the provisions of (the 
Act).'' 25 U.S.C. 2706(b)(10). Pursuant to this clearly stated 
statutory duty and authority under the Act, the Commission has 
determined that MICS are necessary and appropriate to implement and 
enforce the regulatory provisions of the Act governing the conduct of 
both Class II and Class III gaming and accomplish the purposes of the 
Act.
    The Commission believes that the importance of internal control 
systems in the casino operating environment cannot be overemphasized. 
While this is true of any industry, it is particularly true and 
relevant to the revenue-generation processes of a gaming enterprise, 
which, because of the physical and technical aspects of the games and 
their operation, and the randomness of game outcomes, makes exacting 
internal controls mandatory. The internal control systems and standards 
are the primary management procedures used to protect the operational 
integrity of gambling games; account for and protect gaming assets and 
revenues; and assure the reliability of the financial statements for 
Class II and III gaming operations. Consequently, internal control 
systems are a vitally important part of properly regulated gaming. 
Internal control systems govern the gaming enterprise's governing 
board, management, and other personnel who are responsible for 
providing reasonable assurances regarding the achievement of the 
enterprise's objectives. These objectives typically include operational 
integrity, effectiveness and efficiency, reliable financial statement 
reporting, and compliance with applicable laws and regulations.
    The Commission believes that strict regulations, such as the MICS, 
are not only appropriate, but necessary, for it to fulfill its 
responsibilities under the IGRA to establish necessary baseline, or 
minimum, Federal standards for all Tribal gaming operations on Indian 
lands. 25 U.S.C. 2702(3). Although the Commission recognizes that many 
Tribes had sophisticated internal control standards in place prior to 
the Commission's original promulgation of its MICS, many tribes did 
not. This absence of minimum Federal internal control standards in all 
Tribal casinos adversely affected the adequacy of Indian gaming 
regulation nationwide, and reasonably threatened gaming as a means of 
providing the expected Tribal benefits intended by IGRA. The Commission 
continues to strongly believe that promulgation and revision of these 
standards is necessary and appropriate to effectively implement the 
provisions of the IGRA, and, therefore, within the Commission's clearly 
expressed statutory power and duty under Section 2706(b)(10) of the 
Act.

Comments Recommending Voluntary Tribal Compliance With MICS

    Comments were also received suggesting that the NIGC should re-
issue the MICS as a bulletin or guideline for Tribes to use 
voluntarily, at their discretion, in developing and implementing their 
own Tribal gaming ordinances and internal control standards.
    The Commission disagrees. The MICS are common in established gaming 
jurisdictions, and, to be effective in establishing a minimum baseline 
for the internal operating procedures of Tribal gaming enterprises, the 
rules must be concise, explicit, and uniform for all Tribal gaming 
operations to which they apply. Furthermore, to nurture and promote 
public confidence in the integrity and regulation of Indian gaming, and 
ensure its adequate regulation to protect Tribal gaming assets and the 
interests of Tribal stakeholders and the public, the Commission's MICS 
regulations must be reasonably uniform in their implementation and 
application, and regularly monitored and enforced by Tribal regulators 
and the NIGC to ensure Tribal compliance.

Proposed New, Revised, or Removed Definitions in Section 542.2 of the 
MICS

    The Commission has added or revised definitions of the following 
six terms in section 542.2 and has removed the following one term in 
Sec.  542.2. A discussion of each new, revised, or removed definition 
follows in alphabetical order.

``Account Access Card''

    The Commission has revised the existing MICS definition of this 
term to more accurately define the applicability of the referenced 
term. Committee members recommended that the definition of ``account 
access card'' be revised to include the reference that account access 
cards are not smart cards. No comments were received concerning this 
proposed revision.

``Cash Equivalent''

    This is a new definition. Several Commission Committee members 
recommended that a definition of the term ``cash equivalent'' be added 
to the current MICS definitions. In conjunction with other proposed 
rule revisions to the MICS, which include the term and existing 
standards, the NIGC has determined that to ensure that the rules are 
clear and unambiguous, insertion of the definition in the MICS is 
worthwhile.
    Comment was received in previous revisions recommending that the 
definition be added. The Commission agreed with this suggestion and 
developed the definition.

``Counter Game''

    This is a new definition. Several Tribal and Commission Committee 
members recommended that a definition of the term ``counter game'' be 
added to the current MICS definitions. In conjunction with the proposal 
to add accounting standards to the MICS, which include the term, the 
NIGC has determined that to ensure that such revisions and existing 
rules are clear and unambiguous, insertion of the definition is 
worthwhile. No comments were received concerning this proposed 
revision.

