Washington`s Lottery

Transcription

VISION:
To create an environment in which
education is available to all Washingtonians.
MISSION:
We offer chances for people to imagine,
have fun and do good at the same time.
Raffle
Winner, Quoi Truong
Raffle
Winner, Gerald Jackson
Hit 5
Winner, Robert G. Knight
Powerball
Winner, Sarah Heter
WASHINGTON’S LOTTERY
an agency of the State of Washington
COMPREHENSIVE ANNUAL FINANCIAL REPORT
for the fiscal year ended June 30, 2012
prepared by the Finance Department
Table of Contents
Introductory Section
Letter of Transmittal………………………………………………………………………….
03
Certificate of Achievement for Excellence in Financial Reporting……………….…..
11
Principal Officials ………………………………………………………………….………..
12
Organization Chart ………………………………………………………........................
12
Financial Section
Independent Auditors’ Report……………………………………………………………..
14
Management’s Discussion and Analysis………………………………………………….
15
Basic Financial Statements
Comparative Statement of Net Assets……………………………………..……..
21
Comparative Statement of Revenues, Expenses,
and changes in Fund Net Assets……………………………............................ 22
Comparative Statement of Cash Flows…………………………………..…….…. 23
Notes to the Financial Statements………………………………………..……….. 24
Statistical Section
Washington State
Statistical Section………………………………………………………………….…. 33
Demographics of Players………………………………………........................... 36
Net Assets…Last 10 Fiscal Years…………………………………………………... 37
Changes in Net Assets…Last 10 Fiscal Years……………………………………. 37
Sales and Revenues…Last 10 Fiscal Years……………………………………….. 38
Expenses and Contributions…Last 10 Fiscal Years………………………..…... 39
United States
Comparison of Lottery Revenues and Expenses by State…………………….. 40
Comparison of Lottery Revenues and Expenses per Capita………………….. 41
Retailers of the year…………………………………………………………………. 42
Lottery Offices…………………………………………………………………..…................ 43
Games from Washington’s Lottery give players the chance to imagine and for some of the winners
make dreams come true. These lottery winners share their stories of excitement and in some cases
about how their lives have changed.
At the center of the Lottery are its players, their families, and Lottery retailers, all of whom help
support a number of beneficiaries such as state education programs and priorities. Fiscal year 2012
beneficiaries included the Washington Opportunity Pathways Account, stadium debt reduction
(CenturyLink Field & Exhibition Center and Safeco Field), Problem Gambling, Economic
Development and Veterans Innovations Program.
Scratch ticket winner Gary Wiseman won a 2013 Ford Mustang Coupe (red, of course) as part of
Washington's Lottery's Muscle Car Money scratch ticket game. He entered the second-chance
drawing after his $5 ticket didn't win the first time around. When he claimed his new car, it was his
birthday. The Mustang was a present to himself!
Hit 5 winner Jaclyn Lew buys a Match 4 every day and a Hit 5 ticket for every drawing. Lew’s first win
came last Summer when she won $10,000 playing Match 4, and her second win of $160,000 in January
2012 playing Hit 5. Lew plans to save her Hit 5 win.
Mega Millions winner Richard Parsons, a Proud Vietnam veteran, claimed his $250,000 prize from
playing the draw game. He plans to help his daughter but is not planning anything extravagant.
Hit 5 winner William Stidham routinely plays Hit 5 using his go-to numbers -- the birthdates of his wife
and children. William followed this same routine when purchasing three Hit 5 tickets – he won $1
from all three tickets, but when William checked a fourth ticket purchased for a prior Hit 5 drawing,
he discovered that his win wasn’t just a $1, but rather $600,000!
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INTRODUCTORY SECTION
This section includes a transmittal letter describing Washington’s Lottery and its business activities,
a list of principal officials, the agency organization chart, and the Certificate of Achievement for
Excellence in Financial Reporting awarded for the previous year’s report.
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Washington’s Lottery
PO Box 43000 • Olympia, WA 98504-3000 • 814 4th Ave East • Olympia, WA 98506-3922 • (360) 664-4800
November 15, 2012
To the Citizens of Washington State:
Washington’s Lottery is pleased to provide this comprehensive annual financial report for the fiscal year
that ended June 30, 2012. In fiscal year 2012, the Lottery increased sales by $24.7 million or 4.8
percent compared to fiscal year 2011 and contributed a total of $138.0 million to its beneficiaries, with
$121.8 million being distributed to the Washington’s Opportunity Pathways Account to fund
scholarships and other state programs.
Although state law does not require the Lottery to provide stand-alone audited financial statements,
we do so to reflect the highest standards of fiscal transparency and uncompromised accountability to
the public, thereby strongly demonstrating our thorough efforts to disclose all relevant information.
To the best of our knowledge, the enclosed information is accurate in all material respects and is
reported in a manner designed to present fairly the financial position, results of operations, and cash
flow of the agency. All disclosures necessary to gain an understanding of the Lottery’s financial
activities have been included. Management is responsible for the accuracy and completeness of the
contents, and the Lottery maintains strict adherence to its stringent internal control policies.
The Lottery is a State agency mandated to generate funds for the support of state
programs.
Washington’s Lottery sells tickets for games of chance to the general public. The Lottery is a business
funded by sales, which in and of itself pays for the costs of running the business, including producing,
marketing, and selling the products, while delivering all of the profits to public good. In order to
operate the business successfully, the Lottery provides personnel in the following disciplines: security,
legal, administrative, planning, research, marketing, sales, finance, management, and information
services. The Lottery has generated dollars for the Washington Opportunity Pathways Account,
Economic Development Account, Problem Gambling Account, stadium debt payments for
CenturyLink Field and Safeco Field and the Veterans Innovations Program. Lottery ticket sales for
fiscal year 2012 totaled $535.2 million. These sales allowed contributions of $121.8 million to the
Washington Opportunity Pathways Account, $2.7 million to King County (Safeco Field), $10.0 million
to the Stadium and Exhibition Center Account (CenturyLink Field), $3.0 million to the Economic
Development Account, $291 thousand to the Problem Gambling Account and $248 thousand to the
Veterans Innovations Program.
Total Distribution: $529.2 Million
Fiscal Year 2012
Prizes
58.8%
Profit
WA
Opportunity
Pathways
Account
23.0%
Cost of doing business
The legislature decides the beneficiaries and how
much the Lottery can spend on administration.
Economic
Development
0.6%
Administration
2.3%
King County
0.5%
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Stadium &
Exhibition
1.9%
Cost of Sales
6.3%
Retailer
Commissions
6.4%
Problem Gambling 0.1%, Veterans Innovations Program 0.1%:
Percentages too small to show on graph
Washington’s Lottery constantly focuses on maintaining and increasing its ability to generate these funds in
support of scholarships by contributing to the Washington’s Opportunity Pathways Account and other
state programs. Development of new products and game enhancements is an ongoing process with a
focus on responsible gaming and increasing long-term revenues. This is consistent with acceptable
levels of related expenses, which are intended to increase the ability to support these vital programs.
A narrative analysis of the Lottery’s performance for fiscal year 2012 and further details regarding
specific subjects can be found in Management’s Discussion and Analysis in the Financial Section of
this document.
Background
Communities throughout the state have benefited from the Lottery.
Since Washington’s Lottery sold its first ticket in 1982, it has paid almost $6.5 billion in prizes,
and retailers have received over $676.0 million in sales commissions. Winners tend to spend and
invest money in their local communities, and Lottery sales often make a big difference for small
merchants. In fiscal year 2012, Washington’s Lottery paid out more than 28 million winning
tickets ranging from $1 to $11 million. Eight people became millionaires through Washington’s
Lottery in the last fiscal year. Since inception, the Lottery has made more than 625 people
millionaires, and that number is still growing.
The State Legislature decides how the government spends monies contributed by the Lottery. For
fiscal years 2002 through 2004, all Lottery revenues previously transferred to the State General
Fund went directly to education programs through the Student Achievement Fund and the Education
Construction Fund. For fiscal years 2005 through 2010, revenues were sent to the Education
Construction Fund. Beginning in fiscal year 2011, all Lottery revenues previously sent to the Education
Construction Fund are now directed to the Washington Opportunity Pathways Account to fund state
education programs and priorities, such as financial assistance for higher education and early
childhood learning programs. The recipients of Lottery’s proceeds include the Washington
Opportunity Pathways Account, Economic Development Account, the Problem Gambling Account,
stadium debt payments for Safeco Field and CenturyLink Field. The newest beneficiary added in
fiscal year 2012 is the Veterans Innovations Program. Since inception, the Lottery has contributed
more than $3.2 billion to various crucial state programs.
In 1986, the Lottery began collecting outstanding child support and other debts owed to the state.
Before winners are paid, these debts are deducted from Lottery prize monies. Over the years, the
Lottery has collected $3.1 million in previously uncollected money. This figure represents $1.8 million
in child support payments and $1.3 million in recovered taxes, fees, penalties, welfare, and
employment security debts.
Washington State’s Economy and Revenue Outlook
Summary
Since the nation’s recession began in December 2007, Washington State lost almost 206,000 jobs,
or about 6.9 percent of total nonfarm payroll employment. While the state appeared to lag the
nation into this slowdown, local losses accelerated in late 2008 and, for the most part, began to
mirror national trends. By June 2009, the nation was officially out of recession and national
economic indicators were signaling a recovery in economic output. However, employment was
noticeably restrained as employers sought to increase output through productivity gains rather
than by hiring additional workers. Employment patterns were inconsistent throughout 2010 as the
use of temporary Census workers in the late spring and summer masked the below-average
employment trends in the remainder of the economy. Employment growth turned positive in the
last quarter of 2010 and advanced slowly through 2011. Employment maintained its positive track
through 2012 though at a growth rate less than half the historic nor m. Job growth is expected to
grow at a 1.9 percent pace in 2013, slightly faster than in 2012. Because of Washington’s export dependent economy, and despite the increasingly cautious Asian outlook, Washington is still
expected to lead the nation during this recovery and expansion in terms of job and income growth,
thanks to continued hiring trends and the above average wages in aerospace and software.
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It is expected that Washington’s recovery and expansion will build upon the diversity of the state’s
economy, whose elements include a vital export base; the presence of knowledge-based industries
such as business, professional, health, and financial services; and an attractive quality of life. All
these elements should continue to support population growth.
Washington’s unemployment rate fell by a percentage point in fiscal year 2012, as a slow -growing
national economy, weak housing markets, and volatile energy costs continued to hamper the labor
markets. As the annual unemployment rate eased down to 8.6 percent from 9.6 percent in the
previous year, Washington’s jobless rate tracked closely with the national average throughout this
period.
Personal income grew 4.6 percent in fiscal year 2012, despite the slow pace of hiring. Real
personal income – after factoring out inflation – grew by 2.2 percent in fiscal year 2012 after
gaining 3.0 percent in fiscal year 2011. In comparison, real personal income fell 2.5 percent in
fiscal year 2010.
Washington’s outlook for fiscal year 2013 is for modest gains in economic growth as the recovery
and expansion from the financial crisis and national and international recessions take hold in the
local economy. Nonfarm payroll employment in Washington is forecasted to increase by 1.9
percent in fiscal year 2013. Personal income in fiscal year 2013 is predicted to grow by 4.4 percent
in current terms, and by 2.6 percent in real terms.
General Fund-State revenues are forecasted to grow at a 7.1 percent rate in the 2013-15 biennium
compared to the 7.8 percent gain in the 2011-13 Biennium. The slow economy, sluggish hiring, and
weak housing markets have had a negative effect on revenue growth. Particularly hard hit have
been retail sales and real estate excise taxes.
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The Lottery’s Products
In Washington, Scratch is the most popular Lottery game. Scratch is called an ―instant‖ game because
players learn immediately if they have won a prize. Total Scratch sales were $318.1 million in fiscal
year 2012, compared to $309.0 million in 2011. In fiscal year 2012, Scratch sales were $101.1 million
more than all other Lottery games combined. Scratch games provided 59.4 percent of total net
sales for fiscal year 2012, compared to 60.5 percent in 2011. The Lottery launched 63 Scratch games
during fiscal year 2012.
Washington joined the nation’s biggest lottery game—Mega Millions—in September 2002. Washington
was the first state west of the Mississippi to offer the nation’s mega-jackpot lottery game. Until January
2010, other Mega Millions lotteries included California, Georgia, Illinois, Maryland, Massachusetts,
Michigan, New York, New Jersey, Ohio, Virginia, and Texas. Currently, thirty-two other jurisdictions
have joined the original Mega Millions group in selling Mega Millions tickets through a cross-sell
agreement between the Multi-State Lottery Association (MUSL) and the Mega Millions group. Thirtyone Powerball states were added in January 2010, with Louisiana joining in November 2011. Mega
Millions ticket sales in Washington were $59.2 million for fiscal year 2012, representing 11.1 percent
of total net Lottery sales. Mega Millions sales were $55.0 million or 10.8 percent of net sales in fiscal
year 2011. In fiscal year 2012, jackpots ranged from $12 million to $640 million, the largest Lottery
jackpot in world history, with 18 jackpots over $100 million.
Mega Millions is a jackpot-based game with nine prize levels. Tickets cost $1 to play for jackpots of
up to hundreds of millions of dollars. Players pick six numbers from two different fields of numbers.
They choose five numbers from a field of 56 and one number from a field of 46, representing the
―Mega Ball‖, though most players let the computer randomly ―Quick Pick‖ their numbers. Jackpots
start at $12 million and increase if there is no jackpot winner. Drawings are held Tuesdays and
Fridays. Prizes are also paid for various combinations of matching numbers. Players have a total of
9 different ways to win, including a $250 thousand prize if five balls are matched from the pool of 56
balls. Players can buy tickets for up to nine drawings in advance, plus the current drawing.
―Megaplier‖ is a special feature of Mega Millions that when purchased, allows players to multiply a
win by 2, 3 or 4 times. A player who purchases the ―Megaplier‖ feature and matches all 5 of the white
ball numbers automatically wins $1,000,000 instead of the typical $250,000 associated with a secondtiered prize win. This multiplication does not include the jackpot prize.
In January 2010, Washington began selling Powerball, a multi-state lottery game operated by the
Multi-State Lottery Association (MUSL). Powerball sales were $42.9 million for fiscal year 2012,
representing 8.0 percent of net sales, compared to $35.6 million or 7.0 percent in fiscal year 2011. In
fiscal year 2012, jackpots ranged from $20 million to $325 million, with 31 jackpots over $100 million.
The game is played in forty-three other jurisdictions.
Powerball is a jackpot-driven game. Players pick six numbers from two different fields of numbers.
They choose five numbers from a field of 59 and one number from a field of 35, representing the
―Powerball”, though most players let the computer randomly ―Quick Pick‖ their numbers.
