2018 Annual Report

West Virginia Lottery A Component Unit of the State of West Virginia Comprehensive Annual Financial Report for the Fiscal Years Ended June 30, 2018 and 2017 MESSAGE FROM THE DIRECTOR ,DPSOHDVHGWRSUHVHQWWKLV\HDUèV:HVW9LUJLQLD/RWWHU\&RPSUHKHQVLYH$QQXDO)LQDQFLDO5HSRUWIRUWKHĆVFDO year ending June 30, 2018 to the Honorable Jim Justice, Governor; Dave Hardy, Cabinet Secretary, Department of Revenue; and the West Virginia Legislature. Our mission to operate responsibly with the highest standards of LQWHJULW\DQGVHFXULW\KDYHKHOSHGWRSURYLGHDFRQWLQXHGUHYHQXHVWUHDPIRUSURJUDPVWKDWEHQHĆWWKHFLWL]HQV of West Virginia for more than 32 years. The Lottery was created in April 1985 pursuant to authority granted by the West Virginia Legislature with gaming operations beginning in January 1986. Since that time, the Lottery has generated nearly $10 billion in gaming revenue for the State of West Virginia with proceeds supporting education, seniors and tourism. Lottery operations have produced $3.3 billion for education, more than $1.2 billion for senior services, and nearly $1.1 billion for tourism. 7KHĆQDQFLDOHFRQRPLFGHPRJUDSKLFDQGVWDWLVWLFDO data contained in this report is intended to help provide a framework of understanding of the /RWWHU\èV ĆQDQFLDO SHUIRUPDQFH DQG UHSUHVHQWV only the activity for which the West Virginia Lottery exercises regulatory authority. Responsibility for both the accuracy of the data and the completeness A PDF download of this Comprehensive Annual Financial Report is available and fairness of presentation, including all at wvlottery.com. Go to the News and Info tab and to Financial Reports. disclosures, rests solely with the Lottery. An LQGHSHQGHQW FHUWLĆHG SXEOLF DFFRXQWLQJ ĆUP KDV DXGLWHGWKHĆQDQFLDOVWDWHPHQWVDQGDFFRPSDQ\LQJ QRWHV FRQWDLQHG LQ WKH ĆQDQFLDO VHFWLRQ RI WKLV report. JOHN A. MYERS Director, West Virginia Lottery WEST VIRGINIA LOTTERY COMMISSION KENNETH L. GREEAR WILLIAM I. CLAYTON WILLIAM R. LAIRD IV Chairman Vice Chairman Oak Hill Charleston Charleston Law Enforcement Computer Expert Public At Large The Commission was created in 1985 to assist and advise the Director of the Lottery and to carry on a continuous study of West Virginia Lottery operations throughout the state. Members are appointed by the Governor with the approval of the Senate. ROY E. SHREWSBERRY II In accordance with state law, ANDREW B. KNICELEY Beckley Fairmont the Lottery Commission is Public At Large Marketing required to have seven members FRPSULVHGRIDODZ\HUDFHUWLĆHG public accountant, a computer expert, a marketing specialist, and one member with not less than five years experience in law enforcement. An additional two members represent the “public at large.” No more than four members may be from the same political party. Unless ĆOOLQJDQXQH[SLUHGDSSRLQWPHQW members serve overlapping DOUGLAS A. BICKSLER, CPA WHUPVRIĆYH\HDUVDQGDUHHOLJLEOH DAN A. MARSHALL Lewisburg for successive appointments to Parkersburg &HUWLĆHG3XEOLF the Commission. Attorney Accountant WEST VIRGINIA LOTTERY A Component Unit of the State of West Virginia Prepared by Finance and Administration Division Dean W. Patrick, CPA Deputy