``Common Intermediate Format''

    This is a new definition. Commission Committee members recommended 
that a definition of the term ``common intermediate format'' be added 
to the current MICS definitions. In conjunction with the proposed 
rule's addition of digital surveillance standards to the MICS, which 
include the term, the NIGC has determined that to ensure that the 
revisions are clear and unambiguous, insertion of the definition is 
worthwhile.

``Digital Video Recording (DVR)''

    This is a new definition. Commission Committee members recommended 
that

[[Page 69296]]

a definition of the term ``digital video recording (DVR)'' be added to 
the current MICS definitions. In conjunction with the proposed rule 
adding digital surveillance standards to the MICS, which include the 
term, the NIGC has determined that to ensure the revisions and existing 
rule are clear and unambiguous, insertion of the definition is 
worthwhile. No comments were received concerning this proposed 
revision.

``Network Video Recording (NVR)''

    This is a new definition. Commission Committee members recommended 
that a definition of the term ``network video recording (NVR)'' be 
added to the current MICS definitions. In conjunction with the proposed 
rule revisions adding digital surveillance standards to the MICS, which 
include the term, the NIGC has determined that to ensure that the 
revisions and existing rule are clear and unambiguous, insertion of the 
definition is worthwhile. One Commenter noted that although cameras can 
have IP addresses, most often it is the encoders that have IP 
addresses. It was recommended that the definition be changed to 
``utilizing individual IP addresses for each camera `or encoder' on a 
closed network system.'' The Commission disagrees and considers the 
additional clarification to be unnecessary.

``Sufficient Clarity''

    This definition is removed. Several Tribal and Commission Committee 
members recommended that a definition of the term ``sufficient 
clarity'' be removed from the current MICS definitions. The term 
``sufficient clarity'' is being replaced by a more comprehensive 
definition contained within the proposed revision to the surveillance 
section. No comments were received concerning this proposed revision.

Proposed Addition to Sections 542.7(g)(1) and 542.8(h)(1) Electronic 
Equipment

    The Commission proposes to revise the noted regulations to clarify 
the intent of the existing regulation. The amendment has been proposed 
to explicitly state that bingo electronic systems and pull tab 
electronic systems utilizing patron account access cards will be 
required to comply with the applicable standards contained within the 
MICS. No comments were received concerning this proposed revision.

Proposed Addition and Revisions to Section 542.13(o)(4) Customer 
Account Generation Standards

    The Commission proposes to revise the noted regulation to clarify 
the intent of the existing regulation. The amendment has been proposed 
which will explicitly represent that the patron's identification must 
be verified and the account must identify the patron's name. The 
standard is consistent with the Bank Secrecy Act and other gaming 
jurisdictions, which also requires that such patron identification 
information be recorded and verified at the time of setting up the 
account. The revision to obtaining a new PIN is intended to clarify 
that the Gaming Machine Information Center is a clerk who has access to 
a customer file for changing the PIN. No comments were received 
concerning this proposed revision.

Proposed Removal of Section 542.16(f)(vi) Document Storage of Original 
Documents Until Audited

    The Commission proposes to remove the noted regulation since it is 
in conflict with the proposed addition of Sec.  542.19 on accounting 
standards, specifically the maintenance and preservation of books, 
records and documents. No comments were received concerning this 
proposed revision.

Proposed Addition of Section 542.19 What Are the Minimum Internal 
Control Standards for Accounting?

