OPA faults DOF computation of lottery revenues

The Office of the Public Auditor faulted the computation of government revenues generated from the lottery operations during the first quarter of Fiscal Year 1999 when earnings were reportedly understated.

According to an audit report released yesterday, government revenues were understated by as much as $25,232 in the first three months of the last fiscal year.

Government revenue from lottery operations was reported to have reached only $157,830, and should be increased to $183,062 following the audit report’s findings that it was understated.

Lottery operators failed to compute lottery revenues based on the terms of agreement of the Memorandum of Understanding reached with the CNMI government in 1994, 1997 and 1998.

The Public Auditor also blamed lottery operators’ failure to promptly remit quarterly license fees. The audit investigation’s subject were three lotto operators — TMS Saipan, Ltd., Numbers International Lottery, and Just for Fun.

OPA said NIL and JFF sold tickets with different number series as well as different colors and formats, which made it impossible to account for the actual number of tickets sold.

Public Auditor Leo LaMotte said there was no assurance that government revenues received from the two lottery companies were complete.

“This occurred because the lottery operators and DOF did not employ control procedures that can assist in verifying lottery sales reported to the finance department. Accordingly, there was no assurance that government revenues received from NIL and JFF were complete,” the audit report added.

In FY 1998, revenues were also understated because of TMS Saipan’s computation of government earnings from one of the on-line games using a 26.5 percent compensation instead of the required minimum 35 percent.

In the same year, NIL deposited government revenues to the CNMI lottery bank account in an amount less than its computed amount, and that JFF remitted the quarterly license fee on a monthly basis with the last monthly payment deposited after the period under review.

In order to appropriately address understatement of revenues from lottery, OPA recommended that the finance department and its accounting division record the $232 additional commission from TMS.

The Public Auditor is also recommending that DOF address its previous instruction for the installation of adequate procedures to ensure completeness of lottery sales, which is the basis for the computation on government revenues.

OPA suggested that the finance department require lottery operators to ensure that tickets printed and issued to agents are controlled, and that sold and unsold tickets are accounted for on a regular basis.

“Without such a procedure, lottery sales could easily be understated without detection.
Therefore, this procedure should be documented through monitoring log sheets singed by the printing company, lottery operator or agents and reviewed by DOF,” OPA emphasized.

In a letter to Public Auditor Leo LaMotte, Finance Secretary Lucy Nielsen said DOF is currently developing standard lottery regulations to address OPA concerns on the inadequacy of procedures to ensure every single lotto ticket sold is accounted for.