CLEVELAND, Ohio — State Auditor Mary Taylor officially begins her review of the Ohio Lottery Commission next week, two months after lottery officials tried to close the door on her by arguing that the attention is unwarranted.
Auditors and lottery officials are scheduled to sit together next Wednesday at kick-off meeting during which the approach and scope of the audit will be outlined.
The decision to conduct a performance audit of the $2.4 billion state agency is unusual because such audits are typically initiated by a state agency itself, seeking advice on improving operations. Taylor requested this one in October, citing the uncertain nature of gambling revenue, complex Keno game operations and passage of Issue 3, which allows casinos in four Ohio cities. She said these create an "environment of heightened risk" for the lottery.
Lottery Commission Director Kathleen Burke, with the backing of Gov. Ted Strickland's office, initially rebuffed the request. She said last month that the review "does not seem reasonable, necessary or a wise investment of public funds." She also complained that the lottery's sound financial performance refutes Taylor's concerns.
"The fact that the Lottery has generally experienced consistent revenue growth contradicts your statement that gaming revenue from month to month and venue to venue is uncertain and therefore results in additional financial risk," Burke wrote in letter to Taylor.
Under Ohio law, the auditor or the legislature can call for a performance audit on the public's behalf. But this is the first such audit initiated by Taylor against the wishes of an agency that is not in financial trouble.
The audit — separate from yearly audits of financial statements and regular monitoring of game drawings — will examine staffing, planning and budgeting, games and oversight by the administration, among other things.
A Dec. 22 letter from Taylor's office to Burke includes a two-page outline of the performance audit's scope and a two-page request for documents. It appears from the outline that the auditor is interested in taking a close look at Keno, the numbers game added in 2008.
While Keno generated nearly $100 million in sales in the first fiscal year, which ended June 30, sales numbers were a big disappointment, coming in well below the projected $292 million in sales. Lottery officials have blamed slow sales on the difficulty of signing up retailers, such as bars and restaurants, which are reluctant to dedicate wait staff to processing Keno tickets during peak times.
The lottery had hoped to have 2,000 lottery retailers on board but has about 1,300. The lottery hopes that new self-serve Keno devices in bars and restaurants will boost retailer interest.
A representative from Taylor's office and from the lottery commission have already met twice to develop a framework for the audit. Lottery spokeswoman Marie Kilbane Seckers said the lottery staff is collecting information to assist with the audit.
Burke appears to be on board as well.
"The Ohio Lottery anticipates continuing its good working relationship with the Auditor of State," Burke said in a statement to The Plain Dealer. "The agency is proud to be a U.S. lottery industry leader, with eight consecutive years of revenue growth."
Taylor, according to her letter, hopes to release the performance audit publicly in late June or early July.