Texas Lottery audits find more problems

Jul 13, 2006, 12:15 pm (2 comments)

Texas Lottery

Prize estimates were inflated at least 3 times after scandal

Months after Texas Lottery officials were chastised for inflating Texas Lotto jackpot estimates in a scandal that cost the executive director his job, the agency did it again at least three more times, according to one of two highly critical state auditor reports on the lottery released Tuesday.

Auditors found "a significant number of instances in which agency management did not comply with policies and procedures to review or approve documentation related to jackpot estimations, jackpot prize payment calculations and transfers to the Foundation School Fund."

In the second report, state auditors found "significant weaknesses" in employee relations, including a lack of a grievance policy, inconsistent disciplinary actions and inadequate documentation of terminations.

Auditors recommended the agency adopt a grievance policy and hire an employee ombudsman to report directly to the executive director.

Lottery spokesman Bobby Heith said the agency agreed with all the auditors' recommendations and said many of them "have either been addressed or are in the process of being addressed."

The audits were requested last summer by then-Executive Director Reagan Greer, who resigned shortly after admitting that he approved several jackpot estimates that his staffers knew were too high for projected ticket sales to cover.

Greer said he acted on the recommendations of staff, hoping to perk up ticket sales.

The jackpot scandal was followed by months of public scrutiny involving security concerns, a rash of firings and employee complaints that management used its at-will firing policy to perpetuate a culture of fear and intimidation.

Lottery officials had asserted that they inflated four jackpot estimates between May 4, 2003, and June 11, 2005, auditors wrote.

But from November to March, auditors found three more instances in which lottery officials knowingly approved jackpots that exceeded the agency's "high-end" estimated sales.

Winners wouldn't have been impacted on those occasions because, as the report notes, they occurred after commissioners agreed to guarantee winners the higher of either the advertised jackpot or percentage of actual sales.

But auditors noted that "failure to accurately advertise Lotto Texas jackpot amounts may contribute to a lack of public confidence in the Lotto Texas game and the Texas Lottery Commission." They also pointed out that if the agency is required to pay jackpots that exceed sales, they may have to be paid with money that would otherwise go to education.

"That is troubling to me because that does take money from the state," said Gerald Busald, a lottery watchdog and math professor at San Antonio College. "The difference is when Reagan Greer did it, if somebody would have won, the player would have been out money. Now if somebody wins, the state is out money."

Busald praised the audit overall and said he had confidence that the agency's newly named Executive Director Anthony Sadberry, a longtime Houston attorney, would continue improving morale and trying to establish a culture of playing by the rules at the lottery.

The audit focusing on the lottery's work-force management echoed many of the concerns expressed by lottery employees who claimed they were wrongly terminated in spite of positive performance evaluations.

"Incomplete, inconsistent and undocumented" employee-relations practices undermine the agency's ability to create a positive work environment, auditors found.

Weaknesses in evaluations allowed several employees with less-than-positive ratings to receive merit-pay increases while the agency terminated employees whose most recent evaluations indicated no performance problems, auditors found.

Many employees don't trust management, feel intimidated and "fear that they may experience retaliation if they raise significant issues, concerns, or complaints," auditors wrote.

Only 40 percent of nonsupervisory staff agreed or strongly agreed that they "trust human resources," according to the auditor's survey.

"To me, it just validates what we've been saying all along," said Cynthia Suarez, a former lottery employee who is suing over her termination. "Now I think it's up to the commissioners and Mr. Sadberry to clean house, and I think the results are significant enough that they should utilize their termination at will. These managers who didn't follow procedures should be terminated."

Heith, the lottery spokesman, said the new executive director has already made several changes to address employees' concerns. A new human resources director was hired, a more comprehensive personnel handbook was distributed, and Sadberry increased his own oversight while changing the roles of longtime agency officials that whom employees had complained about.

Houston Chronicle

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Winner1313's avatarWinner1313

that is why i promote the texas lottery. more people play these problems will not happen.

Just6ntlc

I hope these problems won't happen again for Texas. I think more people should play Texas Lotto because they no longer have to match bonus number to win jackpot.

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