Beginning January 25, 2012, the price of a Powerball ticket shifted away from the traditional $1 price
point to a new $2 price point. With the change came a higher starting jackpot value of $40 million,
and an increase in the second-tiered prize from $250 thousand to $1 million. The change also
brought the possibility of doubling a second-tiered prize if the ―Powerplay‖ option is chosen at the
time of ticket purchase. Drawings are held Wednesdays and Saturdays. Players have a total of 9
different ways to win, including a $1.0 million prize if all five white balls are matched. Players can
buy tickets for up to nine drawings in advance, plus the current drawing.
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―Powerplay‖ is a special feature of Powerball that when purchased, allows players to win an
increased fixed prize amount on all prizes other than the jackpot prize.
Three times a week, on Mondays, Wednesdays, and Saturdays, Lottery players have a chance to win
$1 million or more by playing Lotto, the Lottery’s flagship game introduced in 1984. Players select 6
of 49 numbers (or let the computer randomly select 6 numbers). Jackpots start at $1 million, and if
no player matches all six numbers, the top prize grows based on ticket sales. Four winning Lotto
jackpots were drawn in fiscal year 2012 ranging from $2.8 million to a record high jackpot of $11.0
million. Prizes are also paid for matching three, four or five numbers. Players can buy tickets for up to
ten drawings in advance. Lotto sales for fiscal year 2012 were $54.5 million, representing 10.2
percent of total net sales. Lotto sales in fiscal year 2011 of $54.5 million were similar to sales in
2012, but represented 10.7 percent of net sales in fiscal year 2011.
Hit 5 replaced the Quinto game in March 2007. It is as easy to play as Lotto; and it’s easier to win.
Players select 5 of 39 numbers (or let the computer randomly select 5 numbers) and match them to
the ones drawn by the Lottery. The cashpot is paid in one lump sum and is won by matching all five of
the numbers drawn by the Lottery. Cashpots start at $100,000. If no player matches all five numbers,
the top prize grows based on ticket sales. Thirty-three Hit 5 cashpots were awarded in fiscal year
2012, ranging from $100,000 to $730,000. Prizes are also paid for matching two, three, or four of the
numbers drawn. Drawings are held on Mondays, Wednesdays, and Saturdays. Sales for fiscal year
2012 were $23.0 million or 4.3 percent of net sales compared to $20.6 million or 4.0 percent of net sales
in fiscal year 2011. Players can purchase tickets for up to ten drawings in advance.
Match 4, the first $2 prize point draw game in Washington, started in August 2008. Players pick 4 out
of 24 (or let the computer randomly select 4) numbers and have the opportunity of winning a top prize
of $10,000. If more than one player picks the winning four numbers, each winner gets $10,000. In
other words, a $10,000 prize is not split equally amongst the winners. Prizes are also paid for
matching 2 and 3 numbers. Numbers are drawn seven nights per week. Sales for fiscal year 2012
were $12.4 million, representing 2.3 percent of net sales compared to $11.2 million or 2.2 percent of
net sales in fiscal year 2011. Players can purchase tickets for up to ten drawings in advance. There
were 565 $10,000 prizes awarded in fiscal year 2012.
Players pick three numbers from 0 through 9 (or choose a computer-generated Quick Pick). They
also choose among nine different play options. Numbers are drawn seven nights per week, and
players can buy tickets for up to seven drawings in advance. The Daily Game, Lottery’s first Draw
game, was introduced in January 1984, under the name Triple Choice. The Daily Game sales totaled
$16.6 million or 3.1 percent of net sales in fiscal year 2012, compared to $16.7 million or 3.3 percent
in fiscal year 2011.
Players pick from 1 to 10 Keno game spots, and then they choose a number from 1 through 80 for each
spot (or they can let the computer choose their numbers with a Quick Pick). Each night, the Lottery
draws 20 numbers. Prizes vary depending on how many spots players choose and how many of the
players’ numbers match the Lottery’s numbers. The top prize in Daily Keno is $100,000. Players can
buy tickets for up to seven advance drawings for this game, which was added to the Lottery’s product
line in November 1992. Daily Keno sales for both fiscal year 2012 and 2011 totaled $5.6 million or 1.1
percent of net sales.
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Each calendar year, beginning in 2011, the Lottery is legislatively mandated to hold one Raffle to
benefit veterans and their families. The first Veterans’ Raffle was held in November 2011 (fiscal year
2012). Proceeds from the Raffle were distributed to one beneficiary, the Veterans Innovations
Program, administered by the State Department of Veterans Affairs. Tickets cost $10 and players had
the chance to win twenty-four (24) top prizes of $50,000 each, two hundred and forty (240) second-tier
prizes of $250, and three thousand (3,000) lower-tier prizes of $50. Sales for fiscal year 2012 were
$2.9 million or 0.5 percent of total net sales, with contributions to the Veterans Innovations Program of
$248 thousand in fiscal year 2012.
FINANCIAL INFORMATION
Internal Controls
Washington’s Lottery’s policies and procedures tightly control assets, inventory, computer systems,
accounting, and the drawing vault. Staffing includes security and law-enforcement personnel. Access
to Lottery offices is limited. Risks of loss, theft, or misconduct are minimized through high-level
security; strict employee, contractor, and retailer standards; and retailer licensing. Anyone
responsible for Lottery tickets or assets, or who works directly with the Lottery, has passed a
background check.
When assets could be at risk, responsibilities have been separated (for example, purchasing and
accounts payable). Data input and processing are separate from system programming. Management
provides approval and oversight. Segregation of duties separates the responsibilities of the custody,
authorization, and recording of assets. Reviews of operations and documented procedures are
performed internally by general counsel, the internal auditor, and the management team. External
auditors also conduct reviews and their reports are presented to the Lottery’s Director.
Measures to guarantee players a fair game:
• Game drawings are held in a locked vault located at Lottery headquarters. Drawings follow strict
security procedures and are witnessed by an independent Certified Public Accountant (CPA).
• Lottery digital drawing systems, which include random number generators for Draw games
and promotions, are stored in locked cases, marked with security seals, and kept in a locked
vault.
• Each retail terminal uses independent random-number-generating formulas for Quick Pick
numbers.
• Lottery Scratch tickets are printed with special inks, dyes, and security codes.
Inherent Limitations of Internal Controls over Financial Reporting
Washington’s Lottery’s internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. Management
does not expect that the internal controls will prevent or detect all errors and all fraud. A control
system can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk
that those internal controls may become inadequate because of changes in business conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Accounting Systems and Policies
The Lottery uses the accrual basis of accounting and follows generally accepted accounting
principles (GAAP). The Legislature and the Office of Financial Management control Lottery
spending through several Lottery fund accounts. Additional information regarding these accounts
can be found in Note 1 in the notes to the financial statements.
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Budgetary System and Controls
The Lottery works with the Office of the Governor to create a biennial budget proposal to support
administrative costs. This proposal goes to the Legislature for approval. The Senate, the House of
Representatives, and the Office of the Governor negotiate any differences. The Office of Financial
Management monitors spending through the Lottery’s business and administrative accounts, but the
Lottery decides when spending will occur. In addition to the Lottery’s fixed administrative budget,
there are also business plan estimates for business expenses based on sales forecasts, new products
introduced, and industry trends. Estimates and forecasts are compared to actual costs and sales
throughout the fiscal year with appropriate changes in action plans made as needed.
The Lottery’s revenue forecast for state planning and budgeting is prepared by the Revenue Forecast
Council, an external State entity. In addition, expense and contribution budgets are approved by the
Lottery Commission and submitted to the Office of Financial Management for inclusion in the State
budget. The Lottery Commission members are appointed by the Governor.
Employees
At the end of fiscal year 2012, the Lottery employed 132 staff. Headquarters and offsite warehouse
had 79 people, with the remaining staff working out of five regional offices in Everett, Federal
Way, Spokane, Vancouver, and Yakima.
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INDEPENDENT AUDIT
Washington State law requires an audit of the state by the Washington State Auditor’s Office, an
independently elected public official. As a state agency, Washington’s Lottery is included in this audit.
The State Auditor’s report on internal controls and compliance with applicable laws and regulations
can be found in a separately issued Washington State Single Audit report.
In addition, the Lottery obtained a separate audit of the Lottery’s stand-alone financial statements. The
fiscal year 2012 audit of Lottery financial statements has been completed in conformance with
generally accepted auditing standards. The financial section of this report includes the
Independent Auditor’s report on the Lottery’s financial statements.
Awards and Acknowledgements
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to Washington’s Lottery for its
comprehensive annual financial report for the fiscal year ended June 30, 2011. This was the twentysecond consecutive year that the Lottery has achieved this prestigious award. In order to be awarded
a Certificate of Achievement, a government unit must publish an easily readable and efficiently
organized comprehensive annual financial report. This report must satisfy both generally accepted
accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. The Lottery believes that its
current comprehensive annual financial report continues to meet the Certificate of
Achievement Program’s requirements, and the Lottery is submitting it to the GFOA to determine its
eligibility for another certificate.
This report reflects the Lottery’s commitment to maintaining publi c trust through high ethics
and uncompromising integrity. It also demonstrates the professionalism and team effort of Lottery
employees. We appreciate our employees’ fine work. We also thank the Lottery Commissioners for
their dedication and guidance in operating Washington’s Lottery.
Respectfully submitted,
R J Foster
Director of Finance and Administration
H W Hanson
Director
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PRINCIPAL OFFICIALS OF WASHINGTON’S LOTTERY
H.W. Hanson
Lottery Director
Lyle Jacobsen
Chair
Manson
Term ends
8/2012
Brian Comstock
Commissioner
Seattle
Term ends
8/2014
Judy Guenther
Commissioner
Chehalis
Term ends
8/2017
Valoria Loveland
Commissioner
Pasco
Term ends
8/2015
Ann Ryherd
Commissioner
Olympia
Term ends
8/2016
ORGANIZATION CHART
Citizens of Washington
Governor of the State of
Washington
Director
Executive and
Commission
Assistant
Security
Director
External
Affairs &
Stakeholder
Outreach
Marketing
Director
Deputy
Director
Legal
Services
Director
Information
Services
Director
Human
Resources
Sales
Director
Director
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Finance &
Administration
Director
Research &
Development
Manager
Whether you are a first time player or a Lottery lover, anyone who plays can be a winner. Winning
often allows players to pursue new dreams, or rediscover old ones.
Diane Shultz of Federal Way won $200,000 playing Gold Rush Scratch. Diane’s husband Usto
purchased one ticket for himself and one for his wife. His wife’s Gold Rush Scratch was the winning
one of the pair. In addition to paying off the mortgage on their home, the couple plans to assist
their son with college expenses, and take a weekend trip to Las Vegas.
Dana Talbert, a Redmond resident, won $6 million playing Lotto. The winning numbers were her
children’s birthdates. Since 1986 Dana has used those dates as her numbers when playing
Washington’s Lottery’s games, which also include Hit5, Match 4, and Powerball. For the October 12,
2011 Lotto drawing, Dana’s favorite numbers finally paid off when she won $6 million dollars. A
longtime renter, she plans to purchase a home.
FINANCIAL SECTION
This section begins with the Independent Auditor’s Report, followed by management’s discussion and analysis,
the comparative financial statements of and the related notes to the financial statements.
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Independent Auditor’s Report
To the Director and Commissioners
Olympia, Washington
We have audited the accompanying financial statements of Washington's Lottery, an agency of the State
of Washington, as of and for the years ended June 30, 2012 and 2011, which collectively comprise the
Lottery’s basic financial statements as listed in the table of contents. These financial statements are the
responsibility of Washington's Lottery management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectivenes s of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, the financial statements present only Washington’s Lottery and do not purport to,
and do not present fairly the financial position of the State of Washington, as of June 30, 2012 and 2011,
the changes in its financial position and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
In our opinion, the financial statements referred to in paragraph 1 present fairly, in all material respects,
the financial position of Washington's Lottery as of June 30, 2012 and 2011, and the changes in its
financial position and its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, as listed in the table of contents, 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 contest. 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.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise Washington's Lottery financial statements as a whole. The introductory section and statistical
section are presented for purposes of additional analysis and are not a required part of the financial
statements. The introductory and statistical sections have not been subjected to the auditing procedures
applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or
provide assurance on them .
Boise, Idaho
November 12, 2012
14
MANAGEMENT’S DISCUSSION
AND ANALYSIS
the sale of Lottery products and the sum of
payments made to winners.
• Contributions to the Veterans Innovations
Program as a result of Raffle sales were $248
thousand.
This discussion and analysis includes an overview of
activities regarding the financial performance of
Washington’s Lottery for the fiscal year ended June
30, 2012. The Lottery is an agency of the State of
Washington and operates for the purpose of
generating revenues for public use for the residents
of the state. This analysis is to be used in conjunction
with the financial statements.
Using this Annual Report
By law, the Lottery is required to distribute all of
its net income, excluding unrealized gains on
investments, to its beneficiaries. The net assets of
the Lottery, as shown in Table 1, consist solely of
capital assets, restricted income for future prizes,
and unrestricted income. The restricted portion of
net assets represents unclaimed prize amounts set
aside for future use as prizes, as required by law
(RCW 67.70.190). Unrestricted income is income
related to unrealized gain on investments held to
fund future payments due on annuitized lottery
prizes. Generally accepted accounting principles
(GAAP) dictate that the Lottery record in its
financial statements the gain or loss related to the
change in market value of these investments. As
the Lottery intends to hold the investments to
maturity, market gains or losses represent temporary
fluctuations and are not recognized in the calculation
of the amounts to be distributed.
Financial Highlights
Sales of all Washington’s Lottery products were
$535.2 million, a 4.8 percent increase from fiscal
year 2011, and a 9.0 percent increase from fiscal
year 2010.
• Mega Millions sales were $59.2 million and
experienced a record high advertised jackpot of
$640 million.
• Powerball sales were $42.9 million, and had a high
jackpot of $325 million.
• Scratch sales increased by $9.2 million or 2.9
percent compared to fiscal year 2011.
• Total contributions to Lottery beneficiaries
decreased $12.1 million or 8.1 percent from
fiscal year 2011. In fiscal year 2011, the Lottery
transferred the final legislatively mandated cash
reserve payments to the Education Legacy Account
and General Fund. Total amount transferred was
$18.9 million, thus causing the decline compared to
fiscal year 2011.
The Lottery’s net assets are shown in Table 1 and
Table 2 below. Net assets increased in fiscal year
2012 by $17.2 million, from $12.0 million in 2011 to
$29.2 million in 2012. The Lottery also experienced
an increase of $11.2 million in market value of
investments held by the Lottery to fund future
annuitized prize payments. The market value
adjustment for fiscal year 2011 was a decrease of $8.7
million.
