Something stinks with PowerballPrevious TopicNext Topic

A handful of major things stink to high heaven with Powerball:

1.  The Powerball Actual Cash Value is only 50% of their
"Estimated Jackpot", whereas for other major lotteries,
the percentage is between 60% to 70%.  Huge difference.
For example, a Powerball estimated jackpot of 100M is
is equivalent to a Megamillions estimated jackpot of 75M.
Highly deceptive.

2.  Go to the Powerball website and click on the link
"Powerball Numbers" on the top left.  In the box on the bottom
it reads:  

"Every attempt is made to ensure that this list of numbers
is accurate, the official winning numbers are recorded in the
official draw files as certified by an independent accounting
firm. Winning numbers are not official until confirmed by the
auditing firm of Harvey, Covington & Thomas, LLC."

But then click on the link "Old Numbers" on the top-right area.
In the bottom box, it states:

"Every attempt is made to ensure that this list of numbers is
accurate, the official winning numbers are recorded in the
official draw files as certified by an independent accounting
firm. Winning numbers are not official until confirmed by the
auditing firm of LWBJ, LLP."

So which is their accounting firm?  Harvey LLC or LWBJ LLP?

3.  Whereas Megamillions uses a major "Big 4" auditing firm,
of PWC, Powerball uses one that's not a "Big 4", neither of which
I've heard of.  You'll recall that Madoff was able to get away
with his sleazy act for so long while he using a small accounting
firm that nobody had heard of.

*Actually, I meant KPMG (another "Big 4" auditor), not PWC.

I've called the one with Harvey,  Covington   and Thomas,   it's real.

Winning numbers are not official until confirmed by the
auditing firm of Harvey, Covington & Thomas, LLC."

But then click on the link "Old Numbers" on the top-right area.
In the bottom box, it states:

"Every attempt is made to ensure that this list of numbers is
accurate, the official winning numbers are recorded in the
official draw files as certified by an independent accounting
firm. Winning numbers are not official until confirmed by the
auditing firm of LWBJ, LLP."

It could be the accounting firm under old numbers was the firm before Florida joined PB and they changed accounting firms after Florida joined.

If you're in CA, why are you concerned about a game not played in your state?

If you're in OH, why are you reading a thread about a game not played in your state?

Probably for the same reasons you are concerned about a game not played in your state.

If your speculation turns out to be true, it'll be a litmus test
to see how quickly they respond by correcting the error.
That is, a test to see if indeed these industry execs pay
attention to LP as some have surmised.

tookabath

From your post:

"1.  The Powerball Actual Cash Value is only 50% of their
"Estimated Jackpot", whereas for other major lotteries,
the percentage is between 60% to 70%.  Huge difference.
For example, a Powerball estimated jackpot of 100M is
is equivalent to a Megamillions estimated jackpot of 75M.
Highly deceptive."

Do some searches here at LP and one of the things you'll learn is no matter what the advertised jackpot is, that money does not physically exist. That amount is based on you taking an annuity that would be paid over 20, 26, or 30 years depending on the speicifc lottery and state.

If someone hits a jackpot and opts for cash the amount is a portion of the advertised jackpot, determined by the lottery. As far as I know, that portion is not "set in stone" and varies.

Here's some information about jackpots from another site:

Usually, your lottery is keeping up to 55% or 60% of all of the gambled money.  Also, they often have a winning rate of only one in fifteen tickets or so.  That obviously doesn't leave that much for the players as prizes in the first place.

If you think about it, there really is no prize money left after deducting over 60% for the lottery authorities, and then with 35% or more of what is left to the first place winner.  Second and third places here are minor amounts. 

Generally, we play these lotteries because they can change your life forever.  Unfortunately, almost all prize levels are trivial other than the eventual first place winner.

Allow me to alleviate your state of confusion by showing you
two recent real-life examples:

Last month:

1.  When Neal Wanless, that kid from SD, won the Powerball $232M
jackpot, he received "a one-time cash prize of $118 million".

Four months ago:

2.  When the group of Chubb insurance employees won the Megamillions
$216M jackpot they got the "cash option of $137 million".

