Certified Public Accountants and Management Consultants GOVERNMENT of the DISTRICT of COLUMBIA LOTTERY and CHARITABLE GAMES CONTROL BOARD SEPTEMBER 30, 2014 and 2013
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GOVERNMENT OF THE DISTRICT OF COLUMBIA LOTTERY AND CHARITABLE GAMES CONTROL BOARD FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS (WITH INDEPENDENT AUDITOR’S REPORT THEREON) SEPTEMBER 30, 2014 AND 2013 Certified Public Accountants and Management Consultants GOVERNMENT OF THE DISTRICT OF COLUMBIA LOTTERY AND CHARITABLE GAMES CONTROL BOARD SEPTEMBER 30, 2014 and 2013 TABLE OF CONTENTS PAGE Independent Auditor’s Report.................................................................................................................... 1-2 Management’s Discussion and Analysis.................................................................................................... 3-13 Basic Financial Statements Statements of Net Position................................................................................................................. 14 Statements of Revenues, Expenses, and Changes in Net Position..................................................... 15 Statements of Cash Flows.................................................................................................................. 16 Notes to Financial Statements............................................................................................................ 17-26 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards........................................................................................................... 27-28 Schedule of Findings and Responses......................................................................................................... 29 CERTIFIED PUBLIC ACCOUNTANTS AND MANAGEMENT CONSULTANTS BERTSMITH Co. INDEPENDENT AUDITOR'S REPORT To the Mayor and Members of The Council of the Government of the District of Columbia, and The Lottery and Charitable Games Control Board Washington, D.C. Report on the Financial Statements We have audited the accompanying statements of net position of the District of Columbia Lottery and Charitable Games Control Board (the Lottery), an enterprise fund of the Government of the District of Columbia, as of and for the years ended September 30, 2014 and 2013, and the related statements of revenues, expenses, and changes in net position and cash flows for the years then ended and the related notes to the fmancial statements, which collectively comprise the Lottery's basic financial statements .. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these fmancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from _material rrusstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the fmancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our au~it opinions. 1090 Vermont Ave nue, N.W. ·!· Suite 920 ·:· Washington, D.C. 20005 ·:· PHONE 202 .393.5600 ·:· FAX 202.393.5608 ·:· INTERNET w ww.bertsmithco.com Opinions In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the Lottery as of September 30, 2014 and 2013, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the financial statements, the financial statements present only the Lottery enterprise fund and do not purport to, and do not present fairly the financial position of the District of Columbia as of September 30, 2014 and 2013, the changes in its financial position or, where applicable its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Our opinion is not modified with respect to the matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 13, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Government Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic financial statement in an appropriate operational, economic or historic context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of Americ,a, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2014, on our consideration of the Lottery's internal control ove;- financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Lottery's internal control over financial reporting and compliance. r Washington, D.C. December 18, 2014 - 2- GOVERNMENT OF THE DISTRICT OF COLUMBIA LOTTERY AND CHARITABLE GAMES CONTROL BOARD MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) SEPTEMBER 30, 2014 and 2013 (Dollar Amounts in Thousands) The discussion and analysis of the D.C. Lottery and Charitable Games Control Board’s (the Lottery) financial performance provides an overview of its financial activities for the fiscal year ended September 30, 2014 and 2013. This discussion and analysis should be read in conjunction with the attached financial statements. Background and Other Significant Information The Lottery was established by Public Law 3-172 as an independent agency of the Government of the District of Columbia (District). In accordance with law, the Lottery is responsible for generating revenues through the sale of lottery products and is required to remit monthly gaming revenues less prizes, operating expenses and a reserve not to exceed 2% of annual prize payments to the General Fund of the District. The Lottery’s financial transactions are accounted for as an enterprise fund in the District’s basic financial statements. Financial Highlights . Gross revenues from lottery gaming activities decreased by $26,420 or 10.90% from the prior year amount. The Agency generated ticket sales of $216,018 for a decrease of $26,412 or 10.90% less than the prior year total of $242,430. Total operating expenses decreased by $13,195 or 7.58% primarily because of lower prize payouts and the lack of an instant ticket contract. The prize payouts in 2014 decreased by $8,153 or 6.30% compared to 2013 and reflected a payout rate of 56.14% of ticket sales versus 53.39% the prior year. The contractor’s fees were reduced by $3,486 or 29.84% from the prior year. Transfers to the District’s General Fund decreased by $13,348 equivalent to 19.54% below the prior year’s total. To effectively understand the Lottery’s operations and to assess its financial