Audit of Government Revenues from CNMI Lottery Operations for FY 1999 4th Quarter
(August 15, 2001)
This letter report presents the results of our audit of government revenues from the Commonwealth of the Northern Mariana Islands (CNMI) lottery operations for the fourth quarter of Fiscal Year 1999. The objective of the audit was to determine whether government lottery revenues were accurately computed in accordance with the Memoranda of Understanding (MOUs) and related agreements between the CNMI Government, as represented by the Department of Finance (DOF), and the three current CNMI lottery operators, referred as Operators A, B, and C in the report.
Lottery revenues for the period totaled $172,659. Our audit showed that DOF balances in the lottery bank and revenue accounts as of September 30, 1999 were not accurately stated because some transactions were not recorded in the proper accounting period. DOF has subsequently recorded adjusting entries to recognize the revenues in the proper period. Our audit also showed that two operators of the Jueteng "number game" had sold tickets with different number series as well as different colors and formats, making it almost impossible to account for the actual number of tickets sold. Accordingly, there was no assurance that government lottery revenues received from the two operators were complete. This control weakness was also noted in prior OPA audits. New controls were implemented beginning Fiscal Year 2000 to ensure that lottery revenues are properly recognized, received, and recorded..We recommend that the Secretary of Finance: (1) instruct the DOF Finance and Accounting Division to make adjustments to the CNMI lottery bank and revenue accounts to record reconciling adjustments of $7,609; and (2) instruct Operator B and the DOF Finance and Accounting Division to fully implement the amendments (Rules 24 and 25) relating to control procedures to help ensure that all government lottery revenues received from operators of the Jueteng "number game" are reported.
In her letter response dated July 3, 2001, the Secretary of Finance concurred with the recommendations, and provided OPA a copy of the letter issued and adjusting journal entries made to address the recommendations. Based on the response we received from the Secretary, we consider Recommendation 1 closed, and Recommendation 2 resolved pending the implementation of the internal control procedures. The additional information or action required to close the recommendation is presented in the report.
