Date of Adoption: February 13, 2004.

     Purpose: Audits and reviews of house-banked card rooms: This amendment requires house-banked card rooms with gross receipts over three million to submit audited financial statements to commission staff, card rooms with gross receipts of one to three million would submit reviewed financial statements and those with gross receipts of less than one million to have complied financial statements. This rule was originally brought forward at the request of the card room industry as a way to show the overall status of their business. Additionally, 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.

     Citation of Existing Rules Affected by this Order: Amending WAC 230-40-823.

     Statutory Authority for Adoption: RCW 9.46.070.

      Adopted under notice filed as WSR 03-20-008 on [September 18, 2003], with a published date of October 15, 2003.

     Changes Other than Editing from Proposed to Adopted Version: Previously, the proposed amendment would have required card rooms with gross receipts of three million or less to submit reviewed financial statements. At the February meeting, the commission lowered the threshold to require reviewed financial statements from only card rooms with gross receipts of one to three million and included language to require card rooms with gross receipts less than one million to submit only compiled financial statements.

     Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

     Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.

     Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 1, Repealed 0.

     Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 1, Repealed 0;      Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 0, Repealed 0.
     Effective Date of Rule: Thirty-one days after filing.

March 1, 2004

Susan Arland

Rules Coordinator

OTS-6629.5

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 one to three million dollars.

     (2) Each licensee with house-banked card game gross receipts of one to three million dollars 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.

Compiled financial statements - gross receipts of less than one million dollars.

     (3) Each licensee with house-banked card game gross receipts of less than one million dollars for the business year shall engage an independent, certified public accountant licensed by the Washington state board of accountancy who shall compile the financial statements in accordance with the statements on standards for accounting and review services in accordance with generally accepted accounting principles, including all required footnotes or disclosures on an accrual basis of accounting.

Financial statement presentation.

     (4) 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.

     (5) 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.

     (6) 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.

     (7) 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.

     (8) 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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