The Western Cape Gambling and Racing Board (WCGRB) briefed the Committee on a three year on-going staff training programme on auditing and other regulatory activities, following an agreement between the Board and the International Gaming Institute of the University of Las Vegas (UNLV). Currently, such training did not exist in South Africa and the UNLV was one of the leading internationally recognised players in the field. The first leg of the programme had already taken place in Johannesburg last year. The Board briefed the Committee on progress and plans for this year and next year – including the costs.
The Board also made a presentation on its tax collection regime, including the audit processes in relation to the different industries in the gaming sector in the Western Cape.
On the first issue, Members’ questions revolved mainly around the nature and utility of the training involved, and whether the Board had made any attempts to acquire the relevant internationally recognised expertise within South Africa before embarking on its venture abroad.
Regarding the tax collection process, Members focused their interest on the extent of fraudulent activity in the industry. Other questions were related to procedures in respect of the untaxable portion of casino funds, known as “unclaimed credits,” which was money existing in a state of limbo as winnings that punters had failed to collect or were for some reason unaware of.
WCGRB staff training
Mr William Bowers, Human Resource Manager: Western Cape Gambling and Racing Board (WCGRB), briefed the Committee on the background and reasons for embarking on the staff training exercise.
During the latter part of 2016, the Board had entered into discussions with representatives of the University of Las Vegas’s (UNLV’s) International Gaming Institute (IGI) to look into the possibility of the latter providing regulatory training for South African and other African gaming regulators.
The purpose of the initiative was two-fold:
- to ensure that the WCGRB was exposed to best practice in the gaming regulatory space;
- to seek a cheaper alternative to sending regulatory employees to UNLV in the USA.
The parties agreed that over a three-year period (2017 to 2019), the IGI would present three training programmes focusing on three operational areas -- gaming licensing, casino auditing and regulation of betting and sports wagering. The first programme was successfully held in Johannesburg last year and the second was scheduled for September/October 2018. The dates and venue of the 2019 programmes would be decided later in the current year.
Depending on the exchange rate, the cost of an individual attending the training in the US was approximately R100 000, while half of that amount would be incurred if IGI instead sent its course presenters over to South Africa.
Mr P Uys (ANC) asked whether the UNLV was an accredited institution and requested further details on the accreditation process. Did the participants get a certificate of some sort and were there no similar institutions in South Africa that could provide the training? If not, he suggested that the Board approach competent institutions inside the country to start training programmes of this nature.
Regarding the 2017 training programme held inside the country, he wanted to know how many people had been trained. For the upcoming training in September/October 2018, he again requested the number of people earmarked for training and how much it would cost. Mr Uys ‘s other concern was that the trained personnel could be poached by the US industry. Given that it was two to three days’ training, how practical was it?
Mr R Mackenzie (DA) asked if the training took into consideration the local legislative framework. Noting that the agreement with the UNLV was over a three year-period, he asked whether this did not provide an incentive for the university to retain exclusive control of the training material. Could the material be used later to train other trainers? He echoed Mr Uys’ question on whether the short duration of the training actually yielded value for money.
Response from WCGRB
Mr Bowers assured the Committee that the University was internationally recognised and fully accredited. The challenge with sourcing training locally was that in order to put together a curriculum, institutions needed to obtain expertise from international consultants and this was costly, especially when local demand for courses could not guarantee a return on investment. Johannesburg had been deemed the most logistically suitable venue when the programme was launched in 2017, and three people had been sent from each of the ten gambling boards in South Africa.
The training programmes were process driven, such as how to do a forensic investigation or how to audit in a casino environment. The training was theoretical and specialised for the gambling industry and also conducted in a workshop format. The training was not about South African gambling legislation per se, but focused on international gambling compliance auditing and investigation norms.
Mr Bowers said the training material was copyrighted and therefore could not be reproduced for use in local train-the-trainer programmes.
In reply to the value-for-money question, Mr Bowers said that without fail, all participants had found the training to be of the highest standard and value. He assured Mr Uys that there was no significant risk of South Africa losing employees to the US gaming industry, since one of the regulations of the American visa (which were already stringent), was that one should have worked for a year for a company based in the US before being allowed in.
To Mr Mackenzie’s question on the type of certificate issued, he said it was a certificate of completion. On restraint of trade, he said each recipient of training signed a “work back” agreement of up to two years, or the equivalent of the financial cost of the training.
