Overview
The Lottery did not always deactivate terminals for sales agents who had missed three bank sweeps within a 12-month period. Missed bank sweeps could result in the Lottery being unable to collect proceeds received from the sale of lottery tickets when due.
We identified that, out of our sample of 45 third missed bank sweeps within a 12-month period, there were 4 instances where the Lottery did not deactivate sales agents’ terminals. Moreover, the Lottery did not conduct finance hearings for 17 instances out of the 45 third missed bank sweeps within a 12-month period in our sample. Furthermore, of the licenses that the Lottery deactivated, there were 4 instances where the sales agents’ terminals were reactivated before the completion of the finance hearing.
By not adhering to its policy, the Lottery risks inconsistencies in consequences for sales agents and threatens to undermine trust and damage the relationship between the Lottery and its sales agents. Maintaining clear and fair practices is essential to upholding the Lottery’s integrity. Additionally, without the timely collection of lottery proceeds, state revenues cannot be reported or transferred to the Department of Revenue (DOR), resulting in the delay of distribution of funds to the Commonwealth’s cities and towns.
Authoritative Guidance
According to the Lottery’s “Credit and Collections Department Policies and Procedures,”
A sales agent has a 3rd [missed bank sweep within] a twelve month period, unless extenuating circumstances permission applies, requires immediate action by the Credit and Collections department.
First, the sales agent’s Lottery terminal is deactivated in [the system] and their ability to order product and supplies is suspended from the system. The agent’s disabled status remains in effect until the Finance hearing determination and complete agent resolution
Reasons for Issue
According to Lottery officials, deactivation of sales agents’ terminals is assessed on a case-by-case basis. This assessment includes risk factors and trends, rather than strictly adhering to the policies and procedures of the Lottery. Furthermore, the Lottery’s “Credit and Collections Department Policies and Procedures” have not been updated to reflect the current practices for missed bank sweeps that Lottery officials shared with us.
Recommendations
- The Lottery should ensure that it deactivates its sales agents’ lottery terminals after they miss three bank sweeps within a 12-month period until a finance hearing determination and complete resolution occur.
- The Lottery should update its written “Credit and Collections Department Policies and Procedures” to reflect its current practices for missed bank sweeps.
Auditee’s Response
- As stated in the Audit findings, the Manager and Director of Credit & Collections reviews all missed sweeps and makes a determination on what action the Credit & Collection Department should take in response to an agent missing a payment. The action taken is based on many factors including the amount due, the agent’s payment history, the agent’s length of time as an agent, the agent’s credit history, the response time in paying the amount due and other factors.
- The audit further states that “the Lottery risks inconsistencies in consequences for sales agents and threatens to undermine trust and damage the relationship between the Lottery and its sales agents.” Each agent’s risk to the Commonwealth may be different and require a different response from the Credit and Collections Department. These actions may include suspending the agent’s terminal privileges, blocking instant ticket ordering, blocking instant activations, securing all instant ticket products, or taking action to educate the agent in the weekly invoice and sweep process. This process of assessing individual risk and acting accordingly has been very successful in keeping receivables at an all-time low and has contributed to and fostered our long-standing partnership with our agents.
- To implement the recommendation to unilaterally suspend all agents after a third missed sweep, and not activating their terminal and limiting their sales until a hearing was held, we believe would cause an increase in monies owed to the Commonwealth, increase risk, a reduction in Lottery sales and local aid, and cause potential irreparable harm to many of our agents. These service interruptions might negatively impact many of these small businesses to the extent they might not survive or be able to pay their outstanding bills to the Commonwealth. These suspensions and closures also have a negative impact on local communities.
- All 17 exceptions for hearings for a missed third payment mentioned in the audit findings were paid in full.
- During the audit period, July 1, 2022 – June 30, 2024, the Lottery reported sales of over 12.2 billion dollars and swept bank accounts for roughly 6,900 agent locations weekly for a total number of invoices during the audit period of over 700,000. Of the terminated agents swept during that period only 93 invoices remain unpaid.
- The Lottery write-offs during that same period remain at all-time lows. In [fiscal year] 2023 and [fiscal year] 2024 the number of invoices written off totaled 127. In 2005, The Lottery instituted a sliding scale for collecting a daily bond fee from our agents. This resulted in additional monies to offset any write-offs. These bond fees have outpaced write-offs for more than 10 years and have resulted in no losses to the Commonwealth.
- The Credit & Collections staff will further update the policies and procedures to ensure that the document reflects the current risk assessment process.
Auditor’s Reply
We acknowledge the Lottery’s concerns about the potential operational and financial effects of implementing a unilateral suspension policy after three missed sweeps. However, we emphasize the need for ongoing review and evaluation of the Lottery’s written policies and procedures to protect the integrity of the Lottery system while minimizing unnecessary disruption. We stress that these policies should be regularly updated to reflect the Lottery’s current practices.
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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