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Legislators grill Ark. lottery financial officer

Aug 25, 2011, 10:56 am

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Arkansas LotteryArkansas Lottery: Legislators grill Ark. lottery financial officerRating:

LITTLE ROCK, Ark. — The Arkansas lottery's chief financial officer said Wednesday that a $90,000 tax penalty probably resulted because of a data input error, though legislators remained puzzled over how the lottery's director wasn't told of the problem for more than three months.

Lottery director Ernie Passailaigue told members of the Lottery Oversight Committee that he was "disappointed" he wasn't told of the Internal Revenue Service problem until long after it had emerged.

The IRS assessed the penalty because the lottery made late payments of withholdings from prizes. Passailaigue explained that those payments are now made daily, which should prevent a repeat of the problem. He also said he believes the IRS is incorrect about at least some of the payments at issue.

Passailaigue said he didn't learn of the problem until Aug. 10, well after chief financial officer Philip Miley was notified by the IRS of the penalty in April.

Sen. Jonathan Dismang, R- Beebe, said lottery officials need to ensure that important issues are brought to the attention of the director, the Lottery Commission and the legislative committee.

"I'm not sure if I still follow the chain of command and why there was the misstep and why there was no internal control to make sure there was the correct communication between the director and the CFO," Dismang said after the meeting.

During the proceeding, Dismang asked committee chairmen Sen. Johnny Key, R-Mountain Home and Rep. Mark Perry, D-Jacksonville, to send Miley a letter asking for his account of what happened.

Miley walked into the committee meeting a short time later and told legislators that he had expected the IRS to negate the penalty. But it was only when the IRS rejected the lottery's challenge this month that he notified Passailaigue.

Miley had already turned in his notice that he will leave his post next month. He also said telling Passailaigue about the IRS issue was part of his wrap-up, to let the director know about significant issues that were hanging.

Miley said he'd been going back and forth with the IRS since April 2010 and thought the penalty would be waived because the lottery was "diligently trying to follow the rules." Plus, he said it is the CFO's job to deal with the IRS, not the director's.

Dismang was not swayed.

"I'm going to argue there was a tremendous breakdown there," Dismang said.

But Miley said he expects a resolution in the lottery's favor.

"I am still convinced that the lottery is not in error," Miley said, adding that he believes the data input problem was on the IRS' end.

As a final question, Dismang asked Miley, "Why are you leaving?"

"The hostile work environment is really too much for me to handle; $80,000 per year is not worth it," Miley replied. He complained that events that would remain internal matters at a private company are aired publicly in government.

"It's hard on me and hard on my family," Miley said.

The lottery has enlisted Carrold Ray, a North Little Rock attorney to appeal the IRS penalty. Ray is not charging the lottery a fee.

The lottery's internal auditor, Barry Hyde, said the breakdown between Miley and Passailaigue "falls under the general control environment" within the office.

Hyde told legislators that one of the 40 categories he has stripped out for periodic auditing is tax payments and the issue will be reviewed.

Passailaigue told legislators that of the 13 Legislative Audit Committee findings from last fiscal year, 12 of them have been cleared. The remaining issue is generating a year-end report that conforms to generally accepted accounting practices.

Rep. Bill Pritchard, R-Elkins, said that as a member of the Audit Committee he took a dim view of the batch of findings in the last audit.

"The Audit Committee has no patience at all with repeat findings," Pritchard said.

The lottery has to enter into a contract with a firm, Crow Horwath LLP of Irving, Texas, for about $55,000 to train workers to generate a comprehensive annual financial report and to produce the next report.

About 25 legislators turned out for the meeting, more than double the 12 members of the joint committee.


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6 comments. Last comment 9 years ago by cbr$.
Page 1 of 1
rdgrnr's avatar - walt
Way back up in them dadgum hills, son!
United States
Member #73902
April 28, 2009
14903 Posts
Posted: August 25, 2011, 12:37 pm - IP Logged

The CFO was right saying the issue was his problem, not the Director's, but the Director should have been notified immediately, regardless.

Miley, the CFO, was trying to cover his own @ss by trying to rectify the problem before the boss found out about it.

He should be on the hot seat before anybody else.

And that's why he's leaving.







"The only thing necessary for evil to triumph is for good men to do nothing"

                                                                                            --Edmund Burke




    United States
    Member #94612
    July 24, 2010
    4735 Posts
    Posted: August 25, 2011, 1:02 pm - IP Logged

    The CFO was right saying the issue was his problem, not the Director's, but the Director should have been notified immediately, regardless.

    Miley, the CFO, was trying to cover his own @ss by trying to rectify the problem before the boss found out about it.

    He should be on the hot seat before anybody else.

    And that's why he's leaving.

    I agree 100%.  This is a GREAT example of what happens when you try to cover up your mistakes.  I am surprised that no one below him tipped the CFO off before this.  And he wonders why there was a hostile work enjoinment?

      temptustoo's avatar - cat anm.gif
      United States
      Member #89194
      April 2, 2010
      2826 Posts
      Posted: August 25, 2011, 3:00 pm - IP Logged

      I.R.S   WRONG ABOUT SOME OF THE PAYMENTS...   no never.. how could that be.. LOL.. !!!!Big Grin Angel

        HaveABall's avatar - rocket

        United States
        Member #72446
        March 18, 2009
        1301 Posts
        Posted: August 25, 2011, 6:27 pm - IP Logged

        I feel sorry for Passailaigue (and the many bosses/leaders in his shoes) !!!  How can one be a good director when BOTH your CFO and Auditor don't tell you everything BIG that they are working on?  By now, Passailaigue is probably questioning his knowledge-share relationship with all of his under employees/independant contractors!!!  Maybe it's time to begin firings and replacements of some under-employee workers.

        The sad part of this saga is that there are SO MANY unemployed former CFO and Auditor job experienced  U.S.A. citizens that would have sincerely shared information about their major work-issues/projects with their Director/Leader within a week's time.  These under-employee workers would have never seen such fair behavior as demeaning (or whatever) to them self.

        Having several millions of dollars in my financial accounts means receiving several valuable services each day!


          sully16's avatar - sharan
          United States
          Member #81738
          October 28, 2009
          75588 Posts
          Posted: August 26, 2011, 6:56 am - IP Logged

          Yikes, what a disaster

          Hi LP family, won't be posting for a couple days, Hurt my right arm.

            cbr$'s avatar - maren
            United States
            Member #104478
            January 15, 2011
            11321 Posts
            Posted: August 26, 2011, 1:21 pm - IP Logged

            No Pity!this sound as if the financial reports are done quarterly meaning there should be 3 -4 signatures on them, the auditor , the financial officer, usally someone else here then the CEO. they each get a copy of the report all proofs and errors should have been corrected before it left them not at the IRS office .as far as Ernie        Passailaigue neecing to be told about a IRS problem, that not a excuse he should have read his own copy before he signed. If the report is late there is a financial penalty if the report has to send back to you for any reason pass the dead line it is concide late you pay the fee.I glad i am not not one of audttor for this job they don't prepare for this audit at all!!!