The Chairperson asked for a timeline on when the Board expected to have filled the training gap in the expertise areas targeted by the training.
Mr Bowers answered that as much as training was an ongoing process to keep up to date with changing technology and other conditions in the industry, it was therefore not possible to set timelines. However, he was confident that the current round of training would be enough to address existing gaps.
Tax Collection Processes
Mr Robin Bennett, Head of Department (HOD): Compliance, WCGRB, led the briefing on the Board’s processes of tax collection. He highlighted that over the years the Board had consistently reviewed its internal processes to ensure that tax collection was relevant, practical and executed with precision. The Board not only conducted regular site audits on a quarterly and six monthly basis, but also carried out weekly and monthly reviews through desktop audits.
Currently, taxes in the WC were in respect of three industries in the gambling sector – casinos, limited payout machines and bookmakers.
Mr Mackenzie asked what happened to money collected under unclaimed credits, and how long was it kept.
Mr Uys wanted to know how many employees were responsible for tax collection. Did the Board have internal or external auditors and if so, which external audit company was the Board in contract with? What role did the Auditor-General of South Africa (AGSA) and the South African Revenue Service (SARS) play, if at all, in the tax collection/auditing process?
He asked the presenter to compare the Western Cape with other provinces such as Gauteng in respect of tax collection – was the WC charging/collecting higher or lower rates? He also wanted to know how the Board ensured that people did not cheat the tax man in cases where revenue was in cash versus electronic.
Mr Mackenzie requested clarification on whether gambling businesses were required to pay an extra levy to SARS.
The Chairperson asked whether the Board had come across, or was aware of, allegations of tampering with the system.
Response from WCGRB
Mr Bennett said all gambling transactions were recorded electronically, and all legitimate institutions were required to use a South African Bureau of Standards (SABS) tested, approved and licensed electronic system.
To Mr Mackenzie’s query on unclaimed credit funds, he said all the money was fully accounted for and in most cases the casino “knew exactly” to whom the money belonged, because it was not in cash but card-based. Even if the casinos, as in past cases, wanted to donate the unclaimed funds to charity, it was still necessary to get the approval of the WCGRB. The funds were not the casinos’ to dispose of as they wished.
At the WCGRB, the internal team responsible for tax audits consisted of a senior person and three subordinates covering the casino and route operators. A further three auditors and a senior person were in charge of the betting section. AGSA‘s involvement in the auditing process was not direct, except only to verify the audit procedures.
Mr Bennett said AGSA had once or twice actually visited the counting room of Cape Town’s Grand West Casino. SARS did not play any role in the auditing process itself, but the WCGRB could look at a gambling entity’s revenue statements submitted to SARS to confirm that the amounts given to SARS corresponded with those submitted to the Board.
Responding to Mr Mackenzie’s question on whether casinos had to pay an extra tax to SARS, Mr Bennett confirmed that this was “unfortunately” the case, but added that it was more of a “gambling levy”. On top of paying the WCGRB for gross gambling revenue, the institutions also paid Value Added Tax (VAT) to SARS.
In tax collection and revenue generation terms, the Western Cape was the third highest earner in South Africa, behind KwaZulu-Natal and Gauteng.
Mr Uys reminded Mr Bennett of his question whether there was an external auditor, and the answer had not been clear.
Mr Bennett did not say there was no external auditor, but only emphasised that the internal auditors did the work “as part of our core audit functions”.
He assured the Committee that should the WCGRB “pick up something”, SARS would be made aware, but as far as he could remember, nothing had caused the Board to do so.
Mr Mackenzie asked how much was in the unclaimed credits fund, how long the money was kept in the fund, and who managed it.
Mr Bennett said the funds were managed by a department of the casino, but he could not quote an exact amount off hand. However, the funds were a very important part of the auditing process because it was income from which the casino was not paying tax, since officially it was not part of its revenue.
Mr Uys asked Mr Bennett’s opinion whether, compared to previous financial years, the WCGRB was currently on course in respect of its tax collection.
Mr Bennett answered that it depended on a number of factors year-on- year, but his response did not betray serious concern with the level of tax collection at the time of reporting.
When Mr Uys urged that Mr Bennett give the Committee an actual amount, he disclosed that it was R420 million as of 21 March 2018. When pressed “in terms of tax”, he said it was about R520 million.
The meeting was adjourned.