Audit of California Lottery finds over $305,000 in improper or dubious spending

Apr 11, 2019, 9:32 am (11 comments)

California Lottery

California Lottery officials tallied more than $305,000 in improper or questionable spending over the last four years that included travel, food, gifts to employees and entertainment expenses, a state audit concluded Tuesday.

Among the improper expenses, the lottery agency spent $21,666 to give staff logo-branded swag such as T-shirts, backpacks, lip balm and iPad cases, labeling the purchases "learning aids" and "training tools," according to the audit by state Controller Betty Yee.

The financial review was launched after rank-and-file employees of the lottery complained in an anonymous letter sent to Gov. Jerry Brown in August and during testimony at public hearings that managers had failed to control spending and had allowed inappropriate conduct at sales staff events.

"Lottery management's lenient oversight and disregard for policies and procedures allowed for more than $300,000 in prohibited and questionable costs," Yee said in a statement. "Clearly, Lottery management needs to overhaul their internal controls and enforce state policies."

Yee's review is just the first investigation completed after employees went public with complaints that included an alcohol-fueled party at which a manager allegedly put his head inside the blouse of a female employee. The state Department of Justice is also looking at allegations of mismanagement, nepotism, cronyism and favoritism by agency officials.

The California Lottery's management reviewed the audit and "generally agrees with its findings and recommendations," the agency said in a statement, adding that "Lottery Sales Division management could have done a better job tracking and documenting expenses and minimizing administrative errors."

An internal review of the issues has already resulted in corrective action, the agency said in its statement, noting that its "staff is receiving updated training to ensure awareness of, and compliance with, all state regulations and rules."

The state lottery was created when California voters approved Proposition 37 in 1984, with a portion of proceeds going to education. The audit comes at a time when the lottery is setting sales records: The agency provided $6.2 billion to public schools during the four-year period covered by the audit, officials said.

"Our audit found that the Lottery lacked adequate controls, including policies and procedures" for travel expenses, including those in an $8-million revolving fund for expenses, the audit concluded.

"In addition, policies and procedures were not followed as a result of the Sales Division's directives and poor oversight," the audit report said.

Auditors identified $240,934 in unallowable costs and $64,088 in questioned costs. The unallowed costs included $131,832 in inappropriate or unnecessary employee travel expenses for sales division staff events.

Improper expenses included $83,411 in hotel costs billed by employees despite a policy against such stays when a worker lives within 50 miles of an event.

"We identified one employee who lived only six miles from the conference but stayed at the hotel for three nights, costing $536," the audit said. Lottery officials also overbooked rooms, resulting in cancellation and attrition fees of $12,731.

In addition, sales managers claimed excessive mileage reimbursement for commutes to the office by making brief stops at retail locations and claiming they were required by their job, the audit found. In one case, auditors said a manager had $13,280 in unallowable mileage costs.

The audit also said $16,738 was improperly spent on food and drinks at a non-mandatory after-hours meet-and-greet event with an agency contractor.

In an email to employees, Lottery Director Hugo López wrote that Yee's office "did not discover any instances of fraud as had been alleged in the anonymous letter."

The agency drew criticism from 27-year veteran lottery worker Tom Weber, a union steward who was one of five employees who complained about mismanagement in testimony to the Lottery Commission in September.

"The lottery, as usual, is downplaying a much more serious problem," Weber said. "They are sweeping it under the carpet."

LA Times

Comments

noise-gate

...so if l understand this right, Weber is upset because the investigation into the allegations did not go the way " it should have" which is focussing on the party, promotion practices etc etc. Doing an audit on improper, unallowable costs is " not what they wanted  " so now it's " sweeping it under the rug." I recall mentioning earlier " careful what you wish for!" For all we know, these whistleblowers benefited from much of the questionable cost expenditures. Staying at a hotel for 3 nights whilst living 6 miles from your residence, hunkered down in piles of paperwork, doing the people's job.Right, Ok. There is name for that..It's called BS

music*'s avatarmusic*

Although State Controller Betty Yee is not a member of my political party I did vote for her. Her pre-election interview was the best one and earned my trust. She will be the one writing the check to me as a future winner. 

  The state Department of Justice is also involved in this case.

 Can we count on our new Governor Gavin Newsom doing a good job with this challenge?

US Flag

Raven62's avatarRaven62

It would seem that previous analysis of  operations and maintaining rigorous systems of internal controls to prevent and detect various forms of fraud and other accounting irregularities have been ineffective!

lejardin's avatarlejardin

Oh shocker lol.  How about firing ALL those who did not follow rules and regulations already in place?    "staff is receiving updated training to ENSURE awareness of, and compliance with, all state regulations and rules." 

cottoneyedjoe's avatarcottoneyedjoe

Although $300K is minuscule compared to what the CA lottery brings in, it's good that state auditors are nipping this in the bud early. If you let them get away with travel expense funny business, they'll be emboldened to take more liberties with expenses.  The old adage "give someone an inch and they'll take a mile" is very true.

sully16's avatarsully16

Quote: Originally posted by Raven62 on Apr 11, 2019

It would seem that previous analysis of  operations and maintaining rigorous systems of internal controls to prevent and detect various forms of fraud and other accounting irregularities have been ineffective!

aka- "OH OH" someone had their hand in the cookie jar.Hyper

Artist77's avatarArtist77

Congratulations to the 99.9% of lp members why realized there was more to come here.

KY Floyd's avatarKY Floyd

"California Lottery officials tallied more than $305,000 in improper or questionable spending over the last four years"

Luckily for the people responsible that's not a firing offense, like letting a woman pull her shirt over your head is.

DELotteryPlyr's avatarDELotteryPlyr

"auditors said a manager had $13,280 in unallowable mileage costs."

I was once threatened with being fired for just over $30 in a mileage cost dispute.  Someone should have caught most, if not all, of this and people should have been fired.  Then the lottery puts out a email saying no fraud found, that means THEY are the issue, starts from the top. 

ckrakowski

Quote: Originally posted by cottoneyedjoe on Apr 11, 2019

Although $300K is minuscule compared to what the CA lottery brings in, it's good that state auditors are nipping this in the bud early. If you let them get away with travel expense funny business, they'll be emboldened to take more liberties with expenses.  The old adage "give someone an inch and they'll take a mile" is very true.

Early my foot. The report that started this was sent by an anonymous employee for two consecutive years.

 

The first time nothing was done.

 

How much of this fraud was done between the time the first letter was sent and the second letter.

 

How much fraud could have been prevented.

 

What a surprise that there is nothing about repaying any money.

Stack47

Quote: Originally posted by KY Floyd on Apr 12, 2019

"California Lottery officials tallied more than $305,000 in improper or questionable spending over the last four years"

Luckily for the people responsible that's not a firing offense, like letting a woman pull her shirt over your head is.

LOL

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