Can Nebraska certify multiple independent laboratories to test bingo and keno equipment, and what must a lab do to be certified?

Plain-English summary

This is a gaming-regulation ruling, not a tax ruling. For years, Nebraska used a single contracted lab to test and examine the bingo and keno (county/city lottery) equipment that manufacturers want to sell in the state. This ruling says the Department may instead certify multiple independent testing laboratories, and may require a manufacturer to use a certified lab.

The legal basis. Manufacturers of bingo equipment and manufacturer-distributors of keno equipment must get Department approval before offering or marketing equipment in Nebraska (Neb. Rev. Stat. §§ 9-255.10 and 9-635), based on conformance with Department specifications, and the manufacturer pays all testing costs. The Department's authority to set up a certification program comes from its rulemaking power under Neb. Rev. Stat. §§ 9-226(12) and 9-620(13).

What "equipment" covers. Broadly. Bingo equipment includes balls, blowers, flash boards, card-monitoring devices/site systems, paper and instant cards, and more. Keno equipment includes automated ball-draw systems, ball-selection/blower devices, keno balls, keno systems, and random number generators.

The attached 7-page certification procedures set out what a lab must submit and meet:

• Application: company identity and organization, financial statements (proof of stability), any anticipated ownership change (30-day post-certification notice), office/testing locations, five-year history of terminated contracts or cancelled licenses, a summary of experience and other-state certifications, and the specific personnel who will do the work.
• Vetting at the lab's expense: the Department may run a background investigation and inspect facilities, and may require annual on-site inspections -- with the applicant paying travel, meals, and lodging for up to two Department staff.
• Technical requirements: ability to generate test scripts/plans; ISO 17025 accreditation; unique identification codes/signatures (e.g., SHA-1 or CRC) on all Critical Program Storage Media; Department-approved verification tools; documented test/certification reports and a draft certification letter stating whether equipment complies with Nebraska law; and a software repository with real-time online access for the Department.
• Service obligations: 24/7 support contact; on-site field inspections on request; 60-day testing turnaround from a complete submission; one-business-day response to "critical incidents"; regular training for the Charitable Gaming Division; and a conflict-of-interest bar -- the lab generally may not provide consulting to Nebraska manufacturer licensees, and no owner/employee/agent (or their spouse) may play in any Chapter 9 gambling activity.
• Fees: billed directly to the manufacturer (monthly itemized invoices, copies to the Department); the State is not a party to and does not guarantee payment.
• Term and appeals: certification is valid two years; a denied applicant may appeal to the Tax Commissioner within 30 days (whose decision is final) and may reapply after 12 months (waivable by the Director); the Department may revoke for cause after an administrative hearing before the Tax Commissioner.
• Confidentiality/records: application data becomes State property and is public, except information properly submitted as "proprietary information" under Neb. Rev. Stat. § 84-712.05(3) (in a sealed, marked package), though the Department accepts no liability for release.

What this means for you

Testing laboratories seeking Nebraska certification

Expect a substantial application: financial disclosure, ownership and litigation history, personnel details, and a demonstrated technical capability anchored by ISO 17025 accreditation and cryptographic signing (SHA-1/CRC) of program media. Plan to fund the Department's background investigation and annual inspections, provide 24/7 support and 60-day turnaround, give the Department real-time access to your report repository, and avoid consulting for Nebraska manufacturer licensees. Certification lasts two years, and both denial and revocation run through the Tax Commissioner.

Bingo and keno equipment manufacturers/distributors

You still need Department approval before marketing equipment in Nebraska, and you'll use a Department-certified lab and pay the testing costs directly (negotiated with the lab; the State isn't involved in billing).

Counties, cities, and villages running keno

This is upstream of your operations -- it governs how the equipment you use gets tested and approved -- but it's part of the same charitable-gaming regulatory framework.

Common questions

Q: Can Nebraska use more than one testing lab?
A: Yes. The ruling authorizes the Department to certify independent testing laboratories rather than contract with a single lab, and to require manufacturers to use a certified lab.

