Audit of the Massachusetts Gaming Commission Objectives, Scope, and Methodology

An overview of the purpose and process of auditing the Massachusetts Gaming Commission.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of the Massachusetts Gaming Commission (MGC) for the period July 1, 2018 through March 31, 2020.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is a list of our audit objectives, indicating each question we intended our audit to answer and the conclusion we reached regarding each objective.

Objective	Conclusion
Did MGC implement policies and procedures to comply with Section 133.02(3) of Title 205 of the Code of Massachusetts Regulations (CMR)?	Yes
Did MGC implement policies and procedures to comply with 205 CMR 152.06?	Yes
Did MGC implement a process for placing individuals on the Non-Voluntary Exclusion List (NVEL) in accordance with 205 CMR 152.03?	Yes
Did MGC administer the Race Horse Development Fund (RHDF) in accordance with the recommendations of the Horse Racing Committee per Section 60 of Chapter 23K of the General Laws?	Yes

 

To accomplish our objectives, we gained an understanding of MGC’s internal control environment related to the objectives by reviewing applicable laws, regulations, and agency policies and procedures, as well as conducting interviews with management and staff members. We evaluated the operating effectiveness of internal controls regarding establishment and enforcement of the Voluntary Self-Exclusion (VSE) list and NVEL as well as the processing of payments from the RHDF.

We performed the following procedures to obtain sufficient, appropriate audit evidence to address the audit objectives.

VSE Application Training

To determine whether MGC complied with 205 CMR 133.02(3), we performed a test to determine whether gaming agents received training as designated agents. We obtained a list from MGC of all gaming agents who processed VSE Program applications. We determined that MGC gaming agents completed 39 of the 524 applications received during our audit period; advisors from GameSense, MGC’s third-party vendor, completed 480; and employees of MGC’s authorized outside agencies, such as mental health counselors, completed 5. We reviewed all 39 applications completed by MGC’s gaming agents during our audit period. We ensured that the gaming agents who received and processed the applications had completed the approved training and had properly signed off on applications.

Gaming Licensee Monitoring

To determine whether MGC provided coverage 24 hours a day, 7 days a week, to monitor enforcement of the NVEL by gaming licensees, we obtained shift reports, which list the MGC gaming agents on duty for all three gaming licensees: Plainridge Park Casino (PPC), MGM Springfield, and Encore Boston Harbor (EBH). Each casino operates on three shifts, which allows for coverage 24 hours a day, 7 days a week. We identified the number of days of operation during the audit period for each casino and determined that there were 1,483 total days of operation (624 days at PPC, 570 days at MGM Springfield, and 289 days at EBH) when MGC gaming agents provided coverage during the audit period. We selected a random, statistical sample of 30 of these 1,483 days, with a 95% confidence level, a 10% tolerable error rate, and a 0% expected error rate.

We obtained and reviewed the daily shift reports filed by MGC gaming agent supervisors, as well as the shift schedules for each location, to ensure that at least one MGC gaming agent or supervising agent was monitoring operations on each licensee gaming floor. We compared the data provided by MGC to the data from the Commonwealth’s Human Resources Compensation Management System, which captures payroll-related accounting entries, and to records in the Massachusetts Management Accounting and Reporting System.⁷ We then reviewed MGC records to verify that gaming agents’ schedules matched their reported work hours.

MGC Placement of Individuals on the NVEL

MGC’s Investigations and Enforcement Bureau determines whether individuals meet the criteria to be added to the NVEL and gathers relevant information, such as arrest records and conviction reports, from each individual’s files. The criteria for an individual are recorded on a document called an exclusion order. We identified nine individuals who were placed on the NVEL during the audit period and reviewed their exclusion orders to determine whether they had been placed according to MGC’s policy.

Horse Racing Committee Recommendations

MGC is required to disburse funds to the Massachusetts Thoroughbred Breeders Association (MTBA) and Standardbred Owners of Massachusetts Inc. (SOMI). The Horse Racing Committee makes recommendations on the percentage of funds to be distributed between the two associations and notifies the clerks of the state Senate and House of Representatives within 30 days after making its recommendations. We obtained all notifications and percentages sent by the Horse Racing Committee to the state Legislature during our audit period. We verified that distributed amounts conformed to the Horse Racing Committee’s recommendations. We identified a population of 21 months of distributions that were made from the RHDF during our audit period. We selected a nonstatistical, judgmental sample of 8 months out of 21.

We identified the annual percentage amounts paid from the RHDF to SOMI and MTBA and reconciled them to the Horse Racing Committee distribution recommendations.

We reviewed documentation and verified the following:

• The distributions from the RHDF were in accordance with the percentages recommended by the Horse Racing Committee.
• Purse accounts received 80% of the funds from the RHDF, breeders’ associations received 16%, and health and pension funds for members of the New England Horsemen’s Benevolent and Protective Association and the Harness Horsemen’s Association of New England Inc. received 4%.
• The distributions in MGC’s fiscal year 2019 annual report matched those in MGC’s monthly report ending March 31, 2020.

Data Reliability Assessment

To determine the reliability of the VSE list, we traced a sample of 20 individuals on the list to their applications filed during the audit period. In addition, we traced a sample of 20 applications to the VSE list.

To determine completeness of MGC NVEL data, we reviewed the files for 12 individuals considered for exclusion. We verified that 3 individuals did not qualify for exclusion based on the criteria in the regulation and that as a result, MGC did not issue exclusion orders for these 3 individuals. We determined that the other 9 individuals were added to the NVEL during the audit period. To determine the accuracy of the data, we performed tracing tests on the NVEL and traced exclusion orders to information on MGC’s website.

We interviewed MGC officials concerning access and security for the VSE list and NVEL.

MGC management provided us with Excel spreadsheets showing revenue from gaming licensees and distribution amounts paid to MTBA and SOMI from the RHDF. We performed electronic testing to check for duplicate records and verify the total number of records on the spreadsheets.

Based on the data reliability procedures described above, we determined that the data obtained for our audit period were sufficiently reliable for the purposes of our audit work.

7.     The Massachusetts Management Accounting and Reporting System is a complete financial management system designed to support the Commonwealth’s financial functions.

Date published:	September 30, 2021