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 fourth quarter of Fiscal Year 1998 when earnings were reportedly understated.

According to an audit report released yesterday, lotto 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.

This failure resulted in the understating of government earnings from the gaming activity by $12,934 in the last three months of FY 1998. OPA said actual government revenues from lottery operations that period was $185,500.

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 understatement of the FY 1998 revenues were caused by 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.

OPA also said that 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.

The Public Auditor is recommending that adequate procedures be put in place to ensure completeness of lottery sales, which is the basis for the computation on government revenues.

The report said NIL and JFF sold tickets with different number series as well as different colors and formats, making it impossible to account for the actual number of tickets peddled.

“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.

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.