The Illinois Lottery solicited donations of MP3 players, airline ticket vouchers, video game systems and other goodies from radio and television stations it advertised with, then used the items to create a "prize closet" for lottery employees, a state audit revealed on Wednesday.
"During this engagement it came to our attention that the Lottery has operated a 'prize closet' dating back to 1989 and possibly longer," said Auditor General William Holland's report.
According to the audit, a letter soliciting "prize closet" donations in fall 2003 stated that the goods would "be utilized as incentives to create excitement and rewards within the Lottery's team of dedicated employees."
Those donations continued through Dec. 4, 2004, when the director of the Department of Revenue, which oversees the state Lottery, decided to end the practice, the audit said.
That was almost a year after the state deleted an administrative code provision allowing for employee incentive pay, making it illegal to distribute state property as incentives to Lottery staff members.
The provision was repealed on Jan. 22, 2004, according to the audit.
In that 11-month period, employees did not receive any incentives, but there was some distribution to retailers, Revenue spokeswoman Geraldine Conrad said.
According to the audit, more than 1,000 "prize closet" items were received in all, and the Lottery failed to monitor those goods properly.
"In eight instances, the Department could not provide evidence reflecting who the ultimate recipient was," the audit reported.
The Department of Revenue noted that those eight items were "of nominal value" (one CD, five DVDs and two VHS tapes) and that they are believed to have been distributed as part of a sales clerk incentive program. The particular retail locations to which they were distributed could not be identified, however.
While a perpetual inventory was maintained on items in the prize closet, the goods were not valued, tagged as state property, recorded in the Department of Revenue's inventory records, or identified in state property reports as required by law, the audit found.
Conrad said the Lottery had stopped soliciting or receiving goods in conjunction with its advertising media buys, and had returned all remaining "prize closet" items.
"All gifts in the cabinet were returned and none have been distributed since last year," she said.
In response to the audit, the department also agreed to seek a legal opinion as to the appropriateness of such practices and what guidelines would need to be followed if the incentive program were resumed.
"The department's general counsel is reviewing what criteria might be appropriate," Conrad said.