Original Notice.

     Preproposal statement of inquiry was filed as WSR 03-05-085.

     Title of Rule: Audits and reviews of financial statements for house-banked card rooms: WAC 230-40-823 House-banked card games--Financial audits required.

     Purpose: By requiring all house-banked card rooms to be either audited or reviewed, the business' financial position will be disclosed to commission staff. These reports will assist commission staff in recognizing undisclosed substantial interest holders and loans due to the footnote disclosures that are required as part of an audit or review. It also allows for an independent party to review and test the financial data of the licensees.

     Statutory Authority for Adoption: RCW 9.46.070.

     Summary: Currently, house-banked card rooms with five million or more in gross receipts submit audited financial statements to commission staff. About twenty card rooms were required to submit these statements last year. This amendment would require house-banked card rooms with gross receipts over three million to submit audited financial statements to commission staff, while card rooms with gross receipts of three million or less would submit reviewed financial statements. This change would require an additional fifty-seven card rooms to submit either audited or reviewed financial statements.

     Reasons Supporting Proposal: See Purpose above.

     Name of Agency Personnel Responsible for Drafting: Susan Arland, Lacey, (360) 486-3466; Implementation: Rick Day, Lacey, (360) 486-3446; and Enforcement: Bob Berg, Lacey, (360) 486-3452.

     Name of Proponent: Staff, governmental.

     Rule is not necessitated by federal law, federal or state court decision.

     Explanation of Rule, its Purpose, and Anticipated Effects: See Purpose and Summary above.

     Proposal Changes the Following Existing Rules: See Purpose and Summary above.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. Proposal is exempt under RCW 19.85.025(2), therefore an SBEIS is not required.

     RCW 34.05.328 does not apply to this rule adoption. This agency does not choose to make section 201, chapter 403, Laws of 1995, apply to this rule adoption.

     Hearing Location: DoubleTree Guest Suites Southcenter, 16500 Southcenter Parkway, Seattle, WA 98199, (206) 575-8220, on November 14, 2003, 9:30 a.m.

     Assistance for Persons with Disabilities: Contact Shirley Corbett by November 1, 2003, TDD (360) 486-3637 or (360) 486-3447.

     Submit Written Comments to: Susan Arland, Rules Coordinator, P.O. Box 42400, Olympia, WA 98504-2400, (360) 486-3466, fax (360) 486-3625, by November 1, 2003.

     Date of Intended Adoption: November 14, 2003.

September 18, 2003

Susan Arland

Rules Coordinator

OTS-6629.2

AMENDATORY SECTION(Amending Order 383, filed 4/14/00, effective 5/15/00)

WAC 230-40-823   ((House-banked card games -- ))Financial audits and reviews required -- House-banking.   Each licensee operating house-banked card games ((with gross receipts in excess of five million dollars per year shall have their financial statements examined by a licensed, independent certified public accountant (CPA) for each fiscal year to evaluate the fairness of the presentation of the statements in conformity with generally accepted accounting principles. This examination shall be conducted in accordance with generally accepted auditing standards. A copy of the report and financial statements shall be submitted to the commission no later than one hundred twenty days after conclusion of the fiscal year. The director or the director's designee may extend the date for audit completion if a request is made by the licensee)) shall prepare financial statements covering all financial activities of the licensee's establishment for each business year. The following requirements shall apply:

Audited financial statements - gross receipts over three million dollars.

     (1) Each licensee with house-banked card game gross receipts in excess of three million dollars for the business year shall engage an independent, certified public accountant licensed by the Washington state board of accountancy who shall audit the licensee's financial statements in accordance with generally accepted auditing standards.

Reviewed financial statements - gross receipts of three million dollars or less.

     (2) Each licensee with house-banked card game gross receipts equal to three million dollars or less for the business year shall engage an independent, certified public accountant licensed by the Washington state board of accountancy who shall review the financial statements in accordance with the statements on standards for accounting and review services or audit the financial statements in accordance with generally accepted auditing standards.

Financial statement presentation.

     (3) The financial statements must be presented in the following manner:

     (a) Financial statements shall be submitted on a comparative basis: Provided, That the first year may be submitted for the current business year only; and

     (b) Gross revenues from each licensed activity should be reported by activity and separate and apart from all other revenues.

Consolidated financial statements.

     (4) Consolidated financial statements may be filed by commonly owned or operated establishments. These statements must include consolidated schedules presenting separate financial statements for each licensed card room location.

Change in business year.

     (5) If a licensee changes its business year, they shall notify the director within thirty days. The licensee shall submit financial statements for the period covering the end of the previous business year to the end of the new business year.

Filing with the commission.

     (6) A copy of the report and the financial statements shall be submitted to the director within one hundred twenty days following the end of the licensee's business year. The director may authorize a sixty-day extension if a licensee submits a written request explaining the need for the extension.

Effective date.

     (7) This rule will be effective for business years ending on or after July 1, 2004.

[Statutory Authority: RCW 9.46.070. 00-09-052 (Order 383), § 230-40-823, filed 4/14/00, effective 5/15/00.]

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