The State Worker

Sloppy expenses at California lottery let workers claim unneeded hotels, mileage

California Lottery employees decry lewd and fraudulent behavior of senior executives

Veteran Lottery employees demand resignations of senior department executives on Thursday, Sept. 20, 2018, after an anonymous whistleblower sent a letter to Gov. Jerry Brown alleging lewd sexual behavior and fraud.
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Veteran Lottery employees demand resignations of senior department executives on Thursday, Sept. 20, 2018, after an anonymous whistleblower sent a letter to Gov. Jerry Brown alleging lewd sexual behavior and fraud.

California State Lottery officials inappropriately spent about $300,000 on travel, food and accommodations over four years for sales conferences that often ran over budget, according to a State Controller’s Office audit.

The audit, released Tuesday, came about six months after anonymous lottery employees sent a letter to the Governor’s Office complaining about rowdy behavior by top department officials at out-of-town sales events.

It’s the second recent state investigation into overspending at lottery sales events. In December, state Auditor Elaine Howle reported that the lottery spent tens of thousands of dollars on pens and other swag for events in 2017 with little justification.

The new report by State Controller Betty Yee found questionable expenses, including a lottery employee who billed the state for three nights at a hotel in 2016 while attending a sales conference that was six miles from the employee’s home.

Yee reported that $131,832 of the department’s inappropriate expenses were unnecessary employee travel expenses for sales staff events. In one instance, lottery staff could not identify a person who was reimbursed as an employee or a contractor.

“Clearly, lottery management needs to overhaul their internal controls and enforce state policies,” Yee said in a news release.

Yee’s office reviewed 14 agreements with hotels that cost more than $50,000 for sales and training events. In all but one case, costs exceeded estimates.

“For example, the 2018 DoubleTree Hilton Modesto agreement was valued at $38,801,” the audit reads. “However, actual costs amounted to $64,413, over $25,000 more than the agreement value. The lottery had no review or approval procedure for when actual expenses exceeded the delegated individual’s authority.

The controller also paid close attention to mileage expenses claimed by certain employees. The report describes managers with long commutes who’d stop by retailers and claim “unallowable” mileage.

One manager with a 75-mile drive would report 95 miles worth of mileage expenses. The manager should have claimed only 20 miles, which is the difference between the manager’s commute and the manager’s actual work-related expenses. The controller found the manager was paid more than $14,000 in what should have been “unallowable” expenses.

The controller’s office regularly reviews lottery expenses. Yee expanded a planned lottery audit in August after an anonymous letter sent to former Gov. Jerry Brown described unprofessional conduct by senior lottery executives after hours at a sales conference. The letter included bawdy photos of lottery staff at a Southern California piano bar.

Brown also directed the Department of Justice to investigate the letter’s allegations. The review is ongoing, according to a message Lottery Director Hugo Lopez sent to staff on Tuesday.

“I know that this time has been challenging for our lottery team, given the dedication with which we approach our work and our mission to provide supplemental funding to California public schools. Nevertheless, we continue to make great progress toward meeting our established business and strategic goals,” Lopez wrote.

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