Director of Finance and Administration DQG&KLHI)LQDQFLDO2IĆFHU Comprehensive Annual Financial Report For the Fiscal Years Ended June 30, 2018 and 2017 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •1 - 10 &HUWLĆFDWHRI$FKLHYHPHQWIRU([FHOOHQFHLQ)LQDQFLDO5HSRUWLQJ• • • • • • • • • • 11 3ULQFLSDO2IĆFLDOVDQG2UJDQL]DWLRQDO&KDUW• • • • • • • • • • • • • • • • • • • • • 12 FINANCIAL SECTION Independent Auditors Report • • • • • • • • • • • • • • • • • • • • • • • • • • • 15 - 16 Management’s Discussion and Analysis • • • • • • • • • • • • • • • • • • • • • 17 - 26 Financial Statements Statements of Net Position • • • • • • • • • • • • • • • • • • • • • • • • • • 27 6WDWHPHQWVRI5HYHQXHV([SHQVHVDQG&KDQJHVLQ)XQG1HW3RVLWLRQ • • 28 Statements of Cash Flows • • • • • • • • • • • • • • • • • • • • • • • • 29 - 30 Notes to Financial Statements • • • • • • • • • • • • • • • • • • • • • • 31 - 63 Required Supplementary Information • • • • • • • • • • • • • • • • • • • • • • • 64 - 70 STATISTICAL SECTION Statistical Section Overview • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 71 Sales by Product and Other Revenues Last Ten Fiscal Years (table) • • • • • • • • • • • • • • • • • • • • • • • 72 - 73 ([SHQVHV'LVWULEXWLRQVDQG1HW,QFRPH Last Ten Fiscal Years (table) • • • • • • • • • • • • • • • • • • • • • • • 72 - 73 Sales by Product Line Last Ten Fiscal Years (graph) • • • • • • • • • • • • • • • • • • • • • • • 74 - 75 Sales by Product Line Last Ten Fiscal Years (graph) • • • • • • • • • • • • • • • • • • • • • • • • • 76 Total Revenue Last Ten Fiscal Years (pie chart) • • • • • • • • • • • • • • • • • • • • • • • 77 Daily Averages Last Ten Fiscal Years (graph) • • • • • • • • • • • • • • • • • • • • • • • • • 78 ([SHQVHVDQG1RQRSHUDWLQJ'LVWULEXWLRQV Last Ten Fiscal Years (graph) • • • • • • • • • • • • • • • • • • • • • • • • • 79 7RWDO([SHQVHVDQG1RQRSHUDWLQJ'LVWULEXWLRQV Last Ten Fiscal Years (pie chart) • • • • • • • • • • • • • • • • • • • • • • • 80 Total Net Position • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 81 U.S. Lotteries Unaudited Sales for Fiscal Year 2017 (NASPL) • • • • • • • • • • • • 82 U.S. Lotteries Unaudited Sales for Fiscal Year 2018 (NASPL) • • • • • • • • • • • • 83 U.S. Lotteries Unaudited Sales for Fiscal Year 2017 (LaFleur’s) • • • • • • • • • • • 84 U.S. Lotteries Unaudited Sales for Fiscal Year 2018 (LaFleur’s) • • • • • • • • • • • 85 1XPEHURI(PSOR\HHV• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 86 6WDWH'HPRJUDSKLFDQG(FRQRPLF,QIRUPDWLRQ• • • • • • • • • • • • • • • • • • • • 87 6WDWH'HPRJUDSKLFDQG(FRQRPLF,QIRUPDWLRQ JUDSKV • • • • • • • • • • • • • 88 - 89 Player and Population Demographics (graphs) • • • • • • • • • • • • • • • • • • 90 - 91 3ULQFLSDO(PSOR\HUV• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 92 LOTTERY PROCEEDS The West Virginia Lottery has generated nearly $10 billion in proceeds for the State of West Virginia since it began operations in 1986. /RWWHU\SURFHHGVEHQHĆWWKHSHRSOHRI:HVW9LUJLQLDLQPDQ\ZD\V/RWWHU\SURFHHGVDUHXVHGWRKHOSIXQGQHZVFKRRO FRQVWUXFWLRQVFKRROLPSURYHPHQWVDQGWKH3520,6(6FKRODUVKLS3URJUDP7KH\DOVRKHOSIXQGYHU\LPSRUWDQWVHQLRU