Texas Lottery Commission
An Audit Report on Management Controls at the Texas Lottery Commission
Report Number 97-092
August 1997
Overall Conclusion
The Commission did not exercise strict control and close supervision over the activities of its contractors, nor did it take prudent and necessary steps to ensure that business with the Lottery Operator and other contractors was conducted at arm's length. However, due to scope limitations encountered during this audit, we are unable to provide complete assurance that all relevant information was obtained concerning some of the issues reviewed in this report.
Key Facts and Findings
Our work identified that the Commission did not exercise strict control and close supervision over the activities of its contractors, nor did it take prudent and necessary steps to ensure that business with the Lottery Operator and other contractors was conducted at arm's length.
We believe the Lottery Operator did not live up to its obligations under the contract and its own ethics policies to serve the public trust, avoid embarrassment to the Lottery, and perform all business activities in a manner that is beyond reproach.
Certain allegations of impropriety or questionable business activities have not been fully addressed due to a lack of timely cooperation by the Lottery Operator and certain individuals with first-hand knowledge of the events in question.
A material weakness in the Commission's control environment contributed to these contractual control deficiencies. An organization's control environment consists of the operating procedures through which management relays its expectations about duty and integrity to employees, contractors, and the public. We documented control weaknesses in integrity and ethical values, commitment to competence, assignment of authority and responsibility, management's philosophy and operating style, and board of directors (Commissioners) or audit committee participation.
We found no evidence that the integrity of the Lottery games has been compromised in any manner, despite weaknesses identified in the Commission's management of its contracts and in certain other management controls.
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