    The Commission proposes to add this new regulation to establish the 
basic required tenets for a casino accounting function. The proposed 
addition is common to established gaming jurisdictions. Furthermore, 
since the MICS were initially adopted, many questions have arisen 
regarding the relationship of Section 571.7 Maintenance and 
preservation of papers and records to the MICS. The proposed addition 
is also intended to clarify and define the scope of the five (5)-year 
record retention requirement, as the requirement relates to casino 
records.
    One Commenter requested that ``any other records specifically 
required to be maintained'' under preparing general accounting records 
include more details as to the phrase ``specifically required by 
whom.'' The Commission disagrees, and considers the representation to 
be clear in that the language pertains to other records required by the 
MICS.
    Proposed Revisions to the Following Sections: 542.21(f)(12) (Tier 
A--Drop and Count) Gaming Machine Bill Acceptor Count Standards; 
542.31(f)(12) (Tier B--Drop and Count) Gaming Machine Bill Acceptor 
Count Standards; 542.41(f)(12) (Tier C--Drop and Count) Gaming Machine 
Bill Acceptor Count Standards.
    The referenced standards represent a duplicate control to an 
identical requirement contained within each of the respective section's 
Gaming Machine Bill Acceptor Drop Standards, refer Sec. Sec.  
542.21(e)(4), 542.31(e)(5), and 542.41(e)(5). Specifically, the 
standard requires the bill acceptor canisters to be posted with a 
number corresponding to that of the machine from which it was 
extracted. The subject control pertains to a drop function, as opposed 
to the count process. Therefore, the Commission is proposing to delete 
the above subsections. No comments were received pertaining to the 
proposed revision.
    Proposed Additions of: 542.23(i) Technical Standards for 
Surveillance Systems--Tier A; 542.33(j) Technical Standards for 
Surveillance Systems --Tier B; 542.43(k) Technical Standards for 
Surveillance Systems--Tier C.
    The Commission proposes to add the referenced regulations to the 
MICS for the analog surveillance standard governing sufficient clarity 
in order to make the frame rate more consistent with industry practice. 
The frame-rate change is deemed necessary for critical functions 
performed in the gaming areas. Furthermore, with the increasing 
utilization of digital surveillance systems, the Commission proposes to 
add the referenced regulation to the MICS. The objective is to ensure 
uniformity commensurate with the generally accepted digital 
surveillance standards of established gaming jurisdictions, and to 
ensure that such systems will facilitate compliance with other relevant 
sections of the MICS. After consultation with Tribal regulators and 
operators experienced with digital systems, state gaming regulatory 
authorities, private gaming operators and digital surveillance vendors, 
the proposed regulation was formulated.
    One Commenter suggested that the requirement of satisfying 
sufficient clarity for 30 FPS or 30 IPS be required for essential areas 
such as Table Games, Cage, Soft Count Room, Hard Count Room, etc. The 
Commission disagrees on adding this to the section on technical 
standards for surveillance systems. The MICS utilization of the term 
``sufficient clarity'' is limited to specific functions within the 
gaming areas, which directly relate to the risk posed by the particular 
function. A general application of the 30 FPS or 30 IPS to the gambling 
games would be difficult for the operator and the

[[Page 69297]]

regulator to measure and confirm compliance.
    One Commenter suggested changing the wording of ``real motion'' to 
``live-action'' in the following way: ``Any area covered by cameras 
activated by motion detection must record `live-action' at the frame 
rate of 30 FPS.'' The Commission agrees and has changed the term used.
    One Commenter suggested that the requirement under the digital 
systems for both audible and visual warning devices was too high of a 
standard, as well as cost prohibitive, and recommended it be changed to 
``of either an audible or visual warning device.'' The Commission 
disagrees. Based on research performed, it has been determined that 
industry practice dictates that both methods of notification are 
needed.
    One Commenter suggested that the terms ``viewable'' and ``view'' be 
added to the digital systems section for satisfying sufficient clarity 
on producing a video record. The Commission agrees and has added these 
terms to the section.
    One Commenter suggested adding to the use of a network video 
recorder (NVR) system section that access to the network be limited to 
not only authorized personnel, but also be password protected. The 
Commission agrees and has added this to the use of an NVR system that 
requires access.

Regulatory Matters

Regulatory Flexibility Act

    The Commission certifies that the proposed revisions to 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 330 Indian gaming operations across the country, 
approximately 93 of the operations have gross revenues of less than $5 
million. Of these, approximately 39 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 39 small 
operations may be affected. While this is a substantial number, the 
Commission believes that the proposed revisions will not have a 
significant economic impact on these operations for several reasons. 
Even before implementation of the original MICS, Tribes had internal 
controls because they 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 a gaming operation. The 
Commission believes that many Indian gaming operation internal control 
standards are more stringent than those contained in these regulations. 
Further, these proposed rule revisions are technical and minor in 
nature.
    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 small gaming operations is 
estimated at between $3,000 and $5,000. The cost of this report is 
relatively minimal and does not create a significant economic effect on 
gaming operations. What little impact exists is further offset because 
other regulations require yearly independent financial audits that can 
be conducted at the same time. For these reasons, the Commission has 
concluded that the proposed rule revisions will not have a significant 
economic impact on those small entities subject to the rule.

