Post Audit Division says Lottery Commission could use ‘modest improvement’ with inspection process
By Matthew Young, RealWV
CHARLESTON, W.Va – The West Virginia Legislature’s Post Audits Subcommittee, on Tuesday, heard an audit presentation of the WV Lottery Commission’s limited video lottery retailer inspection process.
On-hand to deliver the presentation was Adam Fridley, with the West Virginia Post Audit Division.
“By way of background, the Lottery Commission was created by the Legislature to administer and oversee a number of gaming activities across the state,” Fridley explained. “This includes everything from your traditional lottery games, scratch offs, table games, sports betting, and your limited video lottery – or LVL – gaming activities.”
“According to data provided by Lottery in its annual report, LVL gaming has provided a significant overall portion of total lottery revenues over the past five fiscal years,” Fridley continued. “Overall LVL revenues have accounted for approximately 34 to 39% of total annual lottery revenues in each year, from 2019 until 2023.”
Current state code, Fridley explained, allows for up to 9,000 LVL terminals to be placed in licensed retail locations through West Virginia. The Lottery Commission’s most recent annual report shows that approximately 1,200 individual retail organizations are currently operating approximately 8,600 LVL terminals in approved locations.
“To oversee these licensees, Lottery has established an inspection function charged with doing on-site inspections of each licensed retailer, to assess compliance with various requirements,” Fridley added. “Lottery has divided the state into four different regions for inspection purposes, and allocates its staffing resources across the various regions.”
“Given that LVL gaming accounts for such a significant portion of total annual Lottery revenues, and takes place on a statewide level […], our office conducted this review of Lottery’s inspection function over LVL retailers, with two principle objectives in mind,” Fridley noted.
The Post Audit Division’s first objective, Fridley explained, was to determine the extent to which the Lottery Commission conducts routine inspections of LVL retailers. The second objective was to evaluate the overall effectiveness of the inspections.
“With respect to the frequency of inspections conducted, the results of our analysis indicate that Lottery does well with ensuring inspections are conducted in accordance with its policy of twice a year,” Fridley said. “While there were a number of retailers that experienced at least one time interval of greater than six months between inspections, we noted only 24 instances out of nearly 5,000 inspections, wherein a retailer went more than 12 months without being inspected.”
Concerning the effectiveness of the Lottery Commission’s inspection process, Fridley noted several areas that would benefit from “some modest improvement.”
“In accordance with best practices, a comprehensive set of policies governing the inspection process would probably be more appropriate,” Fridley noted. “And in relation to other inspection and enforcement aspects of lottery – such as casino and table game inspections – Lottery has a much more thorough and comprehensive set of policies.”
The Post Audit Subcommittee will meet again during next month’s Interim Session, scheduled from Sept. 8 through 10.
