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PUBLISHED BY THE INSTITUE OF INTERNAL AUDITORS
Vol. 6, No. 3 - Third Quarter 2003
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Ticket-in, Ticket-out Technology

Internal auditors adapt to a new concept: The less cash, the better.

By Diane Sears, free-lance writer

EVERY ONCE IN A WHILE Brian Doyle goes to the casino floor and takes an unofficial poll. The senior auditor at the Argosy Casino Sioux City gambling riverboat in Iowa asks customers whether they like using the new coinless slot machines that operate on ticket-in, ticket-out (TITO) technology. About 90 percent of them say yes, Doyle says, for the same reason internal auditors and those who regulate the gaming industry are adapting well to TITO: It's coin-free.

Players enjoy not having to lug around buckets of quarters, Doyle explains. So do auditors. "It brings excitement to the gaming industry because it's a new technology," he adds. "Not only do our customers get excited about it, but so do our employees."

The technology is an improvement from the regulatory standpoint, too, says Paul Hogan, a former Colorado regulatory official who is now with Gaming Laboratory International Inc., which designs rules for new gambling technologies. "You don't have to be concerned about cash," he says. "Obviously casinos are a cash-rich environment. You have people who are honest who become dishonest when they get involved in this environment."

TITO technology eliminates that risk, Hogan says, because the handling of cash within a casino is limited. But it requires a new way of thinking for casino employees and auditors. "You have to do a paradigm shift," he says. "You're no longer counting cash, you're counting tickets instead."

With TITO technology, customers insert paper money such as a $20 bill into a slot machine's bill acceptor. They can play the full amount or cash out any remaining balance for a ticket that can then be used in another machine or turned in for money. Although the customer's identity remains anonymous, the ticket itself leaves a paper trail once it's in the system that allows auditors to run instant reports via computer that otherwise would not be available, including: 

  • Audit logs.
  • Activity reports.
  • Exception reports.
  • Liability reports.
  • Manual ticket drops.
  • Sequential ticket reports.
  • Ticket drop reports from the count rooms.
  • Tickets expired.
  • Tickets printed.
  • Tickets redeemed in the cage.
  • Tickets redeemed in the count room.

The amount of information an auditor can get from the TITO system is amazing, says Doyle, one of the first auditors at Argosy to work with the new technology. An auditor can quickly look for inconsistencies throughout the system, comparing the tickets issued by the slot machines with the tickets redeemed in the count room, or examining why a cage near a certain group of machines is not redeeming as many tickets as other cage stations.

Best of all, Doyle says, auditors can reduce the frequency of time-consuming hopper tests, which involve choosing a random sampling of machines, dumping out the coins, counting that money, and reloading the machines. Handling the coins is a dirty job.

Tickets, on the other hand, come out of the machine freshly printed, each with its own unique validation number and bar-coding. "Once you have that ticket, it's just like holding money," says Brian Casey, marketing manager for IGT Gaming Systems. Of approximately 130,000 TITO gaming machines in the United States, about 70,000 used in 139 casinos operate on the EZ Pay Ticket System from IGT.

TITO is still relatively new, accounting for a fraction of as many as 700,000 gaming machines in North America today, Casey says. Oddly enough, the coinless machines installed in the past two-plus years are still equipped with hoppers that casinos have to disconnect. That's because early on, much of the industry feared casino patrons would not accept the new technology because they would miss the "ka-ching" sound of the money dropping out of the machine and the feel of the coins in their hands.

"I think a lot of properties were reluctant at first to eliminate hoppers entirely," Casey says. "Over time you'll see more and more machines out there without any coin handling at all. Some have totally eliminated the use of their hoppers. I think it's a gradual transition."

Argosy Casino Sioux City has converted about 70 percent of its machines, and its parent company is aiming to swap out all of its slot machines for coinless systems by the end of 2004 as jurisdictions permit.

TITO technology even appears to be increasing casinos' business, industry watchers say. About two-thirds of the tickets printed are put back into another machine instead of cashed, Casey says. Or, customers can put the tickets in their pockets and bring them back to the casino on another visit before the ticket's expiration date. At Belle of Sioux City, the numbers of tickets issued and tickets redeemed have been increasing, Doyle says. As patrons get more and more used to TITO technology, "We get more repeat customers from those who come back. We've already noticed it here." 

How soon the customer must return to the casino depends on jurisdiction and is a topic of discussion in the gaming industry. Tickets expire after 60 days in Iowa, where the Belle of Sioux City was the first Argosy property to introduce cashless slot machines. In Nevada, tickets expire after 24 hours, while Colorado gives players 120 days to reuse them or cash them in, says Hogan with Gaming Laboratory International. Many casino companies leave it up to their property managers to decide whether to make exceptions and cash in tickets that have recently expired. But, the technology is still new enough that this scenario is uncommon, those in the industry say.

There are other adjustments to be worked out. For instance, some properties have been concerned about the extra burden TITO technology places on their computer systems and their staffs. IGT and other manufacturers have addressed those concerns by offering options that include automated ticket-cashing machines — similar to the banking industry's ATMs — called voucher redemption terminals or VRTs. IGT has also introduced portable wireless handheld devices that casino employees can use throughout the casino to scan tickets for patrons and hand out change on the spot. "The emphasis is placed on making it more convenient for the customers," Casey says. "From an efficiency standpoint, it has dramatically improved operations and service the casinos can offer."

Among other concerns, security measures still have to be in place when casinos perform drops — cleaning money and tickets out of the slot machines several times a day. Internal auditors perform audit tests to verify that tickets issued compare with tickets redeemed and balance with tickets outstanding. The auditors must also validate the liability the casino carries for outstanding tickets until they expire and ensure the resulting income is recorded accurately after expiration.

And then there's the matter of what to do if a casino's computer server crashes, or if a power failure cuts off all mechanical devices. "That can be a nightmare if backup procedures are not in place," Doyle says. According to Hogan, it's important for casinos to develop internal controls for validating tickets when customers choose to cash out under those circumstances. Manufacturers like IGT build redundancies into the system so that one way of handling an extreme circumstance overlaps with another and nothing slips through the cracks, Casey adds.

The Belle of Sioux City, like other casinos, has a backup generator for power failures and a contingency plan for other unusual circumstances. The casino can manually redeem a ticket printed the same day, even if the computers aren't working at the moment, Doyle says. When the system comes back up, the ticket is scanned and counted as redeemed.

"It's an evolving industry, but it is one of the waves of the future," Doyle says. "I'm still learning it. To me it makes the auditing exciting."

 

Copyright © 2003 The Institute of Internal Auditors

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