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Colorado lottery audit unveils woes

Colorado LotteryColorado Lottery: Colorado lottery audit unveils woes

Report: Abuse of perks cuts into proceeds for open space

State auditors released a report Monday on the Colorado Lottery, finding that its sales may be hitting a ceiling and that profits that should be going to parks and open space are being eaten up by increased prizes used to try to attract more players.

The audit also unearthed a series of deep-seated problems in how the lottery monitors company-cellphone usage, its fleet of 55 vehicles and a "gravy train" of employee bonuses.

Those costs also eat into cash that could be paying for the open-space purchases mandated by voters, auditors said.

Also troubling to auditors were trips for lottery officials paid for by the vendors they do business with, which "could represent a conflict of interest."

"It doesn't look good for the public, it doesn't look good for the state, it doesn't look good for you guys," audit committee chairman Sen. Ron Tupa told the lottery and Department of Revenue chiefs. His committee reviews the audits and signs off on their release.

M. Michael Cooke, executive director of the Department of Revenue, which oversees the lottery, largely agreed.

"These findings do concern me," Cooke said. "We definitely have some work to do, and that work is underway."

She pledged to fix all problems the audit uncovered, which spanned 15 items in the 79-page report. And Cooke said she has already implemented fixes to prdvent abuses of travel, cellphone use and of the lottery's vehicle fleet.

The audit was a mandatory performance audit conducted every five years.

Specifically, auditors found the percentage of profits generated for parks, recreation and open space dropped to 26.6 percent this year from 30.2 percent when the lottery began in 1983.

That dip is "of particular concern because the lottery was created specifically to provide funding to benefit outdoor resources and activities," auditor Jenny Page said.

As profits dipped, prizes soared, with 57.6 percent of lottery revenue going to prizes in 2003, compared with 51 percent in 1983.

By law, the Colorado Lottery is required to pay out at least 50-percent of its ticket sales in prizes.

The audit was released just two weeks after lottery director Mark Zamarripa abruptly resigned. He said in an earlier interview that his departure was not related to the audit nor problems at the agency.

"He got out before we could grill him," Tupa said. "It would have been nice to have him here to answer some of these questions."

Reached at home, Zamarripa said he had seen drafts of the audit but not the final version.

"I really don't have a lot to say," he said.

Some key findings include:

The lottery's marketing plan is not coordinated well. For example, in 2003, the lottery spent $1.2 million on sponsorships, promotions, key chains, jackets and golf items, but in most cases did not evaluate closely how these items were used. "As a result," auditors said, "expenses for promotions and giveaways appears subjective, unsystematic, and at risk of misuse."

The lottery needs to reassess bonuses for its sales staff. Since 1983, the lottery has doled out $3.7 million in bonuses to its sales staff. A similar audit five years ago found the lottery unable to demonstrate whether bonuses resulted in more sales. Auditors on Monday found the lottery made few changes since. Tupa called the bonuses a "gravy train" for employees.

The lottery has problems with monitoring its fleet of vehicles. In some cases, mileage reports had been altered. And of the lottery officials who had a state vehicle, nearly half did not meet the requirements for them. Cellphone use is also suspect, auditors found. In some cases, phone charges could not be explained. In another case, the lottery purchased two cellphones for about $500 but could not provide documentation on who received the phones.

The lottery does not do a good enough job tracking the tickets it gives out for sporting dvents and concerts. In one case, lottery sales staff used six tickets worth $100 each to a Red Hot Chili Peppers concert, but the lottery did not provide details for why this was needed or who went to the show.

Lottery officials have been reimbursed by vendors and associations for numerous trips. In addition, documentation surrounding these trips was shoddy, "making review problematic and raising concerns about whether these expenses have been fully disclosed."

The lottery spends about $250,000 annually on consumer research as part of its contract with Scientific Games International, which runs the lottery's scratch-off ticket operation.

Auditors found the lottery did not track the spending of this money well and that the lottery over the past three years paid $51,000 for services that were never provided.

Denver Post

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