• Contributions to the Washington Opportunity
Pathways Account reached $121.8 million.
Table 1: Net Assets (in millions)
• Contributions to the two stadium debts increased by
the legislatively mandated 4.0 percent, bringing
the amount contributed to King County (Safeco
Field) in fiscal year 2012 to $2.7 million, and $10
million to the Stadium & Exhibition Center
(CenturyLink Field). The bonds relating to Safeco
Field were retired in the Fall of 2011 (fiscal year
2012), resulting in only one payment in the fiscal
year.
2012
2011
2010
Current assets
$79.8
$79.4
$94.1
Non-current assets - investments
206.6
222.2
261.3
0.4
0.3
0.4
$286.8
$301.9
$355.8
Capital assets - net of depreciation
Total assets
Current liabilities
90.3
95.1
96.6
167.3
194.8
226.5
$257.6
$289.9
$323.1
Invested in capital assets
0.4
0.3
0.4
Restricted for future prizes
9.5
3.6
3.7
19.3
8.1
28.7
$29.2
$12.0
$32.8
Non-current liabilities
Total liabilities
Net Assets
• Contributions to the Economic Development
Account totaled $3.0 million. Amounts contributed
to this beneficiary represent one-third of prizes that
go unclaimed each fiscal year.
Unrestricted
Total net assets
Table 2: Summary of Changes in Net Assets (in millions)
• Contributions to the Problem Gambling Account
totaled $291 thousand. This beneficiary receives
thirteen one-hundredths of one percent (0.13%)
of ―net receipts.‖ ―Net receipts‖ are defined as
the difference between revenue received from
2012
2011
2010
Sales
$535.2
$510.5
$491.0
Expenses and non-operating activity
(380.0)
(381.2)
(361.3)
Distributions
(138.0)
(150.1)
(142.5)
$17.2
($20.8)
($12.8)
Changes in net assets
15
The Lottery purchases U.S. Treasury Strips to fund
annuitized prize payments. As these securities
mature, they provide the cash flow to satisfy future
payments to prize winners that elect annuitized prize
payments. It is important to note that this adjustment
to the market value does not affect the Lottery’s
ability to meet future liabilities.
thousand or 0.6 percent compared to 2010. Match 4
showed an increase of $1.2 million or 11.0 percent
compared to fiscal year 2011, but a decline of $1.2
million or 9.1 percent compared to fiscal year 2010.
The remaining active Draw games in the product
portfolio are The Daily Game and Daily Keno. These
games enjoy a loyal player base as exemplified by
consistent sales volumes.
Sales and Prize Expense
Draw games prize expenses increased by $6.2
million, or 6.4 percent compared to fiscal year
2011, but declined by $1.4 million or 1.3 percent
compared to 2010. The increase in Draw games prize
expense compared to fiscal year 2011 is due to the
record level Mega Millions advertised jackpot of $640
million. The Lottery experienced only four winning
Lotto jackpots in fiscal year 2012 compared to three
in 2011, adding to the increased prize expense
compared to fiscal year 2011.
Table 3 below compares sales, prize expense, and net
receipts (sales less prize expenses) for Lottery Scratch
and Draw game products for fiscal years 2012, 2011
and 2010.
Table 3: Sales and Prize Expense (in millions)
Scratch Games
2012
Sales
Prize expense
Net receipts
2011
2010
Draw Games
2012
2011
2010
$318.2 $309.0 $289.3 $217.0 $201.4 $201.7
96.7
104.3
$109.6 $110.6 $101.8 $114.1 $104.7
208.6
198.4
187.5
102.9
$97.4
Other Operating Expenses
Table 4 compares operating expenses, other than prize
expense, for gaming operations and administrative
expenses for fiscal years 2012, 2011 and 2010.
Scratch product sales increased $9.2 million or 2.9
percent compared to 2011, and $28.8 million or 10.0
percent from 2010. The number of tickets sold
increased by 2.64 percent from 89 million in fiscal
year 2011 to 91.5 million in fiscal year 2012, and
the average price per ticket showed a slight
increase from $3.47 in fiscal year 2011 to $3.48 in
fiscal year 2012. Scratch prize expense increased in
fiscal year 2012 by $10.2 million, or 5.1 percent
compared to fiscal year 2011, and increased $21.1
million or 11.3 percent compared to fiscal year
2010. The Scratch prize expense ratio increased
from 64.2 percent in fiscal year 2011 to 65.6 percent
in fiscal year 2012. In fiscal year 2012, $6.1 million of
Scratch prizes went unclaimed compared to $9.1
million in fiscal year 2011, causing net receipts to
decrease as a percentage of sales compared to fiscal
year 2011.
Table 4: Retail Commissions and Other
Operating Expenses (in millions)
2012
2011
2010
$33.4
$31.9
$31.0
33.8
33.0
30.6
Salaries and benefits
9.6
9.8
9.7
Goods and services
2.3
2.2
2.3
Travel
0.4
0.4
0.4
Depreciation
0.1
0.1
0.1
$12.4
$12.5
$12.5
Retail commissions
Other game-related expenses
Administrative expenses
Total administrative expenses
Retailer commissions increased in fiscal year 2012 by
$1.5 million, or 4.5 percent compared to fiscal year
2011. Commission costs as a percentage of sales
declined slightly from 6.3 percent in 2011 to 6.2
percent in 2012. Other game-related expenses,
including
vendor
costs,
advertising,
and
miscellaneous promotional expenses, increased by
$822 thousand, or 2.5 percent compared to fiscal year
2011, and $3.2 million, or 10.3 percent compared to
fiscal year 2010. As a percent of sales, these
expenses were 6.3 percent in fiscal year 2012, 6.5
percent in fiscal year 2011, and 6.2 percent in fiscal
year 2010. Vendor expense, which is the largest
component of these costs, is, for the most part,
paid as a percentage of sales. Advertising expense
declined by $930 thousand or 7.9 percent compared
to fiscal year 2011, and declined $1.4 million or 11.6
percent compared to fiscal year 2010. Promotional
and other operational expenses declined $102
thousand or 2.4 percent compared to fiscal year
2011, but increased $51 thousand or 1.3 percent
Draw game sales increased by $15.6 million or 7.8
percent over fiscal year 2011 and increased by $15.4
million or 7.6 percent increase over fiscal year 2010.
The increase over both fiscal years was due to Mega
Millions reaching an advertised world record of $640
million. During fiscal year 2012, Hit 5 had eleven
high jackpots (exceeding $250,000), with a high
jackpot of $730,000. Like other Draw games, Hit 5 sales
are jackpot-driven, meaning that as the jackpot rises
to higher levels, more people are compelled to
participate in the dream of winning the jackpot. This
corresponds directly to the amount of sales realized
on a jackpot-driven game. Lotto is another example
of a jackpot-driven game on a greater scale. Mega
Millions and Powerball, by virtue of being a multi-state
game, enjoy co-mingled sales and rapidly rising
jackpots. Lotto sales declined by $92 thousand or 0.2
percent compared to fiscal year 2011, and $338
16
compared to fiscal year 2010.
future maturity value in exchange for foregoing
periodic interest payments. In the meantime, we must
recognize changes to the book value of the
investments and the present value of the liabilities by
reporting revenue and amortization expense. Since
both the asset value and the future liability are
increasing to the same finite amount, the income and
expense recognized are identical. The only modest
variation is that there is one security held by the
Lottery for multiple winners from which one winner
has been paid. Rather than selling the entire security,
the single winner was paid, leaving the Lottery with
the investment without a corresponding liability.
The Lottery intends to hold that one piece to
maturity.
In fiscal year 2012, administrative expenses
incurred for the general operation of the agency
decreased by 0.9 percent compared to fiscal year
2011, and decreased 0.8 percent compared to
fiscal year 2010. Depreciation increased by 9.4
percent compared to fiscal year 2011 and increased
by 8.9 percent compared to fiscal year 2010. A system
upgrade caused the increase in depreciation
expenses compared to fiscal years 2011 and 2010. As
a percentage of sales, overall administrative
expenses were 2.3 percent compared to 2.5
percent for fiscal years 2011 and 2010.
Salaries and benefits expense declined by $286
thousand, or 3.0 percent compared to fiscal year
2011, and declined $120 thousand or 1.2 percent
compared to fiscal year 2010. Goods and services
increased by $106 thousand or 4.9 percent compared
to fiscal year 2011, but declined slightly by $14
thousands or 0.6 percent compared to fiscal year
2010. Travel expense increased $53 thousand or
13.8 percent compared to fiscal year 2011, and
increased $25 thousand or 6.2 percent compared to
fiscal year 2010.
Table 5 shows interest income and expense on
long-term investments and liabilities, and payments
made to beneficiaries from Lottery proceeds.
Table 5: Non-Operating Revenues (Expenses) (in millions)
2012
2011
Investment revenue
$12.8
$15.0
Market value adjustment
11.2
(8.7)
Amortization of annuity prize liability
(12.8) (15.0)
Interest and miscellaneous income
0.0
0.3
Total non-operating revenues (expenses)
$11.2
($8.4)
before payments
Proceeds Distribution:
Education Construction Fund
$0.0
$0.0
Capital Assets
Washington’s Lottery’s investment in capital assets
as of June 30, 2012 amounts to $359 thousand (net
of accumulated depreciation). This investment in
capital assets includes leasehold improvements
and equipment. The net increase in the Lottery’s
investment in capital assets for fiscal year 2012 was
30.1 percent. The increase compared to fiscal year
2011 was due to a system update of approximately
$188 thousand. Table 6 in note 1 to the financial
statements on page 25 shows the opening and
ending balances for assets and accumulated
depreciation.
Washington opportunity Pathways Account
Education Legacy Trust Account
State General Fund
King County
Stadium and Exhibition Center
Economic Development
Veterans' Innovation Program
Problem Gambling
Total payments
2010
$17.4
4.4
(17.4)
0.2
$4.6
$97.4
121.8
112.3
0.0
0.0
0.0
2.7
10.0
3.0
0.2
0.3
$138.0
11.9
7.0
5.3
9.6
3.7
0.0
0.3
$150.1
13.1
12.9
5.1
9.2
4.6
0.0
0.2
$142.5
Annually, the Lottery makes an adjustment to the
current market value of investment securities held
in accordance with Government Accounting
Standards Board (GASB) Statement No. 31. Since all
securities held in the portfolio are U.S. Treasury
securities, prepayment risk and market risk are
effectively eliminated for the market valuation.
Interest rate risk remains as the primary variable in
determining the current market value. Given the
long-term nature of the investment, since they are
held for winners up to 25 years in the future,
changes in interest rates can have a marked effect
on current valuations.
Debt
At the end of fiscal year 2012, current liabilities
consisted, in part, of $40.1 million annuity prize
payable. Long-term annuity prize liabilities were
$166.4 million. Note 5 ―Prize Liabilities,‖ on page
28, shows the current and long-term portions of prize
payments.
Non-operating Revenues and Expenses
For example, a security was purchased to mature in 20
years and pays 8 percent per year. If one year later, a
similar security for the same time frame could be
purchased that was paying 10 percent per year, the
relative value of the 8 percent security would have
dropped significantly. The reason is that if an
individual can buy a security paying 10 percent
Investment revenue and amortization expense on the
annuity prize liability very nearly equal each other on
an ongoing basis. The reason is that we fund future
prize liability by purchasing U.S. Treasury Strips at a
deep discount. In other words, we are able to
purchase certain future payments at a fraction of the
17
interest, why would they pay the same price for a
security paying 8 percent? If the holder wanted to
sell their 8 percent security, they would have to
drop the price to the level where a purchaser would
earn 10 percent. The opposite is also true that if
current interest rates were to decrease, another
investor would be willing to pay more to get the 8
percent interest payments if they were otherwise to
get only 6 percent. The longer the period this
discrepancy will exist, the greater the effect on the
market value. For instance, if the security were to
mature in one year, the difference in interest
payment will be limited to one year, as opposed to if
the difference were to be realized year after year
over 20 years.
Contributions to Problem Gambling were $291
thousand in fiscal year 2012, $280 thousand in
fiscal year 2011 and $259 thousand in fiscal year
2010. Contributions to this beneficiary are
calculated based on thirteen one-hundredths of
one percent of ―net receipts.‖ ―Net receipts‖ are
defined as the difference between revenue
received from the sale of Lottery products and the
sum of payments made to winners.
The remaining payments required by statute are to
stadium accounts. These consist of semi-annual
payment schedules whereby the required
payment amounts increase by 4.0 percent per
year. The Stadium and Exhibition Center
(CenturyLink Field) payments for fiscal year 2012
totaled $10.0 million. These payments are
scheduled to continue through fiscal year 2021.
Payments to King County (Safeco Field) totaled
$2.7 million in fiscal year 2012. These payments
were scheduled to continue into fiscal year 2016.
However, the bonds were retired in the Fall of
2011 (fiscal year 2012), resulting in only one
payment in fiscal year 2012.
Payments to our beneficiaries as a result of
Washington’s Lottery operations for fiscal year 2012
amounted to $138.0 million.
Beginning in fiscal year 2011, the Lottery’s primary
beneficiary was the Washington Opportunity
Pathways
Account.
Contributions
to
this
beneficiary reached $121.8 million in fiscal year
2012 compared to $112.3 million in fiscal year
2011.
Contributions to the Economic Development
account amounted to $3.0 million in fiscal year
2012, $3.7 million in fiscal year 2011 and $4.6
million in fiscal year 2010.
Amounts to this
beneficiary represent one-third of the amount of
prizes which go unclaimed. Unclaimed prizes are
those expected prizes that do not get presented
for claim within 180 days of the particular game
closure or drawing date.
18
OTHER POTENTIALLY SIGNIFICANT
MATTERS IMPACTING NEXT YEAR
CONTACTING THE LOTTERY
This financial report is provided for interested
parties to evaluate the financial results of Lottery
activities for fiscal year 2012. If you have questions
about this report or need additional financial
information, please contact:
Integrated Financial System
Washington’s Lottery issued a Request For
Information (RFI) for its financial system. The
system will position the agency's financial
reporting and workflow processes to become
more efficient and effective while maintaining
strong internal controls and ensuring timely,
reliable information. The project, if approved by
the Legislature, will be implemented during the
2013-2015 biennium.
Jana Jones
Public Records Officer
Director of Legal Services
(360) 664-4833
[email protected]
Jennifer McDaniel
Public Records Coordinator
Administrative Assistant
(360) 664-4834
Vendor Gaming System
The Lottery’s current vendor gaming contract
expires June 30, 2016. Efforts commenced August
2012 (FY 2013) and will run through December
2016 (FY 2017). Having a contract in place is
critical to the operation of the Lottery as it covers
all Lottery ticket machines.
