Why credit card audits are a growing priority for tribal casinos

Word is spreading that the National Indian Gaming Commission (NIGC) is expecting tribal casinos to focus more on preventing credit card fraud. This is an opportune time for your casino leaders to prioritize strengthening internal controls and establishing audit best practices to reduce fraud and protect tribal assets.

Given the regulations and risks tribal casinos face, employee credit card misuse may be overlooked. But even small, unauthorized purchases can accumulate into significant losses over time. And every dollar lost to fraud is a dollar that cannot be used to support tribal programs, services and community development.

Learn how your gaming enterprise can implement credit card policies and procedures, along with audit processes, to better prevent and detect card misuse and ultimately avoid financial losses and reputational damage.

Why are tribal casinos vulnerable to credit card fraud?

Tribal casinos are unique businesses. Your daily operations may create gaps for detecting credit card misuse that aren’t found in other industries you may have worked in. Here are four reasons why:

1. High transaction volume

Chances are that your casino sees a high volume of transactions on its company credit card account. For larger organizations, it could easily number in the hundreds each month. With so many purchases, it’s easy for smaller fraudulent charges to go unnoticed. Employees who misuse a company card are likely intentional about keeping the dollar amounts of their purchases small to avoid triggering any automatic approval or review processes your organization may have in place.

2. Limited accounting resources

Many tribal casinos operate with lean accounting teams responsible for payments, reconciliations, payroll and compliance tasks. Frequent turnover is another challenge. New accounting employees may still be learning internal processes and may not recognize unusual transactions. Staffing challenges make it difficult to closely review every credit card transaction, increasing the likelihood that misuse goes undetected.

3. Focus on regulatory compliance

Most tribal internal audit teams devote significant attention to gaming operations, Tribal Gaming Regulatory Authority requirements and compliance with Minimum Internal Control Standards. Because business credit card usage is generally outside the scope of many traditional gaming audits, it can fall through the cracks.

4. Tight-knit communities

Many tribal casinos are located in small rural communities. In these close-knit communities, employees may have known each other for a long time, be neighbors or even be related. These relationships can make individuals less likely to report suspicious activity, allowing misuse to persist longer.

What are common fraudulent charges to watch for?

Employee credit card abuse often does not involve extravagant purchases. Instead, it often consists of transactions that can appear business-related at first glance.

• Travel-related expenses: Nonbusiness purchases of gas, hotels and meals are common examples of fraudulent activity. It can be difficult to decipher legitimate travel expenses from fraudulent ones. For example, if an employee charges a hotel room but cannot demonstrate attendance at a conference, training event or business meeting, the transaction deserves additional scrutiny.
• Personal purchases: Clothing, accessories and other retail items without a clear business purpose. These can be purchases that are easy to overlook.
• “Business” meals or entertainment: Personal dining expenses and other outings can easily be disguised as business activities. For business meal and outing expenses, information about the attendees and the event’s purpose should be required.

What is the impact of credit card fraud on tribal casinos?

Credit card fraud is money being stolen from your organization, but the impact can be more than just financial. Here are four more impacts on your business and tribe:

1. Financial loss adds up quickly

Low-dollar, high-frequency transactions can accumulate into material losses over time — diverting funds directly from casino operations and tribal revenues.

The most obvious impact is the direct loss of tribal funds. Because many external audits focus on materiality thresholds, fraudsters with access to a company card will focus on small purchases. But $25 here and $50 there will add up to substantial losses over time.

2. Damaged workplace culture

It takes trust for casino leaders to give an employee access to a company credit card. When that trust is broken, leadership will naturally become more suspicious of its staff.

When employees discover that coworkers have been abusing company resources, morale often suffers. Employees may begin questioning the overall quality of your operation, leading to a loss of trust and respect.

If you discover that an employee has been misusing a card, it will likely result in termination. Staffing is a challenge for many tribal casinos and abrupt departures only make the problem worse.

3. Reputational harm in your community

Tribal casinos are often a prominent amenity in their community. If employees are stealing from you, word will likely spread quickly. Community members may take this as evidence that leadership is asleep behind the wheel. This will not only damage the casino’s reputation, but potentially the entire tribal government’s reputation as well.

4. Reduced benefits to tribal members

Your casino has a mission to serve its tribe. Profits are often used to support tribal members through programs such as:

• Healthcare services
• Housing projects
• Educational programs
• Workforce development
• Essential services like police and fire
• Elder services
• Cultural preservation

When funds are misused, those resources are no longer available to benefit tribal members. Protecting corporate credit card accounts is ultimately about protecting the tribe’s ability to invest in its people.

What controls can tribal casinos implement to prevent credit card abuse?

You need to put strong guardrails in place to prevent credit card fraud. Well-defined policies and procedures will make it harder for fraudulent purchases to occur and easier to spot suspect activity. Key controls to implement include:

• Preapproval requirements: Require authorization for all credit card purchases, especially above defined thresholds.
• Spending limits and thresholds: Set appropriate limits and require additional approvals for higher-dollar transactions. Limits can vary for individual employees depending on their responsibilities.
• Mandatory supporting documentation: Require receipts or invoices for every transaction, with a clearly documented business purpose. Other documentation to collect includes conference registrations and travel itineraries.
• Clear usage policies: Define exactly what items and services can be bought with a company card and what items are prohibited. Provide your staff with training on the approval procedures and documentation requirements.
• Limit card access: Only issue cards to employees whose job responsibilities require them. Maintaining a smaller pool of cardholders reduces risk and simplifies oversight.

What are effective credit card auditing and monitoring policies?

Having strong controls in place is an important starting point. But to prevent fraud from going undetected, you need effective auditing and monitoring procedures to help ensure your controls are working. Consider implementing these four controls:

1. Frequent audits

Frequent internal audits are far more effective than reactive investigations. Regular audits allow organizations to identify issues early, reducing risk and proactively protecting tribal assets.

Audits can catch more than fraud. They can also detect other unwanted charges, such as auto-renewals and automatic bill payments for services your casino no longer wants or uses.

2. Review individual transactions

Auditors should pull credit card statements and examine line-item purchases — not just summary-level data. Sampling should include both high and low-dollar transactions. Be sure to cross-check purchases with approval and business purpose documents.

3. Independent auditors and segregation of duties

Independent oversight is essential for identifying irregularities. The people auditing credit card activity cannot be the same people using the credit cards. Auditors must be independent of the employees and departments they review. Proper segregation of duties increases the likelihood of objective evaluations and reduces the prospect of collusion.

4. Monitor trends and anomalies

Implement a credit card monitoring program to improve your odds of detecting behavioral changes sooner. Establish baselines and track changes over time. Accounting departments should trigger an investigation into any of the following activities:

• Sudden increases in spending
• Higher transaction counts
• Frequent purchases from unusual vendors or retailers
• Recurring expenses that lack documentation

Trend analysis can help identify emerging problems before they become significant losses.

How Wipfli can help

Wipfli’s independent and experienced tribal gaming specialists conduct detailed credit card audits that include transaction testing, statement reviews and documentation verification. We also work with your casino to help stop fraud before it happens by evaluating credit card policies, reviewing spending limits and authorization requirements and assessing ongoing monitoring procedures.

Drawing on decades of tribal gaming, internal audit and financial audit experience, Wipfli helps organizations establish practical processes to protect tribal assets. Start a conversation.

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