Appendix

Scope and Methodology

The Audit Committee directed the California State Auditor to perform an audit related to the bureau's and commission's policies and procedures, the Gambling Fund balance, and several other audit objectives. The table below outlines the Audit Committee's objectives and our methods for addressing them.

Audit Objectives and the Methods Used to Address Them
AUDIT OBJECTIVE		METHOD
1	Review and evaluate the laws, rules, and regulations significant to the audit objectives.	Reviewed relevant laws, policies and procedures, industry standards, and best practices.
2	Review the bureau's process for reviewing the backgrounds of gaming establishments and other licensees and determine whether it is performing these reviews in an efficient and effective manner and in accordance with the APA.	Reviewed bureau policies and procedures related to performing background investigations, including any implications for the APA. Analyzed the efficiency and effectiveness of the bureau's background investigations both in terms of their length and of the hours staff spent completing them.
3	Determine whether the commission and the bureau are complying with statutory time frames and internal goals for processing applications for licensing at gaming establishments and whether a backlog of applications exists. Determine the extent and cause of any backlog.	Reviewed the commission's and bureau's compliance with statutory and regulatory time frames. Analyzed past bureau reports and current bureau licensing data to identify the number and composition of its pending and backlogged applications during the past five years. Used staffing information and licensing data to analyze the bureau's productivity reviewing applications.
4	Determine whether the commission and the bureau have and adhere to policies and procedures to ensure all applicants and licensees are treated fairly and consistently by providing timely hearings, due process, and equal protection regardless of race, national origin, or gender.	Reviewed commission and bureau policies related to conducting licensing reviews, including background investigations. Reviewed commission licensing meetings and evidentiary hearings to determine their timing and content. To the extent possible, assessed commission and bureau documentation to determine whether applicants received consistent and appropriate levels of review during the licensing process, regardless of race or other characteristics.
5	Determine whether the commission or the bureau use gambling funds for any improper purposes. Determine how much time their employees spend in each card room and casino and review expenses incurred by these employees while performing their compliance testing.	Analyzed Gambling Fund fee revenues and uses for both the commission and the bureau. Reviewed bureau and Justice policies relevant to gaming enforcement, including allowable expenditures. Reviewed a selection of compliance-related expenditures by the bureau's enforcement section. Reviewed time-reporting documentation from the bureau's enforcement section.
6	Review and evaluate relevant policies and procedures of IGLS and evaluate its efficiency and consistency in reviewing contracts and documents. Determine whether IGLS has and follows policies and procedures to provide all applicants with timely reviews, basic due process, and equal protection requirements regardless of their race or national origin.	Reviewed budgetary and time-reporting documentation from IGLS related to the different services it provides to the bureau. Determined that IGLS has no written protocols for reviewing gaming contracts and other documents. Reviewed time frames for contract and other document reviews at IGLS to identify any negative effects on the licensing process.
7	For a selection of meetings, determine whether the commission complies with the Bagley‑Keene Open Meeting Act. Further, for a selection of matters, identify the extent to which the same attorneys are representing both the bureau and the commission and assess whether this arrangement is a conflict of interest or constitutes a violation of the Judicial Code of Ethics or the APA.	Examined the commission's compliance with the Bagley‑Keene Open Meeting Act's requirements for both open and closed sessions. Reviewed the use of attorneys at the bureau and commission to identify any issues regarding compliance with the Judicial Code of Ethics or the APA.
8	Identify any surplus balance in the Gambling Fund and determine whether fees paid by applicants and licensees are appropriate.	Analyzed historical and projected fund balances to quantify any surplus funds. Reviewed regulatory gaming fees, including licensing fees and deposits, to determine current fee amounts, revenues, and any stated purpose for those revenues. Compared fee revenues to the commission's and bureau's estimated expenditures to identify any misaligned fees.
9	Review and assess any other issues that are significant to the audit.	Reviewed the circumstances behind the bureau's moratorium on licensing certain games and the resulting backlog of games applications. Determined the bureau's progress in drafting regulations to address its concerns with certain games. Reviewed the frequency of the commission's evidentiary hearings and considered the costs of holding those hearings.

Sources: Analysis of the Audit Committee's audit request number 2018‑132, as well as information and documentation identified in the column titled Method.

Assessment of Data Reliability

In performing this audit, we relied on electronic data files we obtained from the database the bureau uses to track the status of license applications. The GAO, whose standards we are statutorily required to follow, requires us to assess the sufficiency and appropriateness of any computer-processed information we use to support our findings, conclusions, or recommendations. To perform this assessment, we evaluated the bureau's data against sources of corroborating documentation from its actual application files. We determined that the data were sufficiently reliable for the purposes of summarizing the number and age of pending applications at the bureau, as well as for determining how long the bureau takes to review license applications.