[email protected]
19
FISCAL YEAR 2012
FUND DISTRIBUTION
Prizes: $311.5M (58.8%)
King County (Safeco): $2.7M (0.5%)
WA Opportunity Pathways: $121.8M (23.0%)
Administration: $12.4M (2.3%)
Economic Development: $3.0M (0.6%)
Retailer Commissions: $33.4M (6.4%)
Problem Gambling: $0.3M: (0.1%)
Cost of Sales: $33.8M (6.3%)
Veterans Innovations Program: $0.3M (0.1%)
Stadium & Exhibition Center: $10M (1.9%)
Total Payments: $529.2 Million
20
COMPARATIVE STATEMENTS OF NET ASSETS AS OF JUNE 30, 2011 AND 2012
Assets
2012
2011
$18,206,523
$13,935,036
Accounts receivable, net of allowances
21,158,495
19,078,946
Investments, current portion
39,439,295
45,438,585
Inventory
372,291
380,177
Prepaid expenses
617,953
647,015
79,794,557
79,479,759
206,671,888
222,161,038
358,544
275,584
207,030,432
222,436,622
286,824,989
301,916,381
5,504,312
5,582,450
Prizes payable
27,952,132
29,132,563
Annuity prizes payable, current portion
40,136,969
46,152,367
Due to the state
16,404,918
13,896,827
324,339
367,418
90,322,670
95,131,625
166,442,019
194,006,005
814,885
763,007
Total non-current liabilities
167,256,904
194,769,012
Total liabilities
257,579,574
289,900,637
358,544
275,584
9,535,984
3,600,628
19,350,887
8,139,532
$29,245,415
$12,015,744
Current assets
Cash and cash equivalents
Total current assets
Non-current assets
Investments less current portion
Capital assets, net of accumulated depreciation
Total non-current assets
Total assets
Liabilities and Net Assets
Current liabilities
Accounts payable
Salaries and benefits payable
Total current liabilities
Non-current liabilities
Annuity prizes payable, net of current portion
Accrued leave payable
Net assets
Unrestricted
Total net assets
The accompanying notes to the financial statements are an integral part of this statement.
21
COMPARATIVE STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS FOR
FISCAL YEARS ENDED JUNE 30, 2011 AND 2012
2012
2011
$318,149,502
$309,045,103
217,047,664
201,412,321
535,197,166
510,457,424
Prize expense
Retailer commissions
311,545,285
33,383,737
295,155,493
31,941,021
Vendor expense
Advertising expense
18,837,807
16,982,569
10,882,354
11,813,258
4,106,779
4,208,989
378,755,962
360,101,330
9,567,271
9,853,525
Goods and services
2,279,971
2,173,778
434,622
132,145
381,978
120,773
12,414,009
12,530,054
144,027,195
137,826,040
Sales
Scratch ticket sales
Draw game sales
Total sales
Cost of sales
Miscellaneous promotional & other operating expenses
Total cost of sales
Travel
Depreciation
Total administrative expenses
Operating income
Non-operating revenues (expenses)
Investment revenue (loss)
23,979,561
(12,819,949)
6,266,376
(14,981,731)
Interest income
58,387
87,571
Miscellaneous income (expense)
Fee income
13,202
160,896
14,968
12,764
Loss on disposal of capital assets
(5,340)
11,240,829
Payments to Washington Opportunity Pathways Account
Payments to Education Legacy Trust Account
Payments to King County
Payments to Stadium and Exhibition Center Account
Payments to Economic Development
Payments to Problem Gambling
Payments to Veterans Innovations Program
0
(8,454,124)
(121,840,501)
0
(112,262,295)
(11,900,000)
(2,701,415)
(5,298,930)
(9,990,441)
(2,967,678)
(9,609,193)
(3,739,469)
(290,747)
(247,571)
(279,892)
0
Payments to General Fund
Total payments
(138,038,353)
(150,127,754)
Net non-operating expense
(126,797,524)
(158,581,878)
0
(7,037,975)
Change in net assets
17,229,671
(20,755,838)
Total net assets at beginning of year
12,015,744
32,771,582
$29,245,415
$12,015,744
Total net assets at end of year
22
COMPARATIVE STATEMENTS OF CASH FLOWS FOR FISCAL YEARS ENDED JUNE 30, 2011 AND 2012
2012
Cash flows from operating activities
Cash received from players and retailers (net of commissions)
Cash payments for prizes
Cash payments to suppliers of goods or services
Cash payments to employees
Cash payments for other operating costs
Net cash provided by operating activities
Cash flows from non-capital financing activities
Cash payments to Education Funds
Cash payments to Washington Opportunity Pathways Account
Cash payments to King County
Cash payments to Stadium and Exhibition Center Account
Cash payments to Economic Development Account
Cash payments to Problem Gambling Account
Cash payments to Education Legacy Trust Account
Cash payments to Veterans Innovations Program
Cash payment to other state funds
Net cash used in non-capital financing activities
Cash flows from capital financing activities
Payments for acquisition of equipment
Proceeds from sale of capital assets
Net cash used in capital financing activities
Cash flows from investing activities
Receipts of interest
Proceeds from maturity of investments
Net cash provided by investing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at end of year
Reconciliation of operating income to cash
provided by operating activities
Operating income
Adjustments to reconcile operating income to net cash
provided by operating activities
Depreciation
Decrease (increase) in:
Accounts receivable
Prepaid expenses
Inventory
Increase (decreases) in:
Accounts payable
Prizes payable
Lotto and win for life payments
Accrued payroll
Total adjustments
Net cash provided by operating activities
Schedule of non-cash investing, capital, and financing activities
Increase (decrease) in fair value of investments
Amortization of long-term annuity prize liability
23
2011
$499,733,880
(359,063,356)
(36,008,249)
(9,698,323)
(434,622)
94,529,330
$475,899,635
(345,703,470)
(33,368,908)
(9,899,378)
(381,979)
86,545,900
0
(118,488,804)
(2,701,415)
(9,990,441)
(3,327,965)
(294,456)
0
(247,571)
(479,610)
(135,530,262)
(9,397,070)
(99,498,237)
(5,298,930)
(9,609,193)
(4,531,328)
(279,275)
(11,900,000)
0
(8,595,864)
(149,109,897)
(261,946)
41,501
(220,445)
(40,956)
0
(40,956)
24,863
45,468,000
45,492,863
261,490
50,536,001
50,797,491
4,271,486
13,935,036
$18,206,523
(11,807,462)
25,742,498
$13,935,036
$144,027,195
$137,826,040
132,146
120,773
(2,079,549)
29,062
7,886
(2,616,769)
286,345
117,941
(78,137)
(1,180,431)
(46,337,640)
8,798
(49,497,865)
$94,529,330
1,307,635
186,607
(50,734,585)
51,913
(51,280,140)
$86,545,900
$11,221,306
($12,819,949)
($8,715,355)
$14,981,731
WASHINGTON’S LOTTERY
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2012
commissions. The account is allotted based on
projected revenues.
• The Shared Game Lottery Account is classified as
a non-appropriated/allotted enterprise account.
It accounts for all revenues from the sale of
shared-game lottery tickets or any other source
authorized by law. The account is allotted based
on projected revenues.
NOTE 1.
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
• The Lottery Administrative Account is an
appropriated enterprise account. Costs of
operation and administration of the Lottery are
paid from this account. All revenues received are
generated from Lottery product sales, but the
amount that can be spent is limited to a
legislatively approved appropriation. Spending
cannot exceed this biennial appropriation.
Spending authority cannot be carried forward into
an ensuing biennium. The appropriation approved
for the period July 1, 2011, through June 30, 2013,
was $24.7 million.
Reporting Entity
Washington’s Lottery, an agency within the state, was
established under the provisions of Chapter 67.70,
Revised Code of Washington (RCW), in 1982. A fivemember Commission consisting of Washington
residents is appointed by the Governor to
promulgate rules governing the Lottery. The Director,
who is also appointed by the Governor, administers
the agency.
For financial reporting purposes, Washington’s
Lottery is a part of the primary government of the
state of Washington and is included in the basic
financial statements of the state. Disclosures related to
Washington’s deferred compensation plan, selfinsurance
funds,
unemployment
insurance
compensation, state pension plans, post-employment
benefits, and workers’ compensation benefits are
included in the state of Washington’s Comprehensive
Annual Financial Report.
The Lottery Fund is accounted for on a flow of
economic resources measurement focus. With this
measurement focus, all assets and liabilities
associated with the operations of the Lottery are
included on the statement of net assets. Operating
statements present increases (e.g., revenues) and
decreases (e.g., expenses) in net total assets. The
Lottery distinguishes operating revenue and
expenses from non-operating items and presents
them as such in the operating statements. Operating
revenue is comprised of sales from Draw games
and Scratch games. Operating expenses
include cost of sales and administrative
expenses.
These financial statements include all Lottery activity
and do not include any activity related to any other
state agency or fund.
Measurement Focus, Basis of Accounting,
and Basis of Presentation
The Lottery uses the accrual basis of accounting.
Under this basis, revenues are recognized when
earned, and expenses are recognized when the
related liability is incurred. Internal receivables
and payables have been eliminated. Private-sector
standards of accounting and financial reporting
issued prior to November 30, 1989, generally are
followed by the Lottery to the extent that those
standards do not conflict with or contradict
guidance of the GASB. The Lottery has elected not
to
follow
private-sector
guidance
issued
subsequent to November 30, 1989.
The accounting methods and procedures
adopted by Washington’s Lottery conform to
generally accepted accounting principles (GAAP)
for governmental enterprise funds. Enterprise funds
account for operations that are financed and
operated in a manner similar to private
business enterprises where the intent is that the
costs (expenses, including depreciation) of
providing goods or services to the general public on
a continuing basis are financed primarily through
user charges (sales).
Deposits and Investments
The financial transactions of the Lottery are accounted
for by using the following three accounts:
The balance in the cash accounts is available to meet
current operating requirements. For purposes of
reporting cash flows, cash and cash equivalents
include all cash accounts, deposits with the State
Treasurer, and investments with an original
maturity of three months or less.
• The State Lottery Account is classified as a nonappropriated/allotted enterprise account. It
accounts for all revenues from the sale of lottery
products or any other source authorized by law,
and expenses limited to payment of prizes to
lottery winners, cost of sales, and retailer
The Office of State Treasurer (OST) manages the
24
Lottery’s deposits with the state. RCW 43.84.080
authorizes the OST to buy and sell the following types
of investments: U.S. Treasury and Agency securities,
bankers’ acceptances, and certificates of deposit with
qualified public depositories. Securities underlying
repurchase and reverse repurchase agreements are
limited to those stated above. RCW 39.59.020
authorizes the Lottery to invest in any investments
authorized by law for the OST.
Due to State and Other Agencies
Due to Washington Opportunity
Pathways Account
Due to Economic Development
2012
2011
16,115,755
12,764,058
133,641
493,929
Due to Problem Gambling
Due to General Fund
Due to Other Agencies
Total Due to State and Other
Agencies
Fixed-income investments (U.S. Treasury Strips) are
purchased in the name of the Lottery for annuity prize
payments. Investments are stated at fair-market value
based on quoted market prices.
22,367
26,076
-
387,227
133,155
225,537
$16,404,918 $13,896,827
Capital Assets
The state of Washington’s level for capitalization of
Leasehold improvements is $100 thousand, and
other capital assets are $5,000. Capital asset costs
include the purchase price plus those costs
necessary to place the asset in its intended location
and condition for use. Capital assets are depreciated
using the straight-line method over the following
estimated useful lives:
Receivables
Receivables are reported at gross value, reduced
by the estimated portion that is expected to be
uncollectible. Total uncollectible amounts represent
1.2 percent of the Lottery’s receivable. Revenue
and accounts receivable from Draw games are
recognized when tickets are sold to the public. For
Scratch tickets, revenue and accounts receivable
are recognized when retailers activate tickets for sale.
Assets
Years
Leasehold Improvements
5
Computer Equipment
5
Furniture and Equipment
Inventory and Prepaid Expenses
10
Table 6: Capital Assets
Inventories are valued at the lower of cost or market
using the first-in, first-out method. The cost of
consumable supplies is expensed as they are used.
Capital asset activity for the year ended June 30, 2012 was as follows:
Capital assets being
depreciated:
Equipment
Total capital assets
being depreciated
Less accumulated
depreciation for:
Leasehold improvements
Equipment
Total accumulated
depreciation
Certain payments to vendors reflect costs applicable
to future accounting periods and are recorded as
prepaid expenses.
Prize Payable
The prizes payable account represents the difference
between the prize liability and the actual prizes
redeemed. Per RCW 67.70.190 ―unclaimed prizes
shall be retained in the state lottery account for the
person entitled thereto for one hundred eighty days
after the drawing in which the prize is won, or after
the official end of the game for instant prizes. If no
claim is made for the prize within this time, all rights
to the prize shall be extinguished, and the prize shall
be retained in the state lottery fund for further use as
prizes, except that one-third of all unclaimed prize
money shall be deposited in the economic
development strategic reserve account created in
RCW 43.330.250.‖
being depreciated, net
Beginning
Increases Decreases
0Balance
$661,472
$5,082
$0
749,050
256,864
(239,721)
(239,721)
Ending
Balance
$666,554
766,193
1,410,522
$261,946
1,432,747
(534,674)
(600,264)
(68,713)
(63,432)
0
192,880
(603,387)
(470,816)
(1,134,938)
(132,145)
192,880
(1,074,203)
$275,584
$129,801
($46,841)
$358,544
Capital asset activity for the year ended June 30, 2011 was as follows:
Capital assets being
depreciated:
Equipment
being depreciated
Less accumulated
depreciation for:
Due To the State and Other Agencies
Leasehold improvements
Equipment
Total accumulated
depreciation
being depreciated, net
Interagency receivables and payables arise from
transactions with other state agencies and are
recorded by all agencies affected in the period in
which transactions occur. At fiscal year-end 2012,
the breakdown was as follows:
25
Beginning
Increases Decreases
0Balance
$661,472
$0
$0
708,094
40,956
0
Ending
Balance
$661,472
749,050
1,369,566
40,956
0
1,410,522
(463,123)
(551,042)
(71,551)
(49,222)
0
0
(534,674)
(600,264)
(1,014,165)
(120,773)
0
(1,134,938)
$355,401
($79,817)
$0
$275,584
Prize Expense
Economic Development.
RCW 67.70.040(1)(k)(i) states that a minimum of 45
percent of gross annual revenue must be paid as
prizes. For the fiscal years ended June 30, 2012 and
2011, the prize expense as a percentage of sales were
58.2 percent and 57.8 percent, respectively.