Q: Who pays for equipment testing?
A: The manufacturer or manufacturer-distributor that submitted the equipment. Certified labs bill them directly via monthly itemized invoices (copies to the Department); the State is not a party to the payment.

Q: What are the headline technical requirements for a lab?
A: Current ISO 17025 accreditation, unique identification signatures (such as SHA-1 or CRC) on all Critical Program Storage Media, documented test/certification reports, and a software repository the Department can access in real time.

Q: How long does certification last, and can it be challenged?
A: Two years. A denial can be appealed to the Tax Commissioner within 30 days (final decision), and the Department can revoke certification for cause after an administrative hearing before the Tax Commissioner.

Q: Can a certified lab also consult for equipment makers?
A: Generally no. A certified lab must not provide consulting services to Nebraska manufacturer licensees unless the Department authorizes it, and must never support illegal gaming.

Citations and references

• Neb. Rev. Stat. § 9-255.10 (Nebraska Bingo Act) -- requires Department approval of bingo equipment before it is offered or marketed.
• Neb. Rev. Stat. § 9-635 (Nebraska County and City Lottery Act) -- requires Department approval of keno equipment before it is offered or marketed.
• Neb. Rev. Stat. §§ 9-226(12) and 9-620(13) -- authorize the Department to adopt rules and regulations to carry out the Bingo and County/City Lottery Acts, the basis for the certification program.
• Neb. Rev. Stat. § 84-712.05(3) -- the public-records definition of "proprietary information" a lab may ask the Department to withhold (with Attorney General Opinions 92068 and 97033).
• ISO 17025 -- the laboratory accreditation a certified lab must maintain.

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr351002.pdf

Original ruling text

Revenue Ruling 35-10-2
County/City Lottery (Keno)

October 26, 2010

CERTIFICATION OF INDEPENDENT TESTING LABORATORIES
Issue:
The Nebraska Department of Revenue (Department) has historically contracted with a single
independent testing laboratory to test and examine bingo equipment and county/city lottery (keno)
equipment on behalf of the Department. Is it permissible for the Department to certify independent
testing laboratories in lieu of contracting with a single laboratory to provide testing services?
Conclusion:
The Department may require a manufacturer of bingo equipment or a manufacturer-distributor of
keno equipment to use the services of an independent testing laboratory which has been certified
by the Department to test and examine this equipment. This revenue ruling establishes the criteria
for the certification of independent testing laboratories.
Definitions:
Bingo equipment. Bingo equipment means any equipment which is made, sold, or used to conduct
bingo and includes, but is not limited to:
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bingo balls;
bingo card monitoring devices and site systems;
bingo hard cards, disposable paper bingo cards, and instant bingo cards;
blower devices;
facsimile of a bingo card electronically displayed on a bingo card monitoring device;
flash boards;
instant bingo boards;
mechanical cages or machines or other devices from which bingo balls are withdrawn;
reusable shutter bingo cards; and
any other device used in the direct operation of the game.

Director. Director means the Director of the Lottery and Charitable Gaming Division.
Lottery (keno) equipment. Lottery (keno) equipment means all proprietary devices, machines,
and parts used in the manufacture or maintenance of equipment which is used in and is an integral
part of the conduct of the lottery. This equipment directly affects the outcome of the lottery or
monitors the operation of the lottery and includes, but is not limited to:
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automated ball draw systems, and other electronic selection devices;
keno ball selection devices, including electrically operated blower machines;
keno balls;
keno systems; and
random number generators.

