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Vermont Lottery Commission FINANCIAL STATEMENTS JUNE 30, 2017 and 2016 VERMONT LOTTERY COMMISSION FINANCIAL STATEMENTS JUNE 30, 2017 and 2016 C O N T E N T S Page INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS’ AUDIT REPORT 1 - 3 MANAGEMENT’S DISCUSSION AND ANALYSIS 4 - 6 FINANCIAL STATEMENTS Statements of Net Position 7 Statements of Revenues, Expenses, and Changes in Net Position 8 Statements of Cash Flows 9 Notes to Financial Statements 10 - 33 SUPPLEMENTAL INFORMATION Independent Auditor’s 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 34 - 35 Schedule of the Lottery’s Proportionate Share of the Net Pension Liability and Schedule of Lottery Contributions 36 INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS’ AUDIT REPORT To the Commissioners of the Vermont Lottery Commission Barre, Vermont Report on the Financial Statements We have audited the accompanying financial statements of the Vermont Lottery Commission, an enterprise fund of the State of Vermont, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements -RKQ: 'DYLV Management is responsible for the preparation and fair presentation of these financial &3$&)3 &9$ 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 %UHW/+RGJGRQ to the preparation and fair presentation of financial statements that are free from material &3$&)3 &)( misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial statement 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 financial statements are free from 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 financial statements, whether due to fraud or error. In making those risk assessments, the auditor %ODLU3DUN5RDG 6XLWH considers internal control relevant to the entity’s preparation and fair presentation of the financial : LOOLVWRQ9HUPRQW 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 7HO of accounting policies used and the reasonableness of significant accounting estimates made by )D[ ZZZGKFSDFRP 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 audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Vermont Lottery Commission, as of June 30, 2017, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. /LFHQVHG 97$FFRXQWLQJ)LUP To the Commissioners of the Vermont Lottery Commission Barre, Vermont Page 2 Emphasis of Matter As discussed in Note 1., the financial statements present only the Vermont Lottery Commission and do not purport to, and do not present fairly the financial position of the State of Vermont, as of June 30, 2017, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Matters Report on Summarized Comparative Information We have previously audited the Vermont Lottery Commission’s financial statements for the year ended June 30, 2016, and we expressed an unmodified audit opinion on those audited financials in our report dated December 8, 2016. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2016, is consistent, in all material respects, with the audited financial statements from which it has been derived. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4–6 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, 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. Accounting principles generally accepted in the United States of America require that the Schedule of the Lottery’s Proportionate Share of the Net Pension Liability and the Schedule of Lottery Contributions on page 36 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We were unable to apply certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America because we did not perform the valuation and allocation of the State of Vermont’s pension plan. The amounts used in the schedules were provided to us by the Department of Finance & Management of the State of Vermont. We do not express an opinion or provide any assurance on the information. To the Commissioners of the Vermont Lottery Commission Barre, Vermont Page 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards , we have also issued our report dated December 8, 2017, on our consideration of the Vermont Lottery Commission’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements 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 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 Vermont Lottery Commission’s internal control over financial reporting and compliance. Williston, Vermont December 8, 2017 VERMONT LOTTERY COMMISSION MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2017 This discussion of the Vermont Lottery Commission’s financial performance provides an overview of the Commission’s financial activities for the fiscal year ended June 30, 2017. Please read it in conjunction with the financial statements. The Vermont Lottery Commission (the Lottery) is an enterprise fund of the State of Vermont. The Commission’s operations are classified as business-type activities and reported in a manner similar to commercial entities. Financial Highlights • Gross revenues for lottery gaming activities decreased by $1,888,528 or 1.52%. • Total operating expenses for the year decreased by $790,882 or 0.81%. Of this decrease, prize expense decreased by $491,837, facilities management fees increased by $208,527, agent commissions decreased by $254,403, instant ticket printing costs decreased by $1,688, and Tri- State expenses decreased by $322,602. • Non-operating revenue in FY 2017 included an unrealized loss on investments of $76,492. The total investment loss of $43,439 resulted in an overall decrease of $95,530 from the non- operating revenue in FY 2016. FY2016 included an unrealized gain on investments of $21,761. • Income before operating transfers (net revenue) decreased by $1,193,176. Assets and Net Position The assets of the Lottery are primarily cash and investments held for operating purposes.

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