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Audit finds misuse of Colorado Lottery fund

Colorado LotteryColorado Lottery: Audit finds misuse of Colorado Lottery fund

Legislation, rule changes seek tighter tracking of spending

Colorado state leaders Tuesday unveiled plans to curb "substantial problems" uncovered by a newly released audit of Colorado's conservation trust fund, a multimillion-dollar pot of lottery profits that is supposed to pay for parks and recreation.

A state audit released Tuesday found that more than $1.2 million of the fund's expenditures in 2002 were spent by local governments in ways the state does not allow.

The audit also criticized 10 communities that failed to file adequate reports on how they used their share of the funds. In addition, auditors uncovered $574,000 in "questionable" spending, where officials were unclear in explaining how they doled out the cash.

The fund, which distributed $42.3 million in 2002, is intended to be chiefly used for building and maintaining parks and conservation sites. Much of the misspent money went for what auditors called "unallowable purposes" such as fireworks, underwriting public associations, sporting goods or administrative costs, according to the audit.

While some of the expenditures appear to have flouted the will of the state's voters who authorized the fund and the lottery itself, they are not considered illegal. That's because the laws governing the fund have been subjected to multiple interpretations over the years.

Auditors warned that if the laws weren't clarified, Coloradans could ultimately lose out on the benefits of the lottery.

"Over time, expenditures of conservation trust fund monies for unallowable purposes could result in a substantial loss of funds intended for" parks, recreation and open space, the audit said.

The audit closely tracks a report in The Denver Post that outlined how the conservation trust fund, one of the chief pools of lottery profits that voters said must be used to preserve the state's natural beauty, may have been wrongly tapped.

The report found that most local governments honor the law requiring the fund to be used for open space and outdoor recreation purposes.

But there are many examples of curious spending and lax oversight. In one case, an official from the Eastern Plains town of Haswell was able to siphon $1,500 from the fund to feed an Internet gambling habit without being noticed by superiors. In another, officials from the town of Castle Rock, to pay for a TABOR tax refund, dipped into its trust fund account to help defray that cost.

Some legislators suggested the fund can be fixed by a bill sponsored by state Sen. Ron Tupa, a Democrat from Boulder, in concert with rule changes by Michael Beasley, executive director of the Department of Local Affairs, which oversees the fund.

A key component of the legislation announced Tuesday would require the treasurer of each local government that gets the fund to sign off on how the money is used.

That way, embezzlement of trust-fund money, such as what happened in Haswell, could be prdvented.

If the legislation became law, it would also prdvent officials in places such as Grand County from using $1,400 in trust fund money toward a ski/snowboarding trip, Pueblo from spending $20,000 toward a now-defunct minor league baseball team or towns such as Victor from using fund money for office supplies - all of which has occurred, even since an earlier audit tried to clarify the fund's rules.

In addition, the legislation would require local governments to separately track trust fund money. It would also provide the state the power to recover misused trust fund cash and allow the state to halt the release of property tax revenue to communities until they remedy deficiencies.

As it stands, if egregious spending is discovered by state officials, the law is written in such a way that there is little they can do. The state's Department of Local Affairs gives the money directly to cities and counties, based strictly on population, and has no mechanism - short of criminal prosecution - for recovering money spent questionably.

As a result, despite the findings that communities had misspent state money, no one will be forced to repay.

That is because local officials did not know they were doing anything wrong: They were reporting their trust fund spending on a state form that said it was OK to use the money for things such as athletic teams and fireworks - something that should have been fixed in 1995 after an audit that year, auditors pointed out.

Beasley said he will change the form on which communities must detail their trust fund expenditures to comply with the law.

He also said he wants to launch audits of a select sample of local governments each year.

"This is a very balanced proposal," Beasley said of the legislation and the new policies. "It guarantees to the legislature and to the taxpayer that the trust funds will be used correctly."

The audit also found that local governments using the fund for salaries - something else questioned in the 1995 audit - is fine, as long as the money is used for employees such as parks workers and lifeguards.

Beasley's spot-check audits of local governments are likely to cut down on officials using fund money for things such as cellphones and meals for public officials.

Still, these fixes are not assured.

Some legislators are opposed to spending any more to improve oversight of the fund.

"I'm wondering how much cleanup we can do without spawning a whole new bureaucracy," said Rep. Tambor Williams, a Republican from Greeley.

Bill supporters said the cost would be minimal and would essentially amount to the hiring of an additional person. In addition, state leaders are awaiting an opinion from the attorney general, who will rule if the fund can be tapped for the state's oversight costs.

A lobbyist for local governments, Sam Mamet of the Colorado Municipal League called the proposal "overkill," given that the audit found that 96 percent of the overall spending by communities "appeared to be allowable."

"How much of a problem really exists?" Mamet asked.

Still, he noted: "We'll support whatever is necessary to ensure these funds are spent within the letter and the spirit of the law."

Beasley said he will wage a tough fight at the statehouse to make sure the bill is passed.

"I'm going to take the hard line," he said. "I'm going to insist on armor-plated enforcement."

Denver Post

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2 comments. Last comment 14 years ago by Todd.
Page 1 of 1
BabyJC's avatar - Lottery-031.jpg

United States
Member #3271
January 7, 2004
148 Posts
Posted: January 28, 2004, 3:30 pm - IP Logged

First Minnesota, now Colorado!  Unbelievable.

    Todd's avatar - Cylon 2.gif
    Chief Bottle Washer
    New Jersey
    United States
    Member #1
    May 31, 2000
    23962 Posts
    Posted: January 28, 2004, 7:29 pm - IP Logged

    Colorado has actually been going through this for months now.  Check out the Related Articles in the story.


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