Lottery falls short of scholarship goal | Arkansas Blog

Thursday, June 30, 2011

Lottery falls short of scholarship goal

Posted By on Thu, Jun 30, 2011 at 4:59 PM

Near the end of what turned out to be a rather contentious meeting of the Arkansas Lottery Commission's legal and audit committee, lottery director Ernie Passailaigue told commissioners that the $98 million the lottery will transfer to the academic scholarship fund will be short of his original goal. Passailaigue said that lottery sales had come in as projected and that prize payments accounted for the nearly $7 million shortfall. Commissioners Bruce Engstrom and Steve Faris continued their practice of asking Passailaigue tough questions and demanding answers. It's a welcomed change on a commission that, for the most part, deferred to Passailaigue's judgment on big issues. Engstrom suggested the lottery was paying too much in administrative costs, a charge that was denied by the director. He also suggested funds from unclaimed prizes, which Passailaigue says most lotteries use to boost advertising and promotions, should be accounted for in the lottery's budget. The rest, he said, should go to scholarships.

Commissioners covered a lot of ground in today's meeting. Engstrom and Faris hammered Passailaigue on a number of issues including the lottery's escrow account, where the lottery's data should be stored and whether the lottery commission should hire legal assistance to assist staff attorney Bishop Woosley and serve as a contact for commission members regarding legal issues. Get the whole story on the jump.

After the lottery was notified by legislative audit that Intralot, the Greece based company that handles the lottery's online gaming contract, had not fulfilled escrow account requirements set out by the lottery's contract with the company. Legislative Auditor Roger Norman wrote the June 24 letter in response to a question from Sen. Jonathan Dismang. Woosley told the commission the escrow agreement with Intralot was finalized earlier this week. Engstrom said the lottery should have set up the escrow account once the games started rolling out. Passailaigue said it was normal for lotteries to allow their gaming operations to mature before setting up such accounts. Faris said no matter what happened or didn't happen upon the lottery's start up, commissioners should have had some input regarding the escrow agreement. He later told reporters that he believes there is a communication problem between lottery administration, staff and the commissioners. "If we had not asked about [the letter from legislative audit] we might have waited on this for infinity," Faris said. "What bothered me is that we pointed out a problem and then rushed to sign a contract."

Once the committee moved to the next agenda item, Engstrom tried to get to the bottom of exactly what types of data the lottery had and where it was stored. In a June 2 meeting with lottery staff, Engstrom and Faris raised concerns about moving lottery retail information from a system housed by the state's Department of Information Systems to their own "back office system" which is run by Intralot. Faris said he just wanted to make sure that data was safe and located here in Arkansas where legislators, auditors and members of the public could get to it if need be. In today's meeting, Passailaigue defended the practice of keeping the data on the Intralot-supported back office system. All data generated regarding the lottery is put together by Intralot, Passailaigue said. To house the data at DIS would be redundant. Passailaigue told Engstrom to think of Intralot like an alien mother ship.

"You have to go back to the mother ship to get the information," he said.

"Well, I'm just worried about the vendor being the mother ship and not a state agency," Engstrom replied.

The committee also discussed the possibility of hiring outside legal assistance. The recommendation was made by Commissioner Ben Pickard. He said it was important for agencies like the lottery to build up an "institutional memory." Hiring someone else would be a good idea he said, in case Woosley left for some reason. Another legal mind would also be good for commissioners seeking information that a lottery employee might be unwilling to give up. Faris seconded the notion saying hiring extra counsel had worked out well in other situations with which he was familiar. No official decision was made. The committee simply decided to make the recommendation to the whole commission, who will ultimately make the decision to hire extra legal help, or not.

The committee also picked a new chair and vice chair. Pickard was elected chair. Engstrom will serve as vice chair.

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