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818

Revenue Ruling 35-10-2

October 26, 2010

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Analysis:
Neb. Rev. Stat. § 9-255.10 of the Nebraska Bingo Act and Neb. Rev. Stat. § 9-635 of the Nebraska
County and City Lottery Act require a manufacturer of bingo equipment or a manufacturerdistributor of keno equipment to obtain approval from the Department prior to offering or marketing
equipment in Nebraska. Approval is based upon conformance with specifications imposed by
the Department. Any costs associated with the testing and examination of the equipment is the
responsibility of the manufacturer or manufacturer-distributor who submitted the equipment for
testing.
Neb. Rev. Stat. §§ 9-226(12) and 9-620(13) authorize the Department to adopt and promulgate
rules and regulations necessary to carry out the Acts. The certification of independent testing
laboratories for the purpose of the testing and examination of bingo and keno equipment, as
required by Neb. Rev. Stat. §§ 9-255.10 and 9-635, is within the regulatory powers legislatively
granted to the Department.
APPROVED:

Douglas A. Ewald
Tax Commissioner
October 26, 2010
See attached Procedures for Certification of Independent Testing Laboratories

PROCEDURES FOR CERTIFICATION
OF INDEPENDENT TESTING LABORATORIES
The following procedures apply to any business seeking certification as an independent
testing laboratory in Nebraska for the purpose of testing and examination of bingo and lottery
(keno) equipment.
Application
An application for certification must be submitted to the Nebraska Department of Revenue
(Department) in writing on company letterhead and include the following:

1. Applicant Identification and Information –
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full company or corporate name;
address of the company’s headquarters;
entity organization (corporation, limited liability company, partnership, proprietorship);
state in which the company is incorporated or otherwise organized to do business;
year in which the company was first organized to do business;
whether the name and form of organization has changed since first organized; and
federal employer identification number and/or Social Security number.

2. Financial Statements –
   If publicly held, include a copy of the corporation’s most recent audited financial reports
   and statements, and the name, address, and telephone number of the fiscally responsible
   representative of the applicant’s financial or banking organization.
   If not publicly held, include either the reports and statements required of a publicly held
   corporation, or a description of the organization, including size, longevity, client base, areas
   of specialization and expertise, and any other pertinent information submitted in such a
   manner that the Department may reasonably formulate a determination about the stability
   and financial strength of the applicant. Additionally, a non-publicly held firm must provide a
   banking reference.
   The applicant must disclose any and all court judgments, pending or expected litigation, or
   other real or potential financial reversals, which might materially affect the viability or stability
   of the applicant, or state that no such condition is known to exist.
3. Change of Ownership –
   If any change in ownership or control of the applicant is anticipated during the 12 months
   following the application for certification, the applicant must describe the circumstances of
   this change and indicate when the change will likely occur. Any change of ownership after
   certification requires written notification to the Department within 30 days of the effective
   date of the change. The Department reserves the right to revoke prior certification if the
   change of ownership is not in the best interests of the Department.
4. Office Location –
   The applicant must identify the office location responsible for the performance of testing
   services. If the applicant has more than one location where testing services are performed,
   the applicant must identify the locations where testing services will be performed for
   Nebraska purposes. The applicant must perform all testing and certification of gaming
   equipment at the applicant’s places of business or another location approved by
   the Department.
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5. Testing Facilities –
The applicant must provide a detailed description of its test facilities including a description
of the nature of security it relies upon to ensure the integrity and safety of its laboratory and
processes. The applicant must include a description of its internal controls and procedures
for employee integrity and its business practices, including receipt, processing, and testing
of gaming equipment, accounting and billing, physical storage, data storage, and Internet
security, and any other processes, systems, or business practices related to providing
testing services to the Department.

