Massachusetts State Lottery Commission

This is a state performance audit of parts of the Massachusetts State Lottery Commission’s work during July 1, 2010 through September 30, 2012.

“This audit examined certain activities of the Massachusetts State Lottery Commission (MSLC) for the period July 1, 2010 through September 30, 2012.”

Auditors checked whether the Lottery had proper controls over game integrity, sales agents, ticket handling, billing, internal audits, debts from agents, and follow-up on earlier audit findings.

“The objectives of our audit were to examine certain activities of MSLC to ensure that (1) MSLC had established and implemented adequate internal controls to ensure game integrity; (2) lottery games were discontinued in accordance with MSLC regulations and policy; (3) unsold, activated instant-game lottery tickets (instant tickets) were accurately accounted for and properly safeguarded, and sold instant tickets were accurately billed to sales agents in compliance with MSLC regulations and policy; (4) MSLC had appropriate controls in place for the monitoring and oversight of its licensed sales agents; (5) MSLC’s internal audit unit complied with MSLC’s established policies and procedures (this included determining whether corrective actions were taken on identified internal audit findings and recommendations); (6) accounts receivable from sales agents were administered in compliance with the Office of the State Comptroller’s regulations and MSLC’s policy; and (7) MSLC had taken corrective actions to address any findings from our prior audit (No. 2008-0089-3S) that were related to our current audit objectives.”

Lottery money supports cities, towns, arts programs, cultural programs, and gambling-related public health work, so weak controls can affect public money and public trust.

“Lottery funds are unrestricted for the cities and towns, which means they can be spent on public safety, education, and other important local services.”

If you live in Massachusetts, the Lottery’s profits help fund local services in your city or town, so the way it protects games and money matters to taxpayers and residents.

“MSLC’s excess revenue over its expenses is distributed by the Commonwealth in the form of indirect and direct local aid.”

The Lottery mostly had adequate controls in the areas tested, but auditors found important exceptions that needed fixing.

“Based on our audit, we have determined that for the period July 1, 2010 through September 30, 2012, excluding the issues addressed in the Detailed Audit Results and Findings section of this report, MSLC maintained adequate internal controls over its financial operations and program activities for the areas tested.”

The Auditor recommended that the Lottery follow its own background-check rules, tighten ticket-return documentation, review suspicious ticket-scanning patterns as written in policy, and create better checks for employee and household-family prize claims.

“After we completed our audit, MSLC informed us that it had implemented a new policy to ensure that all activated instant tickets collected from terminated sales agents were accurately accounted for, properly safeguarded, and ultimately destroyed and that related supporting documentation was checked for accuracy, completeness, and necessary signatures.”

The biggest significance is that the report points to risks around lottery integrity: who is allowed to sell tickets, whether returned live tickets are protected, whether agents can spot winners improperly, and whether employees or their household family members might claim prizes despite Lottery policy.

“Since activated instant tickets can be cashed up until the point of destruction, there is also a potential financial risk to the Commonwealth that prizes from unsold but activated instant tickets could be claimed.”

“Peeking” means a sales agent improperly scans tickets before sale to try to find winners; “clear errors” are warning signs that this may be happening.

“Clear errors are “intentionally or unintentionally [abusing] auto cash privileges, a potential indicator of attempted ‘peeking.’””