VHUYLFHVWKDWLPSURYHWKHTXDOLW\RIOLIHRI:HVW9LUJLQLDèVVHQLRUFLWL]HQV3URFHHGVDUHDOVRXVHGWRKHOSWKHVWDWHèV tourism industry and West Virginia Veterans. Since 1986, West Virginia has been able to invest: $428.5 MILLION $3.3 BILLION FOR THE PROMISE IN PUBLIC EDUCATION SCHOLARSHIP PROGRAM MORE THAN $1.2 BILLION IN SENIOR PROGRAMS AND SERVICES ALLOWING MORE THAN 55,000 WEST VIRGINIA STUDENTS TO PURSUE THEIR COLLEGE DREAMS (YHU\:HVW9LUJLQLDFROOHJHVWXGHQWKDVKRSHVDQGGUHDPVIRUDEULJKWIXWXUHDQGWRUHDOL]HWKHLUIXOOSRWHQWLDO+LJK VFKRROVHQLRUVHQWHULQJFROOHJHVDQGXQLYHUVLWLHVDFURVVWKH6WDWHEHQHĆWIURPORWWHU\GROODUVWKURXJKWKH3520,6( NEARLY Scholarship Program. $1.1 BILLION INTO THE STATE’S ,Q)<DSSUR[LPDWHO\PLOOLRQIURPOLPLWHGYLGHRORWWHU\UHYHQXHZDVGLUHFWHGWRWKH3520,6(6FKRODUVKLS GROWING program to reward West Virginia’s best and brightest students with the opportunity to attend an in-state college or TOURISM XQLYHUVLW\6LQFHWKH:HVW9LUJLQLD/RWWHU\KDVSURYLGHGPLOOLRQWRWKH3520,6(6FKRODUVKLS3URJUDP INDUSTRY and in turn has helped more than 55,000 West Virginia students pursue a college education without the burden of KHDY\GHEW,QPDQ\FDVHVWKH3520,6(6FKRODUVKLSKDVEHHQFLWHGDVWKHSULPDU\IDFWRUWKDWDOORZHGWKHVHGHVHUYLQJ students to obtain a college degree. LOTTERY RETAILERS AND PLAYERS LOTTERY EMPLOYEES 7KH:HVW9LUJLQLD/RWWHU\FHOHEUDWHGLWVQG$QQLYHUVDU\LQ-DQXDU\,QWKH/RWWHU\èVĆUVW\HDUVPRUH than $10 billion in lottery proceeds have made critical education, senior services and tourism programs possible. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • :HVW9LUJLQLD/RWWHU\SOD\HUVZRQPRUHWKDQPLOOLRQLQSUL]HVIURPWUDGLWLRQDOORWWHU\JDPHVGXULQJĆVFDO • • • • • • • • • • • • • • year 2018. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • APPROXIMATELY 1,500 TRADITIONAL RETAILERS, MORE THAN 1,300 LIMITED VIDEO RETAILERS AND THOUSANDS OF • • • • • • • • • • • • • • • • • • • • • • • • • • • • PLAYERS HAVE HELPED CONTRIBUTE TO THE ECONOMY. PL AY ERS NEARLY $10 BILLION IN LOTTERY PROCEEDS TO THE STATE R The West Virginia Lottery began operations in 1986 with a single scratch off game called “West Virginia Jackpot”. By E WKHHQGRIWKDWĆUVW\HDUWKH/RWWHU\KDGUHFRJQL]HGVDOHVRIPRUHWKDQPLOOLRQGROODUV7RGD\WKH:HVW9LUJLQLD T Lottery regulates and governs several forms of gaming at four racetrack casinos, the Greenbrier Resort as well as video A gaming parlors statewide. Included are; Traditional Lottery Games, Racetrack Video Lottery, Limited Video Lottery and IL 7DEOH*DPHVUHDOL]LQJVDOHVRIQHDUO\ELOOLRQLQĆVFDO\HDU ER S The Lottery owes much of its success to a dedicated and diverse team of professional employees performing a variety of key roles. Thanks to these employees, and those who served before them, the West Virginia Lottery has been able to exceed the $1 billion mark in sales for 16 consecutive years. P.O. BOX 2067 3+21( &+$5/(6721:9 1-800-WVA-CASH James C. Justice John A. Myers Governor Director December 3, 2018 The Honorable James C. Justice II, Governor Dave Hardy, Cabinet Secretary, Department of Revenue Kenneth L. Greear, Chairman, West Virginia Lottery Commission Members of the West Virginia Lottery Commission We

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