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

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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

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9 comments. Last comment 13 days ago by DELotteryPlyr.
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noise-gate's avatar - images q=tbn:ANd9GcR91HDs4UJhjxO7cmeMQWZ5lB_FOcMLOGicau4V74R45tDgPWrr
Chasing the Dream.
White Shores- California
United States
Member #136473
December 12, 2012
5670 Posts
Offline
Posted: April 11, 2019, 10:30 am - IP Logged

...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

 * Voice of Reason *   

 

People who say it cannot be done should not interrupt those who are doing it- George Bernard Shaw.

    music*'s avatar - Trek HAND1.gif
    Fresno, California
    United States
    Member #157851
    August 2, 2014
    3322 Posts
    Offline
    Posted: April 11, 2019, 10:46 am - IP Logged

    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

      "May You Live Long and Prosper" Spock on Star Trek. A Vulcan.

      Raven62's avatar - binary
      25
      New Jersey
      United States
      Member #17842
      June 28, 2005
      100130 Posts
      Online
      Posted: April 11, 2019, 11:04 am - IP Logged

      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!

      A mind once stretched by a new idea never returns to its original dimensions!

      Catch-22: A dilemma or difficult circumstance from which there is no escape because of mutually conflicting or dependent conditions.

      Corruptissima re publica plurimae leges: When the republic is at its most corrupt the laws are most numerous.

        lejardin's avatar - Lottery-014.jpg

        United States
        Member #118605
        November 4, 2011
        1387 Posts
        Offline
        Posted: April 11, 2019, 12:31 pm - IP Logged

        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 avatar - cuonvFT

          United States
          Member #197118
          March 28, 2019
          33 Posts
          Online
          Posted: April 11, 2019, 2:31 pm - IP Logged

          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 avatar - sharan
            25
            Ringleader
            Michigan
            United States
            Member #81738
            October 28, 2009
            61765 Posts
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            Posted: April 11, 2019, 2:37 pm - IP Logged

            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

            Lovies

              Artist77's avatar - batman14

              United States
              Member #121741
              January 16, 2012
              6884 Posts
              Offline
              Posted: April 11, 2019, 6:00 pm - IP Logged

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

              Je vous salue, Marie, pleine de grace.  We will rebuild!

                Avatar
                NY
                United States
                Member #23834
                October 16, 2005
                4056 Posts
                Offline
                Posted: April 12, 2019, 12:29 am - IP Logged

                "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.

                  Avatar
                  Maryland
                  United States
                  Member #162429
                  January 2, 2015
                  1786 Posts
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                  Posted: April 13, 2019, 2:44 pm - IP Logged

                  "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.