REPORT DIGEST

DEPARTMENT OF THE LOTTERY, STATE
LOTTERY FUND

FINANCIAL AUDIT
FOR THE YEAR ENDED JUNE 30, 2021

Release Date:  May 26, 2022

FINDINGS THIS AUDIT:  6

CATEGORY:  NEW -- REPEAT – TOTAL
Category 1:  0 -- 1 -- 1
Category 2:  2 -- 3 -- 5
Category 3:  0 -- 0 -- 0
TOTAL:  2 -- 4 -- 6

FINDINGS LAST AUDIT: 5

Category 1: Findings that are material
weaknesses in internal control and/or
a qualification on compliance with
State laws and regulations (material
noncompliance).
Category 2: Findings that are
significant deficiencies in internal
control and noncompliance with State
laws and regulations.
Category 3: Findings that have no
internal control issues but are in
noncompliance with State laws and
regulations.

State of Illinois, Office of the
Auditor General
FRANK J. MAUTINO, 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 TTY (888) 261-2887

This Report Digest and Full Report are
also available on the worldwide web at
www.auditor.illinois.gov

INTRODUCTION

This digest covers the financial audit
of the State Lottery Fund as of and
for the year ended June 30, 2021, and
the six findings arising from the
financial audit reported under
Government Auditing Standards.  A
separate digest covers the
Department’s compliance examination
for the two years ended June 30, 2021.

SYNOPSIS

• (21-03) The Department had not fully
implemented corrective action to
quantify the impact of improper prior
period overhead charges and had not
performed a “true up” of its estimated
prize liabilities to prizes paid.
• (21-06) The Department did not
maintain adequate controls over
changes to its Internal Control
System.


FINDINGS, CONCLUSIONS, AND
RECOMMENDATIONS

INADEQUATE CONTROLS OVER SPECIALTY
TICKETS

The Department of the Lottery
(Department) had not fully implemented
corrective action to quantify the
impact of improper prior period
overhead charges and had not performed
a “true up” of its estimated prize
liabilities to prizes paid.

During testing, we noted the following
problems:

• During the Fiscal Year 2017 and
Fiscal Year 2018 annual audits,
predecessor auditors had questioned
whether the Department’s practice of
allocating an overhead charge to
specialty tickets conformed with the
Illinois Lottery Law’s net revenue
formula. Department officials
ultimately agreed with the predecessor
auditors and ceased allocating the
overhead charge during Fiscal Year
2019. However, the Department has not
yet quantified the difference between
the overhead charge and its actual
administrative costs solely related to
each specialty scratch-off game from
October 2008 through June 2018. As
such, the Department has not posted
adjusting entries to correct prior
period errors.

• The Department has not performed its
“true up” for its initial estimated
prize liability for specialty ticket
games ending during the two years
prior to June 30, 2018. This true up
would recalculate the amount of net
revenue based upon actual known prizes
paid after the game had formally
ended, with adjusting entries being
posted to correct for estimation
differences.

• Due to the two preceding problems,
the “accrual only” information sent by
the Department to the Department of
Public Health, the Department of
Veterans’ Affairs, and the Department
of Human Services during the State’s
annual financial reporting process was
not complete and accurate.

In addition, this finding was first
noted during the Department’s Fiscal
Year 2017 engagement, five years ago.
As such, Department management has
been unsuccessful in implementing a
corrective action plan to remedy these
deficiencies.  (Finding 3, pages
56-59)  This finding has been repeated
since 2017.

We recommended the Department develop
an annual financial reporting
checklist which includes performing a
“true up” of actual prizes paid to
estimated prizes paid for all games
that have closed out. Further, the
Department should complete its
analysis of the impact of allocating
the overhead rate as opposed to actual
administrative costs and, as
necessary, post adjusting entries.

Department officials accepted our
recommendation.


INADEQUATE CONTROLS OVER CHANGE
MANAGEMENT

The Department did not maintain
adequate controls over changes to its
Internal Control System (ICS).

The Department utilizes ICS to process
lottery drawing transactions and
validate the online gaming system.
During our review of the Department’s
ICS Change Management Procedures, we
noted it had not been updated since
September 2014 and did not document:
• guidelines for prioritization and
classification of changes;
• testing and documentation
requirements; and,
• controls over emergency changes.

Further, we requested the Department’s
documentation controlling developers’
access to ICS’ production environment;
however, this documentation was not
provided.
Therefore, we were unable to determine
if developer access was appropriate.
(Finding 6, pages 64-65)

We recommended the Department update
the ICS Change Management Procedures
to ensure they address:
• guidelines for prioritization and
classification of changes;
• testing and documentation
requirements; and,
• controls over emergency changes.

We further recommended the Department
ensure the developers of ICS have
appropriate access with documentation
maintained of such.

Department officials accepted our
recommendation.

OTHER FINDINGS

The remaining findings pertain to
noncompliance with fund transfer
provisions, inadequate controls over
census data and SOC report reviews,
and system access weaknesses.  We will
review the Department’s progress
towards the implementation of our
recommendations in our next financial
audit.

AUDITOR’S OPINION

The auditors stated the financial
statements of the State Lottery Fund
as of and for the year ended June 30,
2021, are fairly stated in all
material respects.

This financial audit was conducted by
Sikich, LLP.

JANE CLARK
Division Director

This report is transmitted in
accordance with Section 3-14 of the
Illinois State Auditing Act.

FRANK J. MAUTINO
Auditor General

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