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YELLOW SHEET Office of the State Auditor of Missouri |
January 15, 2002
Report No. 2002-05
The following problems
were discovered as a result of an audit conducted by our office of the State
Lottery Commission.
The
State Lottery Commission�s advertising and promotional expenditures were
approximately $10 million for years ended June 30, 2001 and 2000; however, a
thorough study of advertising expenditures� effects on sales has not been
performed.
The
Missouri Lottery�s advertising budget is comparable to other state lotteries
that have the same ticket sales volume as Missouri.� Additionally, it appears that advertisements to make the public
aware of large jackpots and new promotions may help increase sales.� However, much of the advertising done by the
commission does not inform the public of either large jackpots or new
promotions, and the commission could not provide us with evidence that this
type of advertising increases sales.�
While reviewing other state lotteries, it was noted that the
Massachusetts State Lottery has steadily decreased its advertising expenditures
over the past eight years, while its sales have continued to increase.�
A
prior audit performed by our office recommended that the Lottery Commission
have an independent review conducted to analyze the effectiveness of
advertising.� The commission contracted
with the University of Missouri in the fall of 1998 to have an evaluation
performed on the impact of advertising expenditures on sales of Lottery
products.� Because the Lottery
Commission did not maintain data in a manner conducive to analysis, this
evaluation, costing $10,711, could not support its conclusions and was
therefore determined to be inadequate.
A
follow-up to the evaluation was done by the University of Missouri in the
spring of 1999, costing $1,200.� This
follow-up listed ways in which the commission could collect and maintain data
so that studies could be performed in the future.� The State Lottery Commission has begun collecting sales and
expenditure data from the advertising agency in the manner prescribed by the
follow-up done by the University.�
The
State Auditor recommended the Lottery Commission have an independent study made
of its advertising program with the goal of possibly reducing its advertising
expenditures without significantly reducing sales volume. Lottery Commission
employees indicated that an evaluation is planned before the end of the fiscal
year 2002; however, it has yet to be scheduled.
Adequate
controls are not in place or not always enforced for prize check distribution
in the regional offices.� There is not
always an independent verification of the accuracy of the checks.� There were also numerous entries on the
check register of illegible winner�s signatures,
only initials were written, or nothing was indicated at all.� Some checks listed as voided were not
retained and an explanation of the reason for voiding some checks was not
given.� Additionally, some retained
voided checks were not properly marked void.
The
State Lottery Commission does not have a uniform procedure for managing or
accounting for tickets received through sponsorship agreements and various
individuals were responsible for different events.� There is also no formal written policy regarding the use or
tracking of tickets received.
As
a part of its advertising program, the commission sponsors various sporting and
entertainment events.� These events
include, but are not limited to, professional baseball and football, college
football and basketball, concerts, and various minority and women�s events and
projects.� According to the contract
terms, the commission receives various forms of advertising during the events
as well as other items, such as tickets to the events.� During the year ended June 30, 2001, the
Lottery Commission spent over $3 million on sponsorships (up from just over $2
million in 1999).�
The
commission�s sponsorship program includes the purchase of ten season tickets
each year for the St. Louis Rams football games through a personal seat license
(PSL).� The cost of purchasing these
tickets for the 2001-2002 season was $6,500.�
It is the commission�s informal policy to give sponsorship and PSL
tickets to commission retailers as incentives and sales promotions, believing
this will encourage the retailers to increase their participation in lottery
products.� In contrast to the other
tickets received, the State Lottery Commission does not receive any advertising
exposure through the purchase of the PSL tickets except when used in player or
retailer promotions.� The state Lottery
commission should reconsider the purchase of these season tickets.� The State Lottery Commission has a fiduciary
duty to ensure funds are expended in a manner that maximizes revenues, and
therefore maximizes the amount of money transferred for education purposes.
