Oct. 12, 2008
By Jerry Kopel
You scratch mine. I'll scratch yours.
Porno talk? Nope. Just a conversation between two Colorado lottery
players holding addictive instant game tickets costing $20 each.
Price of a lottery ticket is unlimited, except the lottery commission
cannot, by statute, charge less than $1.
The addition of a $20 ticket was partly responsible for the largest ever
sale of instant game tickets in Colorado. And the fiscal year ending
June 30, 2008 produced a new high of over half a billion dollars in
gross lottery sales, a $50 million increase but only $3.2 million in
additional funds for Great Outdoors, Conservation Trust, Parks and
There is also a new "inspector" in town. CRS 24-35-211 requires an
annual financial audit. For the fiscal year ending June 30, 2008, the
lottery hired Clifton Gunderson LLP, a certified public accounting firm
from Greenwood Village. It replaced BKD of Colorado Springs, which did
the independent audits from 2003 through fiscal 2007.
Clifton is a hardball-player firm. This was the first time I saw the
word "corruption" in the yearly financial audits.
First issue: Scientific Games has had the vendor contract since
2005. Each year the independent audit recommended Scientific Games
produce what they agreed in their contract to do, which included
retailer billing and tax reporting.
Every year, the lottery administration promised it would happen and it
never has. The result? Manual labor by lottery employees to obtain
correct information. If the billing is done late, the retailer benefits,
making interest on the money, and the same with tax reporting.
Clifton wrote: "As long as the lottery must rely on manual balancing
systems ... a risk of the loss of data integrity or corruption will
always be present. (Clifton urges) ... ensure that the process ...
fulfills the requirements agreed upon as a part of the vendor's
Is Scientific Games being paid for something they are not doing? I
believe the 2009 fiscal year is the last year of the present contract.
Will there be bidding on a new contract? How much has the manual labor
cost the lottery?
Second issue: The lottery changed marketing firms for the fiscal
year ending June 30, 2008, hiring Cactus Communications from Sept. 10,
2007 through June 30, 2010.
Clifton found "invoices lottery receives do not contain full support for
the charges incurred by Cactus. As of August 2008, the lottery had yet
to conduct an audit of the invoices and related charges submitted for
payment by Cactus." Lottery agreed to conduct a FIRST audit by November,
2008. (I guess there will be no audit for Sept. 2007 through June,
Third issue: Are you a big lottery winner? Are you going for a
cash payout of a smaller sum, or an annuity from a qualified insurance
company? As of June 30, 2008, there were 289 annuities still being paid
by insurance companies for a total of $490 million.
If the insurance company defaults, the lottery is responsible for
payment. Result: The lottery has a qualification policy for insurance
Oh, oh! Six of the 14 companies with annuity contracts of $82 million
total are NOT in compliance.
The six companies are still employed for the annuities previously
contracted and Lottery promises to scrutinize their financial status and
determine " if further action is needed".
Even though the lottery hit a new high of $505.8 million, a $50 million
climb, the overall payout to Great Outdoors and other beneficiaries was
almost like treading water ($3.2 million).
The largest expense increase was "prize expense" at $38 million more
than in fiscal 2007.
Gross ticket sales compared to fiscal 2007:''Scratch was $39 million
higher ($336 over $297). Powerball was $8 million higher ($109.5 vs.
$101.5). Lotto was $1.2 million higher ($41 vs. $39.8). Cash 5 was $1.7
million higher ($19.1 vs $17.4).
There was $122.2 million available for:
|Great Outdoors Colorado
|Conservation Trust Fund
|Parks and Recreation
|| $08. million
Another change: Clifton claims spillover went to Lottery Proceeds
Contingency Reserve Fund instead of the State Public School Fund
Contingency Reserve, but the statute referred to in the audit no longer
In a future column: The recent five year lottery performance audit by
the state auditor and its implication for the lottery's future.
(Jerry Kopel served 22 years in the Colorado House.)