Lotto Management Faces Tough Questions From Legislative Committee

Lottery officials faced tough questions yesterday afternoon when they went before The Arkansas Lottery Commission Legislative Oversight Committee.  Many of the questions came from Sen. Jonathan Dismang (R-Beebe) who demonstrated why it is a smart idea to have an accountant or two in the state legislature.

Much of the discussion centered on the nearly $100,000 IRS penalty that the lottery has been assessed.  The penalty resulted from a delay in submitting the required withholding on lottery prize payouts.  Apparently, lottery officials had not been doing this daily and were not using the Electronic Federal Payment Posting System as they were required to do.  Philip Miley, the lottery CFO who recently resigned, explained that he believed the penalty was an error and that he could get the issue resolved, therefore he did not tell lottery director Ernie Passailaigue about the problem until recently.

"I have a hard time believing there wasn’t that type of control in place that would have notified (Passailaigue) of a penalty and interest that large," said Dismang. "I am not saying he did not know, but I have a hard time believing there was not some type of communication within the departments of the organization."

Add this as just another strike in the many problems the lottery has had to face since its start-up a little over two years ago.  Most readers will recall that when the lottery began there was much focus on the large salaries given to Passailaigue and the two officials he brought over from South Carolina with him.  Part of the justification for this was that the money was worth it for the expertise the Arkansas lottery would receive by hiring them.

But one interesting note that I observed at that time was that the top financial officiers and accountants were hired after the bad press began regarding the high salaries.  Philip Miley, a accountant with a lapsed CPA license, was hired in July 2009 as the controller for $79,092, which is a pretty low salary for the chief financial officier of a major multi-million dollar state agency.  At the time, eleven other lottery officials had higher salaries than him.  Miley even pointed to the salary level as part of his reason for leaving, saying it was not worth it for the amount he was making.

My point here is that you can tell a bit about the lottery’s priorities by where they choose to spend their money.  Most the salary expense has been directed to those responsible for lottery operations and sales rather than on their accounting and financial management.  Perhaps this is a result.

Video from the Arkansas Times.  Additional information for this post came from reports from the Arkansas News Bureau and Arkansas Democrat Gazette.