Comprehensive Annual Financial Report for the Fiscal Years Ended June 30, 2019 and 2018 A Component Unit of the State of West Virginia MESSAGE FROM JOHN A. MYERS I am pleased to present this year’s West Virginia Lottery Comprehensive Annual Financial Report for the fiscal year ended June 30, 2019 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 integrity and security have helped to provide a continued revenue stream for programs that benefit the citizens of West Virginia for more than 34 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 more than $10.4 billion in gaming revenue for the State of West Virginia with proceeds supporting education, seniors and tourism. Lottery operations have produced nearly $3.4 Director, West Virginia Lottery billion for education, more than $1.3 billion for senior services, and more than $1.1 billion for tourism. The financial, economic, demographic and statistical data contained in this report is intended to help provide a framework of understanding of the Lottery’s financial performance, and represents only the activity for which the West Virginia Lottery exercises regulatory authority. Responsibility for both the accuracy of the data and the completeness and fairness of presentation, including all disclosures, rests solely with the Lottery. An independent certified public accounting firm has audited the financial statements and accompanying notes contained in the financial section of this report. A PDF download of this Comprehensive Annual Financial Report is available at wvlottery.com. Go to the News and Info tab and to Financial Reports. WEST VIRGINIA LOTTERY COMMISSION 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. In accordance with state law, the Lottery Commission is required to have seven members comprised of a lawyer, a certified 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 filling an unexpired appointment, members serve overlapping terms of five years and are eligible for successive appointments to the Commission. DAN A. MARSHALL ANDREW B. KNICELEY Parkersburg Fairmont Attorney Marketing WILLIAM I. CLAYTON Vice Chairman Charleston Public At Large Marion Wood Kanawha KENNETH L. GREEAR Fayette Chairman Greenbrier Charleston Computer Expert Raleigh ROY E. SHREWSBERRY II WILLIAM R. LAIRD IV DOUGLAS A. BICKSLER, CPA Beckley Oak Hill Lewisburg Public At Large Law Enforcement Certified Public Accountant TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal ....................................................................................................................................1 - 10 Certificate of Achievement for Excellence in Financial Reporting .................................................11 Principal Officials and Organizational Chart ...........................................................................................12 FINANCIAL SECTION Independent Auditor’s Report ..............................................................................................................15 - 16 Management’s Discussion and Analysis ...........................................................................................17 - 26 Financial Statements Statements of Net Position ........................................................................................................... 27 Statements of Revenues, Expenses and Changes in Fund Net Position ..................... 28 Statements of Cash Flows .................................................................................................... 29 - 30 Notes to Financial Statements ............................................................................................ 31 - 66 Required Supplementary Information .............................................................................................. 67 - 74 A Component Unit of the State of West Virginia STATISTICAL SECTION Statistical Section Overview .......................................................................................................................... 75 Sales by Product and Other Revenues Last Ten Fiscal Years (table) .................................................................................................. 76 - 77 Prepared by Expenses, Distributions and Changes in Net Position Last Ten Fiscal Years (table) ................................................................................................. 76 - 77 Finance and Administration Division Sales by Product Line Last Ten Fiscal Years (graph) ................................................................................................ 78 - 80 Total Revenue Dean W. Patrick, CPA Last Ten Fiscal Years (pie chart) ................................................................................................... 81 Daily Averages Deputy Director of Finance and Administration Last Ten Fiscal Years (graph) ......................................................................................................... 82 and Chief Financial Officer Expenses and Nonoperating Distributions Last Ten Fiscal Years (graph) ......................................................................................................... 83 Total Expenses and Nonoperating Distributions Last Ten Fiscal Years (pie chart) .................................................................................................. 84 Total Net Position .............................................................................................................................................. 85 Comprehensive Annual Financial Report U.S. Lotteries Unaudited Sales for Fiscal Year 2018 (NASPL) .......................................................... 86 For the Fiscal Years Ended June 30, 2019 and 2018 U.S. Lotteries Unaudited Sales for Fiscal Year 2019 (NASPL) ......................................................... 87 U.S. Lotteries Unaudited Sales for Fiscal Year 2018 (LaFleur’s) ...................................................... 88 U.S. Lotteries Unaudited Sales for Fiscal Year 2019 (LaFleur’s) ...................................................... 89 Number of Employees ...................................................................................................................................... 90 Principal Employers .......................................................................................................................................... 90 State Demographic and Economic Information ..................................................................................... 91 Player and Population Demographics (graphs) ...................................................................................... 92 LOTTERY IMPACT PROCEEDS The West Virginia Lottery began operations in 1986 with a single scratch off game called “West Virginia Jackpot” LOTTERY that generated more than $53.0 million in sales. Today, the West Virginia Lottery regulates several forms of gaming that include traditional lottery, racetrack video lottery, limited video lottery, table games, and sports wagering The West Virginia Lottery has generated more than $10.4 billion in proceeds for the State of West Virginia since that collectively generate more than $1.1 billion in total sales annually. 1986. Lottery proceeds are used in a myriad of ways to improve the quality of life of all West Virginians. Proceeds help fund new school construction and improvements, help fund the PROMISE Scholarship program, help provide The Lottery’s continued success is largely attributed to its partnerships with more than 1,400 traditional and important senior services, help grow the State’s tourism industry, and help West Virginia veterans. more than 1,300 limited video lottery retailers who employ tens of thousands of West Virginians. Additionally, optimized products and ongoing communications have created satisfied Lottery players who have had a significant, positive impact on West Virginia’s economy. MORE THAN MORE THAN $1.3 BILLION IN SENIOR PROGRAMS $14.6 MILLION AND SERVICES TO THE VETERAN’S FUND $5 $2 Mountain TreasuresSee ticket back for play instructions. MORE THAN WIN UP TO $30,000! Bear Cardinal Skiing Bee Hiking Maple Leaf Kayaking Rhododendron Mountain Biking Golden Apple Pumpkin Banjo Strawberry Camping Four-wheeling $5 “ ” = 5X WIN! $10.4 See back for play instructions. BILLION IN PROCEEDS $457.5 MILLION MORE THAN TO THE PROMISE PLAYERS $1.1 BILLION SCHOLARSHIP EMPLOYEES PROGRAM INTO THE STATE’S TOURISM INDUSTRY $3.4 BILLION IN PUBLIC EDUCATION P.O. BOX 2067 PHONE: 304-558-0500 CHARLESTON, WV 25327 1-800-WVA-CASH James C. Justice John A. Myers Governor Director December 6, 2019 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 are pleased to transmit to you the