6. Contract Performance –
   If the applicant has had a testing services contract terminated for default or a vendor/
   supplier license cancelled during the past five years, all of these instances must be
   described as required below. Termination for default is defined as a notice to stop
   performance delivery due to the applicant’s non-performance or poor performance, and
   the issue was either not litigated due to inaction on the part of the applicant, or litigated
   determining the applicant to be in default.
   The applicant must submit full details of all termination for default or vendor/supplier license
   cancellations experienced during the past five years, including the other party’s name,
   address, and telephone number. The response must present the applicant’s position on
   the matter. The Department will evaluate the facts and will consider the applicant’s request
   accordingly. If no termination for default or vendor/supplier license cancellation has been
   experienced by the applicant in the past five years, the applicant must indicate this.
   If at any time during the past five years, the applicant has had a contract terminated or
   vendor/supplier license cancelled for convenience, non-performance, non-allocation of
   funds, or any other reason, the applicant must describe fully all circumstances surrounding
   this termination or cancellation, including the name and address of the other contracting
   party or licensing entity.
7. Summary of Experience –
   The applicant must provide a summary of its experience during the past five years, in the
   testing of bingo and keno equipment or equivalent types of systems.
   a. Contract/License Identification. The applicant must provide a list of other state
   regulatory jurisdictions in which it is currently contracted with, licensed, or certified as
   an independent testing laboratory for bingo and keno equipment, or any other types of
   gaming equipment. For each state regulatory jurisdiction, the applicant must provide the
   following.
   i.

Name of the state regulatory jurisdiction;

ii. Length of time the applicant has served as an independent testing laboratory for the
regulatory jurisdiction;
iii. Testing responsibilities; and
iv For reference purposes, the name of a contact person, a current telephone number,
and e-mail address.

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8. Summary of Personnel/Management –
The applicant must identify the specific professionals who will be directly involved in the
performance of the testing services and their individual responsibilities. A brief description
of the qualifications and experience of each professional and the extent of their involvement
in the testing and/or document process must also be provided. Once certified, the
applicant must notify the Department within 30 days of any changes in personnel who are
directly involved in the performance of the testing services. The Department may conduct
background investigations of any new personnel, as deemed necessary, to determine
suitability for performing testing services.
If the applicant intends to subcontract any of the testing services, the applicant must provide
the name, address, and telephone number of the subcontractors and the specific tasks that
each subcontractor will perform.

9. Background Investigation –
   Any company applying to the Department for certification as an independent testing
   laboratory may be required to undergo a thorough background investigation and a review
   and evaluation of the applicant’s competence, integrity, background, and character
   as a condition of certification. The background investigation will be conducted by the
   Department’s investigative personnel and, at the discretion of the Department, include
   inspection of the applicant’s testing facilities and offices where testing services will be
   performed for Nebraska purposes. Background investigations and inspections will be
   performed at the expense of the applicant. The applicant must pay for all reasonable
   and necessary expenses, including travel (round-trip), meals, and lodging, for up to two
   individuals designated by the Department for the purpose of the background investigations
   and inspections.
10. Annual Inspections –
    If determined necessary by the Department, the applicant must allow up to two Department
    employees one visit annually to inspect each of the laboratory sites where testing is
    performed to ensure the integrity of work is maintained and for review of new technology
    being considered for approval. The applicant must pay for all reasonable and necessary
    expenses, including travel (round-trip), meals, and lodging, for up to two individuals
    designated by the Department for the purpose of the inspections.
11. Technical Requirements –
    The applicant must provide sufficient detail regarding its ability to perform the testing
    services required.
    a. The ability to generate and apply test scripts and test plans for the testing and approval
    of gaming equipment. This ability must include demonstration of proficiency and timely
    knowledge about technological innovation, cheating methodology, patron protection,
    and field conditions. The applicant must submit test scripts which it has used previously
    in the testing and evaluation of electronic bingo card monitoring devices, computerized
    keno systems, and random number generators. These test scripts and test plans will be
    considered confidential / proprietary information. These procedures need not specifically
    address Nebraska’s laws, but may include a test script or test plan for evaluating
    compliance with Nebraska’s laws.

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b. The applicant must maintain current International Organization of Standardization (ISO)
17025IT certification and accreditation. The applicant must provide the Department
documentation reflecting this certification and accreditation.
c. The applicant must provide the Department a unique identification code or signature
utilizing an industry-acceptable means for generating this unique identification code or
signatures, such as Secure Hash Algorithm (SHA-1) or Cyclical Redundancy Check
(CRC 16 and CRC-32) to all Critical Program Storage Media (CPSM). The unique
identification code or signature and the means for generating these codes or signatures
must be included in all documents and reports.
d. The applicant’s verification tools and/or mechanisms used to provide unique
identification codes or signatures and the means for generating such codes or signatures
to CSPM’s must be approved by the Department. The applicant must provide the
Department with step-by-step verification procedures for each tool and/or mechanism.
e. The applicant must provide the Department any verification tool and/or mechanism that
is proprietary to the laboratory and which is required for the Department’s authorized
personnel to verify the unique signature of CPSMs.
f.

