REPORT DIGEST

 

DEPARTMENT OF THE LOTTERY

 

FINANCIAL AND COMPLIANCE AUDIT

For the Year Ended:

June 30, 2003

 

(Final Audit)

 

Summary of Findings:

 

Total this audit                      2

Total last audit                      0

Repeated from last audit       0

 

Release Date:

March 4, 2004

 

 

 

 

 

State of Illinois

Office of the Auditor General

WILLIAM G. HOLLAND

AUDITOR GENERAL

 

To obtain a copy of the Report contact:

Office of the Auditor General

Iles Park Plaza

740 E. Ash Street

Springfield, IL 62703

(217) 782-6046 or TDD (217) 524-4646

 

This Report Digest is also available on

the worldwide web at

http://www.state.il.us/auditor

 

 

 

INTRODUCTION

This digest covers our final compliance and financial audit of the Department of the Lottery for the year ended June 30, 2003. Effective June 1, 2003, Executive Order Number 9 (2003) transferred all the powers, duties, rights and responsibilities vested in the Department of the Lottery to the Department of Revenue. As a means of easing the transition of the Department of the Lottery into the Department of Revenue, management decided to report activity of the Department of the Lottery through the fiscal year ended June 30, 2003. The transferring of responsibilities was considered in developing the recommendations to the audit findings.

SYNOPSIS
  • The Department was not in compliance with the Fiscal Control and Internal Auditing Act.

 

 

 

 

 

 

 

 

{Expenditures and Activity Measures are summarized on the next page.}

 

 

                                     DEPARTMENT OF THE LOTTERY

                                               COMPLIANCE AUDIT

                                       For The Year Ended June 30, 2003

 

EXPENDITURE STATISTICS

FY 2003

FY 2002

  • Total Expenditures (State Lottery Fund) #9; 9;

$1,054,094,073

$1,033,456,045

OPERATIONS TOTAL

           % of Total Expenditures

          Personal Services

                    % of Operations Expenditures

                    Average No. of Employees

                    Average Employee Salary

     Other Payroll Costs (FICA, Retirement, Insurance)

                    % of Operations Expenditures

     Contractual Services

                    % of Operations Expenditures

     Telecommunication Expenditures

                    % of Operations Expenditures

     Lottery Game Promotion Expenditures

                    % of Operations Expenditures

     Electronic Data Processing Expenditures

                    % of Operations Expenditures

     Operation of Automotive Expenditures

                    % of Operations Expenditures

     Travel Expenditures

                    % of Operations Expenditures

     Depreciation Expenditures

                    % of Operations Expenditures

     All Other Operations Items

                    % of Operations Expenditures #9;

$62,752,597

6.0%

$7,893,357

12.6%

223

$35,396

$3,605,266

5.7%

$26,394,797

42.1%

$9,177,542

14.6%

$10,551,408

16.8%

$3,922,531

6.3%

$278,381

.4%

$87,624

.1%

$547,330

.9%

$294,361

.5%

$61,208,510

5.9%

$9,213,741

15.1%

272

$33,874

$3,854,058

6.3%

$24,829,646

40.4%

$8,981,371

14.7%

$9,122,817

14.9%

$3,831,257

6.3%

$291,226

0.5%

$93,778

0.2%

$641,300

1.0%

$349,316

0.6%

PRIZE TICKETS

          % of Total Expenses

$885,169,569

84.0%

$866,657,930

83.9%

COMMISSIONS AND FEES

          % of Total Expenses

$106,171,907

10.0%

$105,589,605

10.2%

  • Cost of Property and Equipment

$4,852,398

$5,334,011

OPERATING STATEMENT ANALYSIS (State Lottery Fund)

FY 2003

FY 2002

Revenues: Ticket Sales

                         Unclaimed Prizes

                         Other Operating Revenue

                         Non Operating Revenue – Interest

                                   Total Revenue

Expenses: Prizes

                         Commissions & Fees

                         Other Operating Expenses

                                   Total Expenses

                                   Income Before Transfers

Transfers to Common School Fund

Increase in Net Assets

Net Assets Beginning of Year

Net Assets June 30

$1,564,674,579

22,946,697

2,225,238

331,535

$1,590,178,049

$885,169,569

106,171,907

62,752,597

$1,054,094,073

$ 536,083,976

(539,825,427)

$ (3,741,451)

$ 46,916,033

$ 43,174,582

$1,566,308,572

30,448,090

2,224,862

647,818

$1,599,629,342

$ 866,657,930

105,589,605

61,208,510

$1,033,456,045

$ 566,173,297

(522,269,007)

$ 13,904,290

$ 33,011,743

$ 46,916,033

SELECTED ACTIVITY MEASURES (unaudited)

2003

2002

  • Percentage of Sales paid out in prizes

  • Percentage of sales transferred to the Common School Fund

55.2%

34.1%

54.2%

34.5%

AGENCY DIRECTOR

During Audit Period: Lori Montana ( to April 16, 2003), Kurt Freedlund, Acting Director (April 17, 2003 through May 31,2003), Brian Hamer, Director, Illinois Department of Revenue (as of June 1, 2003)

Currently: Brian Hamer, Director, Illinois Department of Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NONCOMPLIANCE WITH THE FISCAL CONTROL AND INTERNAL AUDITING ACT

As part of our audit testing we noted the Department was not in compliance with certain requirements of the Fiscal Control and Internal Auditing Act (Act). The following instances of noncompliance were noted:
  • The Director did not timely submit the required internal control certification to the Auditor General. The certification was filed with the Auditor General on July 24, 2003, approximately 80 days late.
  • No internal audits were performed during fiscal year 2003.

The Act (30 ILCS 10/3003) requires that by May1 of each year, each chief executive officer of all State agencies prepare and transmit to the Auditor General a certification as to whether or not the systems of internal fiscal and administrative controls comply with the requirements of the Act. In addition, the Act (30 ILCS 10/2003) also requires the chief executive officer to ensure the internal auditing program performs audits of all major systems of internal accounting and administrative control at least once every two years.

Lottery personnel indicated the Chief Internal Auditor position at the Lottery became vacant in October 2002 and the position was never filled. (Finding 03-02, pages 11 & 12)

We recommended the Department’s successor Agency incorporate the Lottery function in its reporting and auditing requirements related to the Fiscal Control and Internal Auditing Act.

Illinois Department of Revenue (IDOR) management concurred with the recommendation and indicated the Lottery will be included in the annual required certification made by IDOR. In addition, it was indicated that future IDOR internal audit plans will include the Lottery program.

 

OTHER FINDINGS

The remaining finding was less significant and is being given attention by the successor Agency. We will review the progress toward the implementation of our recommendation in our next audit.

Mr. Scott Miller, Chief of Staff, of the Illinois Department of Revenue provided the agency’s responses.

AUDITORS’ OPINION

Our auditors stated the Department of Lottery’s financial statements as of June 30, 2003 were fairly presented in all material respects.

 

 

____________________________________

WILLIAM G. HOLLAND, Auditor General

WGH:RPU:pp

 

SPECIAL ASSISTANT AUDITORS

Our special assistant auditors for this audit were Martin & Shadid, CPAs., P.C.