Small Business Regulatory Enforcement Fairness Act

    These following proposed revisions do not constitute a major rule 
under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement 
Fairness Act. The revisions will not have an annual effect on an 
economy of $100 million or more. The revisions also will not cause a 
major increase in costs or prices for consumers, individual industries, 
Federal, state or local government agencies or geographic regions, and 
do 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 the proposed rule revisions do not 
impose an unfunded mandate on State, local, or Tribal governments, or 
on the private sector, of expenditures more than $100 million per year. 
Thus, this 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 the proposed rule 
revisions may have a unique effect on Tribal governments, as they apply 
exclusively to Tribal governments whenever they undertake the 
ownership, operation, regulation, or licensing of gaming facilities on 
Indian lands, as defined by IGRA. Thus, in accordance with Section 203 
of the Unfunded Mandates Reform Act, the Commission undertook several 
actions to provide Tribal governments with adequate notice and 
opportunities for ``meaningful'' consultation, input, sharing of 
information, advice and education regarding compliance.
    These actions included the formation of a Tribal Advisory Committee 
and the request for input from Tribal leaders. Section 204(b) of the 
Unfunded Mandates Reform Act exempts from the Federal Advisory 
Committee Act (5 U.S.C. App.) meetings with Tribal elected officials 
(or their designees) for the purpose of exchanging views, information, 
and advice concerning the implementation of intergovernmental 
responsibilities or administration. 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, the geographic 
location of the gaming operation, and the size and type of gaming 
conducted. The Commission attempted to assemble a Committee that 
incorporates diversity and is representative of Tribal gaming 
interests. The Commission will meet with the Advisory Committee to 
discuss the public comments that are received as a result of the 
publication of the following proposed MICS rule revisions, and will 
consider all Tribal and public comments and Committee recommendations 
before formulating the final rule revisions. The Commission also plans 
to continue its policy of providing necessary technical assistance, 
information, and support to enable Tribes to implement and comply with 
the MICS as revised.
    The Commission also provided the proposed revisions to Tribal 
leaders for comment prior to publication of this proposed rule and 
considered these comments in formulating the proposed rule. 69 FR 
69857.

Takings

    In accordance with Executive Order 12630, the Commission has 
determined that the following proposed MICS rule revisions do 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 the following proposed

[[Page 69298]]

MICS rule revisions do not unduly burden the judicial system and meet 
the requirements of sections 3(a) and 3(b)(2) of the Order.

Paperwork Reduction Act

    The following proposed MICS rule revisions require information 
collection under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., 
as did the rule it revises. There is no change to the paperwork 
requirements created by these proposed revisions. The Commission's 
OMBControl Number for this regulation is 3141-0009.

National Environmental Policy Act

    The Commission has determined that the following proposed MICS rule 
revisions do 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 recordkeeping requirements.

    Accordingly, for all of the reasons set forth in the foregoing 
preamble, the National Indian Gaming Commission proposes to amend 25 
CFR part 542 as follows:

PART 542--MINIMUM INTERNAL CONTROL STANDARDS

    1. The authority citation for part 542 continues to read as 
follows:

    Authority: 25 U.S.C. 2701 et seq.

    2. Amend Sec.  542.2 to add, in alphabetical order, the definitions 
for ``Cash Equivalent,'' ``Counter Game,'' ``Common Intermediate 
Format,'' ``Digital Video Recording (DVR),'' ``Network Video Recording 
(NVR),'' by revising the definition for ``Account Access Card'' and by 
removing the definition for ``Sufficient Clarity'' to read as follows:


Sec.  542.2  What are the definitions for this part?

* * * * *
    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. Account access 
cards are not smart cards.
* * * * *
    Cash Equivalent means the monetary value that a gaming operation 
may assign to a document or anything else of representative value other 
than cash, tokens, or chips. A cash equivalent includes, but is not 
limited to, coupons, vouchers, wagering or payout slips and tickets, 
debit and credit card receipts, and other items to which a gaming 
operation has assigned an exchange value.
* * * * *
    Common Intermediate Format (CIF) or Full Common Intermediate Format 
(FCIF) means a set of standard video formats used in DVR systems, 
defined by their resolution. The original CIF is also known as Full CIF 
(FCIF).
* * * * *
    Counter Game means a game in which the gaming operation is a party 
to wagers and wherein the gaming operation documents all wagering 
activity. The term includes, but is not limited to, bingo, keno, and 
pari-mutuel race books. The term does not include table games, card 
games and gaming machines.
* * * * *
    Digital video recording (DVR) system means a digital video 
surveillance system consisting of video cameras, monitors, recorders, 
video printers, computer hardware and software, switches, selectors, 
and other ancillary equipment used for casino surveillance. Size of 
gaming operation will dictate quantities of cameras, etc.
* * * * *
    Network video recording (NVR) means a digital video surveillance 
system utilizing individual IP addresses for each camera on a closed 
network system.
* * * * *
    3. Amend Sec.  542.7 to add paragraph (g)(1)(iv) to read as 
follows:


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

* * * * *
    (g) Electronic equipment.
    (1) * * *
* * * * *
    (iv) If the electronic equipment utilizes patron account access 
cards for activation of play, then Sec.  542.13(o) (as applicable) 
shall apply.
* * * * *
    4. Amend Sec.  542.8 to add paragraph (h)(1)(iv) to read as 
follows:


