Report 97110 Summary - March 1998

Office of the Attorney General:

Its Office of Gaming Registration Should Protect Tax Documents More Rigorously and Improve Some Procedures

Results in Brief

The Department of Justice (department), under the direction of the Office of the Attorney General, is responsible for regulating the activities of gaming clubs in the State. Enactment of the Gaming Registration Act (GRA) in 1983 created the Office of Gaming Registration (office) as the unit within the department responsible for overseeing the gaming clubs. The office's responsibilities include registering owners, investors, and managers of these clubs. As part of the annual registration, the office requires applicants to submit copies of sensitive financial information, such as Internal Revenue Service (IRS) income tax returns. This report focuses on the office's solicitation, use, and storage of applicants' tax returns.

The office's physical security over sensitive documents appear adequate. However, the office does not protect applicants' tax returns to the same degree as tax agencies. Although consistent with state law, its policy allows a law enforcement agency to access tax returns by providing notification that it is conducting a criminal investigation. This policy is considerably less rigorous than federal law, which specifically requires a court order or the taxpayer's consent to release the returns. Therefore, the office honors certain requests for access to tax returns that the IRS would normally not honor.

In addition, the office does not maintain a standard checklist to monitor the location and status of all sensitive documents for each applicant file. Because of the variety and sensitive nature of these documents, it is important that the office keep track of their status in order to protect the integrity of the file contents. Furthermore, the office does not have formal written policies and procedures that address the physical security of sensitive information, outside requests for sensitive information, and the method for reviewing applications. Finally, the office keeps documents longer than necessary. It has not scheduled hundreds of inactive applicant files for destruction.

Recommendations

In January 1998, the Gambling Control Act repealed the GRA and replaced the office with the Division of Gambling Control (division). The division will be assuming the responsibilities of the office. Therefore, to ensure that it will be objectively and uniformly overseeing the custody of sensitive personal and financial information, the division should do the following:

  • Seek statutory authority to protect tax returns in accordance with federal standards. This statutory change would stipulate that the division inform the requester of an applicant file that the records include federal tax returns and that release of these returns requires a court order or the written consent of the applicant.

  • Establish a checklist of all documents contained in the applicant file. The checklist should identify those documents required by the application instructions and additional documents that the division specifically requests from the applicant. The checklist should also indicate when these documents were received. For documents that were not received, the division should explain on the checklist whether their absence impacts the decision to license the applicant.

  • Prepare formal written policies and procedures covering the physical security of applicant files, outside requests for sensitive information, and the review of applications and renewals for registration.

  • Update its document retention schedule and transfer year-old closed files to the State Records Center for destruction.
Agency Comments

The attorney general disagrees with the recommendation to protect tax returns consistent with federal standards and states that it would result in an unnecessary limitation on the division's discretion. In addition, he states that the Office of the Attorney General will strongly oppose any effort to create such a limitation or to protect those individuals involved in gambling from law enforcement scrutiny.

The attorney general agrees with the other recommendations and states that his staff has already begun to implement the changes referenced in these recommendations.


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