Section 12-865-28 - Policies and ProceduresFinancial Reporting and Auditing(a) Prior to any independent audit of a master wagering licensee or online gaming operator to be performed by a certified public accountant, the master wagering licensee or online gaming operator shall provide to the department the opportunity to meet with the independent certified public accountant that will perform such audit to identify areas of audit to be conducted. At least ten days prior to issuance of a final independent audit report, the certified public accountant performing such audit shall send the draft report to the department for review. The department may require a meeting with the certified public accountant prior to issuance of the final audit report.(b) A master wagering licensee and online gaming operator shall have an independent certified public accountant audit its books and accounts at least once each fiscal year. The books, records and financial statements of the master wagering licensee and the online gaming operator shall be prepared in accordance with generally accepted accounting principles. A master wagering licensee and online gaming operator shall require that an independent certified public accountant submit to the department within one-hundred-fifty days after the close of its fiscal year, a complete set of audited financial statements that present the licensee's financial position and the results of its operations and its cash flows in conformity with generally accepted accounting principles.(c) A master wagering licensee and online gaming operator shall provide to the department any audit report related to internet games, or sports wagering retail operation in the state of Connecticut, completed by any governmental body, independent certified public accountant, independent testing laboratory, or other consultant, including any audit report performed on its electronic wagering platform.(d) Master wagering licensees and online gaming operators shall provide the following to the department on an annual basis: (1) An organizational chart;(2) A report as to whether any material deficiencies in internal controls were noted by the independent certified public accountant during the course of the annual independent audit of the licensee's financial statements. In addition, the master wagering licensee and the online gaming operator shall submit to the department a copy of any report and associated certified public accountant engagement letters issued by the independent certified public accountant lawyers' contingency letters in connection with the annual audit;(3) The master wagering licensee and the online gaming operator's management representation letter to the auditor for accounting information material to the financial statements and for matters relating to audit disclosure requirements. Any reports resulting from an examination or the performance of mutually agreed upon procedures relating to the design or operating effectiveness of the master wagering licensee and the online gaming operator's internal controls; and (4) If amended since the last annual submission to the department, articles of organization, certificates of incorporation, bylaws, corporate resolutions or any other organizing documents of the master wagering licensee or the online gaming operator.(e) An online gaming operator shall also disclose on an annual basis all related-party transactions. For the purposes of this subsection, "related party transaction" means any transaction that includes the online gaming operator and at least one of the following: (1) Any director or executive officer of the online gaming operator;(2) Any nominee for director or executive officer;(3) Any immediate family member of a director or executive officer of the online gaming operator or any business in which such family members collectively have a greater than 5% ownership interest. An immediate family members includes any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or any person other than a tenant or employee, sharing the household of such director or executive officer of the online gaming operator; or(4) An owner of the online gaming operator with an interest of more that 5% in such other business.(f) Recommendations made to a master wagering licensee or online gaming operator as a result of an independent audit shall be implemented within a reasonable time frame, which shall not exceed one year unless approved in writing by the commissioner. If a licensee disagrees with the recommendations, it shall provide a written explanation to the department as to why such recommendations will not be implemented within thirty days of receipt of the audit recommendations. Thereafter, a final determination shall be made by the department as to whether implementation of such recommendations shall be required.(g) The department may require, in its sole discretion, the master wagering licensee or online gaming operator to submit to an audit, which cost shall be borne by the master wagering licensee or online gaming operator, by the department or a third-party, of its financial reports or internal controls. The department, or its duly authorized representatives, shall be provided with total cooperation and such information in a timely manner as may be requested.(h) The master wagering licensee and online gaming operator shall have procedures to internally balance and reconcile all activity from the electronic wagering platform on a daily and monthly basis and shall provide reports of same to the department. Such reporting shall be in a manner and at a frequency determined by the commissioner.(i) Each master wagering licensee and online gaming operator, other than a master wagering licensee or online game operator that solely operates fantasy contests, shall provide the department with continuous internet based read-only access to financial reports maintained by such licensee that provide detailed reporting of the following financial transactions: sales, cashes, cancels, complimentaries issued and redeemed, purges, adjustments, unclaimed sports wagering tickets, dormant internet game accounts, forfeited winnings, forfeited prizes, or any other financial report deemed necessary by the commissioner. If, in the discretion of the commissioner, any such reporting requirements are not necessary to monitor, audit and investigate the operation of fantasy contests conducted by an online gaming operator that does not solely operate fantasy contests, the commissioner may reduce the volume and scope of the requirements.(j) The master wagering licensees and online gaming operators that solely operate fantasy contests, shall provide the department with weekly and monthly reports showing the following daily financial transactions: entry fee, winnings, cancels, purges, adjustments, dormant internet game accounts, forfeited winnings, location percentage as defined in section 12-868 of the Connecticut General Statutes or any other financial report deemed necessary by the commissioner. If, in the discretion of the commissioner, any such reporting requirements are not necessary to monitor, audit and investigate the operation of fantasy contests conducted by an online gaming operator that does not solely operate fantasy contests, the commissioner may reduce the volume and scope of the requirements.(k) Gross receipts from fantasy contests shall be reported to the department on a weekly and monthly basis. Gross receipts shall not include the issuance or redemption of complimentaries. If, in the discretion of the commissioner, any such reporting requirements are not necessary to monitor, audit and investigate the operation of fantasy contests conducted by an online gaming operator that does not solely operate fantasy contests, the commissioner may reduce the volume and scope of the requirements.(l) Coupons or credits, as described in sections 12-866 or 12-867 of the Connecticut General Statutes and actually played by the patrons, shall be maintained in an electronic file that is readily available to the department. The master wagering licensee and online gaming operator shall only deduct coupons or credits from gross gaming revenue if such coupons or credits are issued for use for gaming in the state and redeemed in the state.(m) Each master wagering licensee and online gaming operator shall provide the department, prior to commencing public operation of internet gaming and on an annual basis thereafter, a list of all electronic wagering platform reports and a description of the content of each report. The commissioner may require additional system reporting capabilities and specific information to augment such reports.(n) A master wagering licensee shall make monthly payments based on gross receipts to the State in accordance with section 12-868 of the Connecticut General Statutes.(o) A master wagering licensee that operates fantasy contests, either directly or through an online gaming operator, that exceeds a single monthly reporting period, such as a season-long single-sport fantasy contest, may estimate its monthly payment for gross receipts associated with such contests. Such master wagering licensee shall pay a monthly payment that would be equal to the total gross receipts for the contest divided by the number of months or partial months that the contest runs. Prior to providing an estimated fee pursuant to this subsection, the master wagering licensee shall notify the department of its intent to pay an estimated fee and its methodology for determining the fee and shall receive written approval to provide such estimated fee.(p) A master wagering licensee that operates fantasy contests, either directly or through an online gaming operator, shall notify the department if it concludes that it needs to adjust the estimated fee paid pursuant to subsection (o) of this section because the estimated monthly gross receipts were greater than or less than the amount the master wagering licensee should have owed based on the calculation set forth in the act. The notification shall be provided in a manner and on a form provided by the department and shall include such documentation as the department may request to demonstrate the need for an adjustment. If the department agrees that an adjustment is warranted, the payment for the final month shall be adjusted to reflect the over- or underpayment of the payment.Conn. Agencies Regs. § 12-865-28