Payments to King County
The Lottery is legislatively mandated to make
payments to King County for the purpose of paying
principal and interest payments on bonds issued by
King County to construct Safeco Field, a baseball
stadium. Scheduled payments began in 1996
and increase annually by 4.0 percent. These semiannual payments were scheduled to be made into
fiscal year 2016, however, the bonds were retired
in the Fall of 2011 (fiscal year 2012), at which
point our required contributions ceased. Payments
to King County totaled $2.7 million in fiscal year 2012
and $5.3 million in fiscal year 2011. Because the
bonds were retired during the year, only one
payment was made in fiscal year 2012.
Prize expense represents the amount of winnings to
be paid out for a particular game or drawing. In the case
of Scratch games, the overall prize expense ratio for a
given game is recorded in relationship to the amount
of sales of the game. Draw game prize expense is
recorded from the number of winning tickets sold at a
given prize level. These expected prize payments
are then adjusted 180 days following closure of a
Scratch game or drawing, as appropriate. This
adjustment reduces prize expense to the extent
that the anticipated winning tickets do not get
presented for payment within the specified time
period. These dollars become unclaimed prizes and
become restricted net assets.
Payments to the Stadium and Exhibition
Center
payments to the Stadium and Exhibition Center for
the purpose of paying principal and interest
payments on bonds issued to construct CenturyLink
Field and Exhibition Center, a multi-purpose
stadium and exhibition center. Scheduled payments
began in 1998 and increase annually by 4.0 percent.
These semi-annual payments are scheduled to be
made into fiscal year 2021. Payments to the Stadium
and Exhibition Center totaled $10.0 million in fiscal
year 2012 and $9.6 million in fiscal year 2011.
Retailer Commissions
Commissions on in-state games are computed as 6
percent of net ticket sales. In addition, the Lottery
pays an extra 1 percent commission on Lotto ticket
sales when the declared jackpot is $6 million or
more. Commissions for Mega Millions and
Powerball are paid at a 7 percent rate.
Retailer Selling Bonus
The Lottery pays retailers a selling bonus of 1
percent of the jackpot amount if they sell a jackpotwinning ticket for Lotto or Hit 5. Each retailer who
sells a jackpot-winning Mega Millions or Powerball
ticket receives a $50,000 bonus. Retailers selling a
Mega Millions second-tier prize-winning ticket worth
$250,000 receive a $2,500 bonus, up to $10,000 for
selling a second tiered prize with the Megaplier
feature.
Payments to Economic Development
payments to the Economic Development Strategic
Reserve Account. The Economic Development
Strategic Reserve Account was created for the
Governor, with the recommendation of the Director
of the Department of Community, Trade and
Economic Development and Economic Development
Commission, to make expenditures for the economic
good of the state. This includes preventing the
closure of a business or facility, preventing
relocation of a business or facility outside the state
or to recruit a business or facility to the state.
Payments to this account are defined to be one-third
of the Lottery’s unclaimed prize money. Payments to
Economic Development totaled $3.0 million in fiscal
year 2012 and $3.7 million in fiscal year 2011.
For Powerball, the retailer is paid up to $10,000 for
a second-tier prize-winning ticket worth $1.0
million. The Powerplay feature will not change the
selling bonus amount.
Payments to Washington Opportunity
Pathways Account
This beneficiary became a new beneficiary to the
Lottery on July 1, 2010, and replaced the Education
Construction Fund. Payments to the Washington
Opportunity Pathways Account consist of the balance
of revenues less expenses from all Lottery products,
less legislatively mandated payments to King County,
the Stadium and Exhibition Center, Problem
Gambling, Veterans Innovations Program, and
Payments to Problem Gambling
payments to the Problem Gambling Account. This
account was created for the prevention and
treatment of problem and pathological gambling
and the training of professionals in the
26
identification and treatment of problem and
pathological gambling. Lottery payments to this
account for fiscal year 2006 were defined to be onetenth of one percent of ―net receipts‖, defined as
the difference between revenue received from the
sale of lottery tickets and the sum of payments
made to winners. This amount increased to thirteen
one-hundredths of one percent of ―net receipts‖ in
fiscal year 2007. Payments to Problem Gambling
totaled $291 thousand in fiscal year 2012 and $280
thousand in fiscal year 2011.
the ensuing biennium from revenue sources
derived from proposed changes in existing statutes.
The appropriated budget and any necessary
supplemental budgets are legally required to be
adopted through the passage of appropriation bills
by the Legislature and approval by the Governor.
Operating appropriations are made at the
fund/account
and
agency
level.
Capital
appropriations are generally made at the
fund/account, agency, and project level. The legal
level of budgetary control is at the fund/account,
agency, and appropriation level, with administrative
controls established at lower levels of detail in
certain instances.
Payments to Veterans Innovations
Program
Each calendar year, beginning in 2011, the Lottery
is legislatively mandated to hold one Raffle to
benefit veterans and their families. The first Raffle
was held in November 2011.
Payments to the
Veterans Innovations Program totaled $248 thousand
in fiscal year 2012.
The
Lottery’s
appropriated
and
nonappropriated/allotted accounts are monitored by
the executive branch through the allotment
process. This process allocates the expense plan
into monthly allotments by program, source of
funds, and object of expense. According to RCW
43.88.110, the original biennial allotments are
approved by the Governor and may be revised
at the request of the Office of Financial
Management (OFM), or upon the Lottery’s initiative, on
a quarterly basis. The revisions must be
accompanied by an explanation of the reasons
for significant changes. Also, OFM is authorized to
make allotments based on the availability of
unanticipated receipts. Appropriations are strict
legal limits on expenses and over expenditures are
prohibited. Appropriations lapse at the end of the
biennium.
Net Assets
Restricted net assets represent amounts set aside for
unclaimed prizes retained for future use as prizes, as
required by RCW 67.70.190. During fiscal year
2012, $8.9 million of prizes went unclaimed. Of
this amount, $3.0 million was used for contributions
to the Economic Development Strategic Reserve
Account. As of June 30, 2012, the balance in the
reserved account totaled $9.5 million.
Unrestricted net assets represent the net assets
available for future operations and unrealized
gains or losses on investments. GASB Statement
No. 31 requires that certain investments be reported
at fair value with gains and losses reflected in the
statement of operations. The Lottery uses
investments only to fund its annuity prize
obligations and intends to hold the investments to
maturity. Market gains or losses represent temporary
fluctuations and are not recognized in the calculation of
the amounts due to beneficiaries.
As an enterprise fund, the Lottery Fund is
budgeted using a combination of fixed and flexible
budgets. Fixed budgets are employed using the
appropriation and allotment process. Fixed budgets
are included with flexible estimates in business plans
prepared by the Lottery for operations under its
control. These business plans constitute a fullaccrual GAAP budget. The Lottery does not employ
encumbrance accounting.
NOTE 2.
GENERAL BUDGETARY POLICIES
AND PROCEDURES
NOTE 3.
DETAILED NOTES ON ACCOUNT
BALANCES
As an agency of Washington State, the Lottery is
required to submit a budget through the Governor
to the State Legislature no later than December
20th of the year preceding odd-year sessions of
the Legislature. The budget is a proposal for
expenses in the ensuing biennial period based
upon anticipated revenues from the sources
existing by law at the time of submission of the
budget. The Governor may additionally submit, as
an appendix to the budget, a proposal for expenses in
Deposits and Investments
As of June 30, 2012 and June 30, 2011, the amount of
cash on deposit was $18,289,126 and $13,998,990,
respectively.
All Lottery deposits in a financial
institution are entirely covered by the Federal
Deposit Insurance Corporation (FDIC) or by
collateral held in a multiple-financial-institution
collateral pool administered by the Washington
Public Deposit Protection Commission (PDPC). The
27
PDPC is a statutory authority established under RCW
39.58. There are provisions for PDPC to make
additional pro-rata assessments of need to cover a
loss. Accordingly, the deposits covered by the
PDPC are considered to be insured.
The aggregate lease commitment for the Lottery,
provided cancellation options are not used, is as
follows as of June 30, 2012:
Fiscal Year
The Lottery’s investment policy is to purchase U.S.
Treasury Stripped Coupons (TINTS), or U.S.
Treasury (non-callable) Principal Strips to fund
annuity prize payments and to hold these
investments to maturity. The investment maturities
approximate the annuity prize payment dates.
For an investment, custodial risk is the risk that in the
event of the failure of the counterparty, the Lottery will
not be able to recover the value of its investments that
are in the possession of an outside party. The Lottery
has limited custodial risk because the U.S. Treasury
Strips are held in the Lottery’s name by its custodian.
$782,937
789,300
789,300
789,300
789,300
789,300
$4,729,437
NOTE 5.
PRIZE LIABILITIES
Presented below is a summary of the annuity prize
payment requirements as of June 30, 2012:
U.S. Treasury Strips are explicitly guaranteed by the
U.S. government and, therefore, have limited credit
risk.
Fiscal Year
Interest rate risk is the risk that an investment’s fair
value decreases as market interest rates increase.
Typically, this risk is higher in debt securities with
longer maturities. It’s the Lottery’s policy that interest
rate risk is insignificant because, while the fair market
value is reported, it is the Lottery’s policy to hold the
investments to maturity. In the event of a winner’s
death, the estate has the option of continuing the
annuity payments or settling the Lottery’s obligation,
which would be accomplished by paying the
proceeds received from the sale of the investments.
Principal
Interest
Total
2013
$40,136,969
$1,155,514
$41,292,483
2014
32,227,507
2,989,826
35,217,333
2015
25,210,647
3,956,686
29,167,333
2016
19,668,717
4,311,283
23,980,000
2017
14,336,827
3,893,173
18,230,000
2018-2022
44,670,003
22,763,997
67,434,000
2023-2027
22,768,992
19,393,008
42,162,000
2028-2032
5,947,869
7,825,131
13,773,000
2033-2037
1,355,213
2,556,787
3,912,000
2038-2040
Total
256,244
687,756
944,000
$206,578,988
$69,533,161
$276,112,149
This debt represents annual payments owed to
Lotto jackpot winners and lifetime winners. Annuity
Lotto jackpot prizes are paid in 26 installments, with
the first installment on the day the prize is claimed.
The subsequent annual payments are funded with
U.S. Treasury Strips purchased by the Lottery.
Lifetime prizes are paid semi-annually or annually
for the life of the winner, and are funded with U.S.
Treasury Strips.
U.S. Treasury Strips investments held on June 30, 2012
were as follows:
Table 7: Maturities in Years
Less than 1
1-4
5-10
11-15
16-20
21-29
Fair Market value
Operating Leases
2013
2014
2015
2016
2017
2018
Total
$39,439,295
102,689,235
60,816,331
31,864,998
8,776,391
2,524,933
$246,111,183
Activity of annuity prize payments for the years
ended June 30, 2012, and June 30, 2011 was as
follows:
NOTE 4.
OPERATING LEASES
Fiscal
Year
The Lottery leases office and warehouse facilities in
Everett, Lacey, Olympia, Federal Way, Spokane,
Vancouver, and Yakima under long-term operating
leases, which expire at various dates through
October 31, 2017. Total costs for such leases were
$779,590 and $779,086 for the fiscal years ended June
30, 2012 and 2011, respectively. All leases, which are
for periods of one to five years, include a special
termination provision allowing the Lottery to terminate
the lease.
Beginning
Additions
Balance
Reductions
Ending
Balance
Due within
One Year
2012
$240,158,372 12,758,257
(46,337,641) $206,578,988
$40,136,969
2011
$275,911,227 14,981,731
(50,734,586) $240,158,372
$46,152,367
Compensated Absences
Lottery employees accrue vested annual leave at a
variable rate based on years of service. In general,
accrued annual leave cannot exceed 30 days at the
employee’s anniversary date. The expense and
accrued liability is recognized when the annual
28
leave is earned. The Lottery’s liability for accumulated
annual leave, including the employer share of
pension benefits and payroll taxes, was $557,675 and
$508,034 on June 30, 2012 and 2011, respectively.
NOTE 7.
PENSION PLANS
All Washington’s Lottery full-time and qualifying
part-time employees participate in one of the
statewide retirement systems administered by the
Washington State Department of Retirement
Systems, under cost-sharing multiple-employer
public employee defined benefit and defined
contribution retirement plans. The Department of
Retirement Systems (DRS), a department within the
primary government of the State of Washington,
issues a publicly available comprehensive annual
financial report (CAFR) that includes financial
statements
and
required
supplementary
information for each plan. The DRS CAFR may be
obtained by writing to:
With no limit on accumulation, sick leave is earned
at 12 days per year. Sick leave is not vested; i.e.,
employees are not paid for unused sick leave upon
termination except upon employee death or
retirement, at which time the Lottery is liable for 25
percent of the employee’s accumulated sick leave.
Each January, employees who have accumulated sick
leave in excess of 60 days have the option to redeem
sick leave earned but not taken during the previous
year at the rate of one day’s pay in exchange for each
four days of sick leave. Accumulated sick leave
balances, including the employer share of payroll
taxes as of June 30, 2012 and 2011, represent
possible future payments of $1,174,474 and
$1,169,602, respectively, depending on employee
options, not probable payments. As a result, only
the estimated dollar value of sick leave that will be
paid to employees is recognized as an expense and
accrued liability. The estimates of $257,210 and
$254,973 on June 30, 2012 and 2011, respectively,
are based on the actuarially-determined factor of the
probability that current employees will receive
payments for sick leave buyouts. The Lottery
estimates that approximately 8-10 percent, or
$117,447 of its total liability will be paid within one
year, and as such is considered short term.
Department of Retirement Systems
Communications Unit
P.O. Box 48380, Olympia, WA 98504-8380
The DRS CAFR can also be downloaded from the
DRS website at www.drs.wa.gov.
The following disclosures are made pursuant to
GASB Statements No. 27, Accounting for Pensions by
State and Local Government Employers, and No. 50,
Pension Disclosures, an Amendment of GASB
Statements No. 25 and No. 27.
Public Employees’ Retirement System
(PERS) Plans 1, 2, and 3
Long-term liability activity of leave benefits for
the year ended June 30, 2012 was as follows:
Annual Leave
Sick Leave
Beginning
Additions Reductions
Balance
$508,034 $487,210 ($437,569)
$254,973
$73,427
($71,190)
Ending
Balance
$557,675
Plan Description
PERS is a cost-sharing multiple-employer retirement
system comprised of three separate plans for
membership purposes: Plans 1 and 2 are defined
benefit plans and Plan 3 is a defined benefit plan
with a defined contribution component.