The applicant must provide the Department a recommended format for the submission
of gaming equipment for testing by a manufacturer and the required documentation to be
included with the submission.

g. The applicant must provide the Department a proposed format for its Test Result/
Certification Reports, and must maintain flexibility in the format and content of its Test
Result/Certification Reports, to meet changing regulatory philosophies and conditions.
h. Upon completion of any required testing, the applicant must fully document, in a written
report, the tests performed and the results of those tests. The applicant must submit a
draft certification letter to the Department. This letter must certify that appropriate tests
were conducted and that the specified gaming equipment complies with Nebraska’s
laws, regulations, and test criteria. If the gaming equipment does not comply with
Nebraska’s laws, regulations, and test criteria, the applicant must advise the Department
in writing of the deficiencies which prevented certification of the gaming equipment.
The Department will notify the applicant of any changes which are required to the draft
certification letter prior to the issuance of a final certification letter to the manufacturer.
i.

The applicant must maintain a repository of approved software for all gaming equipment
tested and certified. The applicant must provide the Department with real-time online
access to the repository of reports maintained by the applicant relative to testing
performed on gaming equipment submitted by manufacturers of bingo and keno
equipment licensed by the Department.

12. Additional Requirements –
    a. The applicant must provide the Department a 24 hours per day, seven days per week,
    customer support/regulatory compliance contact.
    b. If requested by the Department, the applicant must perform on-site field inspections of
    gaming equipment.

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c. The applicant must have sufficient resources available to provide consulting services to
the Department, if required.
d. The applicant must not provide consulting services (including, but not limited to, product
development testing, product design, or product evaluation) to Nebraska manufacturer
licensees, unless otherwise authorized by the Department. Additionally, the applicant
must not knowingly provide testing or consulting services to Nebraska manufacturer
licensees in support or furtherance of illegal gaming in Nebraska.
e. The applicant must provide the Department regulatory support and assistance in
regulatory processes, including drafting of rules and regulations and gaming equipment
test criteria, if required.
f.

The applicant must provide regular and on-demand training to the Department’s
Charitable Gaming Division and Investigative Services staff as needed. The applicant
must describe a means of establishing and offering opportunities for regular training to
the Division.

g. The applicant must provide all facilities, labor, equipment, tools, and storage, for the
performance of the testing services required.
h. The applicant must perform gaming equipment testing services in a timely manner,
and must document the cause when it does not meet standards of timeliness. For the
purpose of this section, “timely manner” means within 60 calendar days of the receipt of
a complete submission by the applicant, or as otherwise agreed to by the Department.
The applicant must notify the Department when delays are encountered which will
prevent the completion of testing services within 60 days or any agreed upon time frame
for completion.
i.

The applicant must respond within one business day, via telephone or e-mail, to
requests from the Charitable Gaming Division for technical assistance when critical
incidents arise which require the Division’s immediate attention. For the purpose of this
section, a “critical incident” includes, but is not limited to: an equipment malfunction
or software deficiency which jeopardizes the integrity of the game; or an equipment
modification is required in order to prevent cheating or equipment failure.

j.

