Gaming Machines

One of the easiest methods for clubs to make additional money is through the operation of gaming machines (or poker machines, one armed bandits, or whatever else they are known as). To do this though, requires more than just a good idea, and then sit back and watch the money pour in. Here we will give a brief outline of the responsibilities involved in installing and operating these machines.

Legal Issues

Operation of gaming machines is controlled by law. This law is administered by the Department of Internal Affairs with the collection of duties from the machines the responsibility of the Inland Revenue Department.

The Department of Internal Affairs carries out the following duties:

• Authorises the purchase and trade of gaming machines;
• Approves authorised purposes for the use of funds from gaming machines;
• Completes audits of records of gaming machines and the actual end uses of the funds generated;
• Maintains a register of gaming machines;
• Completes annual relicensing requirements for gaming machines.

Purchase Of Gaming Machines

Once a club has resolved to purchase one or more gaming machines, there is a clear path of action that needs to be followed to put the machines into service.

Application needs to be made to the Department of Internal Affairs to have the machines licenced. The Department has standard forms for this purpose which can either be obtained from the Department, or from the machine provider (assuming the club is purchasing through one of the businesses in this industry, and not from another club). In these forms the club is required to advise:

• Details of the machines and games involved, including serial numbers;
• How the purchase is to be funded;
• What the proposed purposes for the use of the profits are to be;
• Who the Officers of the club are;

This same form is required to be completed if a machine is being decommissioned or replaced. It is also required to be completed when the Officers of the Club change.

Authorised Purposes

Each club authorised to operate gaming machines must nominate the intended purposes that the profits from the machines will be used for. The Department has examples and can provide guidelines in this area. Profits from gaming machines can not be used for day to day operating expenses of the club.

Many clubs apply through a local hotel for funds from their gaming machine profits, and these rules apply in these cases too. There must always be a specific item for which the specific funding is to be used.

Auditing Role

The Department of Internal Affairs audits gaming machine operators, ensuring that:

• The relevant licences are current and displayed;
• Profits from gaming machine operation are only being used for authorised purposes;
• The necessary records are being kept and are accurate;
• The required tax has been paid to the Inland Revenue Department.

Often clubs will also be audited with regards to funds received from a local hotel as part of their audit, usually to ensure they were used as stated in the application, and that the funds did go to the club.

Gaming Machine Register

The Department keeps a record of every gaming machine being operated through-out the country. Each machine is given its own unique identifier. It is because of this register that it is important for clubs to notify the Department of any changes to the machines being operated, as if a machine is not licenced, the club can be liable for severe penalties if it is being operated.

Annual Relicensing

Each year, each club is required to relicense machines being operated. The Department of Internal Affairs forwards the forms for this purpose and it is imperative that they are completed and returned before the due date to avoid the possibility of penalties.

Costs

One of the things that clubs should know is that there are significant costs involved in operating gaming machines, both monetary and non-monetary. Generally profits are more than enough to cover these costs, but clubs do need to be aware of these:

• Licensing fees, both on purchase and for annual relicensing;
• Costs of holding refill and change floats;
• Tax on gaming machine turnover;
• Time to complete the recording requirements;
• Service contracts on machines.

For example, some clubs having low turnover through their machines moved into the $2 machines and found that the first few months cost more than expected with the hoppers and refill floats both often needing topping up.

Recording

The Department of Internal Affairs has put out a great handbook to all gaming machine operators which details all the dos and dont’s, and this is a must for any club contemplating operating gaming machines.

Briefly, the requirements for clubs operating machines are:

• To record all hopper refills;
• To conduct a weekly physical count of the hopper and cashbox contents;
• To record all gaming machine readings weekly;
• To record any cancelled credits paid out other than through the machine;
• To reconcile the cash-in and cash-out for each machine to account for all cash movement through the machine;
• To calculate the profit for each gaming machine on a monthly basis;
• To calculate and pay the tax due on the total gaming machine profits, monthly;
• To update and display the necessary licences.

In the handbook are samples of the forms in use, which can be photocopied as required, and which make the operation a lot more simple than it seems reading all the above.

Decision Time

Overall, it is worth clubs having gaming machines to increase their revenues and to provide an outlet for members and visitors who like to play the machines. But there is a lot of work associated with the operation of gaming machines and a definite requirement for procedures to be followed closely.

Some other matters for clubs to consider if thinking about installing machines:

• What is our budget?
• How many machines?
• What denomination coins should we go for? ($2 machines are normally quite a bit more expensive)
• Should we have a variety of different machines accepting different denomination coins, or should we standardise? (Care here as each different denomination needs its own floats etc)
• Is the turnover going to justify the investment? (Or are you better leaving the money in the bank)
• Have we got the personnel to ensure that our legal requirements can be met?

Conclusion

Gaming machines can be a good source of additional revenue to a club, but if the homework is not done correctly, it could be a while before the returns start coming back.

Don’t rush in boots and all, and always remember, there are clubs like yours out there; Try asking some of them about their experiences before making a hasty decision.

Good punting.