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

* * * * *
    (h) Electronic equipment.
    (1) * * *
* * * * *
    (iv) If the electronic equipment utilizes patron account access 
cards for activation of play, then Sec.  542.13(o) (as applicable) 
shall apply.
* * * * *
    5. Amend Sec.  542.13 to redesignate paragraphs (o)(4)(ii) and 
(o)(4)(iii) as (o)(4)(iii) and (o)(4)(iv), add new paragraph 
(o)(4)(ii), and revise newly designated (o)(4)(iv) to read as follows:


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

* * * * *
    (o) * * *
    (4) * * *
* * * * *
    (ii) For each customer file, an employee shall:
    (A) Record the customer's name and current address; and
    (B) The date the account was opened.
    (C) At the time the initial deposit is made, account opened, or 
credit extended, the identity of the customer shall be verified by 
examination of a valid driver's license or other reliable photographic 
identity credential.
* * * * *
    (iv) After entering a specified number of incorrect PIN entries at 
the cage or player terminal, the customer shall be directed to proceed 
to a clerk to obtain a new PIN. If a customer forgets, misplaces or 
requests a change to their PIN, the customer shall proceed to a clerk 
for assistance.
* * * * *


Sec.  542.16  [Amended]

    6. Amend Sec.  542.16 by removing paragraph (f)(1)(vi).
    7. Add Sec.  542.19 to read as follows:


Sec.  542.19  What are the minimum internal control standards for 
accounting?

    (a) Each gaming operation shall prepare accurate, complete, 
legible, and permanent records of all transactions pertaining to 
revenue and gaming activities.
    (b) Each gaming operation shall prepare general accounting records 
according to Generally Accepted Accounting Principles on a double entry 
system of accounting, maintaining detailed, supporting, subsidiary 
records, including, but not limited to:
    (1) Detailed records identifying revenues, expenses, assets, 
liabilities, and equity for each gaming operation;
    (2) Detailed records of all markers, IOU's, returned checks, hold 
checks, or other similar credit instruments;
    (3) Individual and statistical game records to reflect statistical 
drop, statistical win, and the percentage of statistical win to 
statistical drop by each table game, and to reflect statistical drop, 
statistical win, and the percentage of statistical win to statistical 
drop for

[[Page 69299]]