Both of the cash amounts above are lump-sum (non-anuity), pre-tax.
Now do the math:

Powerball:

$118M divided by $232M = 50.9%

Megamillions:

$137M divided by $216M = 63.4%


The Megamillions winner got $19M more than the Powerball winner
despite the announced jackpot for the Powerball drawing being
$16M more than that of the Megamillions drawing.

Have I spelled it out sufficiently for you?
Now go put on a dunce cap and sit in your corner.

From the Powerball website:

WHY HAS THE CASH JACKPOT GONE DOWN?

Actually, it is the annuity jackpot that has gone UP. Most people assume that we start with the annuity, but we really start with the cash jackpot. In the Powerball game, thirty cents of every dollar sold goes into the cash jackpot pool. The difference between the cash jackpot and the annuity jackpot depends on how much we can make in interest earnings. The more interest that we can make, the higher the annuity jackpot - and the lower the cash percentage. In times of high interest rates, the annuity prize will go UP and the difference between the two jackpot amounts will increase. It is not that we have reduced the cash; but only that we have been able to increase the annuity prize. All of the cash jackpot and the interest earned is paid to the winner for the annuity.

Rising interest rates increase the annuity jackpot (reduces the cash percentage), but a change in the payment method of the Powerball annuity prize is the big reason for the increased interest earnings to build the annuity prize. The annuity is now paid out as a graduated annuity. Each payment is 4% higher than the previous year's payment to help keep up with inflation. The annuity prize used to be paid out in equal payments. Persons who elect to take the annuity prize do so because they don’t want to worry about investing the money. They want to maintain their lifestyle for the term of the annuity. In fact, our past practice of equal installments did not really meet the needs of these winners. Going from an income of say, $50,000 a year to say, $1 million per year, sounds great (and I hear that it is), but ten years later, the winner’s income is still $1 million a year and the price of luxury cars and yachts has gone up. In twenty years, the fact that the winner is living on a “fixed income” really starts to sink in. If you took the same cash jackpot amount to a professional financial advisor, they would certainly recommend investing in a graduated annuity so that your “real” income would stay at the same level every year. The Powerball annuity jackpot now does that.

IS THE CASH AMOUNT THE JACKPOT AMOUNT AFTER TAXES?

No. When we advertise a prize of $100 million paid over 29 years (30 payments), we actually have less than $50 million in cash. When someone wins the jackpot and wants cash, we give them all of the cash in the jackpot prize pool. If the winner wants the annuity, we invest the $50 million in cash to fund the annuity payments. The winner gets the cash plus the interest earned. When you see an estimated jackpot annuity prize, we are estimating both sales and what the market's prices on certain securities will be. The annuity jackpot amount and the cash jackpot amount that we announce are always estimates until sales are final and, for the annuity jackpot, until we take bids on the purchase of securities.

Federal and State Income tax apply to whatever income you actually receive in a given tax year, whether it is wages or lottery prizes. If you take the cash amount (say $50 million), then you pay income tax on $50 million). If you take the annuity (say $100 million), then you pay income tax on the money you actually receive each year. Just like your wages, a withholding amount is required to be taken out immediately. The lottery will send you a W2-G form and you figure your actual tax at tax time. 

I read the text that you cut and pasted presumably from the
Powerball website.  It gives a flimsy excuse about rising interest
rates and inflation, and how that accounts for the greater difference
between the annuitized prize and the cash option.
It don't make no sense.  The interest rate and inflation is the
same for Megamillions and all the other major state lotteries
as it is for Powerball.  And yet, Powerball chooses to announce
their jackpot amount in a way that makes their jackpot seem
relatively 33% larger than the other lotteries.  It's deceptive
advertising, plain and simple.  They need to appoint a lottery czar
to look into this.

Anyway, the greater concern is that there's something not quite right
about Powerball's auditing methods.  It threatens the very integrity
of Powerball drawings.

After Madoff and AIG and the housing debacle and collapse of Wall St
investment banks, you just can't take anything for granted anymore.
I refuse to believe that just because Powerball is a huge and
long-established organization and brand, that everything is
just fine and dandy.  There has to be a greater level of scrutiny
and transparency.  Shine some daylight on them, and let's
see the critters scampering out of the shadows.

The only thing that stinks about Powerball is that I can't win a darn thing from it!