No owner, employee, or agent (or spouse of an owner, employee, or agent) of an
applicant certified as an independent testing laboratory may play in any gambling activity
which is authorized or regulated under Chapter 9 of the Nebraska Revised Statutes.

k. All costs associated with the testing and examination of the equipment are the
responsibility of the manufacturer or manufacturer-distributor who submitted the
equipment for testing and must be billed directly to the manufacturer or manufacturerdistributor. A manufacturer or manufacturer-distributor may negotiate directly with the
applicant relative to any testing costs. The applicant must provide monthly invoices to
the manufacturer or manufacturer-distributor for any testing services performed. The
monthly invoice must itemize all services actually performed during the monthly reporting
period, by date and type of service provided. Copies of the monthly invoices must be
provided to the Department.
The applicant may exercise discretion in determining how to collect the fees for
services to be rendered. This includes, but is not limited to: payment in advance;

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deposit in advance; payment at regular intervals; or payment upon completion of
services. However, the State shall not be a party to any payment agreement between
the applicant and any manufacturer or manufacturer-distributor, nor shall the State be
deemed to guarantee or insure payment of any services rendered by the applicant.
The applicant may, at its discretion, refrain from providing the Department with its
final report regarding test results of a manufacturer’s or manufacturer-distributor’s
gaming equipment or conducting further testing for a manufacturer or manufacturerdistributor only for the purpose of securing, and solely in order to secure, full payment
for services rendered. Any questions or disputes concerning the applicant’s billing
statements will be formally resolved between the applicant and the manufacturer or
manufacturer‑distributor.
l.

The applicant must indicate all costs that are to be charged to the Department for
the provision of consulting services, regulatory support including drafting of rules and
regulations and test criteria, staff training, and any other miscellaneous services.

13. Certification Approval –
    Upon completion of the review of the company’s application and the performance of the
    background investigation, if required, the Department will notify the applicant in writing
    whether certification has been approved. If the Department denies a company’s application
    for certification, a letter will be sent to the applicant explaining the reasons for disapproval.
    The decision of the Department may be appealed to the Tax Commissioner. The appeal
    must be in writing, explain the basis for the appeal, and be filed with the Department
    within 30 days of notification of the Department’s disapproval. Any decision of the Tax
    Commissioner will be final and not subject to appeal. An applicant which has been
    disapproved, may reapply for certification after a period of 12 months has elapsed, unless
    the Director waives this requirement.
    The Department’s certification of an independent testing laboratory is valid for a period
    of two years from the date certification was approved unless sooner terminated by the
    Department. A certified testing laboratory must notify the Department, in writing, at least 30
    days prior to the expiration date of the certification of its desire to be re-certified.
    The Department reserves the right to revoke the certification of an independent testing
    laboratory for cause. Prior to revocation of certification, the Department shall serve
    advance notice on the applicant by certified mail, return receipt requested, of the time,
    date, and place of an administrative hearing before the Tax Commissioner, or his or her
    designee, for the purpose of responding to the proposed revocation. Any decision of the Tax
    Commissioner will be final and not subject to appeal.
14. Confidentiality –
    All materials and information provided by the Department, or acquired by the applicant on
    behalf of the Department, are regarded as confidential information, and must be handled in
    accordance with Federal and State law and ethical standards.
15. Proprietary Information –
    Data contained in the application for certification and all documentation provided in it,
    become the property of the State of Nebraska and the data is public information. If the
    applicant wishes to have any information withheld from the public, this information must fall

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within the definition of “proprietary information” contained within Nebraska’s public record
statutes. All proprietary information the applicant wishes the Department to withhold must be
submitted in a sealed package, which is separate from the remainder of the application. The
separate package must be clearly marked PROPRIETARY on the outside of the package.
“Proprietary information” is defined as trade secrets, academic and scientific research
work which is in progress and unpublished, and other information which if released
would give advantage to business competitors and serve no public purpose (see
Neb. Rev. Stat. § 84-712.05(3)). In accordance with Attorney General Opinions 92068 and
97033, applicants submitting information as proprietary may be required to prove specific,
named competitors who would be advantaged by release of the information and the specific
advantage the competitors would receive. Although every effort will be made to withhold
information that is properly submitted as proprietary and meets the State’s definition of
proprietary information, the Department is under no obligation to maintain the confidentiality
of proprietary information and accepts no liability for the release of such information.

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