‘Significant deficiences’ noted in Arkansas Lottery audit

The Arkansas Legislative Joint Audit Committee released its findings on the Arkansas Lottery Commission on Friday (Nov. 15).

Auditors found a myriad of issues of concern, including two "significant deficiencies."

One deficiency centered on the preparation of financial reports in accordance with generally accepted account principles (GAAP). Another deficiency involved proper approval of contracts worth over $4.5 million.

There were 11 other issues brought forward related to internal controls within the state lottery office, which generated $384.5 million in its first year, with net revenue of around $82 million.

Jason Tolbert with The Tolbert Report, noted the following about the audit hearings: “The report also included a management letter that found issues with contributions to Director Ernie Passailaigue’s retirement, travel reimbursements to Passailaigue, insufficient review of employees participating in lottery games, incomplete background checks prior to hiring employees, improper granting of comp time, overpayment of salaries based on retroactive time, inefficient accounting software, insufficient review of disbursements for procurement, over-reliance on vendors to calculate the amount owed to the state, and insufficient documentation for mileage reimbursements.”

Passailaigue was curt with reporters following the audit hearing. He denied any intentional efforts that led to write-ups in the report.

"I think what I said [in committee] was that I took full responsibility," said Passailaigue. "I think I’m human like you are and everybody else is and we make mistakes. But at the end of the day, one person has to take responsibility for everything that happens in a business and that’s me.”

Derrick Smith, vice-chair of the Arkansas Lottery Commission, told Talk Business that commissioners received the report earlier in the week. He expects they will discuss it at length at their Dec. 10th planned meeting. (Link here for the report from Talk Business, including a video of Passailaigue’s interview with reporters.)

"I suspect that the commission will focus on two sections – the two [major] findings. It looks like one of those findings is being addressed.  The other we’ll have to talk about," Smith said.

When asked if a meeting might be expedited, Smith said he did not believe holiday scheduling would allow for much flexibility.

The reports led some legislators to speculate that the high-paid lottery managers should have produced less controversy in their start-up enterprise. Smith said he did not feel any of the findings could not be corrected.