Audit of the Massachusetts State Lottery Commission Objectives, Scope, and Methodology

An overview of the purpose and process of auditing the Massachusetts State Lottery Commission.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of the Massachusetts State Lottery Commission (MSLC) for the period April 5, 2019 through March 31, 2020.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is a list of our audit objectives, indicating each question we intended our audit to answer, the conclusion we reached regarding each objective, and where each objective is discussed in the audit findings.

Objective	Conclusion
Does MSLC conduct background reviews for its active lottery sales agents and new license applicants, as required by its policies and Section 27 of Chapter 10 of the General Laws?	No; see Finding 1
Does MSLC ensure that tickets that have been in the custody of terminated lottery sales agents are obtained and accounted for, as required by its policies and procedures?	No; see Finding 2
Does MSLC ensure that its employees and their immediate household members do not claim prizes, as required by Section 31 of Chapter 10 of the General Laws?	No; see Finding 3

 

To achieve our audit objectives, we gained an understanding of the internal controls we determined to be relevant to the objectives by reviewing applicable agency policies and procedures, as well as conducting interviews with MSLC’s staff and management.

We performed the following procedures to obtain sufficient, appropriate audit evidence to address the audit objectives.

Lottery Sales Agent Background Review

We obtained the Enterprise Series (ES) system’s Sales Agents [Criminal Offender Record Information, or CORI] Status Report, which listed all 9,732 lottery sales agents who were active during the audit period. We performed an analysis to determine whether MSLC’s Licensing Department had conducted criminal background reviews for all these agents. Using TeamMate Analytics,³ we determined the following:

1. whether, for active lottery sales agent license renewal, the ES system’s CORI Date field was within four years of the last CORI review
2. whether, for active lottery sales agents with no original CORI review dates, the ES system’s CORI Date field was empty.

Additionally, we selected a nonstatistical random sample of 25 of the 9,732 lottery sales agents. We obtained and reviewed the ES system’s Agent Summary Sheet to determine whether the date each agent consented to a CORI review, and the last CORI review date, were within the four-year agent license renewal period.

Of the 9,732 lottery sales agents on the Sales Agents CORI Status Report, 367 were people who had applied to be agents during the audit period; we selected a nonstatistical random sample of 25 of these 367. We obtained and reviewed the corresponding CORI reports and credit reviews to ensure that the ES system’s background reviews for applicants had been conducted and approved by MSLC management.

Terminated Lottery Sales Agents

To determine whether MSLC conducted final settlements as required by its procedures, we obtained the Terminated Sales Agents Report, listing all 726 lottery sales agents terminated during our audit period, from the ES system. We randomly and nonstatistically selected 50 terminated agents to determine whether final settlements had been performed for them. We reviewed the final settlement process completed at each agent location to ensure the following:

• that each Instant Ticket Game Partial Book Return Report, which shows the entire scanned partial ticket book inventory at the terminated lottery sales agent’s site, was signed by the lottery sales representative (LSR) and the agent
• that each Instant Ticket Game Full Book Return Report, which shows the entire scanned full ticket book inventory at the terminated lottery sales agent’s site, was signed by the LSR and the agent
• that the instant ticket game books were no longer in the terminated lottery sales agent’s inventory, as shown on the Inventory Movement Report
• that the lottery sales agent and the LSR had signed the Final Settlement Report.

Prize Claim Review

To ensure that MSLC employees and their immediate household members did not claim prizes, which they are prohibited from doing by Section 31 of Chapter 10 of the General Laws, we obtained a list of lottery claim winners from the ES system (representing 155,258 claims processed during our audit period), and a list of MSLC employees and their home addresses, from the Commonwealth Information Warehouse (CIW). We compared the addresses listed for all 155,258 claims to the home addresses of MSLC employees from the CIW list.

Whenever sampling was used, we applied a nonstatistical approach, and as a result, we did not project our results to the entire population.

Data Reliability

We assessed the reliability of the data obtained from the ES system by interviewing knowledgeable MSLC personnel about the ES system and testing the data for missing records or fields, duplicate records, invalid identifiers, and report dates outside our audit period. We tested ES system controls, which included security management, access control, and segregation of duties, and determined whether configuration management and contingency planning policies were in place during the audit period. We selected 20 active lottery sales agents from the ES system’s Active Sales Agent Report and traced each agent’s information (such as name, CORI report status, and credit review status) to the agent application forms. From our data reliability analysis and information system control testing, we found that the data in the ES system were reliable for the purposes of our audit objectives.

3.     This is an Excel-based data analytics tool that allows auditors to execute advanced data analysis.

Date published:	June 9, 2021