Computation errors understate revenues from lotteries in 2Q

Computation errors have once again taken its toll on the complete accounting of government revenues from lottery operations in the second quarter of the last Fiscal Year, a report from the Office of the Public Auditor disclosed.

Public Auditor Leo LaMotte said government revenues during the January-March 1999 period were understated by about $25,000, from the earlier report of $144,841 to $170,042 due to computation errors and the operators delay in the remittance of the quarterly license fees.

“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.

Numbers International Lottery and Just For Fun sold tickets with different number series as well as different colors, which made it impossible to account for the actual number of tickets sold, the OPA report said.

“Accordingly, there was no assurance that government revenues received from NIL and JFF were complete,” said Mr. LaMotte in his September 18, 2000 letter to Finance Secretary Lucy Nielsen.

He has recommended that the finance department initiate actions to implement the adopted amendments relating to control procedures established to ensure completeness of government revenues received from the jueteng operators.

OPA has also faulted the computation of government revenues generated from the lottery operations during the first quarter of Fiscal Year 1999 when earnings were reportedly understated.

Government revenue from lottery operations in the first quarter of FY99 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.

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.

The Public Auditor is 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.

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.