each type of table game, by shift, by day, cumulative month-to-date, 
and cumulative year-to-date, and individual and statistical game 
records reflecting similar information for all other games;
    (4) Gaming machine analysis reports which, by each machine, compare 
actual hold percentages to theoretical hold percentages;
    (5) The records required by Sec.  542 and by the Tribal internal 
control standards;
    (6) Journal entries prepared by the gaming operation and by its 
independent accountants; and
    (7) Any other records specifically required to be maintained.
    (c) Each gaming operation shall establish administrative and 
accounting procedures for the purpose of determining effective control 
over a gaming operation's fiscal affairs. The procedures shall be 
designed to reasonably ensure that:
    (1) Assets are safeguarded;
    (2) Financial records are accurate and reliable;
    (3) Transactions are performed only in accordance with management's 
general and specific authorization;
    (4) Transactions are recorded adequately to permit proper reporting 
of gaming revenue and of fees and taxes, and to maintain accountability 
of assets;
    (5) Recorded accountability for assets is compared with actual 
assets at reasonable intervals, and appropriate action is taken with 
respect to any discrepancies; and
    (6) Functions, duties, and responsibilities are appropriately 
segregated in accordance with sound practices by competent, qualified 
personnel.
    (d) Gross gaming revenue computations. (1) For table games, gross 
revenue equals the closing table bankroll, plus credit slips for cash, 
chips, tokens or personal/payroll checks returned to the cage, plus 
drop, less opening table bankroll and fills to the table, and money 
transfers issued from the game through the use of a cashless wagering 
system.
    (2) For gaming machines, gross revenue equals drop, less fills, 
jackpot payouts and personal property awarded to patrons as gambling 
winnings. Additionally, the initial hopper load is not a fill and does 
not affect gross revenue. The difference between the initial hopper 
load and the total amount that is in the hopper at the end of the 
gaming operation's fiscal year should be adjusted accordingly as an 
addition to or subtraction from the drop for the year.
    (3) For each counter game, gross revenue equals:
    (i) The money accepted by the gaming operation on events or games 
that occur during the month or will occur in subsequent months, less 
money paid out during the month to patrons on winning wagers (``cash 
basis''); or
    (ii) The money accepted by the gaming operation on events or games 
that occur during the month plus money, not previously included in 
gross revenue, that was accepted by the gaming operation in previous 
months on events or games occurring in the month, less money paid out 
during the month to patrons as winning wagers (``modified accrual 
basis'').
    (4) For each card game and any other game in which the gaming 
operation is not a party to a wager, gross revenue equals all money 
received by the operation as compensation for conducting the game.
    (i) A gaming operation shall not include either shill win or loss 
in gross revenue computations.
    (ii) In computing gross revenue for gaming machines, keno and 
bingo, the actual cost to the gaming operation of any personal property 
distributed as losses to patrons may be deducted from winnings (other 
than costs of travel, lodging, services, food, and beverages), if the 
gaming operation maintains detailed documents supporting the deduction.
    (e) Each gaming operation shall establish internal control systems 
sufficient to ensure that currency (other than tips or gratuities) 
received from a patron in the gaming area is promptly placed in a 
locked box in the table, or, in the case of a cashier, in the 
appropriate place in the cashier's cage, or on those games which do not 
have a locked drop box or on card game tables, in an appropriate place 
on the table, in the cash register, or other approved repository.
    (f) If the gaming operation provides periodic payments to satisfy a 
payout resulting from a wager, the initial installment payment, when 
paid, and the actual cost of a payment plan that is funded by the 
gaming operation may be deducted from winnings. The gaming operation is 
required to obtain the approval of all payment plans from the Tribal 
gaming regulatory authority. For any funding method which merely 
guarantees the gaming operation's performance, and under which the 
gaming operation makes payments out of cash flow (e.g. irrevocable 
letters of credits, surety bonds, or other similar methods), the gaming 
operation may only deduct such payments when paid to the patron.
    (g) For payouts by wide-area progressive gaming machine systems, a 
gaming operation may deduct from winnings only its pro rata share of a 
wide area gaming machine system payout.
    (h) Cash-out tickets issued at a gaming machine or gaming device 
shall be deducted from gross revenue as jackpot payouts in the month 
the tickets are issued by the gaming machine or gaming device. Tickets 
deducted from gross revenue that are not redeemed within a period not 
to exceed 180 days of issuance shall be included in gross revenue. An 
unredeemed ticket previously included in gross revenue may be deducted 
from gross revenue in the month redeemed.
    (i) A gaming operation may not deduct from gross revenues the 
unpaid balance of a credit instrument extended for purposes other than 
gaming.
    (j) A gaming operation may deduct from gross revenue the unpaid 
balance of a credit instrument if the gaming operation documents or 
otherwise keeps detailed records of compliance with the following 
requirements. Such records confirming compliance shall be made 
available to the Tribal gaming regulatory authority or the Commission 
upon request:
    (1) The gaming operation can document that the credit extended was 
for gaming purposes;
    (2) The gaming operation has established procedures and relevant 
criteria to evaluate a patron's credit reputation or financial 
resources and to then determine that there is a reasonable basis for 
extending credit in the amount or sum placed at the patron's disposal;
    (3) In the case of personal checks, the gaming operation has 
established procedures to examine documentation, normally acceptable as 
a means of identification when cashing checks, and has recorded a bank 
check guarantee card number or credit card number, or has satisfied 
paragraph (j)(2) of this section, as management may deem appropriate 
for the check-cashing authorization granted;
    (4) In the case of third party checks for which cash, chips, or 
tokens have been issued to the patron, or which were accepted in 
payment of another credit instrument, the gaming operation has 
established procedures to examine documentation, normally accepted as a 
means of identification when cashing checks, and has, for the check's 
maker or drawer, satisfied paragraph (j)(2) of this section, as 
management may deem appropriate for the check-cashing authorization 
granted;
    (5) In the case of guaranteed drafts, procedures should be 
established to ensure compliance with the issuance

[[Page 69300]]

