State Audit Discovers $200 Million In Illinois Lottery Bookkeeping Errors
By Chuck Sudo in News on Jul 2, 2013 8:20PM
Here’s another black eye for the Illinois Lottery. An audit conducted by Illinois Auditor General William Holland concluded the Lottery has “material weaknesses” in its internal financial controls that resulted in $200 million in bookkeeping errors.
Holland’s summary report, which covered the Lottery’s year ending June 30, 2012, contained “a number of errors, inaccuracies and weaknesses in the Department of the Lottery’s internal control structure.”
“Because of the significance of the errors, inaccuracies and weaknesses the auditors considered them to be material weaknesses in the Lottery’s internal control over financial and fiscal operations,” Holland added. The audit also found these problems extended to computers used to generate reports, which weren’t properly password protected
The Auditor General’s report led to finger pointing between the Lottery and Northstar Lottery Group, the private company hired to handle marketing the lottery and increase its sales. Illinois Lottery director Michael Jones said the accounting errors happened during a period where his department separated itself from the Illinois Department of Revenue and that bookkeeping errors are “not uncommon” during such transitions.
Jones laid most of the blame for the errors on Northstar, with whom his department has been arguing over compensation related to Northstar’s failure to meet lottery sales goals. Jones said most of the data in the audit came from Northstar. Northstar rejected that argument and said the audit focused on how the lottery keeps its own records.
Northstar was fined $20 million in March for failing to meet lottery revenue projections in 2012. They also fell short of projections in 2011. Meanwhile, Jones and other Lottery officials have had their ethics called into question after the Sun-Times reported they received tickets to pro basketball, baseball and hockey games; that Jones hired a consultant to help with Internet lottery sales who received $115,000 for four months of work; and that Jones tried to get Northstar to hire his daughter’s ballet company for a promotion.
Jones called the accusations a smokescreen by Northstar to deflect from the money they owe the state for not meeting sales projections.
The audit raised some eyebrows among Springfield lawmakers who said Jones and the Lottery need to get their own house in order before calling out Northstar. House General Services Appropriations Committee chairman Rep. Fred Crespo (D-Hoffman Estates) said, even if the errors are a result of the Lottery’s transition to an independent agency, “the figures are concerning.” Rep. David Harris (R-Arlington Heights) added the Lottery “needs to pay more attention to internal financial controls.”
The Illinois Lottery made headlines twice since December 2012 for bouncing checks to winners. Each time, Lottery spokesmen blamed those errors on computer files that weren’t sent to banks in time to authorize payments. At this point, it may be wise to buy every Lottery employee a copy of PC for Dummies.