Mid-Year Alert – Six Ways to Stay Ahead of Your Year End Audit

Year End Audit

Spring cleaning for your next audit

Trees are budding. Grass is turning green again. Spring is in the air. It’s time to start our spring cleaning and yard work to mend things from the effects of winter. This can also be a good time to do the same thing in our financial and operational “house” at the casino. If you have a September 30 fiscal year-end, you’re half way through another year. Now is a good time to do a little catch-up and clean-up before another year-end and audit are upon us. Here are a few things that your team should be doing now to make sure the next year-end and audit go smoothly:

1. One of the most important things you should do between audits is address the internal control findings from your last audit.

Unresolved findings from the MICS Agreed Upon Procedures report and any other internal control deficiencies and material weaknesses noted by the auditors send red flags to gaming commission internal audit staff, the external auditors, and, if unresolved for several years, the NIGC. Make the effort now to clean up the processes and policy documents that gave rise to the findings. You may not be able to resolve all issues before the next audit, but better to be doing something to address them than ignoring them.

2. Your accounting and finance staff should be reviewing any new standards coming into effect in the current year and determining how they will be addressed from a transaction recording and financial reporting perspective.

Why? The accounting standard setting bodies, FASB and GASB, have been fairly active in the past few years. They may require changes to some processes or procedures. They can also change report formats and, in some cases, may necessitate a change in the way some things are done or how contracts are executed. Your team may want to consult with the auditors on how they expect the new standards to be handled.

3. If there have been any noted issues related to the preparation of Title 26 returns and/or subsequent reporting to the IRS, those should be addressed sooner rather than later.

This will ensure that your solutions are complete and effective. Properly capturing transaction information and educating staff and your guests also takes time. Get things done before there are issues again at year-end.

4. This can also be a good time of year to review your Title 31 Currency Transaction Reporting processes, training and report filing.

Poor Title 31 processes can cost your casino significantly. Someone, internally or externally, should be auditing your program annually. Ensure your risk assessment is up-to-date and any findings are being addressed promptly. While we certainly want to avoid being fined and penalized for non-compliance, we definitely do not want the bad publicity that comes when law enforcement finds that you have been oblivious to money laundering occurring at your facility.

5. I recommend that senior management of the property sit down with finance quarterly and review the reconciliations of all cash related accounts, including bank accounts, vault, kiosks and ATMs.

Cash is a very significant asset on any casino’s balance sheet and is still the life-blood that flows through the casino. It is also a highly popular item to steal (duh). Any large items, items older than 60 days, and anything that looks unusual or unexpected should be thoroughly explained. Many frauds and thefts are masked by poor or intentionally deceptive reconciliation practices. The nature of the items may also bring to light operational issues that should be addressed.

6. The last thing I want to discuss really doesn’t have to do with audits or year­end; it’s about periodically checking things to stay optimized.

Every three to six months you should evaluate the adequacy of your casino’s bankroll. Having too much cash on hand in the casino increases the risk of theft, the cost of your insurance and is a lost opportunity to use those funds to earn interest. For several years now, interest rates have been so low that simple interest-bearing accounts didn’t really earn much. With the increases in short-term rates in recent months, investing any excess cash can now be a decent source of additional revenue.

As we enter into Spring, now is a good time to take stock of where things stand from recent audits and take steps to ensure corrections are made before the next audit. It’s also a good time to check other areas of risk and compliance. Don’t get caught in the embarrassing situation of having repeat findings year after year, or non-compliance or theft. We don’t want the dust and dirt of old problems and bad habits keeping our “house” dirty. Play it smart. Now is the time to clean things up and get prepared.

Kevin Huddleston