and acceptance procedures prescribed by the issuer;
    (6) The gaming operation has established procedures to ensure that 
the credit extended is appropriately documented, not least of which 
would be the patron's identification and signature attesting to the 
authenticity of the individual credit transactions. The authorizing 
signature shall be obtained at the time credit is extended.
    (7) The gaming operation has established procedures to effectively 
document its attempt to collect the full amount of the debt. Such 
documentation would include, but not be limited to, letters sent to the 
patron, logs of personal or telephone conversations, presentation of 
the credit instrument to the patron's bank for collection, settlement 
agreements, or otherwise demonstrates that it has made a good faith 
attempt to collect the full amount of the debt. Such records 
documenting collection efforts shall be made available to the Tribal 
gaming regulatory authority or the Commission upon request.
    (k) Maintenance and preservation of books, records and documents. 
(1) All original books, records and documents pertaining to the conduct 
of wagering activities shall be retained by a gaming operation in 
accordance with the following schedule. A record that summarizes gaming 
transactions is sufficient, provided that all documents containing an 
original signature(s) attesting to the accuracy of a gaming related 
transaction are independently preserved. Original books, records or 
documents shall not include copies of originals, except for copies that 
contain original comments or notations on parts of multi-part forms. 
The following original books, records and documents shall be retained 
by a gaming operation for a minimum of five (5) years:
    (i) Casino cage documents;
    (ii) Documentation supporting the calculation of table game win;
    (iii) Documentation supporting the calculation of gaming machine 
win;
    (iv) Documentation supporting the calculation of revenue received 
from the games of keno, pari-mutuel, bingo, pull-tabs, card games, and 
all other gaming activities offered by the gaming operation;
    (v) Table games statistical analysis reports;
    (vi) Gaming machine statistical analysis reports;
    (vii) Bingo, pull-tab, keno and pari-mutuel wagering statistical 
reports;
    (viii) Internal audit documentation and reports;
    (ix) Documentation supporting the write-off of gaming credit 
instruments and named credit instruments;
    (x) All other books, records and documents pertaining to the 
conduct of wagering activities that contain original signature(s) 
attesting to the accuracy of the gaming related transaction.
    (2) Unless otherwise specified in Sec.  542, all other books, 
records, and documents shall be retained until such time as the 
accounting records have been audited by the gaming operation's 
independent Certified Public Accountants.
    (3) The above definition shall apply without regards to the medium 
through which the book, record or document is generated or maintained 
(paper, computer generated, magnetic media, etc.).
    8. Amend Sec.  542.23 to redesignate paragraphs (i) through (r) as 
(j) through (s), add new paragraph (i), and revise newly redesignated 
paragraphs (m)(1) introductory text, (m)(2)(i), (o)(1) introductory 
text, and (o)(4) to read as follows:


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

* * * * *
    (i) Technical Standards for Surveillance Systems. (1) Analog 
Systems:
    (i) To satisfy the sufficient clarity requirement of this section, 
continuous movement must be recorded at the frame rate of 30 FPS 
(frames per second);
    (ii) To satisfy the sufficient clarity requirement of this section, 
the resolution must be sufficient to produce a video record that is a 
complete, accurate and viewable representation of the activity being 
observed; and
    (iii) Any area covered by cameras activated by motion detection 
must record live-action at the frame rate of 30 FPS.
    (2) Digital Systems (referred to as DVR System):
    (i) To satisfy the sufficient clarity requirement of this section, 
the DVR System must capture, record and view continuous movement at the 
minimum rate equivalent to 30 IPS (images per second);
    (ii) To satisfy the sufficient clarity requirement of this section, 
the resolution must be sufficient to produce a video record that is a 
complete and accurate representation of the activity being observed;
    (iii) The DVR System must have pre- and post-alarm activation at a 
minimum of five (5) seconds (before and after event) for those areas in 
which motion-activated cameras are allowed;
    (iv) Viewing and recording size of images will be at a minimum of 
CIF or FCIF for all inclusive areas of the DVR System;
    (v) An internal backup system must be included in the configuration 
to perform in the event that a hard drive failure will have negative 
impact on the system's ability to record video images;
    (vi) The DVR System must have a failure notification function 
consisting, at a minimum, of both audible and visual warning devices 
when system failure could negatively impact the ability to record, play 
back, or store video images;
    (vii) If the Casino Operation chooses to utilize a network (also 
referred to as NVR System) for the interconnection of or playback from 
digital recording devices, access to this network must be limited to 
authorized personnel and be password or code protected in order to 
maintain integrity and data network security;
    (viii) If the Gaming Operation elects to utilize authentication/
encryption code software, the software must be submitted to the Tribal 
Gaming Regulatory Authority (TGRA) for inspection and approval.
* * * * *
    (m) Table games. (1) Operations with four (4) or more table games. 
Except as otherwise provided in paragraphs (m)(3), (m)(4), and (m)(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:
* * * * *
    (2) * * *
    (i) Comply with the requirements of paragraph (m)(1) of this 
section; or
* * * * *
    (o) Gaming machines. (1) Except as otherwise provided in paragraphs 
(o)(2) and (o)(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:
* * * * *
    (4) Notwithstanding paragraph (o)(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.
* * * * *
    9. Amend Sec.  542.33 to redesignate paragraphs (j) through (y) as 
(k) through (z), add a new paragraph (j), and revise newly redesignated 
paragraphs (p)(1)

[[Page 69301]]

introductory text, (p)(2)(i), (r)(1) introductory text, and (r)(4) to 
read as follows:


