California Auditor Blasts Lottery for flouting education funding laws

An audit released on Tuesday blamed the California Lottery of an outdated prize pay-out scheme and lack of oversight. It added that the lottery haddefied education funding laws and owes public schools $36 million.

State Auditor Elaine Howle confirmed the concerns of suspicious lawmakers by revealing that the lottery hasn’t complied with a 2010 funding law, nor can it prove its pay-outs are crafted to maximise education benefits. Howle warned the lottery needs better state oversight to meet its voter-approved purpose of strengthening public education.

The audit opens stating, “The lottery failed to provide $36 million in funding to education in the fiscal year 2017–18 because it did not budget to adhere to the proportionality requirement in the Lottery Act.”

As per Howle, the lottery last reviewed its pay-out structure 10 years back. In the meantime, it handed out $5.7 million in non-competitive contracts without “adequate evidence.”

“Until the lottery determines the correct prize pay-out percentage, California will not know whether education is receiving all of the funding from the lottery that it should,” Howle added.

The lottery’s directors wrote a response letter pushing back on many of the audit’s findings – the letter stated that in the 4 years the proportionality requirement has been in place, the lottery has provided $6.7 billion for education. It says that the lottery has set a goal of contributing $2 billion to education by 2021 and Howle’s findings of a short-change “arise from a fundamental difference of opinion over interpretation” of the law.”

The audit claims thata lack of oversight by the State Controller’s Officehas left lawmakers out of the loop about the lottery’s performance. Howle says the regulator eraseda 2019 auditinformation about questionable travel and hotel costs amounting to $720,000 and has allowed the lottery to essentially perform its own reviews.

“The controller’s office relied solely on the lottery to prepare a report for the Legislature on the lottery’s performance without assessing the thoroughness of the report, and therefore the Legislature has gone without independent analysis of whether the lottery has fulfilled the purposes of the 2010 changes to the Lottery Act,” the audit adds.

The state controller’s office repliedsaying the “audit makes assumptions and selective interpretations of fact that are inconsistent with responsible auditing practices.”

Howle recommends that the Legislature should instruct the lottery to repay $36 million and direct the controller’s office to conduct audits of the lottery’s procurement procedures. He alsosuggeststhat the lottery study and come up with a better prize pay-out rate by August.

State Senator Ling LingChang (R-Diamond Bar), who had requested the audit, says she is not surprised by the audit findings.

Chang stated,“They’ve wasted money that should go to classrooms. I will be introducing legislation to ensure schools get their lost funding back and get max funding in the future.”