Controller Condemns Lottery Over Audits, Late Finance Reports

The California Lottery Wednesday was accused by the state controller’s office of sloppy auditing and failure to submit prompt reports of its financial operations.

The state controller’s office has recommended that start-up of the lottery’s electronic lotto numbers game--expected to begin in September--be postponed until the lottery properly accounts for the current ticket scratch-off games.

It has also considered halting payments to holders of winning lottery tickets, although Thomas D. Colby, lottery program manager for Controller Kenneth Cory, said that drastic step is not imminent.

Colby said wrongdoing is not suspected but would not rule out the possibility.

The charges of inadequate audit controls at the lottery were aired at a meeting of the Commission on Government Organization and Economy, better known as the Little Hoover Commission.

Colby and Jack Brown, chief of the Audits Division for the controller’s office, testified that:

- The lottery is operating its sixth ticket scratch-off game since it went into business Oct. 3, but it has completed an inventory of misplaced tickets only for the first game.

- Even for the first game, the lottery has 400,000 unused tickets in its warehouse that cannot be accounted for in its computer. It also has 300,000 unused tickets recorded in the computer that are not in the warehouse, Colby said.

- The lottery’s report for operations in its first business quarter ending Dec. 31 still are being audited. The report for the second quarter, which ended March 31, was submitted Tuesday.

- Lottery officials have agreed to submit reports on Games 2, 3 and 4 to the controller by June 30 and to submit regular monthly financial reports starting with May operations.

Commissioner Resigns

In other developments Wednesday, Lottery Commissioner Kennard Webster submitted his resignation to Gov. George Deukmejian, and lottery director Mark Michalko announced that another $225 million is being transferred by the lottery to the controller’s office for education, bringing the seven-month total of lottery funds distributed to California education to $497 million.

Webster, 65, a retired accountant from the Palm Springs suburb of Bermuda Dunes, cited “personal and family reasons” for leaving the part-time post. Deukmejian’s acting press secretary, Kevin Brett, said Webster will continue to serve until the governor appoints a replacement on the five-member panel.