Overview
The Lottery failed to provide evidence that it conducted financial reviews or criminal background checks for all its sales agent applicants as required by Sections 3.2–3.4 and 4.2.2–4.2.3 of its “Licensing Department Procedures,” potentially allowing retailers who did not meet all licensing requirements to hold a lottery license. From our sample of 60 applications from a population of 1,856 sales agent applicants, we found notable deficiencies in the verification process.
Financial Checks
The Lottery failed to provide us with evidence that it conducted Intercept debt checks related to state taxes, school loans, or child support payments for all 32 (100%) new applicants that were in our sample who were required to undergo a debt check.
Furthermore, for all 35 new applications (100%) in our sample that required a lottery license debt check, the Lottery failed to provide evidence to us confirming that these verifications were completed.
Criminal Background Checks
During our audit, we found that for 5 out of 60 applications (8%) in our sample, the Lottery failed to provide evidence that it conducted criminal background checks. For example, for one application involving two individuals who shared the same email address, the Lottery conducted two criminal background checks on the same individual, rather than one criminal background check on each individual. Additionally, the Lottery failed to provide us with evidence of criminal background checks for four license applications involving six individuals who already held a lottery license, for a different store that is not a chain store.
Maintaining all financial and criminal background check records is essential for the Lottery to demonstrate that its applicants have met all the requirements to become licensed sales agents. Failing to perform or provide proof of complete financial checks and criminal background checks makes it impossible to confirm that the Lottery has thoroughly reviewed applicants before approving them, which could increase the Lottery’s financial, compliance, and reputational risks.
Authoritative Guidance
According to the Lottery’s “Licensing Department Procedures,”
- No owner can owe any state taxes or have any outstanding school loans or child support. If any owner is delinquent in any of these categories, then the application will be denied. . . .
- The application is also reviewed to make sure that there is no outstanding Lottery debt from a prior agent licensed at the location address.
- Each owner listed [on a new application] will be required to undergo a background screening . . .
- If the owner(s) are identified as already being current owner(s), the system evaluates if that owner has undergone a background screening within the last 4 years. . . .
- If they have not had a screening within 4 years, a new [background] screening transaction is generated.
According to section L13-12 of the Massachusetts Statewide Records Retention Schedule, the Lottery must retain all sales agent licensing records for “six years after licensing potential expires,” including “applications, support materials, background checks, and related correspondence.”
Reasons for Issue
Related to the missing evidence for the Intercept data checks, Lottery officials stated that approved applications that meet the outstanding debt and lottery license debt requirements are not saved with supporting documentation. While a credit and collections representative could capture evidence—for example, taking a screenshot to confirm that an applicant has no past due state taxes, school loans, or child support payments (this would show as a blank screen in the system)—this evidence would be insufficient to show that the review was completed. In cases where a credit and collections representative performs multiple steps to review that there is no lottery license debt on file, Lottery officials indicated that documenting each step would be cumbersome.
Related to the missing evidence of completed background checks, Lottery officials explained that there was an oversight because Lottery staff members did not review the results of the background checks, resulting in license applications being approved even if a background check was performed for only one applicant. They also stated that a different system was used to conduct criminal background checks for the six individuals applying for four license applications in our sample. Lottery officials told us that the Lottery no longer has access to that system and is unable to retrieve the records from when the background checks were completed.
Recommendations
- The Lottery should develop and implement monitoring controls to ensure that Lottery staff members review financial and criminal background checks on new and renewing applicants before approving or denying a sales agent application.
- The Lottery should ensure that it maintains all licensing records in accordance with the Massachusetts Statewide Records Retention Schedule.
Auditee’s Response
- The Lottery Licensing Department has implemented a new online application platform. This new software allows additional tools for the Credit & Collections staff to record the individual and date that the staff reviewed both [Department of Revenue (DOR)] outstanding debt as well as any location debt for that application. The Lottery is confident that this process has been followed and that all debts have been identified and locations denied or debts resolved before approval. The Lottery has in many cases denied applications for DOR debt and location debt.
- The Credit and Collection staff will update policies and procedures to reflect that the Supervisory staff or internal auditor will occasionally test the licensing approval process for DOR debt and location debt.
Auditor’s Reply
Based on its response, the Lottery is taking measures to address our concerns in this area. We will review progress on this issue as part of our post-audit review process in approximately six months.
| Date published: | November 26, 2025 |
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