$257,210
Long-term liability activity of leave benefits for
the year ended June 30, 2011 was as follows:
Annual Leave
Sick Leave
Beginning
Additions Reductions
Balance
$500,280 $495,832
($488,078)
$243,978
$76,209
($65,214)
Ending
Balance
$508,034
PERS members who joined the system by September
30, 1977 are Plan 1 members. State employees who
joined on or after October 1, 1977, and by either
February 28, 2002 are Plan 2 members unless they
exercised an option to transfer their membership to
Plan 3. PERS members joining the system on or after
March 1, 2002, have the irrevocable option of
choosing membership in either PERS Plan 2 or Plan
3. The option must be exercised within 90 days of
employment. Employees who fail to choose within
90 days default to Plan 3. Notwithstanding, PERS
Plan 2 and Plan 3 members may opt out of plan
membership if terminally ill, with less than five years
to live.
$254,973
NOTE 6.
RISK MANAGEMENT
The Lottery faces various risks of loss related to torts,
theft of, damage to and destruction of assets, and
natural disasters, for which the Lottery participates in
Washington State’s risk management and insurance
program. In order to participate, an annual premium
in proportion to the anticipated exposure to liability
losses is assessed.
PERS is comprised of and reported as three separate
plans for accounting purposes:
Plan 1, Plan 2/3,
29
and Plan 3. Plan 1 accounts for the defined benefits of
Plan 1 members. Plan 2/3 account for the defined
benefits of Plan 2 members and the defined benefit
portion of benefits for Plan 3 members. Plan 3
accounts for the defined contribution portion of
benefits for Plan 3 members. Although members can
only be a member of either Plan 2 or Plan 3, the
defined benefit portions of Plan 2 and Plan 3 are
accounted for in the same pension trust fund. All
assets of this Plan 2/3 defined benefit plan may legally
be used to pay the defined benefits of any of the Plan
2 or Plan 3 members or beneficiaries, as defined by
the terms of the plan.
Therefore, Plan 2/3 is
considered to be a single plan for accounting
purposes.
member remains disabled or until the member
attains the age of 60, at which time the benefit is
converted to the member’s service retirement
amount. A member with five years of covered
employment is eligible for non-duty disability
retirement. Prior to the age of 55, the benefit
amount is 2% of the AFC for each year of service
reduced by 2% for each year that the member’s age
is less than 55. The total benefit is limited to 60% of
the AFC and is actuarially reduced to reflect the
choice of a survivor option. Plan 1 members may
elect to receive an optional COLA amount (based on
the Consumer Price Index), capped at 3% annually.
To offset the cost of this annual adjustment, the
benefit is reduced.
PERS Plan 1 and Plan 2 retirement benefits are
financed from a combination of investment earnings
and employer and employee contributions. Employee
contributions to the PERS Plan 1 and Plan 2 defined
benefit plans accrue interest at a rate specified by the
Director of DRS. During DRS’ Fiscal Year 2012, the
rate was five and one-half percent compounded
quarterly. Members in PERS Plan 1 and Plan 2 can
elect to withdraw total employee contributions and
interest thereon upon separation from PERS-covered
employment.
PERS Plan 1 members can receive credit for military
service while actively serving in the military if such
credit makes them eligible to retire. Members can
also purchase up to 24 months of service credit lost
because of an on-the-job injury.
PERS Plan 1 members are vested after the completion
of five years of eligible service.
PERS Plan 2 members are vested after the
completion of five years of eligible service. Plan 2
members are eligible for normal retirement at the
age of 65 with five years of service. The monthly
benefit is 2% of the AFC per year of service. The
AFC is the monthly average of the 60 consecutive
highest-paid service months. There is no cap on
years of service credit; and a cost-of-living
allowance is granted (based on the Consumer Price
Index), capped at 3% annually.
The survivor of a PERS Plan 1 member who dies after
having earned ten years of service credit has the
option, upon the member’s death, of either a
monthly survivor benefit or the lump sum of
contributions plus interest.
PERS Plan 1 members are eligible for retirement after
30 years of service, or at the age of 60 with five years
of service, or at the age of 55 with 25 years of service.
The monthly benefit is 2% of the average final
compensation (AFC) per year of service, but the
benefit may not exceed 60% of the AFC. The AFC is
the monthly average of the 24 consecutive highestpaid service credit months.
PERS Plan 2 members who have at least 20 years of
service credit and are 55 years of age or older, are
eligible for early retirement with a reduced benefit.
The benefit is reduced by an early retirement factor
(ERF) that varies according to age, for each year
before age 65.
The monthly benefit is subject to a minimum for
retirees who have 25 years of service and have been
retired 20 years, or who have 20 years of service and
have been retired 25 years. If a survivor option is
chosen, the benefit is reduced. Plan 1 members
retiring from inactive status prior to the age of 65 may
also receive actuarially reduced benefits. Plan 1
members may elect to receive an optional COLA that
provides an automatic annual adjustment based on the
Consumer Price Index. The adjustment is capped at
3% annually.
To offset the cost of this annual
adjustment, the benefit is reduced.
PERS Plan 1 provides duty and non-duty disability
benefits.
Duty disability retirement benefits for
disablement prior to the age of 60 consist of a
temporary life annuity. The benefit amount is $350 a
month, or two-thirds of the monthly AFC, whichever is
less.
The benefit is reduced by any workers’
compensation benefit and is payable as long as the
PERS Plan 2 members who have 30 or more years of
service credit and are at least 55 years old can retire
under one of two provisions:


With a benefit that is reduced by 3% for
each year before age 65; or.
With a benefit that has a smaller (or no)
reduction (depending on age) that imposes
stricter return-to-work rules.

PERS Plan 2 retirement benefits are also actuarially
reduced to reflect the choice, if made, of a survivor
option. The surviving spouse or eligible child(ren)
30
of a PERS Plan 2 member who dies after having
earned ten years of service credit has the option of
either a monthly benefit or a lump sum payment of the
member’s contributions plus interest.
PERS Plan 3 benefit retirement benefits are also
actuarially reduced to reflect the choice, if made, of
a survivor option.
PERS Plan 2 and Plan 3 provide disability benefits.
There is no minimum amount of service credit
required for eligibility. The Plan 2 monthly benefit
amount is 2% of the AFC per year of service. For
Plan 3, the monthly benefit amount is 1% of the AFC
per year of service. These disability benefit amounts
are actuarially reduced for each year that the
member’s age is less than 65, and to reflect the
choice of a survivor option. There is no cap on years
of service credit, and a cost-of-living allowance is
granted (based on the Consumer Price Index)
capped at 3% annually.
PERS Plan 3 has a dual benefit structure. Employer
contributions finance a defined benefit component
and member contributions finance a defined
contribution component. As established by chapter
41.34 RCW, employee contribution rates to the
defined contribution component range from 5% to
15% of salaries, based on member choice. There are
currently no requirements for employer contributions
to the defined contribution component of PERS Plan 3.
PERS Plan 3 defined contribution retirement benefits
are dependent upon the results of investment
activities. Members may elect to self-direct the
investment of their contributions. Any expenses
incurred in conjunction with self-directed investments
are paid by members. Absent a member’s selfdirection, PERS Plan 3 investments are made in the
same portfolio as that of the PERS 2/3 defined benefit
plan.
PERS Plan 2 and Plan 3 members may have up to ten
years of interruptive military service credit; five
years at no cost and five years that may be
purchased by paying the required contributions.
PERS Plan 2 and Plan 3 members who become totally
incapacitated for continued employment while
serving the uniformed services, or a surviving
spouse or eligible child(ren), may request
interruptive military service credit.
For DRS’ Fiscal Year 2012, PERS Plan 3 employee
contributions were $95.2 million, and plan refunds
paid out were $66.2 million.
PERS Plan 2 and Plan 3 members can purchase up to
24 months of service credit lost because of an onthe-job injury.
The defined benefit portion of PERS Plan 3 provides
members a monthly benefit that is 1% of the AFC per
year of service. The AFC is the monthly average of
the 60 consecutive highest-paid service months.
There is no cap on years of service credit, and Plan 3
provides the same cost-of-living allowance as Plan 2.
PERS members may also purchase up to five years of
additional service credit once eligible for
retirement. This credit can only be purchased at the
time of retirement and can be used only to provide
the member with a monthly annuity that is paid in
addition to the member’s retirement benefit.
Effective June 7, 2006, PERS Plan 3 members are
vested in the defined benefit portion of their plan after
ten years of service; or after five years of service, if
twelve months of that service are earned after age 44;
or after five service credit years earned in PERS Plan 2
by June 1, 2003. Plan 3 members are immediately
vested in the defined contribution portion of their
plan.
Beneficiaries of a PERS Plan 2 or Plan 3 member with
ten years of service who is killed in the course of
employment receive retirement benefits without
actuarial reduction. This provision applies to any
member killed in the course of employment, on or
after June 10, 2004, if found eligible by the Director
of the Department of Labor and Industries.
Vested Plan 3 members are eligible for normal
retirement at age 65, or they may retire early with the
following conditions and benefits:


A one-time duty-related death benefit is provided to
the estate (or duly designated nominee) of a PERS
member who dies in the line of service as a result of
injuries sustained in the course of employment, or if
the death resulted from an occupational disease or
infection that arose naturally and proximately out of
the member’s covered employment, if found
eligible by the Department of Labor and Industries.
If they have at least ten service credit years
and are 55 years old, the benefit is reduced
by an ERF that varies with age, for each year
before age 65.
If they have 30 service credit years and are at
least 55 years old, they have the choice of a
benefit that is reduced by 3% for each year
before age 65; or a benefit with a smaller (or
no) reduction factor (depending on age) that
imposes stricter return-to-work rules.
31
Funding Policy
Each biennium, the state Pension Funding Council
adopts PERS Plan 1 employer contribution rates, PERS
Plan 2 employer and employee contribution rates, and
PERS Plan 3 employer contribution rates. Employee
contribution rates for Plan 1 are established by statute
at 6% for state agencies and local government unit
employees, and at 7.5 % for state government elected
officials. The employer and employee contribution
rates for Plan 2 and the employer contribution rate for
Plan 3 are developed by the Office of the State
Actuary to fully fund Plan 2 and the defined benefit
portion of Plan 3. Under PERS Plan 3, employer
contributions finance the defined benefit portion of
the plan and member contributions finance the
defined contribution portion. The Plan 3 employee
contribution rates range from 5% to 15%, based on
member choice. Two of the options are graduated
rates dependent on the employee’s age.
As a result of the implementation of the Judicial Benefit
Multiplier Program in January 2007, a second tier of
employer and employee rates was developed to fund,
along with investment earnings, the increased
retirement benefits of those justices and judges that
participate in the program. The methods used to
determine the contribution requirements are
established under state statute in accordance with
chapters 41.40 and 41.45 RCW.
The required contribution rates expressed as a
percentage of current-year covered payroll as of
December 31, 2012, are as follows:
PERS Plan 1 PERS Plan 2 PERS Plan 3
Employer*
Employee
7.21%
6.00%
7.21%
4.64%
7.21%**
***
*The employer rates include the employer
administrative expense fee currently set at 0.16%.
** Plan 3 defined benefit portion only.
*** Variable from 5.0% minimum to 15.0% maximum
based on rate selected by the PERS 3 member.
The Lottery’s and employees’ contributions to PERS
for the years ending June 30, 2012, 2011 and 2010 are
displayed below. Both Washington’s Lottery and its
employees made the required contributions. The
required contributions for the years ending
December 31 were as follows:
Washington's Lottery
2012
$506,651
2011
$393,578
2010
$390,137
Lottery employees
$365,224
$351,206
$342,372
32
STATISTICAL SECTION
This section offers relevant financial, economic and demographic statistical information, including national
lottery industry trend data
33
Financial Trends
depending upon the game. The Lottery launched 63
Scratch games during fiscal year 2012.
Lottery’s sales increased by $24.7 million or 4.8
percent over fiscal year 2011. Strong sales in Scratch
games and Powerball, and a record level $640 million
Mega Millions advertised jackpot contributed to the
growth compared to fiscal year 2011. The Lottery
experienced record high sales in fiscal year 2012 of
$535.2 million, compared to $510.5 million in fiscal
year 2011. The total number of Scratch tickets sold
increased by 2.6 percent in fiscal year 2012,
compared to 2011, and the average price per ticket
showed a slight increase from $3.47 in fiscal year
2011 to $3.48 in fiscal year 2012. Operating expenses
are dominated by prizes, retailer commissions,
gaming vendor commissions, marketing and
advertising. Prize expenses increased in fiscal year
2012 by $16.4 million, or 5.6 percent compared to
fiscal year 2011, and increased $19.7 million or 6.8
percent compared to fiscal year 2010. Net operating
profit increased by $6.2 million or 4.5 percent
compared to fiscal year 2011, and $19.0 million or
15.2 percent compared to fiscal year 2010. The
record high Mega Millions jackpot of $640 million
drove most of the increase compared to both years.
In addition, in fiscal year 2010, Powerball was
introduced into the marketplace in January 2010,
accounting for only six months of sales.
The number and type of retail locations that sell
Lottery products in Washington also impact the
revenue capacity. During fiscal year 2012, the Lottery
reduced a net of 149 retailers bringing the total
number at the end of fiscal year 2012 to 3,781,
compared to 3,930 for the prior year.
Debt Capacity
The Lottery offers Lotto winners the option to receive
their prize over a 26-year period and Mega Millions
over a 25-year period. Powerball winners have the
option of taking their winnings over a 30-year
period.
Some Scratch games have ―For Life‖
winnings. This long-term liability is backed by the
Lottery purchasing Treasury Strips, or annuities, at a
deep discount. In other words, the Lottery is able to
purchase certain future payments at a fraction of the
future payments.
Demographic and Economic Information
Washington State’s population is almost 6.7 million
people. As of 2010, 5,149,729 were over 18 years of
age and eligible to purchase Lottery products.
The demographic charts on page 36 display the
population separated by age, education, ethnic
background, employment status, and annual
income. These categories are further broken out
into players versus non-players.
Net assets are affected by the fluctuation in the
value of securities, and the Lottery saw an increase
of $11.2 in the value of its securities. These are
impacted by changes in interest rate from year to
year. Because nearly all securities are held to
maturity, there is no real change in their value. All net
assets for the Lottery are incorporated into one
enterprise fund.
Age: Lottery play is less prevalent in the youngest
(under 24) and oldest (over 65) age classes. More
than two-thirds of Lottery players are between 30
and 65 years old.
Income: The median household income category is
$50 to $75 thousand per year for both players and
non-players. Although the distribution of household
income is very similar between players and nonplayers, players are slightly more likely to report
household income greater than $100,000 per year.
Education: The majority of both players and nonplayers had some education beyond high school.
Players were more likely to have high school
diplomas,
two-year
degrees
or
technical
certificates than non-players. Players were less
likely to have postgraduate degrees than nonplayers.
