By Jack O’Toole | A state auditor’s investigation is reporting significant evidence of mismanagement at the South Carolina Education Lottery (SCEL), including lax oversight of retailers, missing or incomplete employee records and, in at least some cases, a failure to conduct legally-required criminal background checks.
But state lottery officials hotly disputed the findings in a formal agency response, which is included in the auditor’s final report.
South Carolinians rely on the lottery to provide more than $500 million a year in funding for students, schools and colleges throughout the state.
The S.C. Legislative Audit Council (LAC) this week issued the 94-page audit. It includes interviews with SCEL employees, payroll records, data collected from SCEL’s customer relationship software, and independent reviews of relevant laws, regulations and best practices from around the country. In total, it offers 40 specific recommendations to improve the lottery’s operations and administration, while noting that only two of the 40 recommendations it has made in previous lottery audits have been fully implemented.
“Our job is to provide recommendations for improvement,” lead auditor Tammy Saunders said in an interview. “And that’s what we feel like we found – areas where improvements could be made in the oversight that the lottery has over its retailers and, of course, in the Human Resources area.”
Poor retailer oversight and HR problems
The audit discovered major deficiencies in the lottery’s practices and procedures related to retailer oversight. Specifically, it found the lottery fails to consistently conduct undercover retail compliance visits, fails to ensure those visits take place in all S.C. counties and fails to investigate retailers that may have been involved in misconduct.
Furthermore, auditors were unable to determine what actions lottery officials would typically take in cases of proven retailer misconduct or whether those actions were ever implemented in any particular case.
The report warns that SCEL “needs to improve its oversight of lottery retailers to preserve the integrity of the lottery.”
The audit also spotlights a number of human resources (HR) problems, including the lack of a formal HR manual, a failure to consistently perform name-based criminal background checks prior to hire as required by law and a complete lack of employee reviews from 2009 to 2022. In addition, the audit found that lottery officials never notified eight employees that their personal information may have been compromised when their personnel files were lost and failed to maintain documentation to justify pay increases.
“A fundamentally flawed report”?
In a sharply worded response, lottery officials strongly disputed the audit’s findings.
“Several of the LAC’s recommendations are either misleading or propose a solution to a problem which the LAC has failed to make evident in its audit report,” the response said. “The audit report, and more particularly the processes employed to conduct the review, is fundamentally flawed. Regrettably, the LAC audit procedures led to a final report replete with factual errors that directly lead to inaccurate findings and recommendations.”
For instance, lottery officials say auditors were provided with clear evidence of undercover compliance visits that the final report claims never happened. In addition, it states investigators received a copy of the agency’s 514-page HR manual during the document production process – an HR manual the audit says does not exist.
Such a pattern of “factual errors” and “material misrepresentations” throughout the report “calls into question the verity of the audit council’s core findings,” lottery officials wrote.
But the LAC said it stood by its findings and recommendations.
“We have an excellent system of quality management control within the agency that ensures our reports are accurate,” said Saunders. “So yes, we stand by that.”
The audit, which was prepared for the General Assembly, will be made available to Gov. Henry McMaster and members of the state legislature for further review and consideration of its recommendations.
- Jack O’Toole reports on statewide issues for Statehouse Report and the Charleston City Paper. Have a comment? Send to: feedback@statehousereport.com.
We Can Do Better, South Carolina!
I agree with the integrity of this message. Retailers are corrupt and speak with customers as if they are dogs. I have been mistreated by retailers.Retailers. the retails cheat winners out of amounts on their tickets. I could go on but I am running out of paper.
Why does the South Carolina lottery hide from the audience the ball rotation and the ball being blew up in the tube I think this is very suspicious. Every other state shows this.but at the end of every drawing then they show you everything after its over with