Summary

Report on Financial Statements

The financial statements prepared by the Department of the Lottery present fairly, in all material respects, the financial position of the Lottery as of June 30, 2007, and the changes in operations and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Report on Internal Control and on Compliance and Other Matters

In our opinion, Lottery management maintained, in all material respects, effective internal control over financial reporting.  Also, for those items tested, the Lottery generally complied with significant provisions of laws, administrative rules, regulations, contracts, and other guidelines.

Additional Observations and Findings

Information Technology (IT) Controls

During our audit, we identified the need for enhancements to the Lottery’s IT control practices.  Specific details of these matters are not disclosed in this report to avoid the possibility of compromising Lottery information.  However, the appropriate Lottery personnel have been notified of these issues.

Marketing and Research Support Funds

The Lottery’s On-line ticket and Scratch-Off ticket gaming service vendors are contractually required to periodically make deposits into marketing and research support funds (fund).  In audit report No. 2007-093 we recommended that the Lottery amend applicable provisions of each contract to include language that specifically addressed the ownership of each fund.  Lottery management indicated that the Lottery is in the process of negotiating with its Scratch-Off vendor to amend existing contract language to specifically address ownership of the marketing and research support funds.  The Lottery had chosen not to pursue contract renegotiations with its On-line vendor due to a small balance in that fund.  

Minority Retailer Participation

Section 24.113, Florida Statutes, requires that 15 percent of the Lottery’s retailers shall be minority business enterprises, as defined in Section 288.703, Florida Statutes; however, no more than 35 percent of such retailers shall be owned by the same type of minority person, as defined by Section 288.703, Florida Statutes.  Our audit disclosed that as of September 21, 2007, retailers comprising one minority type totaled 62 percent of the total number of minority retailers.  A similar finding was included in Auditor General Report Numbers 2007-093 and 2006-098.

Management Response

In a letter dated January 25, 2008, the Secretary provided responses to our findings.  This letter is included in its entirety at the end of this report.

Related Reports

In its Report No. 07-09, the Office of Program Policy Analysis and Government Accountability (OPPAGA) provided recommendations to enhance the earning capability of the Lottery and improve the efficiency of Lottery operations.  The report also tracks the Lottery’s implementation of revenue enhancement initiatives and prior OPPAGA recommendations.  OPPAGA plans to issue a follow-up report in February 2008.

The Secretary's response to our findings is included in its entirety at the end of this report as Appendix A.