Revenue Capacity
The Lottery’s sole focus is the sale of tickets for games of
chance. These products are divided into two main
types: Scratch, or ―instant‖ game tickets, and
―draw‖ game tickets. The Lottery offers seven
different Draw games in which winning numbers are
drawn either two, three or seven times a week,
Employment Status: The majority of both players
and non-players were employed. Players were
more likely to be employed full-time than nonplayers.
34
Ethnic Background:
Nearly 90% of survey
respondents identified themselves as white or
Caucasian.
The table below shows a six-year trend of Lottery
employees, and is comprised of 100 percent
government employees (headcount) as of June
30th each year. The Lottery is overseen by a fivemember Commission appointed by the Governor
with the consent of the Senate. The Commission
advises and makes recommendations to the Director
for the operation and administration of the Lottery.
No data prior to fiscal year 2007 is available, and the
Lottery will continue to gather information in order
to report the required 10 years of information.
Median household income in Washington in 2011 was
$55,550 and per capita personal income was $43,878.
Washington’s unemployment rate in 2011 was 9.2
percent.
The top ten private employers in the state are
displayed below for fiscal year 2012.
Table 8: Top 10 Employers
#
1
2
3
4
5
6
7
8
9
10
2012
Employees
Employer
City
Percentage
Count
Microsoft Corp
Redmond
35,000
31%
Seattle Tacoma Intl Arprt-Sea
Seatac
21,000
19%
Providence Health & Services
Renton
19,000
17%
NVAL Air Station Whidbey Island Oak Harbor
10,000
9%
South Seattle Community College Seattle
5,000
4%
Barrett Business Service Inc
Moses Lake
5,000
4%
Pacific Northwest National Lab
Richland
4,700
4%
Stewart Title
Seatac
4,500
4%
Fairchild Air Force Base
Fairchild AFB
4,500
4%
St Joseph Medical Center
Tacoma
4,400
4%
Total
113,100
100%
Department
Executive
Finance & Administration
Information Services
Security
Human Resources/Customer
Service
Marketing
Sales
Total
Operating Information
Operationally, the Lottery is comprised of seven
divisions. These divisions include Executive,
Finance & Administration, Information Services,
Security, Human Resources/Customer Service,
Marketing, and Sales. The Executive Division
includes 8 employees. These employees include
the Director, Deputy Director, Legal Counsel,
Legislative Liaison, and Research and Development.
The Sales Division is the largest with 63 employees
working in headquarters and the five regions
throughout the state. Supporting the Sales staff are
the Finance and Administration Division with 20
employees, Marketing Division with 11 employees,
Information Services Division with 13 employees,
Security Division with 5 employees, and Human
Resources/Customer Service Division with 12
employees.
35
2012 2011 2010 2009 2008 2007
8
10
11
12
12
12
20
19
21
20
22
21
13
15
14
13
13
13
5
5
5
5
5
5
12
5
5
5
5
4
11
63
132
12
72
138
9
72
137
11
73
139
10
73
140
10
74
139
WHO PLAYS WASHINGTON’S LOTTERY GAMES?
Demographics of Lottery Players and Non-Players
The following charts reflect the results of the Fiscal Year 2012 demographic survey. The respondents were
categorized as Lottery players and non-players. These charts reflect the percentage of respondents in these two
categories by selected demographics.
$50K to $70K
45-54
$15K to 20K
$70K to $100K
25-29
55-64
$20K to $30K
$100K+
30-34
65 or older
$30K to $40K
Don’t know
35-44
Don't know
ANNUAL INCOME
30%
Under 15K
18-24
AGE
25%
20%
15%
10%
5%
0%
Players
20%
15%
10%
5%
0%
Non-players
No Degree or Diploma Received
$40K to $50K
Players
Post Graduate Degree /
Master's Degree
High School Diploma / GED
Don't Know
EMPLOYMENT STATUS
2 Year College Degree / Associates
Degree or Tech School Degree
EDUCATION
4 Year College Degree / Bachelor's
Degree
40%
35%
30%
25%
20%
15%
10%
5%
0%
ETHNIC BACKGROUND
Players
White / Caucasian
Asian / Pacific Islander
African-American
Multi-Racial
Native American Or American Indian
Other
Hispanic / Latino
Don't know/Refused
Employed Full-Time
Retired
Employed Part-Time
Homemaker
Self-Employed
Unemployed
Student
Don't know
50%
40%
30%
20%
10%
0%
Players
Non-players
Non-players
Non-players
100%
80%
Intentionally left blank
60%
40%
20%
0%
Players
Non-players
Data Source: Washington’s Lottery Usage and Attitude Tracking Study conducted by IPSOS-Reid.
36
Ten Years of Net Assets
Net Assets
Unrestricted
Total net assets
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
617,723
10,878,666
95,821,928
107,318,317
447,116
13,661,545
48,196,243
62,304,904
455,784
13,883,107
58,972,564
73,311,455
259,804
12,234,490
22,699,110
35,193,404
387,936
11,216,128
20,945,418
32,549,482
307,841
15,107,376
35,024,787
50,440,004
276,746
7,824,817
37,511,394
45,612,957
355,401
3,659,665
28,756,516
32,771,582
275,584
3,600,628
8,139,532
12,015,744
358,544
9,535,984
19,350,887
29,245,415
Ten Years of Changes in Net Assets
37
Sales
Scratch ticket sales
Draw game sales
Total Sales
Cost of Sales
Prize expense
Retailer commissions
Vendor expense
Advertising expense
Misc. promotional & other operating
expenses
Total Cost of Sales
Goods and services
Travel
Depreciation
Total Administrative Expenses
Operating Income
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
241,891,045
218,464,391
460,355,436
277,991,863
203,447,449
481,439,312
294,674,176
163,457,377
458,131,553
305,512,725
172,372,789
477,885,514
325,197,396
167,393,768
492,591,164
330,520,307
190,582,290
521,102,597
307,004,644
180,714,035
487,718,679
289,324,733
201,696,753
491,021,486
309,045,103
201,412,321
510,457,424
318,149,502
217,047,664
535,197,166
297,975,327
28,907,128
13,619,773
9,001,036
295,488,431
30,336,856
14,648,388
7,604,276
280,862,647
28,747,652
13,800,972
6,467,379
291,773,401
30,345,420
14,655,710
6,844,990
304,834,285
31,190,099
14,250,830
9,767,655
314,923,284
32,391,044
14,637,059
11,292,640
301,279,527
30,751,766
14,026,413
12,161,926
291,827,949
31,005,437
14,283,685
12,315,924
295,155,493
31,941,021
16,982,569
11,813,258
311,545,285
33,383,737
18,837,807
10,882,354
2,588,746
2,385,192
2,200,067
1,903,783
6,442,018
5,057,841
5,008,198
4,055,394
4,208,989
4,106,779
352,092,010
350,463,143
332,078,717
345,523,304
366,484,887
378,301,868
363,227,830
353,488,389
360,101,330
378,755,962
8,201,981
2,548,949
441,204
236,408
11,428,542
96,834,884
8,260,003
2,430,825
470,702
227,581
11,389,111
119,587,058
8,419,855
2,518,265
325,339
160,863
11,424,322
114,628,514
8,511,768
2,268,688
408,116
94,896
11,283,468
121,078,742
8,861,222
2,490,003
476,157
114,165
11,941,547
114,164,730
9,232,680
2,658,744
519,150
117,647
12,528,221
130,272,508
9,446,681
2,375,804
369,462
110,969
12,302,916
112,187,933
9,687,211
2,294,355
409,270
121,305
12,512,141
125,020,956
9,853,525
2,173,778
381,979
120,772
12,530,054
137,826,040
9,567,271
2,279,971
434,622
132,145
12,414,009
144,027,195
Non-Operating Revenues (expenses)
Investment revenue (loss)
Interest income
Misc. income (expense)
Fee income
Loss on disposal of capital assets
68,311,038
(35,742,602)
673,843
(10,338)
20,200
-
(13,639,930)
(34,131,698)
479,537
252,986
20,995
(4,946)
42,074,221
(31,219,691)
1,145,184
497
19,425
(9,885)
(7,993,787)
(28,344,906)
2,329,880
5,534
18,000
(122,338)
23,871,431
(27,099,716)
2,757,471
24,086
19,825
(10,932)
33,252,141
(47,023,056)
12,009,751
(34,107,617)
(437,835)
Payments to:
Education Funds
WA Opportunity Pathways Account
Education Legacy Trust Account
Other state funds
King County
Stadium and Exhibition Center Account
Problem Gambling
Veterans Innovations Program
General Fund
Total payments
Net non-operating expense
Change in net assets
Prior period adjustment to net assets
Total net assets at beginning of year
Total net assets at end of year
38,105,795
(22,658,996)
2,421,131
10,636
27,175
-
22,480,606
(20,000,662)
841,625
37,412
18,125
-
21,777,420
(17,351,689)
150,319
36,415
17,894
-
6,266,376
(14,981,731)
87,571
160,896
12,764
-
23,979,561
(12,819,949)
58,387
13,202
14,968
(5,340)
17,905,741
3,377,106
4,630,359
(8,454,124)
11,240,829
(86,789,871) (102,000,000) (102,000,000) (102,000,000) (101,932,376) (102,000,000) (102,000,000) (97,368,911)
(112,262,295) (121,840,501)
(13,100,000) (11,900,000)
(835,000)
(3,871,876)
(4,026,752)
(4,187,821)
(4,355,334)
(4,529,547)
(4,710,730)
(4,899,160)
(5,095,125)
(5,298,930)
(2,701,415)
(7,019,151)
(7,299,917)
(7,591,914)
(7,895,591)
(8,211,414)
(8,539,871)
(8,881,466)
(9,236,724)
(9,609,193)
(9,990,441)
(3,034,511)
(2,975,639)
(3,677,118)
(2,377,226)
(4,573,866)
(3,739,469)
(2,967,678)
(186,129)
(244,084)
(268,038)
(243,995)
(258,950)
(279,892)
(290,747)
(247,571)
(4,250,746)
(1,851,979)
(7,617,611)
(11,091,970)
(1,990,239) (12,859,114)
(7,037,975)
(98,515,898) (117,577,415) (115,631,714) (125,089,176) (117,893,060) (130,287,727) (120,392,086) (142,492,690) (150,127,754) (138,038,353)
(65,263,757) (164,600,471) (103,621,963) (159,196,793) (118,330,895) (112,381,986) (117,014,980) (137,862,331) (158,581,878) (126,797,524)
31,571,127 (45,013,413) 11,006,551 (38,118,051)
(4,166,165) 17,890,522
(4,827,047) (12,841,375) (20,755,838) 17,229,671
1,522,243
75,747,190 107,318,317
62,304,904
73,311,455
35,193,404
32,549,482
50,440,004
45,612,957
32,771,582
12,015,744
107,318,317
62,304,904
73,311,455
35,193,404
32,549,482
50,440,004
45,612,957
32,771,582
12,015,744
29,245,415
Ten Years of Sales and Other Revenues
Scratch
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
241,891,045
277,991,863
294,674,176
305,512,725
325,197,396
330,520,307
307,004,644
289,324,733
309,045,103
318,149,502
Draw:
The Daily Game
Lotto
18,187,625
17,307,691
17,237,543
18,167,348
18,977,376
19,799,094
18,341,004
16,993,685
16,736,124
16,597,018
104,968,610
90,261,504
58,610,401
61,886,078
57,108,545
56,918,875
58,245,291
54,805,991
54,559,716
54,468,198
45,875,414
55,188,340
50,238,381
60,055,375
57,197,968
65,445,763
59,577,333
68,642,733
55,036,067
59,196,654
19,995,130
35,588,849
42,858,045
Mega Millions
Powerball
-
Quinto
Keno
Lucky for Life
-
-
-
-
26,331,899
21,638,161
21,625,534
23,068,753
16,694,094
7,276,751
6,697,829
6,443,230
6,687,377
6,739,225
15,824,092
12,353,924
9,302,288
2,507,858
-
-
-
-
6,507,227
-
5,523,027
-
5,271,489
5,550,604
-
-
-
-
-
-
-
-
-
-
Zip
-
-
-
Hit 5
-
-
-
-
Raffle
-
-
-
-
-
Match 4
-
-
-
-
-
10,676,560
29,799,251
24,433,740
12,112,080
-
22,340,255
-
20,649,685
-
5,633,672
22,961,307
2,117,470
2,925,910
14,593,640
13,647,470
11,173,806
12,406,860
Total Draw
218,464,391
203,447,449
163,457,377
172,372,789
167,393,768
190,582,290
180,714,035
201,696,753
201,412,321
217,047,664
Total Sales
460,355,436
481,439,312
458,131,553
477,885,514
492,591,164
521,102,597
487,718,679
491,021,486
510,457,424
535,197,166
673,843
479,537
1,145,184
2,329,880
2,757,471
2,421,131
841,625
150,319
87,571
58,387
20,200
20,995
19,425
18,000
19,825
27,175
18,125
17,894
12,764
14,968
Miscellaneous
(10,338)
248,040
(8,616)
(116,804)
24,086
1,482,154
37,411
36,415
160,896
(53,832)
Total Other Revenues
Total Sales and Other
Revenues
683,705
748,572
1,155,993
2,231,076
2,801,382
3,930,460
897,161
204,628
261,231
19,523
461,039,141
482,187,884
459,287,546
480,116,590
495,392,546
525,033,057
488,615,840
491,226,114
510,718,655
535,216,689
Interest
600
Match 4
Raffle
500
Since Inception,
Sales Began Nov. 15, 1982
Hit 5
Daily Game
$475.0 million
Zip
400
Lucky for Life
300
Scratch
$5.7 billion
Lotto
$3.3 billion
Keno
Quinto
200
Powerball
100
Mega Millions
Lotto
2012
2011
2010
2009
2008
2007
2006
2005
2004
0
2003
38
License Fees
The Daily Game
Mega Millions
$576.5 million
Raffle
$17.2 million
Quinto
$574.3 million
Lucky For Life
$118.7 million
Zip
$2.5 million
Hit 5
$130.9 million
Powerball
$98.4 million
Match 4
$51.8 million
Daily Keno
$186.7 million
Scratch
Total Sales: $11.2 Billion Sales
Ten Years of Expenses
2003
Prizes
2004
2005
2006
2007
2008
2009
2010
2011
2012
297,975,327
295,488,431
280,862,647
291,773,401
304,834,285
314,923,284
301,279,527
291,827,949
295,155,493
311,545,285
28,907,128
30,336,856
28,747,652
30,345,420
31,190,099
32,391,044
30,751,766
31,005,437
31,941,021
33,383,737
Cost of Sales
25,209,555
24,637,855
22,468,418
23,404,483
30,460,503
30,987,540
31,192,738
30,655,003
33,004,816
33,826,940
Administration
11,428,542
11,389,111
11,424,322
11,283,468
11,941,547
12,528,221
12,302,916
12,512,141
12,530,054
12,414,009
363,520,552
361,852,253
343,503,039
356,806,772
378,426,434
390,830,089
375,526,947
366,000,530
372,631,384
391,169,971
Total Expenses
Note: Non-operating expenses are not included.