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

* * * * *
    (j) Technical Standards for Surveillance Systems. (1) Analog 
Systems:
    (i) To satisfy the sufficient clarity requirement of this section, 
continuous movement must be recorded at the frame rate of 30 FPS 
(frames per second);
    (ii) To satisfy the sufficient clarity requirement of this section, 
the resolution must be sufficient to produce a video record that is a 
complete and accurate representation of the activity being observed; 
and
    (iii) Any area covered by cameras activated by motion detection 
must record live-action at the frame rate of 30 FPS.
    (2) Digital Systems (referred to as DVR System):
    (i) To satisfy the sufficient clarity requirement of this section, 
the DVR System must capture, record and view continuous movement at the 
minimum rate equivalent to 30 IPS (images per second);
    (ii) To satisfy the sufficient clarity requirement of this section, 
the resolution must be sufficient to produce a video record that is a 
complete, accurate and viewable representation of the activity being 
observed;
    (iii) The DVR System must have pre- and post-alarm activation at a 
minimum of five (5) seconds (before and after event) for those areas in 
which motion-activated cameras are allowed;
    (iv) Viewing and recording size of images will be at a minimum of 
CIF or FCIF for all inclusive areas of the DVR System;
    (v) An internal backup system must be included in the configuration 
to perform in the event that a hard drive failure will have a negative 
impact on the system's ability to record video images;
    (vi) The DVR System must have a failure notification function 
consisting, at a minimum, of both audible and visual warning devices 
when system failure could negatively impact the ability to record, play 
back, or store video images;
    (vii) If the Casino Operation chooses to utilize a network (also 
referred to as NVR System) for the interconnection of or playback from 
digital recording devices, access to this network must be limited to 
authorized personnel and be password or code protected in order to 
maintain integrity and data network security;
    (viii) If the Gaming Operation elects to utilize authentication/
encryption code software, the software must be submitted to the Tribal 
Gaming Regulatory Authority (TGRA) for inspection and approval.
* * * * *
    (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:
* * * * *
    (2) * * *
    (i) Comply with the requirements of paragraph (p)(1) of this 
section; or
* * * * *
    (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:
* * * * *
    (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.
* * * * *
    10. Amend Sec.  542.43 to redesignate paragraphs (k) through (z) as 
(l) through (aa), add a new paragraph (k), and revise newly 
redesignated paragraphs (q)(1) introductory text, (q)(2)(i), (s)(1) 
introductory text, and (s)(4) to read as follows:


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

* * * * *
    (k) Technical Standards for Surveillance Systems. (1) Analog 
Systems:
    (i) To satisfy the sufficient clarity requirement of this section, 
continuous movement must be recorded at the frame rate of 30 FPS 
(frames per second);
    (ii) To satisfy the sufficient clarity requirement of this section, 
the resolution must be sufficient to produce a video record that is a 
complete and accurate representation of the activity being observed; 
and
    (iii) Any area covered by cameras activated by motion detection 
must record live action at the frame rate of 30 FPS.
    (2) Digital Systems (referred to as DVR System):
    (i) To satisfy the sufficient clarity requirement of this section, 
the DVR System must capture, record and view continuous movement at the 
minimum rate equivalent to 30 IPS (images per second);
    (ii) To satisfy the sufficient clarity requirement of this section, 
the resolution must be sufficient to produce a video record that is a 
complete, accurate and viewable representation of the activity being 
observed;
    (iii) The DVR System must have pre- and post-alarm activation at a 
minimum of five (5) seconds (before and after event) for those areas in 
which motion-activated cameras are allowed;
    (iv) Viewing and recording size of images will be at a minimum of 
CIF or FCIF for all inclusive areas of the DVR System;
    (v) An internal backup system must be included in the configuration 
to perform in the event that a hard drive failure will have negative 
impact on the system's ability to record video images;
    (vi) The DVR System must have a failure notification function 
consisting, at a minimum, of both audible and visual warning devices 
when system failure could negatively impact the ability to record, play 
back, or store video images;
    (vii) If the Casino Operation chooses to utilize a network (also 
referred to as NVR System) for the interconnection of or playback from 
digital recording devices, access to this network must be limited to 
authorized personnel and be password or code protected in order to 
maintain integrity and data network security;
    (viii) If the Gaming Operation elects to utilize authentication/
encryption code software, the software must be submitted to the Tribal 
Gaming Regulatory Authority (TGRA) for inspection and approval.
* * * * *
    (q) Table games. (1) Operations with four (4) or more table games. 
Except as otherwise provided in paragraphs (q)(3), (q)(4), and (q)(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:
* * * * *
    (2) * * *
    (i) Comply with the requirements of paragraph (q)(1) of this 
section; or
* * * * *

[[Page 69302]]

    (s) Gaming machines.
    (1) Except as otherwise provided in paragraphs (s)(2) and (s)(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:
* * * * *
    (4) Notwithstanding paragraph (s)(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.
* * * * *

    Signed in Washington, DC, this 1st day of November, 2005.
Philip N. Hogen,
Chairman.
Nelson Westrin,
Vice Chairman.
Cloyce Choney,
Commissioner.
[FR Doc. 05-22506 Filed 11-14-05; 8:45 am]
BILLING CODE 7565-01-P