Audit flags Lottery Corporation operations, losses, expenses

'Current governance practices do not equip ALC to deal with ... an ever-changing gaming market'

N.S. Auditor General Michael Pickup reports on the joint audit of the Atlantic Lottery Corporation.
N.S. Auditor General Michael Pickup reports on the joint audit of the Atlantic Lottery Corporation.   Lexi Harrington

A report by the auditors general of four provinces has exposed key problems within the Atlantic Lottery Corporation, including poor communication with government, questionable investments and poorly managed salaries and expenses.

“Our audit found that current governance practices do not equip ALC to deal with challenges in an ever-changing gaming market,” said Nova Scotia’s auditor general, Michael Pickup.

The auditors general of New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island released their joint report on Wednesday, the first audit since 1996 of the corporation that operates lotteries in the region.

The audit included the corporation’s $8-million investment into an online gambling venture called Geonomics. The corporation ended up writing off the entire amount after the gamble didn’t pay off.

“What we found is that the board didn’t do a good job in independently considering how risky this venture was, before giving management the go-ahead to proceed,” said Pickup.

“It was an expensive lesson learned, at $8 million.”

Pickup says the corporation did not consult with the provincial governments regarding costs, which is a “significant weakness.”

Pickup also pointed out large increases in compensation to corporation executives in 2014-15.

“ALC did not approach the Nova Scotia government to determine if it was comfortable with these large increases,” Pickup said.

As well, corporation staff are able to earn salary increases every year, of from two to six per cent.

“In 2014-15, as an example, 93 per cent of employees were eligible to get a salary increase,” Pickup said.

“I cannot accept that a corporation of this size and importance did not realize the need to consult with the governments around compensation.”

The report says that the corporation spent about $4 million on travel, hospitality and board expenses. The expenses were not well-managed and lacked proper documentation, the audit found. The report describes areas of “questionable spending,” including hosted events.

“This is an area that needs to be cleaned up by ALC, so that these expenses are properly approved and are supported by required documentation,” Pickup said.

The corporation spent $14,000 on tickets for the Cavendish Beach Music Festival, which the corporation sponsored.

The tickets were “mainly given to politicians, political staffers, senior bureaucrats, board members, and ALC executives,” and were purchased on top of the 270 tickets the corporation received as sponsor of the festival.

It also spent $14,000 for a Christmas party. “That’s one Christmas party,” Pickup said.

Pickup credits the corporation with being receptive to what he describes as the audit’s “tough observations” and “strong recommendations.”

ALC “have agreed to both the findings and the recommendations, and I think that is very important in terms of where they go from here.”

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