Ten Years of Contributions
2003
State General Fund
WA Opportunity Pathways
Education Funds
Education Legacy Trust
2004
2005
2006
835,000
4,250,746
1,851,979
7,617,611
86,789,871
-
102,000,000
-
102,000,000
-
102,000,000
3,034,511
2007
-
2008
2009
2010
2011
1,990,239
12,859,114
7,037,975
101,932,376
2,975,639
102,000,000
3,677,118
102,000,000
2,377,226
97,368,911
13,100,000
4,573,866
112,262,295
11,900,000
3,739,469
121,840,501
2,967,678
290,747
Problem Gambling
-
-
-
186,129
244,084
268,038
243,995
258,950
279,892
Veterans Innovations Program
-
-
-
-
-
-
-
-
-
King County
3,871,876
4,026,752
4,187,821
4,355,334
2012
11,091,971
4,529,547
4,710,730
4,899,160
5,095,125
-
247,571
5,298,930
2,701,415
Stadium & Exhibition
7,019,151
7,299,917
7,591,914
7,895,591
8,211,414
8,539,871
8,881,466
9,236,724
9,609,193
9,990,441
Total Contributions
98,515,898
117,577,415
115,631,714
125,089,176
117,893,060
130,287,728
120,392,086
142,492,690
150,127,754
138,038,353
39
Distributions Since Inception
July 19, 1982 - June 30, 2012
Sales by Product
Retailer
Commission
$676.0 million
Expenses and Contributions
(amounts in millions)
500
Stadium & Exhibition Account
Prizes
$6.3 billion
King County
400
Education Legacy Trust
WA Opportunity Pathways Account
200
State General Fund
Washington
Pathways
Account $234.1
Administration
100
Cost of Sales
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Education
Construction
Stadium
Contributions $879.5 million
$175.2 million
Economic Development Contributions $23.3 million, amount too small to show on graph
Education Legacy Trust Account $25.0 million; amount too small to show on graph
Veterans Innovations Program $248 thousands; amount too small to show on graph
Problem Gambling $1.8 million, amount too small to show on graph
0
Administration
$292.6 million
General Fund
$1.88 billion
Education Construction
300
Cost of sales
$634.7 million
Prizes
39
COMPARATIVE STATEMENT OF LOTTERY REVENUES AND EXPENSES BY LOTTERY FOR FISCAL YEAR 2011
Millions of Dollars
As Percentage of Sales
New York
6,758.65
3,967.67
404.65
246.96
Net
Income
2,538.75
58.71%
5.99%
3.65%
Net
Income
37.56%
Massachusetts
Florida
4,416.29
4,008.72
3,199.44
2,460.22
251.97
223.39
88.63
134.71
887.92
1,179.68
72.45%
61.37%
5.71%
5.57%
2.01%
3.36%
20.11%
29.43%
Texas
3,811.27
2,387.24
212.23
184.32
1,029.70
62.64%
5.57%
4.84%
27.02%
California
Georgia
3,438.58
3,335.61
1,904.79
2,120.84
233.57
230.93
199.40
142.53
1,080.03
839.10
55.39%
63.58%
6.79%
6.92%
5.80%
4.27%
31.41%
25.16%
Pennsylvania
3,207.91
1,958.43
168.59
126.09
960.61
61.05%
5.26%
3.93%
29.95%
New Jersey
Ohio
2,636.45
2,600.99
1,543.67
1,603.05
146.97
161.33
55.97
109.29
930.63
720.93
58.55%
61.63%
5.57%
6.20%
2.12%
4.20%
35.30%
27.72%
Michigan
Illinois
2,339.95
1,344.33
168.37
103.33
753.88
57.45%
7.20%
4.42%
32.22%
Maryland
2,264.69
1,714.40
1,368.47
1,029.04
111.94
113.69
120.85
111.25
668.42
467.48
60.43%
60.02%
4.94%
6.63%
5.34%
6.49%
29.51%
27.27%
Virginia
North Carolina
1,482.69
1,461.11
881.03
863.00
83.84
102.13
74.92
63.39
444.21
437.31
59.42%
59.06%
5.65%
6.99%
5.05%
4.34%
29.96%
29.93%
Tennessee
1,102.58
683.51
77.46
52.00
293.38
61.99%
7.03%
4.72%
26.61%
South Carolina
Connecticut
1,047.06
1,016.60
667.64
620.13
74.05
56.96
37.64
48.34
271.30
291.30
63.76%
61.00%
7.07%
5.60%
3.59%
4.76%
25.91%
28.65%
Missouri
Lottery
Sales
Prizes
Commissions Expenses
Prizes
Commissions Expenses
1,000.68
639.01
61.85
45.21
263.53
63.86%
6.18%
4.52%
26.34%
Indiana
Kentucky
791.45
719.36
494.52
422.51
56.24
47.29
49.20
37.71
188.23
208.80
62.48%
58.73%
7.11%
6.57%
6.22%
5.24%
23.78%
29.03%
Arizona
Colorado
583.54
518.92
360.49
326.74
39.25
39.58
39.33
40.04
144.84
113.30
61.78%
62.97%
6.73%
7.63%
6.74%
7.72%
24.82%
21.83%
Washington **
Minnesota
Wisconsin
510.46
295.16
31.94
45.53
129.37
57.82%
6.26%
8.92%
25.34%
504.44
502.65
310.86
290.49
30.35
35.25
41.55
32.16
121.89
143.81
61.62%
57.79%
6.02%
7.01%
8.24%
6.40%
24.16%
28.61%
Arkansas
464.02
307.45
26.22
38.04
93.83
66.26%
5.65%
8.20%
20.22%
Louisiana
383.59
317.45
202.90
208.67
21.37
26.83
24.84
25.02
135.91
58.44
52.90%
65.73%
5.57%
8.45%
6.48%
7.88%
35.43%
18.41%
271.39
232.37
158.96
132.33
17.29
13.78
27.41
22.43
67.98
66.20
58.57%
56.95%
6.37%
5.93%
10.10%
9.65%
25.05%
28.49%
D.C.
231.75
125.86
14.77
28.90
62.24
54.31%
6.37%
12.47%
26.86%
Rhode Island 3,4
New Hampshire
230.59
228.87
140.16
139.26
28.15
12.93
9.09
14.78
54.36
62.25
60.78%
60.85%
12.21%
5.65%
3.94%
6.46%
23.57%
27.20%
Maine
216.43
134.18
13.93
18.68
51.19
62.00%
6.44%
8.63%
23.65%
Oklahoma
West Virginia 3,4
198.15
193.57
106.60
120.71
13.22
13.56
12.49
15.21
66.27
56.50
53.80%
62.36%
6.67%
7.01%
6.30%
7.86%
33.44%
29.19%
Idaho
147.15
90.23
8.98
12.79
35.96
61.32%
6.10%
8.69%
24.44%
Delaware
New Mexico
136.85
135.54
75.85
73.61
9.25
8.86
18.52
11.80
33.23
41.31
55.43%
54.31%
6.76%
6.54%
13.53%
8.71%
24.28%
30.48%
Nebraska
Vermont
131.92
95.54
76.87
60.61
8.21
5.61
16.55
7.94
30.67
21.36
58.27%
63.44%
6.22%
5.87%
12.55%
8.31%
23.25%
22.36%
South Dakota 3,4
47.17
27.18
2.57
5.12
12.72
57.62%
5.45%
10.85%
26.97%
Montana
North Dakota
Total
46.04
23.00
24.78
11.94
2.72
1.18
7.79
3.95
10.68
6.02
53.82%
51.91%
5.91%
5.13%
16.92%
17.17%
23.20%
26.17%
55,506.4 33,960.43
3,413.25
2,551.70 16,075.52
61.18%
6.15%
4.60%
28.96%
Oregon 3,4
Iowa
Kansas
Note to Table: fiscal year 2011 is the latest data available. Fiscal year ends June 30 except New York (March 31), Texas (August 31) and D.C. and Michigan
(Sept. 30). 1 Source: U.S. Census Bureau; 2 Source: U.S. Bureau of Economic Analysis; 3 This data represents only revenue from traditional lottery games; 4 Prizes
do not include VLT prizes paid; 5 Traditional lottery commissions only; 6 Traditional lottery expenses only; 7 Includes transfers for VLT operations;
Note: If a lottery’s operating statement did not include actual profits raised for government, the ―government transfers‖ may represent the net income.
** Reflects operating income only. Source: ―La Fleur’s 2011 World Lottery Almanac,‖ TLF Publications, Inc.
40
COMPARISON OF LOTTERY REVENUES AND EXPENSES PER CAPITA BY LOTTERY FOR FISCAL YEAR 2011
Figures Per Capita
Lottery
Population (M)
Sales
Expenses
Net Income
California
37.69
91.23
50.54
6.20
5.29
28.66
Texas
25.68
148.41
92.96
8.26
7.18
40.10
New York
19.47
347.13
203.78
20.78
12.68
130.39
Florida
19.06
210.32
129.08
11.72
7.07
61.89
Illinois
12.87
175.97
106.33
8.70
9.39
51.94
Pennsylvania
12.74
251.80
153.72
13.23
9.90
75.40
Ohio
11.55
225.19
138.79
13.97
9.46
62.42
Michigan
9.88
236.84
136.07
17.04
10.46
76.30
Georgia
9.82
339.68
215.97
23.52
14.51
85.45
North Carolina
9.66
151.25
89.34
10.57
6.56
45.27
New Jersey
8.82
298.92
175.02
16.66
6.35
105.51
Virginia
8.10
183.05
108.77
10.35
9.25
54.84
Washington **
6.83
28.34
43.22
4.68
6.67
18.94
Massachusetts
6.59
670.15
485.50
38.24
13.45
134.74
Indiana
6.52
121.39
75.85
8.63
7.55
28.87
Arizona
6.48
90.05
55.63
6.06
6.07
22.35
Tennessee
6.40
172.28
106.80
12.10
8.13
45.84
Missouri
6.01
166.50
106.32
10.29
7.52
43.85
Maryland
5.83
294.07
176.51
19.50
19.08
97.87
Wisconsin
5.71
88.03
50.87
6.17
5.63
25.19
Minnesota
5.35
94.29
58.10
5.67
7.77
22.78
Colorado
5.12
101.35
63.82
7.73
7.82
22.13
South Carolina
4.68
223.74
142.66
15.82
8.04
57.97
Louisiana
4.58
83.75
44.30
4.67
5.42
29.67
Kentucky
4.37
164.60
96.68
10.82
8.63
47.78
3.87
82.03
53.92
6.93
6.47
15.10
Oregon
1
Prizes Commissions
Oklahoma
3.79
52.28
28.13
3.49
3.30
17.49
Connecticut
3.58
283.97
173.22
15.91
13.50
81.37
Iowa
3.06
88.69
51.95
5.65
8.96
22.22
Arkansas
2.94
157.83
104.57
8.92
12.94
31.91
Kansas
2.87
80.97
46.11
4.80
7.82
23.07
New Mexico
2.08
65.16
35.39
4.26
5.67
19.86
West Virginia1
Nebraska
1.86
274.44
64.90
7.29
8.18
30.38
1.84
71.70
41.78
4.46
8.99
16.67
Idaho
1.59
92.55
56.75
5.65
8.04
22.62
Maine
1.33
162.73
100.89
10.47
14.05
38.49
New Hampshire
1.32
173.60
105.50
9.80
11.20
47.16
Rhode Island 1
1.05
219.61
133.49
26.81
8.66
51.77
Montana
1.00
46.20
24.78
2.72
7.79
10.68
Delaware1
0.91
150.48
83.35
10.16
20.35
36.52
South Dakota
0.82
57.52
33.15
3.13
6.24
15.51
North Dakota
0.68
33.82
17.56
1.74
5.81
8.85
Vermont
0.63
151.65
96.21
8.90
12.60
33.90
D.C.
0.62
373.79
203.00
23.82
46.61
100.39
Total
295.7
187.71
114.85
11.54
8.63
54.71
Note to Table: fiscal year 2011 is the latest data available. Fiscal year ends June 30 except New York (March 31), Texas (August 31) and D.C. and Michigan
(Sept. 30).
1 Source: U.S. Census Bureau; 2 Source: U.S. Bureau of Economic Analysis; 3 This data represents only revenue from traditional lottery games; 4 Prizes do
not include VLT prizes paid; 5 Traditional lottery commissions only; 6 Traditional lottery expenses only; 7 Includes transfers for VLT operations;
Note: If a lottery’s operating statement did not include actual profits raised for government, the ―government transfers‖ may represent the net income.
** Reflects operating income only. Source: ―La Fleur’s 2010 World Lottery Almanac,‖ TLF Publications, Inc.
41
Retailers of the year
Washington’s Lottery awarded five retailers across the state with the title of Retailer of the Year. These great
retailers include:





Everett region winner: Evergreen Food Store
Yakima region winner: Rainier Place ARCO (fifth consecutive year)
Vancouver region winner: Handy Mart
Federal Way region winner: Hilltop Red Apple
Spokane region winner: Rosauers Food & Drug
The annual Retailers of the Year award gives Washington’s Lottery an opportunity to recognize premier retailers
from every region of the state. The employees at these stores strive to provide the best service possible to all of
their customers. Additionally, the retailers recognize Washington’s Lottery as an organization that adds value by
adding an element of fun and an opportunity to dream for their customers.
42
814 4th Ave East
Olympia, Washington 98506-3922
Phone (360) 664-4800
WWW.WALOTTERY.COM
Mailing Address:
PO Box 43000
Olympia, WA 98504-3000
Regional Offices and Prize Claim Centers
Everett Regional Office
Federal Way Regional Office
Spokane Regional Office
11419 19th Ave SE, Suite A106
Everett, WA 98208-5120
33701 9th Ave S
Federal Way, WA 98003-6762
10517 East Sprague Ave,
Spokane Valley, WA 99206-3631
Vancouver Regional Office
Yakima Regional Office
1503 Northeast 78th St, Suite #4,
Vancouver, WA 98665-9668
9 South 5th Ave,
Yakima, WA 98902-3432
This publication is available in alternate format upon request, (360) 664-4815, TDD/TTY (360) 586-0933.
43
44

Washington`s Lottery

Transcription

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